Thinking Outside The Jewel Case

Record labels are now earning about 11.4 percent of their income from new income streams, including touring and merchandising, according to a British Phonographic Industry report.

The BPI figures indicate that record company revenues besides direct sales of music increased by 13.8 percent, from £106.9 million ($212.84 million) in 2006 to £121.6 million ($242.11 million) in 2007.

Physical and digital music sales continue to represent a huge proportion of record companies’ income, generating £1.4 billion ($2.79 billion) in retail revenue and £943 million in trade income in the U.K. in 2007. But there are signs that the new revenue streams will contribute substantial additional revenue in the coming years.

New partnerships and business models mean record labels’ income through licensing is increasing. Labels are also generating income outside the direct sales of music and licensing by extending their relationships with artists to include a broader range of artist services.

Digital sales continue to grow, with the various formats now accounting for about 85 percent of all Top 20 singles sales.

More than 200 million downloads have now been sold in the U.K. since the launch of the first mainstream stores in early 2004. In total, digital formats now account for 8.6 percent of all U.K. record company sales income.

Digital licensing income is increasing too. On-demand streaming services, both online and on mobile platforms – including advertising-supported services such as We7 and Yahoo Music – saw income from new digital business models grow by 55.7 percent.

Labels are also generating more income from other areas of copyright licensing. Synchronization license income from the use of music in advertisements, films and games continued to grow strongly in 2007, with revenues up by 20.1 percent.

There was also a 14.8 percent increase in record label income from broadcast and public performance licensing (PPL).

"As consumption patterns change, music companies are finding new ways to recoup the huge investments they make in music," said BPI chief exec Geoff Taylor.

"They are using new technology to find new audiences and offer consumers more choice. Today’s record business is unrecognisable to that of five years ago. Labels have rapidly evolved into digitally literate businesses that generate significant revenues through licensing.

"Selling CDs and digital downloads remains the main way in which we recoup that investment, but increasingly new streams of revenue are coming into the picture."