Chapter 5 Music Export and Music Import

The region, like most regions of the world, is a net importer of music, but has very significant export potential. In this decade, the live music sector created greater opportunities for exports, both because of its higher value and because of the comparative advantages of the region in creating music events.

5.1 Cultural Tourism: Imported Audience

The most important source of revenue for the local music scene is export revenue from visitors to the region. Cultural tourism is the best carrier of music export both in economic and cultural terms. When foreign visitors buy tickets to music events, they create export revenues while they spend foreign earned money in the local economy. These events also have the potential to introduce the work of the local music business to foreign people.

Austria is one of the most important global destinations for cultural tourism, and particularly music tourism throughout the year. Music and opera related tourism has a very long tradition, which had been increasingly diversified with jazz, rock and new music. Bratislava, Budapest and Prague because of their cultural and geographical proximity often play a role in these programmes, especially when visitors are arriving from other continents. Budapest, the largest capital city in Central Europe, attracts many classical music and opera fans in her own right.

In popular music, the region has strong comparative advantages for festival tourism. First of all, the festival market is relatively strong, because the domestic demand is less condensed in space and time, and there is a strong ecosystem present to stage events on temporary infrastructure. Live music, particularly festivals, is very labour intensive – large stages are often served by hundreds of people, and large festivals employ temporarily up to 10,000 people. Because of the relatively cheaper labour and locations, such mega-events can be organized in the CEE with a cost advantage.

In the period of 2009-2019, Open’er (Poland) won 3, Exit (Serbia) and Sziget (Hungary) won 2-2, and Untold (Romania) won the Best Major Festival Award, allowing the prize of the European Festival Association to go to Western Europe only three times to other regions of Europe.

5.2 Touring

Our research in the past five years has tried to map, with an increasing number of countries and regions, the touring map of the CEE region. This period coincided with the closure of many domestic small venues, which further forced bands to seek new tour destinations. These tours follow the European touring routes, but they are heavily influenced by cultural factors. Cultural and linguistic proximity plays a huge role in the interconnected Czech and Slovak live sectors, or the Hungarian band’s routes in Eastern Romania and Southern Slovakia where many Hungarian-speakers live. Another, increasingly important demand driver for tours is the large Central European diasporas in major British, German and Benelux cities. Vienna for Serbs, or London for Hungarians and Poles, are the second largest cities in terms of purchasing capacity, and in some cases, the population of the diaspora is approaching the size of the second largest cities in these countries.

5.3 Exporting & Importing Recordings

As we have seen in chapter 4.2 , if a CEE recording has only a domestic audience, its income prospects are very poor compared to similar recordings in mature markets.

Market Position of Typical Songs in Select Countries

Figure 5.1: Market Position of Typical Songs in Select Countries

In the countries that we compared, domestic recordings had the best prospects in our large, independent reference database. This is the case in very underdeveloped markets (in our example: North Macedonia) or in developed markets.

Cultural and geographical proximity played a great role in the performance of foreign tracks: in Austria, German songs; in Czechia, Slovak songs; and in Slovakia, Czech songs had much better sales prospects than songs from any other countries.10

  • typical Austrian (red) and German (blue) song in Austria, with the listening quantities of ‘any other typical song’;

  • the typical Czech (red) and Slovak (blue) song in Czechia and – in this case the Czech song is the ‘domestic song’;

  • typical Slovak (red) and Czech (blue) song listening quantities in Slovakia, in this case, the Slovak song is the ‘domestic song’.

For comparison, we show the ‘typical Macedonian’, ‘typical Dutch’ and ‘typical British’ recordings’ position against a song coming randomly from all over the world.

There are about 200 countries and territories that are trying to export their music globally. No wonder that a ‘typical song’ from anywhere in the world has very little chance of success in any of the countries. A ‘typical’ song has a far better prospect in its home market, where the musicians have fans, friends, and where their language is understood.

The distinctive feature of popular music is that it is mainly vocal, and the artists are usually composers and performers at the same time. Since the rock and roll revolution, audiences expect artists to interpret their own songs with their own voice. As opposed to classical music and jazz, the language of the artist is a very important feature. The cultural proximity of another country, the common language, as in the case of Austria and Germany, the presence of native ethnic minority or new diaspora, open routes to Serb, Slovak, Hungarian, Romanian songs within the region and beyond.

The cultural geography of the CEE region is famously different from Western Europe. Population density is lower, resulting in less dense and strong national markets. The number of languages used is high, and most countries have mixed-language populations. Slovak speakers are spread out in Slovakia, Czechia and Serbia; Hungarian speakers in Hungary, Romania, Slovakia and Serbia. Serbian speakers are not only spread around in all the former Yugoslav republics, but their songs are largely understandable for speakers of the Croatian, Bosnian or Montenegrin language/dialect. In the case of the CEE repertoire, it is better to talk about ‘regional’ and not ‘national’ markets. These regions do not strictly follow the ‘territories’ defined by copyright jurisdictions.

In these loosely defined cultural boundaries, for example, in Slovakia, the Czech market is important; for Czechs, the Slovak market may bring as much volume as several regions of Czechia. Becoming a hit and reaching the top 50 is challenging in these near markets, and less likely than taking a hitlist position by a British or American superstar, but infinitely more likely than breaking into the chart by a ‘typical’ British or American performance.

The situation is similar if we take a look at relatively successful songs, which are ahead in listening quantities of 90% of the songs in our sample. It is important to keep in mind again that the sample does not contain any major international hits.

Market Position of Successful Recordings in Select Countries

Figure 5.2: Market Position of Successful Recordings in Select Countries

5.4 Import and Regulatory Quotas

While the sales prospects of ‘typical’ domestic songs are usually much better than the sales of foreign songs, this does not really reflect the market share of the domestic or international repertoire. Most of the artists and labels never, or almost never, make it to the national hitlists, or get into the top list of the streaming services – not even in their domestic country. However, most of the listening time and money goes to these top hits. Because there are about 100 million songs available in each country, the competition is very strong and a small number of artists and producers are moving the national market shares.

There are about 100 million songs in competition globally, but there are only a few thousand songs altogether in the European charts. Every year, only a few hundred songs make it to the national charts, and these songs take probably 80-90% of the total royalties. We have seen in the previous chapters that it is possible to find a sizable audience in the region, but to gain a sizable market share of the royalty distribution is beyond the reach of most artists and labels.

Country of Origin on Spotify National Hitlists

Figure 5.3: Country of Origin on Spotify National Hitlists

If we take a look at the streaming charts of the region, we usually find that the vast majority of the streamed songs are foreign songs – except for in Austria, US songs. For comparison, we added a similar, middle-income emerging market (Argentina) and a rich, small-population English-speaking country, Australia, to the chart. These countries seem to be in a similar position to the CEE countries.

Arguably, the strongest countries for songwriting are the United States and Brazil – these are the countries that have run out of the ISRC recording identifier range. Their charts are filled with their domestic songs, but they are not alone. Japan and the bigger EU countries, France, Germany and Poland have very strong domestic performance, too.

Of course, there are many factors at play here. Large countries with large artist populations generate a lot more recordings, so local fans always have thousands of new songs to select from. In small countries, the total annual creations, from pop to jazz, from authentic folk to classical, amounts to a few thousand tracks. But it is not only size that matters. Sweden’s population is similar to that of Austria, Hungary and Czechia, yet the Swedish repertoire performs better in Sweden, and as we will see in the next chart, abroad, too.

We created a second chart to visualize how hits are travelling across national borders. To make the chart easier to read, we omitted the United States, Brazil and Japan as countries of origin, and concentrated only on intra-European hit flows.

The second week of September 2019 (see Fig. 5.4) was not an exceptional week. Most EU countries’ producers did not score any hits in any other EU countries’ Spotify Top 50 hits. The UK exported many great hits all over Europe, as usual, but there were other important hit flows. These hits mainly follow cultural proximity.

France exported hits to the two Francophone countries of Europe, Belgium and Romania, and furthermore to Greece, a Southern country with particularly unique chart composition. Germany exported many hits to Austria, another German-speaking country, and some hits to other Germanic countries. Dutch producers placed a few hits in the Germanic countries and in Belgium, where the Dutch-speaking Flemish community has its own radios, TVs, press and hitlists. The Netherlands is a powerhouse of electronic pop music that is not bound by language, which finds an audience in several countries.

Flow of cross-border hits in Europe

Figure 5.4: Flow of cross-border hits in Europe

The strength and competitive position of the national market where an artist is most known and has a fan base is usually a determining factor of track performance and revenue. The overall revenue prospects and competition situation of a Hungarian or Croatian song are very different from a British or even a Polish song. But overall, most European recordings are not bound to a domestic country. Because of cultural proximity, the presence of native minorities or new immigrant diasporas, even small-language songs are being listened to in a much wider territory than the artists’ original countries. Some relatively small EU countries, such as Sweden and the Netherlands, successfully export their music on a regular basis.

Nevertheless, as the streaming services slowly overtake all other forms of use, the charts above depict a very fundamental market change. Whereas in the traditional channels of physical sales, digital downloads and broadcasting, the CEE countries, like other small- and medium-sized EU countries, enjoyed 30-50% market share, among the streaming hits their producer’s share is below 10%. It is not unusual to find only domestic recordings in physical sales hitlists, while domestic songs rarely enter the streaming charts in the region, with the exception of Poland.

The traditional sales channels protected CEE markets in several ways. After EU accession most import duties are gone, but physical products have very significant logistics costs, which give local producers a competitive edge. Because physical products are increasingly sold at concerts and festivals, where the market share of domestic performers is usually very high, the traditional, mechanically licensed sales had a protected market.

The broadcasting channel, which used to be the most important promotion channel, too, was protected in many European countries by national content quotas, or supported with generously funded national, regional, local public broadcasters who gave a preference to national composers, producers and performers. These market barriers are not present in the streaming markets, which poses many questions. Our research is aiming to answer these questions, but it took several years to build a data infrastructure that can help produce an accurate market overview.

5.4.1 Conclusions and discussion points

  • What skills are necessary to promote the domestic repertoire on streaming platforms?

  • In the increased international repertoire competition, domestic players will increasingly scrutinize the distribution of collectively managed revenues, such as public performance royalties.

  • The role of public broadcasters at national, regional and local level, and community radios will have an increased importance in audience building for local acts. They have to find new strategies to re-build their audience in the streaming services.

  • There is a growing discussion about the potential introduction of similar quotas on streaming services. This is not at all a straightforward task; a critical revision of existing quota definitions, market effects, and possibilities in the global services is absolutely necessary. Many quotas in the region are ill-defined, not well-monitored, and their effect on the market share of domestic creators is unknown.

  • Most music is now sold in the world by various machine learning & other artificial intelligence algorithms. In the past, local wholesale and music professionals had an effect on the music sold, but currently their role is minimal. Understanding how algorithms work and how new music can be connected with its audience requires vast R&D investment and regional cooperation, because the data requirements and engineering investments needed for algorithm training are beyond reach for CEE labels. Often the total national repertoire is too small for competitive algorithm-training.

  1. We have to highlight that we only dealt with typical and mildly successful songs, and did not analyze the greatest hits on the charts - which are usually the same international hits.↩