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South African musicians need to remember they are brands and can be monetised for their benefit.

The music business in South Africa is in trouble. In the past, recording companies were the big winners in that they reaped profits from publishing and recorded sales.

The value that accrued to artists from CD sales was, at best, limited to an average of 12 percent. Artists’ main lifelines were advances from recording companies, enabling them to finance CD recordings and pay musicians used in recording sessions.

Recording artists used whatever was left over to cover their living expenses.

Recording companies paid for CDs’ printing and distribution, as well as marketing costs. The economics of this arrangement favoured recording companies. They were, in fact, advancing the artists loans, which would be recouped from their future royalties.

On the industry’s publishing side, black artists were royally ripped off as they did not secure the copyright to material they composed. This resulted in most composers losing out on royalty revenue, which to this day is earned by recording companies to which composers assigned the copyright of their work. So, black singer-songwriters of the past era died as paupers and some continue to live in poverty.

Live performances – a very small market – is another area where artists earn their living in South Africa.

These include annual jazz festivals and, among smaller gigs, the corporate-event scene. In truth, this is what keeps black artists from being consigned to oblivion by current market conditions.

PricewaterhouseCoopers’s South African Entertainment & Media Outlook: 2010-2014 says: “The physical market (that is CDs) had been increasing until 2007, but during the past two years began to decline. In 2009, the decrease accelerated to 17.3%.

“We (PwC) project that the physical format market will continue to decline at double-digit annual rates through 2012 before moderating to single-digit decreases during 2013-14. Spending will fall to R810 million in 2014 from R1.4 billion in 2009, a 10.4% compound annual decline.”

This is not good news for artists and recording companies. One would think the digital market in South Africa would be an alternative source of revenue for artists. But the news is not necessarily promising.

The PwC report says: “The digital market is centred on mobile phones and has been buoyed by the entrance of new services. Although digital spending rose by 25% in 2009, the digital market in South Africa is still behind other countries.”

With computers’ lower penetration and lack of cheap broadband in South Africa, digital space offers no relief for the music industry’s woes.

Internationally, the music business is surprisingly healthy, and becoming more so. The Economist recently reported that in Britain, Will Page of PRS for Music – which collects royalties on behalf of writers and publishers – said the British music industry turned over £3.9bn (R43.5bn) in 2009, 5 percent more than in 2008.

Much of the money bypassed the record companies, but they managed to pull in £1.1bn last year, up 2 percent from 2008.

The key is musicians have learnt to capture value for themselves. Top areas for value capture are songwriting, live performances and merchandising. In songwriting, royalties earned are not only restricted to CD sales, but songwriters can earn royalties from live performances, mobile ringtones, films and adverts that, among others, use their music.

Live performances are also a great way to increase artists’ revenue. In South Africa, in the old days of apartheid, 12pm to 12am festivals attracted huge crowds to stadiums.

This used to be a great platform for artists and music promoters, and could be what is needed to rejuvenate the live performance scene in South Africa’s music industry. In the past, artists toured to promote their new CDs, but now tracks are made available to boost ticket sales for live performances.

Merchandising sales will soon replace CD sales as a source of revenue for artists.

South African musicians need to remember they are brands and can be monetised for their benefit.

Artists need to realise they have to manage themselves as business entities to be sustainable in the turbulent times ahead.