Sound recording

The Canadian sound recording industry experienced its worst financial performance in six years in 2003 in the wake of bleak sales, declining new releases and a huge drop in profits.

In total, Canadian labels reported just over $708.7 million in revenue from the sale of recordings. This was 17.7% below the level in 2000 and 20.5% below the peak in 1998.

It was a hard year for Canadian artists whose sales plunged 20.0% between 2000 and 2003 to just under $110.4 million. Despite this decline, however, their share of the market remained stable at roughly 16%. That is because sales by foreign artists fell 17.3% to about $598.4 million.

Rock and popular music genres were still by far the most popular. But their share of the market dropped as consumer tastes shifted slightly to classical, country, jazz and blues.

Smaller record labels, that may produce as little as a single release, tend to enter and leave the market rapidly. The sound recording industry consisted of 300 recording companies in 2003, down from 331 in 2000.

Recording companies issued 5,619 new releases in 2003, down from 6,654 in 2000. Of the total in 2003, only 904 belonged to Canadian artists, the first time in over five years that their output fell below the 1,000 mark.

Total employment in the industry fell from 3,305 people in 2000 to just over 3,000 in 2003. Companies cut mostly full-time staff and increased the number of freelancers. Combined salaries, benefits and freelance fees declined 8.5% to $153.5 million.

Company profits combined totalled only $30.5 million in 2003, less than one-fifth of the level just three years earlier. Their combined profit margin fell from 11.9% to 2.6%.

Not all news gloomy: Music-themed DVDs growing

Not all the news was gloomy. While sales of recordings spiralled downward, record labels sold music-themed DVDs in growing numbers. Sales of music-themed DVDs and videos, such as those of concerts, far more than doubled between 2000 and 2003.

Even so, total sales of these DVDs and videos accounted for only 4.5% of total revenue, so their impact on the industry was minimal. However, it is one example of future revenue streams that record labels may be able to pursue. Downloading songs as ring-tones for cellular phones may also be a future revenue source, as could royalties from music used in video games.

Canadian-controlled companies hang in

Foreign-controlled companies continued to dominate the sound recording industry in Canada in 2003, accounting for about 85% of total sales. These companies had net sales of just over $600.0 million, while Canadian-controlled firms had net sales of $108.7 million.

Sales of music declined for the industry as a whole. However, Canadian-controlled firms suffered smaller declines in sales than their foreign-controlled counterparts, mostly due to their sales of Canadian artists' recordings. Sales by Canadian-controlled firms of all artists' recordings fell only 3.1% between 2000 and 2003, compared with a 19.9% decline for foreign-controlled firms.

Sales of Canadian artists' recordings released by foreign-controlled companies, however, took a downturn in 2003. Foreign-controlled companies sold only $44.2 million worth of recordings by Canadian artists, accounting for 40% of all sales by Canadian artists in 2003. Meanwhile, Canadian-controlled companies sold $66.1 million worth of recordings, increasing their share of the market of Canadian artist sales from 46% in 2000 to 60% in 2003.

Organizational and structural changes resulted in increased revenues, expenses and employment among Canadian-controlled firms. On the other hand, foreign-controlled firms faced large lay-offs. Between 2000 and 2003, their work force fell by about one-fifth.

Canadian-controlled firms continued to rely on freelancers as a source of labour. They employed 1,434, with just under half of them full time.

Both Canadian- and foreign-controlled firms ended up with a similar bottom line: much lower profits and decidedly lower profit margins.

In fact, Canadian-controlled firms were left with almost no profit margin (0.5%) compared with a profit margin of 7.1% in 2000. The profit margin for foreign-controlled firms also fell, from 12.7% to 3.2%.

Sales of rock and popular music in slump

Between 1998 and 2000, music sales in Canada fell 3.4%. But in the subsequent three-year period between 2000 and 2003, they fell at a much faster pace of 17.7%.

This overall decline in sales raises questions about factors such as illegal file downloads and swapping song files. Other possible factors in the decline include competition for the consumer's entertainment dollar from an array of media, ranging from computer games to movies to cell phones.

According to the Survey of Household Spending, Canadian households on average spent almost $464 on rental of cablevision and satellite services in 2003, but just $118 on pre-recorded audio and video cassette tapes, compact discs and DVDs.

The decline in music sales had a particularly hard impact on rock and popular recordings, which progressively lost market share during the six-year period. In 1998, rock and popular music accounted for 73% of total music sales. By 2003, this proportion had dropped to 67%.

Companies sold $472.7 million worth of popular music and rock recordings in 2003, but this represented a 24.1% decline from 2000.

During the same period, other categories increased their market share, in particular classical and related music, jazz and blues and country and folk music.

Sales of classical recordings totalled $55.6 million in 2003, up 5.8% from 2000, while sales of country and folk recordings jumped 9.1% to $47.9 million. Sales of children's music rose 6.9% to $13.9 million, the smallest of all categories.

Definitions, data sources and methods: survey number 3115.

Selected data from the Sound Recording Survey are now available online in table format in Sound Recording: Data Tables (87F0008XIE, free). Special tabulations are available on a cost-recovery basis.

For more information, or for enquiries on the concepts, methods and data quality of this release, contact Client Services (1-800-307-3382; 613-951-7608; fax: 613-951-9040; cult.tourstats@statcan.gc.ca), Culture Statistics Program, Culture, Tourism and the Centre for Education Statistics.