GERMANY

Country Profile

July 2011

Das Branchenmagazin

Airport Berlin Tempelhof7– 9 September 2011www.popkomm.com

The International Music Business Market

7–11 SEP2011

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“The industry has grasped the fact that it needsstrong and solid artists,” says EMI GSA’s chairman andhead of commercial development, Wolfgang Hanebrink.“And to achieve this sometimes requires more time thanthe life cycle of an album.”

Although he adds that part of the mix includes fastmoving, hit-based acts – often spawned by TV talentshows such as Deutschland Sucht Den Superstar and XFactor – the chairman also cites the growth of quality anddiversity of homegrown talent as a significant develop-ment in recent years.

According to IFPI figures, domestic productionsaccounted for 49% of album chart share in 2010 [interna-tional acts took 48.6% and soundtracks 2.4%] having risen

ABOVE Hit factoryAs with UK music TV shows,Deutschland SuchtDen Superstar and its like havebuoyed thedomestic marketin Germany

PICTURED Home and awayInternational actsincluding Belgium’sMilow (left) bolstera roster of Berlin-signed local bandswhile Düsseldorf’sHauschka (right)is signed to FatCatin the UK, wherethe label seesGermany as agateway to centraland northernEurope

GERMANYIN THE

FAST LANEHaving overtaken the UK as the world’s third largest music market,Germany must be doing something right – but what is it that haselevated the country’s industry to the status of a true global player?

COUNTRY PROFILE! BY OLAF FURNISS

continuously since 2001 when they made up only 29.5%.“Thanks to being able to perform live, German bands

and artists across all genres are able to build a strongerfanbase,” says Richter. Four Artists has carved out astrong position in the market with domestic acts rangingfrom Nena to Tiefschwarz, but in recent years hasexpanded its roster to include international artists suchas Icelandic seven-piece Hjaltaín and New York’s Balkan

Beat Box. And local companies are capitalising

on Germany’s appeal for acts from foreign territories.

“Now that fewer bands have record deals,more try to sign territory by territory,” explains

Ulysses Hüppauff, founder of Halb MieteManagement. His roster includes Finland’s

Apocalpytica, Heather Nova from the US andSweden’s Royal Republic.

Although Warner and Universal have long actedas an international springboard for acts fromabroad, there are signs that this is a growing trend.The latter’s international exploitation department

is dominated by foreign bands such as Volbeat[Denmark], Milow [Belgium] and Katzenjammer[Norway] – signed directly to the Berlin-based affiliateand augmenting a release schedule which includes localstalwarts such as Tokio Hotel, Rae Garvey andRammstein.

Some UK industry figures also see Germany as a use-ful gateway into other markets.

“Securing key press and radio in Germany bleeds intoneighbouring territories – Switzerland, Benelux, France –and in turn generates sales across the whole of Europe,”says Alex Knight, managing director of Brighton-basedFatCat Records, whose signings include Düsseldorf-based Hauschka

He cites conditions in the live sector as particular-ly favourable, with higher fees obviating the need for label tour support, and a large network of venuesand promoters enabling acts to develop a fanbasethrough touring.

Although Jens Michow, president of the concert pro-moters’ association IKDV cautions that live revenues for2009 might see a slight decline – and he bemoans anobligatory VAT exemption which prevents promotersclaiming back money – he is upbeat about the govern-ment’s abandonment of withholding tax last year.

“For many years this was the artists’ worst enemy inGermany,” he says.

According to Jens Markus Wegener, managing direc-tor of Hamburg-based publishing company AMV Talpa,it is not just the labels and the live sector which are enjoy-ing interest from abroad. Last year his company licensedAC/DC’s catalogue for GSA from Albert & Sons and hebelieves his commitment to work other acts signed to theAustralian publisher helped land the deal.

“There has been a rise in confidence and Germanpublishers are working much harder internationally,” hesays. “At the same time, foreign publishers are keen topush into continental Europe and Germany providesthat gateway.”

T EN YEARS AGO FEW WOULD HAVEexpected Germany’s beleaguered recordedmusic industry to overtake the UK in terms ofrevenue. At the time, CD burning was rampant,

retailers were closing en masse and record companieswere haemorrhaging staff. Few commercial or publicradio stations supported new talent, while A&R waslargely marketing-driven with little in the way oflong-term artist development.

As if this was not dismal enough, there waslittle sympathy from central government, whichstalled the implementation of more robust copy-right protection, while also failing to respond topleas for radio quotas and other remedies it washoped would alleviate the situation.

Commentators have been quick to attribute the turn-around to German consumers continuing to favour moreprofitable physical releases [which account for 81% of rev-enue compared to 67% in the UK] over downloads[respectively 13% and 25%], as well as the healthy state ofthe country’s economy. However, Dieter Gorny, chairmanof Germany’s IFPI affiliate the BVMI, is bullish about thereasons.

“It’s not the slow uptake of downloads, but the slowdowntake of physical product that caused the relativestrength of the German market,” he says.

And far from prompting an outbreak of schadenfreudeon the other side of the North Sea, the figures have havebeen met with disinterest by some within the industry.

“[Overall] there has been little response to the news,”says Alex Richter, managing

director of Berlin-basedbooking agency FourArtists. “Germany willalways be an importantmarket for internationalacts.”

For many, the country’srelatively good showing in

2010 is the result of several otherfactors whichinclude adapt-ing businessmodels to the changingmarket, animproved radiolandscape anda continuingfocus on devel-oping long-term

acts.

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Significantly for international promoters, InitiativeMusik recently launched a fast-track grant scheme foracts invited to play outside Germany, with each bandmember receiving !400 towards travel within Europe and!800 outside.

However, despite his role as head of Initiative Musik’ssupervisory board, the IFPI’s Dieter Gorny believes thatpoliticians still have work to do.

“The Government should ensure a legal frameworkwhich enables the sustainable enforcement of rights inthe digital environment,” he says.

Nevertheless, few doubt that music’s strong positionwithin the creative sector is beyond dispute. AndPopkomm director Daniel Barkowski believes thatBerlin’s status as a creative hub is particularly powerful.

“The world is changing and it is no longer the casethat a company like IBM is going to come and create3,000 jobs,” he observes. “During Berlin’s last election allthe candidates referred to the creative industries in theircampaign literature.”

His view is echoed by Dimitri Hegemann, founder ofBerlin’s legendary Tresor club and label.

“In 2010 there were 20 million overnight stays inBerlin with an average spend of !200 each,” he says.“Fifty per cent of visitors were cultural tourists. Thehistorical subculture has given rise to an importanteconomic motor.”

Significantly, Hegemann has sought to develop thebrand to ensure the business’ survival, being acutelyaware that many of the 70,000 people on his database areno longer up to partying for an entire weekend.

Hegemann now runs regular events for 12-15-year-olds, allowing budding DJs to showcase their skills, andhe is about to launch a Tresor in Beijing. The venture willaim to develop musical partnerships between China andGermany and enjoys the support of Abeleton, a Berlin-based production and recording software company. It isto equip a studio in the Chinese venuewhich in turn will serve as an “acade-my of the electronic arts”.

A variety of companies across thebusiness spectrum have responded byadapting their core activity, includingHamburg-based Edel. It now focuseson distribution and manufacturing,having reduced its label operation toreleasing heritage acts such as StatusQuo and Deep Purple. Moreover, ithas diversified into video and bookpublishing.

Although the company also ownsone of Germany’s largest digital music

distribution platforms, Kontor New Media, Edel founderand CEO Michael Haentjes believes that the industrywould be unwise to abandon physical formats.

“These days the biggest distribution [platform] is viapiracy, which has made the business considerably more dif-ficult,” he says, while adding that there should be a greateronus on attractive products “that are worth the money.”

Moreover, he attributes niche areas such as audio-books, children’s albums and Schlager (a popular style of“hit” music) as a factor in buoying CDs sales, as they areless likely to be copied.

There are also signs of digital platforms becomingmore accepted and while Spotify has yet to gain afoothold in Germany, local streaming service Simfy gotoff the ground in May 2010 thanks to equity deals withUniversal, Sony and Merlin, and a licensing agreementwith Gema.

It now has 1m registered users, attracted an addition-al !10m in finance 12 months after launch and hassecured partnerships with O2, cable TV operator Kabel Deutschland and social networking platform VZ Networks.

“Streaming and subscription models are an impor-tant and elegant link between record companies andmusic consumers,” says Sony’s Berger, who adds that hewould welcome more players in the market.

Both Berger and Universal Germany CEO FrankBriegmann recently hit out at Gema, accusing the coun-try’s collection society of holding up a deal withYouTube. However, this is regarded as disingenuous byAMV’s Wegener. He points to an arbitration systemwhich would allow the Google-owned platform to oper-ate until a rate has been decided and says its reluctance todo so has led to Gema taking legal action.

“If I have a business which needs electricity, then Ihave to pay for it,” he says. “What happens if you don’tpay your bill? At some point it ends up in court.” He adds

that the dispute is not just about roy-alty rates, but about getting the dataso that the revenue can be distributedequitably.

The majors’ frustrations are under-standable, given that German con-sumers are being denied the opportu-nity to watch video clips by domesticacts which can be freely viewed abroad.

However, they might allow them-selves to take some small comfortfrom the fact they have overtaken theUK, where YouTube and Spotify havereached agreements and downloadsales are considerably higher.

Wegener, who previously co-owned one of Germany’slargest music promotion companies, Public Propaganda,points to a resurgence in the popularity of radio accom-panying the growth of domestic talent. Several years agohe advocated a quota, but like many other industry fig-ures appears to have softened his stance.

“There are still a lot of formatted stations with smallplaylists, but you now have a much better chance of get-ting domestic repertoire played,” he says. “Radio hasexperienced a bit of a comeback.”

Wegener believes that this is due to a public desire for“filters” as well as a decline in the music television plat-forms previously offered by MTV and Viva. Moreover,there are also signs of a rapprochement between labelsand broadcasters, with companies such as Sony bringingtogether programming bosses from leading stations todiscuss ideas and proffer suggestions.

“Sony Music always seeks to strengthen the dialoguewith its media partners,” explains Sony MusicEntertainment Germany’s CEO, Edgar Berger.

At the same time, broadcasters such as Motor FM areseizing the initiative. Launched in 2004, the company haslicenses in Bremen and Stuttgart, and is looking to securea presence in key cities such as Hamburg and Munich.This is a particularly ambitious move, as broadcasting inGermany is controlled at regional level and securingnationwide coverage would involve dealing with 16 dif-ferent bureaucracies.

With a strong onus on new music, Motor’s strategy isto use the FM broadcasts as a hook to develop strongerties with listeners via its online presence. Moreover, man-aging director Mona Rübsamen has positioned the sta-tion as a platform for emerging talent across the creativespectrum to include designers, architects, writers andfilm-makers.

“We focus on new music but also act as an incubatorfor the overall creative scene, which has become a big dealin Germany over the past couple of years,” she says.Rübsamen adds that many of Motor’s listeners areunlikely to go undetected due to surveys being carriedout via landlines.

There is a widespread view that the contributionmade by the creative industries to the overall economy isenjoying a new-found recognition at both national andregional government level.

Leading trade events Popkomm, Reeperbahn Festivaland CO Pop all benefit from public money, and the FederalGovernment co-funds the Initiative Musik organisation.

The latter was created in 2007 to provide financialsupport for artists and professionals in the rock, pop andjazz sector. Grants between !10,000-!30,000 are awarded,with 40% of the funding coming from the artist, label,management or publisher.

Its project manager Katja Hermes says that the six-person team is also actively involved in assisting withinternational networking opportunities at Germantrade events, as well as hosting showcases at interna-tional gatherings including SXSW, The Great Escape,Midem and Eurosonic.

ABOVE GovernmentsupportEvents likePopkomm (pic-tured abovewithNew Music Awardwinner Kraftklub)are being rewardedfor their input intoGermany’s creativeindustries

“There has been a rise in confidence and German publishers are working much harderinternationally...”JENS MARKUS WEGENER,

AMV TALPA

“Streaming andsubscription models are animportant and elegant linkbetween recordcompanies and music consumers...”EDGAR BERGER, SONY

“The industry hasgrasped the fact itneeds strong andsolid artists. Andto achieve this sometimes requiresmore time thanthe life cycle of an album...”WOLFGANG HANEBRINK, EMI GSA

“Fifty per cent ofvisitors to Berlin[in 2010] were cultural tourists.The historical subculture hasgiven rise to an importanteconomic motor...”DIMITRI HEGEMANN, TRESOR

RIGHT Export potentialAhead of a fulllaunch in Beijing,Berlin club Tresorhosted a one-nightevent in China last year

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