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Sound recording and music publishing

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The Daily


Tuesday, March 18, 2008
2006 (correction)

Canada's sound recording and music publishing industries maintained profitability for the second consecutive year in 2006, but not without a struggle.

Operating revenues exceeded operating expenditures for each of the three major segments of Canada's music industry (record production, music publishing and sound recording studios), but music publishing was the only industry able to achieve true revenue growth in 2006.

Operating revenues for the music publishing industry rose 4.8% from 2005 to $124.2 million. At the same time, its operating expenses increased more than twice as fast (+11.8%), reaching $111.7 million. As a result, its operating profit margin dropped from 15.7% in 2005 to 10.1% in 2006.

In contrast, total sales and overall profitability both declined in the record production industry, the largest of the three. Operating revenues went from $765 million to $712 million in 2006, dropping by 6.9%. The cost-cutting measures implemented by many firms during the previous year were not as significant in 2006. National operating expenses fell by only 3.0% to $644 million, noticeably less than the 14.9% reduction in 2005.

As a result, the profit margin for the record production industry fell from 13.1% to 9.5%. The industry posted an operating profit of $67.9 million, roughly one-third lower than the $100.6 million it made in 2005.

(Correction: The majority of record production industry revenues, roughly 79%, continued to be generated by foreign-controlled companies.

However, Canadian-controlled record labels remained consistent and focused in responding to the economic and competitive challenges facing them in 2006. Total operating revenues for Canadian-controlled firms climbed 6.6% to $144.8 million in 2006. As a result, their share of national industry revenues increased from 18% in 2005 to 21% in 2006.

Nevertheless, Canadian-controlled firms had a lower operating profit margin than their foreign counterparts (4.2% compared with 11.2%). They spent more on primary expense items, such as cost of goods sold, salaries, wages, benefits and outsourcing. Combined, these three expenditures accounted for only 40% of total operating expenses for foreign-controlled firms, but 60% for firms under Canadian ownership.)

In the sound recording studio industry, the smallest of the three, total operating revenues dropped 10.4% to $82.9 million in 2006, while operating expense fell 11.7% to $72.5 million.

As a result, these firms posted an operating profit margin of 12.5%, up slightly from 11.2% the year before.

Note: The annual Survey of Sound Recording and Music Publishing measures the financial performance of record producers, integrated record production companies, music publishers and sound recording studios. Commencing with reference year 2005 and every two years thereafter, the survey also collects detailed information on characteristics specific to these industries, such as sales by source of revenue, sales by Canadian artists, new releases by musical category, sales and number of recordings by format as well as selected expenditure information.

Data for 2006 should not be compared with data published prior to 2005 since significant changes were made to the survey at that time.

Data for record production and integrated record production have been combined in this analysis. To facilitate the presentation of characteristics in this release, references to "record producers", "labels" or "record production companies" include firms classified to the record production and integrated record production industries.

Available on CANSIM: table 361-0005.

Definitions, data sources and methods: survey number 3115.

Selected information from the 2006 Survey of Service Industries: Sound Recording and Music will be available soon in the publication Sound Recording and Music Publishing: Data Tables (87F0008XWE, free). These tables include breakdowns of data by province.

For more information about the survey, or to enquire about the concepts, methods or data quality of this release, contact Heather Archibald (613-951-0403; fax: 613-951-6696; heather.archibald@statcan.gc.ca), Service Industries Division.