Will the South African music industry benefit from the optimism of the World Cup?

South Africa is a country of great optimism. Growth has returned to the economy, and although the recovery from the financial crisis is expected to be gradual, the hosting of the FIFA World Cup soccer tournament is boosting spending, particularly in the tourism sector. A three-hour concert was staged at the Orlando Stadium in Johannesburg the day before the World Cup began which featured performances by major international artists and popular local singers. But will the wider music industry benefit from staging the world’s biggest sporting event?

South Africa is the wealthiest country in Africa, yet it suffers great uneven distributions of wealth and power. The majority of the population is classified as African or black. Although white minority rule ended in 1994, and the country has been transformed into a democracy led by a non-racial government, an ongoing problem for the successive elected governments has been balancing economic growth with the redressing of socioeconomic disparity. Despite some success achieved with the creation of a black middle class and some social mobility, the country’s wealth remains unequally distributed by race.

Music sales
For the majority of the previous decade, recorded-music sales in South Africa increased steadily. In contrast with most developed markets in Europe and North America, which have experienced large declines in physical sales, sales in South Africa rose each year up to and including 2007. However, in 2008 and 2009 the trade value of physical sales decreased. According to the global trade association the IFPI, physical sales fell by 2.8% to US$109.3 million. Digital sales were up by 24.2% to US$4.1 million.

Traditionally, international repertoire has accounted for the majority of music sales in South Africa. However, this dominance declined from 74% in 2000 to 55% in 2009. South Africa is in a different position to the previous hosts of the World Cup. Its artists already account for a significant share of music sales. Many also hold mainstream acceptance. Because of this, the World Cup should be a platform for artists to expand internationally. Around 70% of the performing musicians at the opening concert were from African countries and they more than adequately held their own against the 30% of A-list international acts.

Local repertoire is divided between different ethnic groups and cities. In the black community, music styles range from local versions of hip-hop and R&B to township-dance genre Kwaito, as well as pop, gospel and choral styles such as Zulu Isicathamiya singing and Harmonic Mbaqanga. Also, a number of acts release music in English. However, during the past few years, there has been a resurgence in the popularity of artists using Afrikaans, a language spoken by about 60% of the country’s white population. Few details are published regarding sales of specific language recordings. But in May, Lianie May’s “Vergeet My Nie” was honored as the best-selling album at the South African Music Awards. Another Afrikaans-language release to receive recognition was Elizma Theron and Nicholis Louw’s “Kom Ons Vat ’n Kans”, which was the best-selling full-track download and best-selling real tone.

Digital prospects
Although digital sales are low, South Africa has the digital communications infrastructure needed to raise sales. Mobile is the dominant source of digital sales. In terms of population, South Africa’s mobile penetration exceeds 100%. High-speed subscriptions accounted for 13.2% of all subs at end-March. However, that figure is forecast to increase to 81.5% by end-2014. South Africa is the only country in Africa that is seeing significant 3G take-up, and with its mobile market nearing maturity, operators are under pressure to increase value-added-service revenues to make up for falling income from voice. Multiple-SIM-card ownership has exaggerated the population penetration rate, and a large number of poorer South Africans are still excluded from mobile ownership. To combat this, all South African mobile operators have introduced very-low-denomination top-ups and a range of cheap handsets.

In contrast to mobile, broadband penetration is low. At end-March, 10% of households had a broadband connection, and the figure is only expected to reach just over 20% by end-2014. High prices and poor bandwidth have limited growth. Digital music sales online (excluding ad-supported and subscription services) accounted for around 10% of the digital total in 2009. That figure is likely to grow because of developments that are increasing broadband access and bandwidth. The commercial launch of at least three submarine cables will change the broadband landscape in South Africa and several of its neighbors. The resulting sudden increase in international bandwidth should cause retail prices to fall and demand to rise. There should also be an increase in the number of multiplay-service launches, which are now common in developed countries. Digital music services will not be restricted to mobile or broadband platforms and should become more appealing to consumers.

Mobile handset manufacturer Nokia has made some headway in digital music sales. Although its Comes With Music service has not proved popular since its launch in September, its local Music Store service, which was launched the previous April, has been more successful. Content for the service is provided by all four of the majors and by a number of local independents. Several other digital music services offer downloads in South Africa, but Nokia is the most high profile, and in the absence of iTunes it could repeat the success in South Africa that the Apple download store has achieved elsewhere.

Recording companies
As in most European and North American countries, the four major recording companies dominate the music market in South Africa, accounting for close to 80% of sales in 2009. Few details of album and singles sales are published, because South Africa does not have a national sales chart. Radio-station charts are the best guide to what is the most popular.

Independent recording companies in South Africa are represented by the Association of Independent Record Companies (AIRCO), which was formed in 2006 by the Department of Arts and Culture, Business and Arts South Africa, the Moshito Music Conference and local authors’ society SAMRO. According to AIRCO, close to one-third of domestic music sales and almost two-thirds of releases in the country are accounted for by its members. Notable independent music companies include Mozi Musiek, Select Musiek, Sheer Sound, Rhythm Records and Bula Music. In September, independent label Ghetto Ruff and US-based music group Lalabela formed joint-venture label Muthaland. Lalabela is owned by producer Gordon Williams and will operate as a 360 company, representing South African artists through recording, publishing, artist management and merchandising.

Royalty collections
Authors’ rights collections in South Africa are administered by SAMRO. For the 12 months to end-June 2009, rights collections totaled ZAR277.7 million (US$36.27 million), up 5.4% compared with the previous 12 months. Of the total, local authors’ rights accounted for almost 95% of collections, with local authors’ collections having risen 6.5%, to ZAR262.9 million. SAMRO also collects mechanicals, having in 2006 been made a member of BIEM, the international organization of societies that handle mechanical rights. Total mechanical collections decreased 27.8% in the 12 months to June, to ZAR6.8 million, reflecting the fall in recorded-music sales in the period.

The largest income source for SAMRO is general licensing, which accounted for 26% of total music-rights revenues (see fig. 3). According to SAMRO, general licensing income increased 17.2% year-on-year in the 12 months to end-June. Total broadcast income rose 2.6% year-on-year, with public TV providing the largest share of broadcast revenues.

Music broadcast on radio in South Africa is governed by quotas. For nonprofit broadcasters, 40% of music must be local repertoire, and for public and private broadcasters, the quota is 25%. But broadcasters have been criticized for not meeting the quotas. To remedy the situation, the Department of Communications is planning to begin working on its Local Content Development Strategy, with the intention of increasing local content quotas.

Compared with other countries in Africa, South Africa is streets ahead in terms of music sales and music industry development. The World Cup is certainly the most exciting thing to happen in the continent and the effects are being felt all over all over the region. Local sources continue to report a pride all across Africa that the World Cup is being staged for the first time in an African country and although time will tell if the current focus can have a longer lasting effect, the exposure provided by the world’s media is certainly providing a platform to launch the career of many a local artist.

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.