Here’s a shocker: Billboard reports that Germany has now overtaken the UK as the #1 European market for music.

This is while obscure, little-known UK acts like Adele, Tinie Tempah, and Taio Cruz are sitting at the top of the charts around the world– and the biggest selling track in Germany last year was by Unheilig. How is this happening? How can the country that gave us the Beatles and the Stones fall behind the country that gave us Falco and Milli Vanilli? And what does it mean to the future of civilization?

Adele

As in most things statistical, there is more than one way to read these numbers. The IFPI (the international music trade group) reports that the trade revenue generated by sales of recorded music in the UK dropped 11% in the past year to $1.38 billion USD, while Germany generated $1.41 billion USD, which clearly gives Germany the edge. However, the UK remains a considerably bigger consumer of music per capita than Germany, with Brits buying 1.93 albums per capita compared to 1.32 for the Germans. But the more interesting stat was the one that explained the difference in revenues between the two countries:

The primary reason for the relatively stronger performance from Germany in 2010 was the continued dominance of the CD in that market, where physical sales still account for 81% of recorded music purchases. This contrasts with the UK where the move to digital music, whether it’s iTunes purchases or services like Spotify, is much further along. In the UK, physical sales are only 67% of total sales.

Bottom line: you generate a lot more revenue selling CDs than you do selling downloads.

Putting a positive spin on their fall from glory, UK experts (and quite a few US experts as well) explain that because Britain is further along in the transition to a digital market, their country is actually better positioned for the future, even if they are lagging a bit in the transition period. To put an Easter spin on it, you gotta die before you can be resurrected– therefore, the sooner you die, the better off you are. Of course, if digital sales stall (which they have started to do) and the coming Cloud actually brings less income than the physical business that’s been cleared away, well then… there is no resurrection. You’re just dead.

This may be one of the lessons in the turnabout between the Brits and the Germans that’s worth noting:

Anytime you encourage the new kid, you’re discouraging the old one. Of course, one wants to support the future, and it’s only natural that the music industry should get behind successful digital distribution channels like iTunes. But we have to remember that by doing so, we only hastened the demise of the old, brick and mortar retailer on the corner. It might have been worth asking if iTunes really had the potential to make us more than our old friend did. Likewise, an industry embrace of streaming services like Spotify will only fast-forward to the end of download sales. Are we sure that the income from streaming services, that vague mix of advertising revenue (which has been soooo profitable with YouTube) and subscriptions (which no one seems to buy) will beat 99 cents a download?

While the UK industry has sacrificed retailers like Zavvi, Borders, and though they’re still breathing, HMV, all in the name of progress, the German industry has continued to support it’s retailers with new product and packages. Explains Frank Briegmann, president of Universal Music Germany, “Over the past few years, we have repeatedly tried to generate impetus for the physical product without merely lowering prices”.

In return, the retailers have supported the local acts, and in particular, veteran artists, making local repertoire a dominant factor on both the German radio and sales charts. Pretty remarkable– given that it would be hard to name one genuine worldwide superstar in the German market. While the UK has compiled its numbers based on Adele, Tinie Tempah, JLS, and Taio Cruz, Germany topped them with the likes of Rammstein, Lena, Ich + Ich, and the Scorpions. What can it all mean?

Scorpions

It comes down to this one terribly unsexy truth:

The weasels that win over the next three to five years will be the ones that play to the past, not the future.

The writing is on the wall everywhere– even if no one particularly wants to read it. The top touring acts? Bon Jovi and U2. The top-selling albums of last year? Lady Antebellum, Susan Boyle, Sade, Michael Buble… all aimed at the adult demographic. Even Eminem and Alicia Keys are not exactly new faces. The reason people are bidding to buy Warner Bros. is not for their new stars (there aren’t many) but for their catalog. The same is true of Warner Chappell and EMI Publishing. Their value is in the classic songs, not in their current market share.

Roger Waters

Across Europe, it’s not only the Germans who are profitably investing in revitalizing or re-packaging their older superstar acts. In Italy for example, the charts continue to be dominated by names like Eros Ramazzotti and Vasco Rossi. Given the predominately aging populations of most of the major European countries, this trend won’t change anytime soon. In America, Rihanna has had an unprecedented string of #1 hits, and still can’t manage to mount a successful tour, while acts like Roger Waters pack arenas, without having had a hit record in more than a decade.

Rihanna

For music publishers, the older catalogs are far more profitable than chasing current hits. It’s the classics that show up on American Idol; the classics that get made into jukebox musicals like “Jersey Boys”, “Mama Mia”, or “Rock of Ages”; the classics that will bring the worldwide money with the advent of mobile music and video. As for me, I’m giving up my spot at Mercury Lounge or Rockwood and checking out whoever’s playing at Foxwoods casino.

If you’re in the record or music publishing business and you’re looking for safe ground, put your money on heritage acts. Old acts singing old songs to old people may not be the future of the music business, but it sure looks like the here and now. The generation that created lasting superstar acts like Bon Jovi and U2 is one that continues to support live music and buy CDs. Until something better comes along, that’s what keeps us all in business.

Like the Germans, you may only be holding off the inevitable Five years from now, all that investment in older acts might well put you out of position to face the future. On the other hand, if there is no future, you will have stayed alive longer than anyone else. Sometimes winning is just not losing. It’s better to be #1 than #2, even if it’s only for today. Just ask the Brits.

    I can’t help but wonder about the baby boomers all around the world. The US has 70-80 million alone and if you can say one thing about this generation as a whole is that music was/is engrained in the boomer soul. I’m thinking what you might be talking about here is related to the second coming of the boomers and whatever that’s going to look like who knows……

    Dennis:

    It’s exactly what I’m talking about. The demographic and economic reality is that the populations of the countries that have sustained the music industry over the hundred years are growing older. At the same time, the younger generation is simply not committed to music in the same way that the baby-boomer generation of the 60′s and 70′s, and even the post baby-boomers of the 80′s were. There are new entertainment alternatives out there, and music is not a culturally-defining element to people in their teens and twenties the way that it once was. I’m all for embracing the future, but you also have to survive today. And you have to support those who are passionate about your product.

    Thanks for checking out the blog. Hope you’ll stay in touch.

    Song Write By the way, it doesn’t matter what type of music you’re into- rock, pop, soul, blues, country, or bagpipe love songs, since the principles of good songwriting are universal to all genres of music.

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