Music in the sights of industrial groups

The French music industry has been shaken by the unprecedented entry of industrial groups into its entire field of activity. The phenomenon began in 2004 with the emergence of Live Nation and the creation of its first festival: Main Square, in Arras.

Emmanuel Négrier, University of Montpellier

Since then, the music world, until then based on a mixed economy and multiple small businesses (subsidized festivals, producers with few artists, municipal or mixed-economy venues), has been the scene of takeovers by a few operators.

Diversification and concentration are both evident. Diversification is characterized by the entry of companies formerly specialized in one segment (production, venue management, festivals, record labels, etc.) into other segments. These companies may be mainly French, such as Fimalac, Vente-privée, Morgane or LNEI, or multinational, such as Vivendi, AEG or Live Nation. Concentration means that a limited number of companies take control of companies that were previously interdependent, but now belong to sub-sectors that are subject to their own expertise and rules. Mergers therefore raise the challenge of linking businesses, but also previously separate statuses.

This concentration is " diagonal " , since it borrows from the three types of concentration classically distinguished in industrial economics, and particularly in the media sector (financial, horizontal and vertical). Its motives are multi-faceted, and not all of them profit-driven. Perhaps this is what makes it so enigmatic and fragile.

A " diagonal " concentration

The first type of concentration is financial, enabling one company to take control of another while maintaining its formal autonomy and brand identity. Fimalac, headed by Marc Ladreit de Lacharrière, fits this model well, with sales of almost 250 million euros (in 2016) corresponding to an entertainment division (3S Entertainment) which, at the end of 2016, encompassed 101 theaters and 12 production companies, some of which, like Miala, organize festivals. The aim of preserving brand identity is not to make an abrupt break with the personalization that counts for the value of these often artisanal and fragile businesses. It does not preclude economies of scale, such as the pooling of ticketing activities, for example.

In this first type of concentration, we can find players who specialize in several niches at once without embracing the entire artistic value chain. Fimalac's strategy claims to exclude the " 360 degrees " in the name of artistic diversity, while Vivendi (nearly 11 billion euros in 2016) intends to go from development to production and touring of artists, right up to their valorization in the media and recording industry, through all the group's resources.

The second form of concentration is horizontal, involving the absorption of competitors or the duplication of an event in the same sub-sector. We're thinking here of the Live Nation group and its variations on the same festival in several countries - such as Lollapalooza - and the 3,300 or so artists under contract who tour the world, in particular at the 25,500 concerts organized annually by a group with sales of 7.5 billion euros in 2016. This phenomenon is not as recent as it might seem, since in the scholarly music sector René Martin had, on an admittedly more modest scale (and without this involving a question of capital in the same way as ownership of production companies or festivals), duplicated his La Folle Journée festival in several metropolises, while also taking over the management of other festivals in France (Saint-Chartier, La Roque-d'Anthéron).

Another example is the Lagardère group and its artist production strategy, in the same way that the firm began managing the careers of top athletes. This concentration on a single business niche generates expectations of economies of scale on a much greater scale than in the previous case. For example, duplicating an event enables a number of costs to be pooled: graphic design, serial artistic fees, continuity of technical equipment, communication, etc.

The third form of concentration is vertical, involving the absorption of customers or suppliers. This brings us closer to " 360 degrees ", more or less completely, by capitalizing on the interdependencies that exist between the initial risks (in the development of an artist, the creation of a label, a cultural venue, etc.) and the benefits derived from all possible exploitations of an artist or a work. Examples include Fimalac, Vivendi and Live Nation. We might also mention Sony, on the equipment and record side, whose investment in artist production is of course linked to the collapse in profitability of recorded music and the shift in profit sources towards entertainment.

The diagonal concentration is clearly linked to the fact that it is impossible to associate operators with a single niche. It's by crossing each of these fields (venue management, festival organization, production, publishing, digital services, ticketing, merchandising, etc.) that we see the interpenetrations underway. But how can we explain this sudden industrial passion for music? There's a paradox here that needs to be clarified: most of the strategies implemented by these groups in France (taking over festivals, venues, labels) are now resulting in losses. Strange, for captains of industry who cultivate a business secrecy that contrasts with the public purpose of their investment. Let's try to shed some light on their motives.

What motivates these concentration phenomena?

There are five reasons for these great maneuvers: passion, mediation, vision, attention and surety.

Passion evokes these leaders' emotional relationship with music. On the enchanter's side, it's the prince's classic voluptuousness as he mirrors himself in the patronized artist. On the strategist's side, culture is used to symbolically elevate oneself, when one's success in business is due to grey stock market activities or dubious sex trades, as Laurent Mauduit reminded us in his 2016 book Main Basse sur l'Information.

Mediation means using a prime position in the music business to make other, otherwise profitable, business. Financial losses in the music business are offset by the fact that, in VIP squares and in discussions with elected officials on the bangs of festivals, contracts are sealed, support is obtained and deals are negotiated in the elation of the moment. Losing (small) wins (big). All the while, he adorns himself with the status of hero, savior of French culture, benefactor of the arts. On April 22, 2017, he told Le Monde that his strategy would make his group " the secular arm of the Ministry of Culture"(Le Monde, April 22, 2017, interview by Fabienne Darge and Philippe Dagen).

The vision of these managers lies in their anticipation of the deregulation of the sector, which is part of the contemporary trend: the reduction in public subsidies which, in their view, distorts competition; the implementation of trade treaties, such as CETA, which excludes the music sector from the scope of the cultural exception. Today, we are losing in order to gain better tomorrow. And we're not losing much either, since we're buying festivals and venues at prices that take no account of the subsidies paid out over the years. For example, the AEG group's acquisition of ownership of the Rock en Seine festival did not take into account the significant subsidies granted to the event over many years by the Île-de-France regional council. Yet these subsidies can legitimately be considered to have played a major role in establishing the value of the event, without resulting in any financial return to the community when the festival was bought out.

Attention corresponds to this new economy linked to the possibility of using information linked to users' practices on social networks or during their exchanges on the Internet. By entering this sector, industrial groups gain access to the metadata collected when purchasing space or exchanging information on forums and networks. It's no coincidence that these groups are investing in ticketing services: Ticket Master (Live Nation), Vivendi Ticketing, My Ticket and Tick&Live (Fimalac). These are the sources of profit (and standardization of offerings) linked to the attention economy referred to by Yves Citton. The personality inferred from the purchase of a ticket can lead to commercial instrumentalization, starting from an initial act (a ticket to a show) with an ultra-positive emotional charge. The perfect algorithm!

A guarantee in the event of an emergency

As for the bonding aspect, it reduces the burden to the basics. But it's true that while we're losing a little money, we've nonetheless acquired assets - on the side of theaters, publishers, broadcasters, etc. - that have an asset dimension, particularly property, and strengthen the equity of these companies, in a relatively uncertain context. - This strengthens the equity capital of these companies in a relatively uncertain environment. So, in the event of a bubble bursting, it's a guarantee in the event of a hard blow.

Once these motives have been spelled out, doubts remain as to their cultural value in France or elsewhere. Naturally, these groups feel they are making their own contribution to artistic creativity, given the breadth of their artist catalogs. But their growing influence on programming, and their control of the most attractive posters, confirm the risk that these strategies represent in terms of diversity, and of increased dependence of artists on these firms. This could be the subject of another study, which would also look at how to counteract the most deleterious effects: standardization of events, rising prices linked to rising artistic fees and safety standards, reduction of artistic risk through the concentration of posters around artists". home ".

Emmanuel Négrier, CNRS Research Director in Political Science at CEPEL, University of Montpellier, University of Montpellier

The original version of this article was published on The Conversation.