Safe haven of music hits right notes
Doug Morrison
INTERNET piracy and falling compact disc sales have been an unholy combination for the music industry, and one with no obvious sign of respite for the foreseeable future.
But there is a sanctuary from all the doom and gloom. To be precise there is the Sanctuary Group.
The group was formed 25 years ago to manage heavy metal band Iron Maiden, but is now an international media company with interests in just about every aspect of the music business.
This week City analysts are expecting Sanctuary to post a pretty upbeat trading position, seemingly at odds with the prevailing negative sentiment yet wholly consistent with the groups enviable financial track record following its stock market flotation in 1998.
Sanctuary has delivered 25%-plus annual growth since then and is forecast to lift profits from £10.1m to £13.7m for its September year-end.
By contrast, the groups shares, now standing at 32.5p, have halved over the past year because it has been lumped in with all the record company majors that have lamely pinned the blame for their poor CD sales on illegal downloading of music from the internet.
Andy Taylor, Sanctuarys chairman, holds a contrary view and is indeed defiantly optimistic about the outlook for the group and the industry as a whole. "The demand for music is as strong as its ever been, if not stronger," he says.
Global CD sales have fallen by 5% over the past year, something Taylor attributes to economic conditions - but only partly.
"A lot of the problems that the big companies are suffering from come down to the fact that the quality of music is not that great," he suggests.
"Music is not a necessity in life, its a choice. The type of music we release we know people want."
And far from decrying the impact of the internet, Taylor maintains it will "provide phenomenal growth to our industry".
The reason for such upbeat optimism derives from the way he and co-founder Rod Smallwood have structured Sanctuary.
They still look after the interests of Iron Maiden, but their management business has grown into one of the largest in the world with a roster of acts as diverse as Guns N Roses and Elaine Paige. A recent acquisition has added The Who and Led Zeppelin to this impressive list.
Were not vying with the majors for breaking the next pop act
Sanctuary also has a touring booking agency representing 350 acts and a merchandise business, which involves not just the obligatory tour T-shirt but everything to do with an acts image rights.
Put the three service businesses together with Sanctuarys record labels and its audio-visual production subsidiary, then, as Taylor suggests, "youve got a powerful base".
There is arguably no other company with the same broad spread of interests, although Sanctuary is competing against some tough opposition on each front - not least against the majors when it comes to CD sales.
There again, the company has deliberately gone down the low-risk niche route with its record label, signing acts with established careers and loyal fans who will buy anything that is put out.
Recent label signings such as Dolly Parton and Gary Moore could not be farther apart musically but they conform to Sanctuarys financial model.
Not that the group shuns up-and-coming bands - New York band The Strokes are on the books - but they are there to be nurtured for the long term.
"The quantum of what they sell is not the issue, its the consistency of sales," says Taylor. "Were not competing with the majors for breaking the next pop act."
According to Sanctuarys own research, 94% of the populations of the UK and America listen to music as part of their lives, 33% spend money on music on a regular basis and 5% are fanatical about one or more acts. It is that 5% that interests Sanctuary and has helped drive its profits. Its extensive back catalogue - through the acquisitions of the Castle and Trojan labels - underpins the formula.
According to Taylor, recurring income from such music niches is unlikely to be hit by internet downloading in the same way as, for instance, the transitory TV Pop Idols.
Taylor believes the internet pirates have been good for the industry because the people who rarely buy CDs anyway have got used to downloading music.
Once it is done legally it will provide further publishing income to both acts and record companies.
"Were using the internet to increase the penetration of our acts," says Taylor. "The area of the business that will be hit worst by the internet is not the record industry but the radio stations."
Equally important, he adds, is that the doom-mongers have overlooked the wider use of music in films and adverts. What was once regarded as ancillary to CD sales is now a key part of the income to both Sanctuary and its acts.
Taylor says: "There is nothing wrong with the music industry. Its a $100bn a year industry. The whole global income grew by 9.4% last year and I believe it will continue to grow dramatically."
The real boon has been DVD - "the fastest growing consumer market of all time".
Sanctuary got into this when the majors all but ignored the audio-visual rights of their artists. The group first moved into TV production (last weeks BBC documentary on Phil Collins was a Sanctuary production), giving it the expertise when music DVDs took off - especially among those loyal fanatics.
Sales of a recent Iron Maiden DVD have topped 150,000 - far more than those of many mainstream pop acts.
Taylor has said he wants Sanctuary to have a £1bn stock market value. Today it is worth £105m, and for all its mix of interests, the group is benchmarked against EMI even though it is far more reliant on CD sales.
"All it proves is that the share price has nothing to do with the value of the business," says Taylor. "Within the trade, Sanctuary is seen as a star."
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Taken from scotlandonsunday.com
Doug Morrison
INTERNET piracy and falling compact disc sales have been an unholy combination for the music industry, and one with no obvious sign of respite for the foreseeable future.
But there is a sanctuary from all the doom and gloom. To be precise there is the Sanctuary Group.
The group was formed 25 years ago to manage heavy metal band Iron Maiden, but is now an international media company with interests in just about every aspect of the music business.
This week City analysts are expecting Sanctuary to post a pretty upbeat trading position, seemingly at odds with the prevailing negative sentiment yet wholly consistent with the groups enviable financial track record following its stock market flotation in 1998.
Sanctuary has delivered 25%-plus annual growth since then and is forecast to lift profits from £10.1m to £13.7m for its September year-end.
By contrast, the groups shares, now standing at 32.5p, have halved over the past year because it has been lumped in with all the record company majors that have lamely pinned the blame for their poor CD sales on illegal downloading of music from the internet.
Andy Taylor, Sanctuarys chairman, holds a contrary view and is indeed defiantly optimistic about the outlook for the group and the industry as a whole. "The demand for music is as strong as its ever been, if not stronger," he says.
Global CD sales have fallen by 5% over the past year, something Taylor attributes to economic conditions - but only partly.
"A lot of the problems that the big companies are suffering from come down to the fact that the quality of music is not that great," he suggests.
"Music is not a necessity in life, its a choice. The type of music we release we know people want."
And far from decrying the impact of the internet, Taylor maintains it will "provide phenomenal growth to our industry".
The reason for such upbeat optimism derives from the way he and co-founder Rod Smallwood have structured Sanctuary.
They still look after the interests of Iron Maiden, but their management business has grown into one of the largest in the world with a roster of acts as diverse as Guns N Roses and Elaine Paige. A recent acquisition has added The Who and Led Zeppelin to this impressive list.
Were not vying with the majors for breaking the next pop act
Sanctuary also has a touring booking agency representing 350 acts and a merchandise business, which involves not just the obligatory tour T-shirt but everything to do with an acts image rights.
Put the three service businesses together with Sanctuarys record labels and its audio-visual production subsidiary, then, as Taylor suggests, "youve got a powerful base".
There is arguably no other company with the same broad spread of interests, although Sanctuary is competing against some tough opposition on each front - not least against the majors when it comes to CD sales.
There again, the company has deliberately gone down the low-risk niche route with its record label, signing acts with established careers and loyal fans who will buy anything that is put out.
Recent label signings such as Dolly Parton and Gary Moore could not be farther apart musically but they conform to Sanctuarys financial model.
Not that the group shuns up-and-coming bands - New York band The Strokes are on the books - but they are there to be nurtured for the long term.
"The quantum of what they sell is not the issue, its the consistency of sales," says Taylor. "Were not competing with the majors for breaking the next pop act."
According to Sanctuarys own research, 94% of the populations of the UK and America listen to music as part of their lives, 33% spend money on music on a regular basis and 5% are fanatical about one or more acts. It is that 5% that interests Sanctuary and has helped drive its profits. Its extensive back catalogue - through the acquisitions of the Castle and Trojan labels - underpins the formula.
According to Taylor, recurring income from such music niches is unlikely to be hit by internet downloading in the same way as, for instance, the transitory TV Pop Idols.
Taylor believes the internet pirates have been good for the industry because the people who rarely buy CDs anyway have got used to downloading music.
Once it is done legally it will provide further publishing income to both acts and record companies.
"Were using the internet to increase the penetration of our acts," says Taylor. "The area of the business that will be hit worst by the internet is not the record industry but the radio stations."
Equally important, he adds, is that the doom-mongers have overlooked the wider use of music in films and adverts. What was once regarded as ancillary to CD sales is now a key part of the income to both Sanctuary and its acts.
Taylor says: "There is nothing wrong with the music industry. Its a $100bn a year industry. The whole global income grew by 9.4% last year and I believe it will continue to grow dramatically."
The real boon has been DVD - "the fastest growing consumer market of all time".
Sanctuary got into this when the majors all but ignored the audio-visual rights of their artists. The group first moved into TV production (last weeks BBC documentary on Phil Collins was a Sanctuary production), giving it the expertise when music DVDs took off - especially among those loyal fanatics.
Sales of a recent Iron Maiden DVD have topped 150,000 - far more than those of many mainstream pop acts.
Taylor has said he wants Sanctuary to have a £1bn stock market value. Today it is worth £105m, and for all its mix of interests, the group is benchmarked against EMI even though it is far more reliant on CD sales.
"All it proves is that the share price has nothing to do with the value of the business," says Taylor. "Within the trade, Sanctuary is seen as a star."
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Taken from scotlandonsunday.com
