Case study: A decade lost in Argentina
As global as the internet might be, it’s not very international. As part of my series of case studies of the online music world, I thought a visit to the land of Tango might be in order.
I was recently talking online with Federico Novick, proprietor of record label / production company Labil Musica.
Federico had just finished reading the 20 Things e-book, and was wondering aloud what it must be like to be in an online music environment that includes all the things we assume it includes for everyone.
But without trucking out that tired old ‘Digital Divide’ thing, there’s still disparity between different national environments when it comes to commerce, politics, technology — and music.
Tell me about popular music in Argentina. What are people listening to?
Argentineans listen mostly to international pop hits, latin pop or “soft” rock acts, local rock, “tropical” music (a lot of sub-genres exist under this umbrella, from cumbia superbands to more hip-hop influenced music), folklore and tango.
Commercial radio has been dominated by a mix of Latin and Anglo-pop for more than a decade, with some Argentinean rock hits here and there. In the eighties, almost all rock music in Spanish was made here. In a decade, we lost that crown to the Mexicans.
What size market are we talking about? How many people live there?
In 2001 there were 37 million people living here.
The music market is big, and the record market used to be: an example could be the Rolling Stones playing five 60.000 capacity stadiums. In spite of the decline in record sales after the late 90s crisis and devaluation, CD sales went up after the 2002 devaluation.
In May 2007 CAPIF (Argentine Chamber of Phonogram and Videogram Producers) says that there were 1.264.377 units sold. But in 1998 (whole year) the number was 23.379.400.
Are independent music retailers common? How are they doing?
If you mean non-chain music stores, there are plenty, but they offer almost the same product than the big ones.
As for independent (or indie) music retailers, there are some in the big cities, mostly here in Buenos Aires and they cater to buyers who still want the artifact. There are imported cd and dvds, small and mid local indie label cds, and some other merch: the niche indie market itself still breathes there.
But there’s a new generation of buyers, who don’t care about discs and will never care, who is out of there. And they don’t buy online music at all. That’s where the problem starts.
We think of online music stores as being international. How popular are things like the iTunes Music Store in Argentina?
iTunes doesn’t operate in Argentina. They are not “international” at all.
There’s a couple of online music stores, but the volume they sell is quite low — almost nothing. People simply don’t buy online, but you have to understand that online mail-order CD sales (not digital download) never took off in this place because the mail is just not reliable.
As Gustavo from Ultrapop (the biggest indie music distributor in Argentina) said to me, we need four or five years to establish a sort-of iTunes culture.
So, ahead is a void: CD buyers are the same, new ones download and burn music or buy pirate, and the record industry transforms at 300 miles per hour all around the world — while we don’t know what’s going to happen here.
It’s interesting, it’s bizarre, and hard to follow.
So… how much does the broadband cost, and what do you get for your money?
There are several plans, but you can get a decent broadband connection for around 20 to 40 USD per month, depending on speed and service. 2.5 megs costs $40, which is a lot of money.
Do ringtones and mobile music feature much?
The ringtone market’s growing, but the mp3 songs are not that popular. Phones with multimedia capabilities are starting to become popular and cheaper models are available. Hit songs or popular tv shows music are the most downloaded, in the monophonic or polyphonic format.
Is there much of a CD Piracy problem there?
There is a big problem. People don’t seem to understand that pirated CD sales is what hurts the industry, not downloads.
It’s very clear: in 2005 pirated cds were 55% and legal 45% (CAPIF figures) of the whole market.
How can an independent record label like yours make money in that sort of environment?
Since CD sales in the indie music arena are very small (there are many labels, and 2000 copies is considered almost a gold record), I developed a different strategy.
I started last year with two compilations co-produced with two different brands — clothes and a hotel — and we sell these CDs to independent stores and promote those brands while offering very good local music.
We produce music for the advertising industry as well, and my ambition here is for one field to help develop the other. A song from a new band could end in a TV spot, a tourist can pick up a CD at a hotel and discover that there’s a great vocal/electronic act he or she didn’t know about.
Publishing is the only “arm” the majors are not going to let go, and for me it should be the same among the indies.
Live music is another very profitable way to go, maybe the most important one.
The cycle, in a country where there is no online music sales, could be: Myspace – Band’s Website – Free Song Download – Live Show – “Premium” or “Hard to find” CD – Additional merchandise.
Other than CD piracy, what’s the biggest challenge facing the music scene in Argentina?
The industry has lost a decade: we didn’t develop major international acts, exported the great music we do produce, or promote new and fresh sounds across the country.
But there are many people who are trying to revert that — indie labels who work hard and excellent artists. In the next few years we’ll see if this new online world/death of the old record industry environment will help our music.
What are your opportunities for export?
There are many. Tango, different Hard and Heavy Rock genres, World Music, Jazz are doing very well. Indie Rock or Pop is harder but doable if you travel, get the right connections or both!
Digital sales outside Argentina are starting: you can find some local music online, for sale, but you can’t buy it here. Strange!!
Do you think the online environment is changing in Argentina? In what way?
The music industry will have to “enter” the online world for good, but it won’t happen as soon as we want.
You need to know that broadband connections are growing but most of the country has either no permanent internet access, or no access at all.
That said, there’s a large p2p culture that has grown over the years: even if you want to buy music, you can’t because the majors won’t put something out unless it’s a big hit.
Indies try their best, and the music scene’s quite interesting. We have a really rich history and great artists.
Music always finds the ears that want to listen, no matter how.
What other ways are Argentinians making money from music?
Live shows, mostly, but you need to let people know about what you are doing and media conglomerates are not saying “welcome” to electronic / indie / world / whatever different music. Established acts do sell merchandise, which is a market that is slowly becoming interesting.
What would you say to independent labels, distributors or artists in say, the US or UK? Is there business to be done in Argentina?
Yes. You can come and play, there are great venues and a wonderful audience.
Our recorded music needs new channels to reach the right ears around the world, so we need aggregators and record distribution. The electronic scene is very big as well. Companies that need fresh content can find it here: original artists who experiment, great composers and players who work hard, bands that rock.
Where would you start?
I would check some good sites and browse around: global-art.com, ultrapop.com.ar, rock.com.ar, and indicevirgen.com for indie music.
You can drop me a line as well: info@labilmusica.com
Finally, what’s the best thing about being in the Argentinian music business right now?
The future. Nobody knows where this is going, but we feel it’s going to change big time.
I love to imagine models, dream about formats: anything could happen in this bizarre and transitional time.
Kids downloading from kiosks? Artists signing contracts to record companies where they share live music revenues? Majors with 10 employees that deal only with publishing issues? Paid private webcasts? Creative Commons discographies?
Possible.
I am trying to make it work with a new idea, trying to mix two different worlds that were cousins: advertising and music — and make them live in an indie platform.
Also… we’re working on a pop girl group.
7 Comments. Write a comment or link to this post
Robert Baum
Would be interesting to research iPod sales in Argentina. If Apple was smart they’d get a store up and running in Argentina, adding to its clout as a #3 retailer. As you said and the online world makes more accessible: “People hear music-People like music-People buy music.”
Jun 23rd, 2007
mikhail alexandrovich
Federico said “But there’s a new generation of buyers, who don’t care about discs and will never care, who is out of there. And they don’t buy online music at all. That’s where the problem starts.” what does he mean by this, is he suggesting people who don’t buy discs and don’t buy downloads, they only consume music they can find for free on the net or listen to on the radio?
You mentioned the postal service is not trust worthy so that can explain the slow pace of mail order consumption and the importance of buying direct from the act at live shows but one question I think needs asking is what role credit cards play in all this. itunes, shops like amazon, paypal and the rest all assume you have a bank account or a permanant residential address or a credit card. In this country most people i speak to have a bank account or sometimes a credit card or at least a permanant postal address which allows the buying of discs or downloads online. However in places like Ukraine, because the banking system collapsed in 1990 few people trust the concept of a bank, which can disappear with their money at any time. Of course, if you want a credit card you can’t get one unless you pay a very large deposit upfront(often more than the credit allowed on the card itself!!) or you have to have some sort of security to offer against the credit card like a bank account with a financial track record etc.
The piracy of music in terms of CD sales, how much do you think this is driven by the fact the people don’t buy using credit cards? Do you think that buying with cash from illegal sellers is more convenient than having to make your way into a city to buy from a shop at much higher prices? Do you think the fact that people don’t buy online is becuase they have no means to purchase online anyway?
Do you think the distribution of population versus the location of Music Retail outlets plays a part in all this too? Can people get to music shops easily or are they only found in the big cities?
In the UK I have noticed the majority of my online CD sales are going to places away from Urban areas and this suggests that I am selling to people who can’t get to the music shops easily or who have no access to specialist shops in their area. Of Course the postal service and the use of a credit card or paypal account usually generates the sale.
Another thought, surely if 55% of available music is pirated this is a great way to get your product into the market at no cost to yourself so playing live, merchandise, publishing income from radio play and advertising or film revenue, even some form of sponsorship would be the way forward until the music sales income situation can be resolved? Perhaps the answer is to licence music to other territories where the pirating problem is not so serious?
Easier said than done I understand but I think the Pirates have a role to play, but trying to harness the pirates to help work for you rather than against you maybe the big problem. I’m sure as a new band you would love to have your music pirated and sold all over the place but as an established act the pirates are clearly making money out of your hard work so there must be ways to get round the problem. I would be intersted to hear your thoughts on any of this.
Jun 24th, 2007
Federico
Mikhail, will try to answer your questions!
People don’t buy music online yet. They buy pirated discs, listen to the radio (as you said), and some download through p2p programs.
We had the same problem with the bank system many times in Argentina. Credit cards are not that hard to get, and e-commerce is solid. But the real problem is the mail: goods are lost, or stolen. It’s getting better, though.
Piracy is not linked to the use (or lack of) credit cards. It’s about price, since a cd is around 10 USD and a pirated one costs you 2 or ev en less. Maybe people buy pirated because they don’t have the means to buy online. But they wouldn’t buy at retail stores either.
Where you find retail outlets, you will find “top mantas”, or small pirates selling cds out in the street. There are small cd stores in small cities, but distribution is an issue. I don’t know if more retail stores would end up in better legal sales.
About your sales in the UK, that’s interesting. Reaching the right music buyers is a goal, but I think that those guys or girls want the actual cd. I am trying to compare what you say to what happens in my country, and I don’t see people in this niche market downloading from an online store. The non-urban buyers are scarce.
I can’t agree more with your idea on other territories. We won’t have a normal online music market in the next three or four years, if we ever have one. We are doing that export thing, but we need more!
The “free” advertising and distribution pirates offer to new/established acts is not a good thing. What we need here is more internet access for more users, so social networks, music sites, and online media can do that job.
Thanks for your questions and ideas, I really appreciate them.
Jun 30th, 2007
Fernando
I live in Argentina and the claim that the postal service is “not reliable” is not so. If sent with tracking, it can even be tracked on the web.
I receive packages in the mail all the time, both from overseas (USA, Australia) and also locally.
Most of the times that mail is lost is because:
-It was sent with the cheapest option, with no tracking number (unregistered)
-The piece is actually delivered, but people living in apartment buildings often do not have individual mailboxes, so you have to rely on each building’s doorman willingness/expertise to hand-deliver the received mail at the end of the day, or sometimes people are left packages in front of their apartment door. Needless to say this is NOT very secure.
If the postal piece is sent registered, not only you have a tracking # that you can follow over the web at http://www.correoargentino.com.ar, but also the mailman will never leave it unless you sign for it. For small packages, you are left a notice and the receiver must go in person to his nearest post office to retrieve it.
FC
Jul 17th, 2007
Nicolas Cohen
Hi Andrew,
Its great you write a piece about argentinian music industry, there are a few more reasons why people don’t buy music online:
1. The biggest attempt for an online music store uses Microsoft’s WMA files, which dont play at most available music players (except ones from Phillips).
a.They sell music for 2.80-3.50 pesos, which is only 1 peso less than pirated cd’s from the same artists. 15 songs cost $45, while a legal cd costs $20 – $30.
Why do they charge that much?
Its not because of SADAIC (the association that charges for commercial usage of musical work), which charges 10% or a minimum 10 cents of the total cost (which would be $0.35 for them), which actually goes to the artist un a 90% (if the artist is associated correctly, which might mean some paperwork)
I don’t know how much they pay to the owner of the music. I don’t believe is more than 50-70 cents per song.
Credit cards get most of the money there, typically charging $1 to $1,50 for a transaction, plus some porcentage between 3% and 5%, and then there’s payment gateway costs, wich is somewhere around $0,30 per transaction.
So here is where much of the actual cost of online music will go with per song credit card payment, almost 2 pesos. Now the total $2.80 – $3.50 is easily explained.
How can we solve this? I am not sure, there has been a few attempts to do it, but nothing has catched. This site i was explaining sells $10-$28 cards in music stores so people can buy the songs… i haven’t seen anyone i know ever buy one.
Mobile and Land Phone companies have a chance there, they could charge some money when you call some number, that associates with your account somehow, but they’re not opening that payment method to small business, so there’s no chance a regular folk can do it, it probably has same or more costs than credit cards, cause no one has tried it yet.
The buenos aires subway company has a “digital purse” which i believe could do the trick, if they only had an online payment gateway. People already use this cards to move faster on the subway and they already have some money in there *tip tip*.
Then theres all the big companies which have services like ISP’s, Newspaper and magazines subscriptions, etc.. which could charge all charges in they’r monthly bill, but i’m guessing its not business for them yet, or maybe they don’t have much imagination, maybe it involves lots of paperwork or some legal status, also it’s not they’re usual business…
There’s also the credibility thing: Most websites that sell online in argentina are ugly and difficult, it just seems like they’re gonna break anytime (ive tried buying a computer from dell and failed miserably, also a ticket from ticketek, the biggest concert ticket salesplace, which actually required me to put all my personal information in before allowing me to put a sale). Overall, if i wherent a web developer i probably wouldnt ever use my credit card on an argentinian website.
Its not about hackers, its about the design.
Most people with some income have debit cards, cause there’s a weird law here that forces emplyers to give a bank account for each employee, which comes with a debit card. I haven’t seen any online store wich allows for debit card payments…
b.They also don’t seem to have ever heard about the long tail, cause most available music there is from the top sellers.
c.As they’re not making much business they’ve added lots of banners, urged for some revenue, making the website ugly and poorly usable, you cant find easily that you actually can buy music there.
Sep 15th, 2007
So... What do YOU think?