The Tera Report published on the 15th of March 2010, ostensibly is aimed at informing the reader of;  Building a Digital Economy : The Importance of Saving Jobs in the EU’s Creative Industries.

The Tera Report insists that job losses in the limited selection data-set (France, Germany, Italy, Spain and the UK) are from file sharing.

Unfortunately the Tera report failed to analyse the fluctuating economic market conditions that have existed in Europe since the 2001 general downturn in the economy.

The report fails to include or analyse other publications on job losses in the EU.

Figure 1 – GDP & Employment – EU, 2007-2009 (based on Hurley J, 2009)

Subset of Hurley J’s dataset, limited to the Tera report “selected basket of countries”

According to Hurley J (2009) The global downturn has profoundly changed the face of the labour market in Europe: by July 2009, 22 million men and women were unemployed throughout Europe, five million more than a year previously. (Not one of whom claimed that their job was lost through file sharing.)

Additional corroboration of Hurley J’s data was found in;

Eurofound Press release, 30 April 2009

Job losses outnumber job creations by almost three to one

Eurofound Press release, 1 February 2010

Levels of restructuring job loss continue to decline but so does job creation across Europe.

According to Tóth A, (2005) the majority of job losses stem from corporate relocations to countries offering cheaper labour regimes.

Toth states that the transfer of jobs from the west to the east has been an ongoing concern in Europe since the late nineties.

He cites the case of the IBM hard disk manufacturing plant in Székesfehérvár, in Hungary, where 3,700 jobs were lost when IBM sold their disk business to Hitachi whom elected to move operations to Asia citing depressed economic conditions in the sales of Personal Computers and peripherals in 2003.

“actual or even threatened relocations could trigger forms of concession bargaining and may lead to so-called regime shopping, whereby firms search for the locations which they believe can guarantee the most convenient regulatory regime (supposedly with a low level of labour protection) and governments and unions find increasingly hard to resist the demands for de-regulation of labour markets and reduced labour protections, since they try to preserve existing economic activities and employment (or to attract new activities and increase employment). In this perspective, a possible outcome of such pressures on regulatory frameworks may be a race to the bottom in terms of labour standards.”

This “race to the bottom” severely impacts mainly those countries with the strongest employment protection standards
[unions]. Like Germany, the UK, France, Italy and curiously Spain.

And further we interrogated the IMF database;

Figure 2 Unemployment EU 1998-2009 % of Workforce

Source: http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/weorept.aspx?sy=1998&ey=2009&ssd=1&sort=country&ds=.&br=1&pr1.x=64&pr1.y=9&c=184%2C132%2C134%2C136%2C112&s=PPPEX%2CLUR&grp=0&a=

In fact, as can be seen from the above IMF sourced data, job growth amongst the selected countries was strong to 2001, with a small correction (dot com crash) induced drop through 2003 and a gradual easing to 2007 with another recession drop.

An obvious recessional side effect would be the restriction on discretionary entertainment income, like music, computer games and movies.

In Muriel A (2009 – P.38) he shows that the most affected are the 18-24 year old age group

Which are in the main the principle targets of the majority of new music releases.

Figure 3 Unemployment by age Group 2005-2008 (Muriel A, 2009)

In Hansard (HL Deb, 3 November 2008, c12) (House of Lords debates)

Lord Myners (Parliamentary Secretary, HM Treasury; Labour) said:

“Let me say a few words regarding the present economic environment, which noble Lords know is very difficult. No Government can prevent a downturn in the face of the unprecedented shocks we and others are facing….

The latest economic data show very clearly the task we are facing. The preliminary estimate of GDP growth recorded the first quarter of  negative GDP growth for the third quarter of this year since the second quarter of 1992 and the weakest since the final quarter of 1990. Data suggest that individuals are reigning in spending on discretionary and big-ticket items as disposable incomes have been squeezed by high energy prices, alongside growing uncertainties arising from the global financial situation. Consistent with consumers acting more cautiously in this challenging environment, retail sales fell in September.”

In bringing up previous recessions we thought we would chartthose recessions over the Album sales chart (In case dear reader, this is yourfirst visit; we have displayed this next chart before.)

Figure 4 Recessions -vs- Record Sales (Albums) 1972-2008 UK

Sources: BPI – Albums Shipped and UK GDP.

The years since 2000 have not been easy for the members of the EU with ups and downs.

Figure 5 National Currency (EU VS EU/USD) PPP

Source IMF Data referenced in Figure 5

Which appear to be reflected in the number of albums shipped in the UK in Figure 4 above.

Of course, as Manufacturing moves eastwards, the Euro appears to be loosing ground on a yearly basis with the average European citizen now contemplating…..

Figure 6 EU GDP based on PPP Share of World Total.

Source IMF Data IMF Data referenced in Figure 2

Vastly reduced buying power of overseas goods priced in American dollars [e.g.: Music, DVD's, Games].

The Hunt for The Job Loss Data or We look for the 186,000 missing Jobs

There are a recorded 11,372 incident reports in the ERM database, yet Tera have failed to provide even a cursory analysis of the ERM reports relating to the limited (country) dataset they have elected to dissect.

We spent considerable time examining the stated reasons for job losses in the EU from companies in the ERM database.

Cinram are one the largest manufacturers of recorded mediaproduct in the western hemisphere.

They recently made an announcement that they had lost the Warner DVD business to a French Company and that it would affect their operations globally including Spain.

TORONTO (February 1, 2010) – Cinram International Income Fund (TSX: CRW.UN) announced today that it has received written notice from Warner Home Video Inc. [“WHV”] that WHV has exercised its option to terminate its service agreements on July 31, 2010. The notice covers all Cinram entities globally and will directly impact operations in North America, Mexico, UK, France, Germany and Spain.

WHV revenues for 2009 represented approximately 28% of the total consolidated revenues of Cinram International Inc.

From the Cinram about us page :

Today, we are the world’s largest independent provider of pre-recorded multimedia products and related logistics services and have the capacity to manufacture 1.77 billion DVDs per year. Our major customers include Warner Home Video, Warner Music Group, New Line Home Entertainment, Twentieth Century Fox Home Entertainment (Fox), Metro-Goldwyn-Mayer Home Entertainment (MGM), Artisan Entertainment/Lions Gate, Alliance Atlantis and EMI Group plc (EMI).

We  searched for Cinram on the ERM system.

Company: CinramGeographic location- Country:                      France- Region:                       Est ; Lorraine- Affected unit(s):           Saint-Marguerite (Vosges)Company – Group : Cinram - Sector : Manufacturing : Manufacture of television and radio receivers, sound or video recording or reproducing apparatus and associated goods (Nace DI-DL)- Number employed:    103

Employment effects – Announcement Date: 16-05-2003-Planned job reductions: 103- Type of restructuring: Internal restructuring- Employment effect start: 01-05-2003- Employment effect timeline: 01-12-2003

This entry stated that the reasons for the job losses wereformat change related:

Cinram announced the closure by the end of the year of its unit located in ‘Sainte-Marguerite’. This is due to the changing market of video tapes since the introduction of the DVD. The company do not want to dismissed all the workers. They might be transfered to another unit in ‘Haute-Normandie’.

The announcement didn’t mention either file sharing or CD or DVD piracy.

The Warner/Cinram announcement stated that Warner were merely moving their jobs from Cinram to Paris-based Technicolor. Again, no mention of job loss due to Piracy.

In fact our search using the following parameters, found 6882 out of a total of 11374 restructuring cases that might qualify as the data the Tera report was referring too.

Figure 7 Our Search Criteria on ERM

Ann date	Country	Company	Type of restructuring	Sector	Planned job creation	Planned job reductions
18/03/2010	CzechRepublic	AFSI (Advanced Filtration Systems Inc.)	Business expansion	Manufacturing	185
15/03/2010	Austria	Gabor	Offshoring/Delocalisation	Manufacturing		170
15/03/2010	Poland	Huta CMC Zawiercie	Internal restructuring	Manufacturing		120
10/03/2010	United Kingdom	Toyota	Internal restructuring	Manufacturing		150
10/03/2010	Germany	ZF Friedrichshafen	Internal restructuring	Manufacturing		550
9/03/2010	Germany	Getrag	Internal restructuring	Manufacturing		700
4/03/2010	United Kingdom	Cadbury	Merger/Acquisition	Manufacturing		150
4/03/2010	United Kingdom	Thyssenkrupp Tallent	Bankruptcy/Closure	Manufacturing		490
3/03/2010	CzechRepublic	Brose CZ	Offshoring/Delocalisation	Manufacturing		300
2/03/2010	United Kingdom	AstraZeneca	Bankruptcy/Closure	Manufacturing		1200

We reviewed a small dataset (the largest by job losses) of these 6,882 announcements, (N=<200) but failed to find any that claimed that closure, sale or relocation was due to anything other than economic downturn, change in corporate ownership or alterations in employment policy.

Specifically, not one of the (approx 2.5% of the dataset,) of the results we reviewed included the words, piracy, file sharing or cited lost sales through unknown channels (piracy….) as a reason for job loss.

We then caused to be extracted from the database, all records that dealt with loss of jobs exceeding 999.

119 ERM records matched our search criteria starting from 1/03/2001 and ending 15/03/2010

Figure 8 Subset of Job Losses where Jobs lost >999 on ERM

By totaling job losses and subtracting new jobs, we were left with a total of 796,543 reported job losses throughout the EU.

We removed the Hungarian police, the British Civil servants, Health workers, Mining, Real Estate Salesman, Teachers, farmers and mortgage brokers and were left with : 463,543 lost jobs.

Figure 10  Breakdown of EU Job Losses on ERM Manufacturing, Transport and Retail Only

It was starting to look like we were going to have a problem getting to 185,000 job losses in the creative industries, just for 2008 . (The 119 subset dataset covers 2001-2010.)

By the time we remove the motor vehicle companies, steel working companies and Newspapers (it is not possible to pirate a physical newspaper) we are left with only about 200,000 job losses spanning nine years.
So the number quoted by Tera in their report “186,000” in 2008 alone is impossible amongst those companies that are large enough to qualify for (almost) automatic reporting to the ERM database.

Exceptions to inclusion include very small companies.

Possibly the Tera report is referring to closures in the largest portion of employers in the creative industries, the small home based end of the music industry.

The local pub gig bands and the mom and pop, music companies. So was the Tera Report referring to job loss in the Soho/SME end of the music business?

Indie artists and Innovation versus the Big End of Town.

Last week we quoted from Margrét Sigrún Sigurdardottir PhD dissertation entitled “Dependently independent Co-existence of institutional logics inthe recorded music industry,” which breaks down the constitution of the Core Music Industry in the UK:

Of all the cultural and creative sectors the music industry is the only one where employment has been going down. This corresponds to the falling total sales of music in the world, claimed to be a result of increased illegal file sharing and digital sales not making up for the drop in physical sales (IFPI, 2007)

So far, she would seem to agree with the Music Industry Claims. But now she creates a new track by proving that the biggest employer in the music business is the Soho and SME businesses….

…the music industry is dominated by small firms. With 77.8% of the businesses in the industry employing fewer than five people (although this is slightly lower than the creative cultural sector average of 84.7%) 13.2% have 5‐9 employees, 5.2% employ 10‐19,leaving only 3.8% with more than 20 employees.

She concludes…

From these figures it is clear that this is an industry of small firms with only a handful of very large firms. The figures presented above cover all of the music industry in the UK.

Over the last twelve months we have researched how the smaller companies feel about file sharing, P2P and the whole internet “sharing” thing.

The Internet has literally hundreds of anecdotal experiences of these small bands, whom all appear to state quite categorically that file sharing appears to assist their Public Relations and Marketing efforts.

In (Devenish 2004) Wilco’s business manager Tony Margherita was asked about the effects of file sharing on his bands revenues:

‘‘As a musician, you want your music out there, you want it out in as many places as it can possibly be.’’ This increases the chances more people will pay to see your band when it comes through town (and perhaps buy merchandise), or that a newfound fan will purchase one of your other albums

Wilco is the Chicago-based rock band who was dropped by Warner after the major label deemed their album ‘‘uncommercial,’’ the group searched for a new label, and the tracks leaked onto file-sharing networks—so they put the album on their website so fans could listen to it for free. By applying the major labels’ logic, this should have cut into sales, but the exact opposite happened.

Wilco’s Yankee Hotel Foxtrot ended up debuting in the  Billboard Top 20 and went on to be the band’s biggest album, selling a half million copies, double that of its previous album. The publicity surrounding the plight of the record combined with the free distribution of their music on the Internet undoubtedly generated more sales for the little band that could.

Too Much Joy’s Tim Quirk on file sharing…

‘‘As a musician, you want your music out there, you want it out in as many places as it can possibly be.’’ This increases the chances more people will pay to see your band when it comes through town (and perhaps buy merchandise), or that a newfound fan will purchase one of your other albums

 The activity of the larger record labels in attempting to combat file sharing appears to provide entertainment for the smaller labels.

 (Nelson 2003) quotes label owner Rich Egan, owner of independent record label, Vagrant in New York.

Vagrant and many other independent label owners cheer them on. File sharing, these owners say, helps their small companies compete against conglomerates with deeper pockets for advertising and greater access to radio programmers.

And they do need help. For the small labels, a top ten hit is rare and file sharing appears to be the only methodology that levels the public relations and marketing playing field.

(Nelson 2003) observes that for some independent label executives, their confidence [existence?] stems from subscribing to unconventional barometers of success and that success (profit), can be achieved in sales of as little as 10,000 to 25,000 copies of a record.

The industry, which successfully sued The Pirate Bay operation, claims that more than 1bn illegal music downloads were made in 2007, crippling the industry. I don’t approve of illegal downloads, but where is the evidence of economic damage? Look at the figures. In the last quarter of 2008, album sales in the UK were – wait for it – 0.9% up on the previous year, when the economy contracted by 1.5%. And UK royalties for songwriters rose 8% in 2008. Recession? What recession? Overall album sales, which some had predicted would collapse by more than 10% in 2008, fell by only 3.25%, while digital albums rose by 65%. And the singles market? Why, 2008 was the biggest year on record in terms of units sold across all formats.

  Music industry must change the record Thursday 21 May 2009

Victor was almost right. Because 2009, beat 2008.

Most of the smaller artists, have normal 9-5 jobs whilst they are waiting for their “big break” on the Internet.

Internet 1998 start-up online Indie music seller, CD-Baby has demonstrated that that there is a demand for “unknown” non-advertised music artists.

From humble beginnings

Figure 11 CD Baby Sales 1998-2005 Solid Steady (No Marketing Budget) Growth.

The business grew to nine digit numbers today.

278,510 albums being sold on CD Baby

5,339,025 CDs sold online to customers

$107,769,092 paid directly to the artists

However, growth in 2008 dropped to only 2% – but compared to the rest of the industries 14% (apparent) loss, CD-Baby did reasonably well.

Therefore, if file sharing is responsible for damaging sales, (as per the Tera Report) it would appear that file sharers are staying away from sharing unknown titles from unknown indie artists that can be listened to free online anyway…

The argument defies logic, or suggests that file sharers are only interested in the big name acts.

But we decided we would put it the test just in case Tera Consultants were wrong.

Figure 12 CD Baby Top Sellers – Texas Hippie Collection iTunes or Free…

The consumer option is (1) buy the album on iTunes, (2)  listen to the podcast of the texas hippie collection (for free) or (3) I could do the pirate thing search for it on the ed2k networks.

Fifteen versions of the files with around seven hundred offering to share it.

Figure 13  Texas Hippie Collection on eMule ED2K – 15 iterations.

Yet the Band is selling copies and is at the top of the CD-Baby topsellers list.

At this stage this is an anecdotal case history, however, the data obviously allows for an in depth empirical study of “un-commercial” works being:

Podcast, Streamed, purchasable via digital (CD Baby), iTunes and via P2P.

For the moment, it would seem, that the Independent labels, whom have to fight harder to survive and whom in the main consist of companies with less than 9-20 employees, generally believe that file sharing assists their marketing efforts and the sales figures would appear to confirm that theory.

The difference between CD Baby, the other indies and the big four music companies?

1.   The indies didnt sue their customers.

2.   The indies depend on talent and social networking, including P2P to get the word out

3.  The indies usually trade in one currency or small amounts and are not dependent on variations in the foreign exchange rates to determine whether or not their VALUE is up or down for the year.

We tried to think of another reason why the Tera report arrived at a vastly different conclusion to ourselves in relation to the job loss data.

Possibly the Tera Report had forgotten to add-in the video production revenues from the fastest new growing segment of the industry, music videos.

But surely, that would only occur if they got their NACE categories wrong and omitted whole sections of newly categorized industries.