Spain’s music industry still seeking a way out of the jungle

Sales of recorded music are increasing, but the VAT hike has hit concerts hard

Fernando Navarro
Fito & Fitipaldis performing at Madrid’s Palacio de Deportes last year.
Fito & Fitipaldis performing at Madrid’s Palacio de Deportes last year.víctor lerena (EFE)

Perhaps the song that best sums up the state of the music industry both in Spain and around the world these days is Guns N’ Roses’ 1987 hit Welcome to the Jungle. After the worst decade in its history, during which sales have fallen by more than 50 percent, the Spanish music industry is showing signs of a gradual recovery, albeit thanks largely to sales by a few major artists.

The record labels continue to call for tougher enforcement of laws against downloading unlicensed content, as well as for the repeal of the 21 percent VAT rate on cultural introduced in 2012. To draw attention to the issue, the industry is calling for a silent protest on May 20, with no concerts to be held anywhere in the country.

Up-and-coming groups say that despite sold-out concerts, they are unable to make a living from music

“Let’s hope things start to improve from now on, even though we know that these figures don’t mean a turnaround,” says Antonio Guisasola, the head of Promusicae, the body that represents the country’s main record companies. Sales of recorded music rose by 21.2 percent in 2014 on the previous year: “good news” says Guisasola, adding the caveat that the government needs to start applying legislation passed in October of last year to protect intellectual copyright: “If we could lower piracy levels to those of other EU countries, we would be seeing much stronger growth in sales.”

The most recent report by the International Intellectual Property Alliance (IIPA), a private sector coalition of seven trade associations representing US companies that produce copyright-protected material, suggests that if Spain applied its legislation on property rights, music industry sales would increase by 361.3 percent. In 2014, Spaniards spent €149.9 million on music, a long way from the €626 million they spent in 2001.

Ups and downs

Recorded music sales rose by 21.2 percent in 2014.

Pablo Alborán sold 157,000 copies of his new record; David Bisbal, 125,000; El Barrio, 120,000; and Fito & Los Fitipaldis, almost 100,000. In total, close to half a million of the 12.5 million total sales.

Digital music is now worth €47.2 million, a 36.3 percent increase on 2013.

Online streaming makes up 42 percent of the market, while CD and vinyl make up the rest.

The number of people using streaming services has increased by 30 percent.

Spaniards spent a total of €149.9 million on recorded music in 2014, a similar figure to that spent in 2011.

The impact of the VAT hike in its first year was a 22-percent drop in the number of concerts held in Spain.

During the same period, revenue from income and company tax, as well as Social Security contributions, fell by €42.3 million.

The Spanish music market has fallen by 80 percent since 2000.

But most of this growth, which barely managed to slow down the fall in CD sales, was partly due to pay services such as Spotify, Deezer and Youtube, as well as to releases by big stars such as Pablo Alborán, David Bisbal, El Barrio, Fito & Fitipaldis, and Melendi. Up-and-coming groups such as Madrid-based rockers Toundra say that despite sold-out concerts, they are still unable to make a living from their music: “Each euro we earn goes back into the group and into helping us grow,” says guitarist Esteban Girón.

Toundra form part of what might be called the middle classes of the Spanish music industry, which have been hit hard by the crisis, and notably by the 21 percent VAT rate the government has slapped on entertainment. “Spain is alone within the euro in imposing this high a tax,” says Félix Suárez of distribution company PIAS. Portugal’s is 13 percent, while France’s VAT rate on the arts and entertainment sectors is just 5.5 percent.

The rate has hit live performances particularly hard, prompting the protest on May 20, in the same week that municipal elections are due to be held throughout the country. “This tax is an abuse for which there is no justification, and we feel that our government has abandoned us,” says Pascual Egea, president of the Association of Music Promoters (APM). Joan Serrat, one of Spain’s most enduringly popular artists, decided to bring forward a concert date he had planned in Madrid for May 20 when he heard about the protest.

The SGAE, Spain’s leading copyright management organization, says that the number of concerts staged in the country last year was down 22 percent on 2013. During the same period, the government raised an extra €13.3 million from VAT, while revenue from Social Security, company and income tax fell by €42.3 million. “The numbers just don’t add up,” says Egea.

More information
Arts and entertainment industry calls on government to reduce sales tax
The slow death of live music
84% of content acquired in Spain is pirated, says report
Stage dive: Live music in Spain suffers major drop

Furthermore, say its critics, the VAT rate on the arts and entertainment industries is unfair. Bars that hold gigs must pay 21 percent VAT not just on tickets, but also on food and drink, while another bar that doesn’t stage concerts only pays a 10 percent rate. But the VAT hike has also hit large venues. Overseas promoters are leaving Spain out of big-name performers’ tour schedules, or at best they hold just one concert here. “We are being left out of things. That’s why Bruce Springsteen only played one gig in Spain, in Gijón, on his last tour. Beyoncé decided not to perform in Madrid, and held just one concert, in Barcelona,” says Neo Sala, who runs promoter Doctor Music.

Things may be looking up for the Spanish music industry, but nobody is popping champagne corks yet. It’s still a jungle out there, and one where, as Sala puts it, “everything is completely crazy.”

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