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DOWNTOWN MUSIC HUB PRESENTATION TO PORTFOLIO COMMITTEE: 29 AUGUST 2012BUSINESS PLAN

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“We want to create a unique and innovative music production entity that will empower all the stakeholders in the music industry, with special emphasis on the musicians and the communities from which they are drawn. It should become a significant player in local content development across all genres of South African music.” Former Minister Pallo Jordan April 2009

“On the 28th of April 2010, I inaugurated the Downtown Music Hub Board following the purchase of Downtown studios by my predecessor, Dr Pallo Jordan.  Downtown studio was purchased from Avusa in the 2009/2010 financial year and the vision is to develop the studios into a Music Hub which will be a music heritage centre as well as the state-of-the-art local content music production hub that will produce high quality content for the market place.” Former Minister Lulu Xingwana April 2010

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“We will also ensure that through the down town studios in Johannesburg, the music community becomes an integral part of the music industry.” Minister Paul Mashatile Budget Vote Speech 2011/2012

BACKGROUND

Up to 90% of the global music market is accounted for by just five corporations: EMI Records, Sony, Vivendi Universal, AOL Time Warner and BMG. Collectively, these corporations are known as ‘the Big Five’, and operate in all of the major music markets in the world.

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MARKET SHARE

6RAND VALUE IN THE MARKET - RESEARCH BY IBILLION MUSIC JULY 2009 IN GAUTENG ONLY

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EMPLOYMENT BY SECTOR

Employment by Sector

Cultural heritage and tourism

25%

Multimedia2%

Music10%Craft

13%

Audiovisual13%

Publishing12%

Design14%

Performing Arts3%

Visual Arts4%

Fashion4%

BACKGROUND

Cultural industries account for more than 7% of the world’s GDP

Cultural industry sectors are much more accessible - more than other investments, they require cultural resources to possess the ability to be reproduced at different levels

SOUTH AFRICA HAS THE POTENTIAL

South Africa has a rich cultural landscape and talent Local music industry is well organised significant recording

capability Manufacturing capabilities Extensive retail and broadcast network Internationally recognised system of royalty collection Strong professional organisations local music industry was the fastest growing music market in

the world In 2006 the recording industry alone worth over 2 billion

CHALLENGES

Lack of strong music industry focused policy Entrepreneurial constraints Lack of complementary services Weak home-grown investment climate Monopoly by multinationals

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DAC (through the NAC) purchased the Downtown Studios which has produced numerous South African Artists like Mahlathini, Mahotella Queens, Lucky Dube, Stimela, Ladysmith Black Mambazo .

FACILITIES

2 functioning recording studios catering predominantly to traditional Zulu music

An hourly rate of R265 for studio 2 and R242 for studio 3

A daily rate of R2858.62 for studio 2 and R2528.58 for studio 3

Rehearsal room rates start from R250 per day Rental space available for primarily music industry

tenants at rates ranging from R407.95 to R3947.35

COMPETITION SABC studios: Downtown Studios has a

high heritage value, its rates are extremely competitive, it is easily accessible and provides axillary services to musicians.

Home Studios: We are only competing with home studios because of our outdated equipment

NOTABLE ACHIEVEMENTS ABET based programme in partnership

with the Gauteng Department of Sports, Arts Culture and Recreation.

30 students spent 3 months at the Downtown Music Hub where they were taught inter alia the basics of financial and time management, project management and contracts.

NOTABLE ACHIEVEMENTS Recording of the 2011 Nelson Mandela

birthday song which was sung by Ubuhle be Mfundo in Tsakani Extension 11.

 Thokozani Langa won the best Maskandi album of the year at this year’s SAMA awards. The album was recorded at Downtown Studios and he worked with a Downtown Studios of our sound engineers.

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STUDIOS

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STUDIO 3

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STUDIO 2

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RECORDING BOOTH

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STUDIO 1

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REHEARSAL ROOMS

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REHEARSAL ROOMS

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SURROUNDING LOCATION

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SURROUNDING LOCATION

SPE/DOWNTOWN MUSIC HUB Board appointed by Former Minister Lulu Xingwana in

April 2012 Downtown Music Hub became operational in July 2010

and took over daily management of Downtown Studios, its 4 staff the building known as Fox Street Properties.

The SPE is an NPC which is there for the benefit of the music industry.

The board prepared and approved a business plan in anticipation of transfer of the assets.

POLICY FRAMEWORK The White Paper on Arts, Culture and Heritage of 1996

and the recent copyrights bill, which is at its final stages in the Parliament of the Republic of South Africa;

Cultural Industries Growth Strategies Final Report 1998;

The Music Industry Task Team (MITT) Report 2000; Gauteng’s Creative Industries analysis 2008; and Gauteng Music Strategic Framework Final Report

2009.

BUSINESS PLAN DEVELOPMENT

The Downtown Music Hub has been tasked with meeting commercial and developmental imperatives in the management of the assets and also meeting some of the DAC’s strategic objectives including social cohesion, creating decent employment and training and development

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RECORDED MUSIC INDUSTRY VALUE CHAIN

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Distribution of Music Products: To create access for individual musicians and recording companies to distribute their music in local and international markets.

Production of Music Products: To create cutting edge recording facilities for pre and post production of music and other products, in order to facilitate a conducive environment for the production of high quality music products on a large scale for local consumption and exportation to international markets.

Broadcasting of Local Music Content: To contribute meaningfully towards the drive to prioritise the playing of local content in the various broadcasting, media and other facilities, therefore ensuring that the livelihoods of local musicians are secure.

DOWNTOWN MUSIC HUB STRATEGIC AREAS OF FOCUS

31 Education, Training and Development: To create

empowerment projects and programmes with the requisite partners in, order to facilitate human capital development and create decent work through training and education.

Publishing: To create a platform for publishers in the music industry to practice their craft in an environment where their works are protected and the requisite benefits accrue to them.

Music Manufacturing and Packaging: To create a state of the art compact disc manufacturing plant.

Music Heritage: To preserve and promote South African music heritage.

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MUSIC DISTRIBUTION The Board notes that the leading challenge

facing authors, musicians, record labels and other role players in the music industry is distribution of their products to the consumers. It also notes that the most adversely affected are producers of indigenous music, which carry the heritage value of South African music.

The Hub will establish a solid relationship with the current music retailers to ensure that South African music has a fair representation and accessibility in music stores. In return it will provide a service entitled Press and Distribute (PND Deal) with independent record companies to facilitate availability of their music products in stores. The Hub will employ the service of professional sales persons to focus on main and small music retailers.

The Hub will also create and supply the Music Digital Cafe Containers containing the latest music digital distribution systems. The container model for music distribution is one of a kind and takes South African music to the people; the strategy is informed by the tried and tested container model used successfully by cell phone companies in South Africa. The Cafe will be a franchise opportunity for music role players, particularly musicians who will form cooperatives to operate the Music Digital Cafe in their villages, townships, towns, etc. The Hub will supply the branded, fully equipped and stocked containers for cooperatives members/ franchisees to operate. In the Cafe, the consumer will be able to buy a physical copy of the music, as well as a digitally tailor-made playlist and other related products.

The Hub will establish a solid relationship with community based radio stations to promote the Music Digital Cafe in villages, townships, towns, etc.

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PRODUCTION OF MUSIC There is growing perception that a

large percentage of South African music products are not ready for global competitive markets because of their inferior quality and also large number of independent record companies operate informally with poor quality recording facilities. In order to substantially increase the quality of globally competitive music content produced in South Africa, the Hub will therefore create:

Pre-production studios for music composers and authors;

Recording Studios for recording, mixing and mastering services for local and international artists and companies;

Remixing Suites for DJs; Mobile recording studios for rural

outreach; Supplementary service studios

such as graphic and design, animation, photos, make-up and fashion stylists;

The Hub will cater for recording both digital and analogue (live); and

The rehearsal and music instruments will also made available for users.

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BROADCASTING OF LOCAL MUSIC CONTENT The Board noted that another

challenge for the local music role players is that their music is not played sufficiently on local, regional and national radio stations, unlike other countries like the USA, India, France, etc.

The Hub will interact with music representatives’ organisations/institutions, as well as the Department of Communications, to review current policies and broadcasting strategies that do not favour South African music. Ideally, the Hub will engage the Department of Communications regarding the use of Radio 2000 as a benchmark for the broadcasters.

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The Hub will also explore opportunities to work with old and new music broadcasters, film producers and promoters to benefit the authors and composers through royalties and needle time

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EDUCATION, TRAINING AND DEVELOPMENT It is noted that there is a need for training and

development of professionals at all levels in the music industry so that they can use these skills to participate meaningfully in the economy. The main focus is to create entrepreneurs who will be able to create employment opportunities: However, their education will also form an integral part of the strategy. The Board is also concerned about the human resource skills and qualifications. The Hub will liaise with education institutions to review current music courses and qualifications to align them with the music industry needs.

  There will be various levels of Training and

Development with strategic partners: Bursary based schemes to previously

disadvantaged children in partnership with Universities, Technikons, FET institutions, organisations in the music and other industries).

The Hub will work with the Further Training and Education (FET) Sector to offer elementary music education and ABET, as well as recorded music business lectures.

The Hub will create working opportunities for graduates with Music certificates, Diplomas, Degrees and PhD or MBA qualifications.

Internship programmes both at DTMH and other similar institutions (Partnerships with organisations like AIRCO, MAPPSETA) for those who have not received bursaries.

Business Training for those already running businesses (Partnerships with entities like the Gauteng Enterprise Propeller, etc.)

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PUBLISHING As a vital segment of the

copyright industry, music publishing is fast becoming as money spinning business within financial circles. This indicates that there exist great opportunities for music publishers in generating substantial streams of income by controlling and administering the copyright of intellectual properties.

To set up a music publishing component at the Downtown Music Hub.

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MANUFACTURING AND MUSIC HERITAGE As a vital part of the

music value chain, and also in order to keep up with manufacturing and packaging trends, the establishment of a manufacturing plant is an important aspect of both empowering South Africans and creating jobs

The Hub will dedicate a section of its building to highlight music heritage of South Africa in partnership with all relevant government departments and music institutions. The heritage will showcase the origin of music recording and the history of recorded South African music – the apartheid and democratic contrasts. The Hub will commission painters and sculptures to create South African icons for display, exhibition and exportation purposes.

BUSINESS PLAN BUDGET

BUDGET FOR OPERATIONAL AND CAPITAL EXPENDITURE    

DSITRIBUTION  7 707

000

PRODUCTION  19 491

001

BROADCASTING  8 022

627

MANUFACTURING  1 298

000PUBLISHING   779 100EDUCATION TRAINING AND DEVELOPMENT  

4 830 000

HERITAGE  43 156

828

BUILDING RENOVATIONS  9 772

882OPERATIONAL EXPENDITURE 2012  

8 099 757

TOTAL103 157

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BUDGET CONTINUED

SHORT TERM MEASURES The Studios are operating at limited

capacity and require immediate investment We have already lost R514 640 in potential

revenue from idle studios In the short term, in order to attract more

customers, grow the business and begin the journey towards self-sufficiency we require R20 million.

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DOWNTOWN MUSIC HUB FINANCIALS Our draft audit

reports indicate that we have received unqualified audits for the 2010/2011 and 2011/2012 financial years

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The Downtown Music Hub Needs to engage the sector on: Its Membership; Its Plans; The sector in general

and its contribution the Mzansi Golden Economy.

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WAY FORWARD The assets need

to be transferred to the Downtown Music Hub in order for it to implement its business plan.

Funding is required for the business plan, the Downtown Music Hub is looking at a number of sources including the DAC, Lotto, the IDC and other institutions

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Thank You