51224 audio production studios in the us industry report

WWW.IBISWORLD.COM� Audio�Production�Studios�in�the�US July 2011 1

IBISWorld Industry Report 51224Audio Production Studios in the USJuly�2011� Kathleen�Ripley

Face the music: Digital technology and changing consumer preferences will stifle demand

2� About�this�Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3� Industry�at�a�Glance

4� Industry�Performance4 Executive Summary

4 Key External Drivers

6 Current Performance

9 Industry Outlook

11 Industry Life Cycle

14� Products�&�Markets14 Supply Chain

14 Products & Services

15 Demand Determinants

16 Major Markets

17 International Trade

18 Business Locations

20� Competitive�Landscape20 Market Share Concentration

20 Key Success Factors

21 Cost Structure Benchmarks

22 Basis of Competition

23 Barriers to Entry

24 Industry Globalization

25� Major�Companies

26� Operating�Conditions26 Capital Intensity

27 Technology & Systems

28 Revenue Volatility

29 Regulation & Policy

29 Industry Assistance

30� Key�Statistics30 Industry Data

30 Annual Change

30 Key Ratios

31� Jargon�&�Glossary

www.ibisworld.com��|��1-800-330-3772��| ��[email protected]


Firms in this industry provide facilities and technical expertise for sound recording in a studio. Industry firms may provide audio production or postproduction services for producing

master recordings, and may provide audio services for film, television, and video productions. After the recording has taken place studios also offer post-production services to fine tune music recordings.

The�primary�activities�of�this�industry�are

Sound recording production

Sound recording postproduction

Other sound recording production services

33461 Recordable�Media�Manufacturing�in�the�USHistorically, sound recording has been transmitted onto physical media such as CDs. Digital music is, however, changing this practice.

51221 Independent�Label�Music�Production�in�the�USMusic labels produce music, develop artists and generally oversee the entire musical process. Independent labels tend to lack distribution capacity.

51222 Major�Label�Music�Production�in�the�USMajor labels dominate the music industry, controlling much of the revenue, although their influence is being curtailed by digital music.

Industry�Definition

Main�Activities�

Similar�Industries

Additional�Resources

About�this�Industry

For�additional�information�on�this�industry

www.ifpi.org�International Federation of the Phonographic Industry

www.riaa.com�Recording Industry Association of America

www.census.gov�US Census Bureau

The�major�products�and�services�in�this�industry�are

Album production

Audio post production

Commercial spot production

Demo production

Duplication services

Mastering services

Original music production

Other


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1705 07 09 11 13 15Year

Demand from independent label music production

SOURCE: WWW.IBISWORLD.COM

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1703 05 07 09 11 13 15Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2011)

20%Album production

11%Mastering services

16%Original music production

8%Commercial spot

production

5%Duplication

services

15%Audio post production13%

Demo production

12%Other


Key�Statistics�Snapshot

Industry�at�a�GlanceAudio�Production�Studios�in�2011

Industry�Structure Life Cycle Stage Decline

Revenue Volatility Low

Capital Intensity Medium

Industry Assistance Low

Concentration Level Low

Regulation Level Light

Technology Change High

Barriers to Entry Medium

Industry Globalization Low

Competition Level High

Revenue

$735.9mProfit

$29.4mWages

$265.2mBusinesses

4,955

Annual�Growth�11-16

-0.1%Annual�Growth�06-11

-4.0%

Key�External�DriversDemand�from�independent�label�music�production

Per�capita�disposable�income

Demand�from�major�label�music�production

Demand�from�movie�and�video�production

Demand�from�TV�production

Total�US�advertising�expenditure

Album�sales

Market�ShareThere are no Major Players in this industry

p. 25

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30



Key�External�Drivers Demand from independent label music productionAn increase in downstream demand from record producers will lead to an increase in demand for the services of audio recording studios. In particular, demand from independent label music production drives industry revenue. The overall music industry has been adversely affected by changes in music formats and consumer listening behavior. This factor

has negatively affected demand for audio production studios. This driver is expected to decline during 2011, resulting in a potential threat to the industry.

Per capita disposable incomeAn increase in disposable income will lead to an increase in consumer demand for a range of entertainment services, including TV, movies and music. All of these entertainment industries use sound

Executive�Summary

It is no secret that much of the music industry is in turmoil. The rapid advance of internet technology has allowed consumers to bypass traditional means of accessing music and find what they are looking for online for little to no cost. CD sales are plummeting and legitimate online downloads are not making up the difference. The film and TV industries face similar challenges in the digital marketplace. As a result, film and TV producers, musicians and record labels are increasingly unwilling to invest in

expensive outside recording studios. Furthermore, the vast improvement in digital recording capabilities over the past five years has made recording outside of studios more affordable and easier for producers, labels, musicians and independent artists.

The combination of these factors spells trouble for the Audio Production Studios industry. Over the five years to 2011, the industry’s revenue is estimated to fall 4.0% per year to $735.9 million, including a 3.3% decline during 2011. The ability to conduct recording and post-production on

relatively simple software on personal computers has diminished the need for recording studios; though sound engineers remain in demand.

Industry operators are finding themselves increasingly marginalized as their incomes fall and studio owners cut costs. However, the need to retain experienced staff is still high because high-caliber staff is often the primary reason that studios can retain clients. Instead of reducing head count, many industry firms have shifted to part-time employment. As a result, the average wage is expected to fall by 4.1% per year from 2006 to 2011.

The five years to 2016 look slightly better for the industry. The music, film and TV industries will likely continue to struggle to adjust to consumers’ changing preferences in the digital age. Many major players in these downstream industries have brought audio recording operations in-house to cut costs during the recession. Some of these declines will be mitigated as demand for the industry’s services is expected to increase with renewed advertising budgets and improvements in the general economy. As a result, IBISWorld expects industry revenue to contract by a marginal 0.1% per year over the period to $732.3 million in 2016.

Industry�PerformanceExecutive�Summary�� |�� Key�External�Drivers�� |�� Current�PerformanceIndustry�Outlook�� |�� Life�Cycle�Stage

� Changing preferences will hurt growth, but renewed advertising budgets will soften the blow


Industry�Performance

Key�External�Driverscontinued

recording studios to make their products. This driver is expected to increase slowly during 2011, representing a potential opportunity for the industry.

Demand from major label music productionAn increase in downstream demand from record labels will lead to an increase in demand for the services of audio recording studios. However, changes in music formats and consumer listening patterns have hurt demand from major label music production. This driver is expected to decrease during 2011.

Demand from movie and video productionMovie and video production use services offered by audio recording studios, particularly post production services. Therefore, an increase in demand from movie and video production has a positive effect on the industry. This driver is expected to decrease during 2011.

Demand from TV productionTV productions use services provided by audio recording studios, particularly post-production services. Therefore, an increase in demand from TV production typically benefits the industry. This driver is expected to increase during 2011.

Total US advertising expenditureAdvertising companies use a variety of services and facilities offered by sound recording studios, including commercial spot production, audio post production and duplication services. Thus, an increase in total US advertising expenditure positively influences the industry. This driver is expected to increase during 2011.

Album salesThe major market for this industry is the music industry, so increased CD sales (as measured by US album sales) will increase demand for the services provided by this industry. This driver is expected to decrease during 2011.

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Per capita disposable income


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2

1705 07 09 11 13 15Year

Demand from independent label music production



An�ailing�music�industry

The Audio Production Studios industry is largely influenced by activity in the Major Label Music Production industry (IBISWorld report 51222) and the Independent Label Music Production industry (51221), as well as film, TV and advertising industries. Unfortunately, one of the ways that these players are cutting costs is by limiting the need for recording studios and their services by bringing audio production in-house or hiring independent engineers who only need a computer, software and a microphone to do what once could only be done in a recording studio.

The music production industries have particularly been hammered as a result of the total revolution in the way people consume music. Over the past few years, retail sales of CDs have declined due to illegal downloading of music online, the growth in free streaming radio and on-demand music available on websites like YouTube. Also, the unbundling of albums in digital formats through websites like iTunes is leading to a shift in consumer behavior toward individual song purchases, further harming music industry revenue. The falling revenue

Current�Performance

Almost every industry that sound recorders rely on for revenue is facing difficulty. Record labels are struggling as digital sales fail to make up for the decline of the compact disc (CD). TV and film producers are losing advertising to the internet and are their programs are facing the same digital problems as the music industry. Furthermore, advertisers have retreated in the face of a hostile economic climate. Over the five years to 2011, IBISWorld estimates that revenue for the Audio Production Studios industry will decrease at an average annualized rate of 4.0% to $735.9 million.

The industry has entered into the decline phase of its life cycle, with technological improvements and the new digital environment for entertainment industries creating significant obstacles. Strong growth in advertising (before 2007), independent label music production and overall consumer expenditure and sentiment have protected the industry against a more significant downturn, but revenue has experienced a marked reduction in recent years. Furthermore, this decline in revenue has been amplified by the recession. IBISWorld forecasts industry revenue will fall an additional 3.3% over 2011.

CD�sales�and�shipments�(2004-2010)�

YearSales�volume�

(Millions) (% change)Sales�value�($ million) (% change)

2005 705.4 -8.0 10,520.2 -8.12006 619.7 -12.1 9,372.6 -10.92007 511.1 -17.5 7,452.3 -20.52008 384.7 -24.7 5,471.3 -26.62009 292.9 -23.9 4,274.1 -21.92010 225.8 -22.9 3,361.3 -21.4

SOURCE: RECORDING INDUSTRY ASSOCIATION OF AMERICA



An�ailing�music�industrycontinued

recorded by the labels correlates quite closely to the diminished earnings generated by upstream music industries in the United States, including audio production.

The new musical marketplace offers some benefits for the Audio Production Studios industry. Smaller labels now have greater bargaining power because the larger labels’ distribution advantage is made obsolete by digital technology, leading to more new artists being offered a chance to produce records.

New internet platforms and the ease of digital distribution have also led to a swell of music content, and the number of artists releasing albums has taken off. In the early 1990s, before the digital revolution, about 40,000 albums were released every year. In 2009, nearly 100,000 albums were released. While artists have greater access to software and other technology that allows them to record outside of audio production studios, this swell in album creation has helped alleviate the industry’s decline.

Filmmakers�in�trouble Demand from the Movie and Video Production industry (51211a) has reduced its reliance on audio studios since the onset of the recession. Despite a brief boost in box office receipts and DVD rentals during the recession, the increasing pervasiveness of internet viewership is a long-term threat. Meanwhile, cheaper audio technology and cuts in production costs mean that film and TV studios are taking more and more work in-house.

TV and film producers are increasingly unwilling to spend heavily on recording and post-production, particularly because the required technology for recording is now easily and cheaply available for TV and film studios to use themselves. This increase in the number of studios conducting their own recording and

post-production operations is a further difficulty faced by audio production studios.

Moreover, during the recent economic slump, advertising spending has been one of the most glaring casualties. Advertiser companies are struggling to remain profitable, while major industries are pulling out of long-planned campaigns, with the effectiveness of online advertising in question. Moreover, traditional mass-media advertising is also becoming less popular as ratings fall due to the aforementioned challenge posed by online visual content.

The�industry�adjusts The Audio Production Studios industry is fragmented, diversified and made up of predominantly small players. The majority of industry establishments (96.6%) employ fewer than 10 people. In fact, about 86.1% of establishments employ fewer than five people. Only a

very small number of establishments have an employer base greater than 10, which reflects the low amount of industry concentration. This trend has been exacerbated over the past five years as staff regularly switch to part-time work rather than leave the industry altogether.

� The economic downturn hampered advertising spending, which hurt firms



The�industry�adjustscontinued

The four largest firms in the industry collectively account for less than 10.0% of industry revenue, while the top 50 firms in the industry account for about 35.0% to 40.0% of

industry revenue. IBISWorld estimates that the number of firms has declined over the past five years at an average annualized rate of 3.0% to 4,955 in 2011.

Do-it-yourself�recording

Over the five years to 2011, there has been a growing number of “home studios,” where potential production studio customers acquire the necessary technology to record sound themselves. This move is partly due to the increasing availability and affordability of high-quality audio production equipment. This trend has been particularly

damaging to smaller players that essentially operate with the same equipment. Home studios do not count as industry operators because they do not charge for their services; however, their increasing penetration is an indication of potential clients moving away from paying for professional studios to perform their recordings.

Shift�to�part�time The number of studios is expected to contract at a far milder pace than revenue. The reason behind this has been the proliferation of small establishments, often operated by sole proprietors. These studios have faced falling barriers to entry, with digital recording equipment becoming simpler to use and more affordable. Many recording staff have established their own low-cost studios with cheap but effective equipment.

To counter this trend, larger studios have changed their employment structure to favor part-time staff. Recording staff are increasingly working multiple jobs, remaining at their studios part time and taking on employment elsewhere to maintain incomes. Employment is expected to fall by 2.3%

per year over the five years to 2011, with the shift to part-time employment ensuring the drop is less severe than revenue and profit levels.

The result of this shift has been marked on total wages, which are estimated to fall 4.1% each year to $265.2 million in 2011, representing 36.0% of revenue. As a result, the average wage is expected to fall markedly over the period, with many staff working fewer hours at a similar or lower hourly rate than in the past.

� Major studios have been reducing their staff’s hours to help save money



Music�piracy While it has yet to be empirically measured, estimates of how much illegal music downloading and peer-to-peer file sharing cost the economy have been as high as $1.4 billion per year. Arguments against such high estimates focus on the fact that much of the music downloaded would likely not have been purchased if no free version been available. Regardless, illegal file sharing is a substantial drain on industry revenue and record labels are increasingly inclined to sign contracts that bring in

non-traditional revenue from shares of an artist’s performance and merchandise proceeds and music sales. While piracy will likely remain a significant problem, efforts by the music sector’s major players, coupled with increasing ease of accessing cheap, legal downloads, will reduce the impact of this behavior over the five years to 2016.

Still, the availability of free music online is a potential boost for the industry, with artists like Lily Allen and the Arctic Monkeys finding fame by offering their

Music�industry�is�no�savior

The anticipated decline in revenue is primarily due to inconsistent performance in the music industry. The most dramatic change to take place in music industries over the next five years is a focus on new revenue streams brought on by a continued shift in consumer behavior. The availability of streaming music

services and the popularity of individual downloads will lead to a greater volume of sales; however, the value of these sales will fall considerably. This shift will force music labels to grow revenue from less traditional products and services as album sales continue to fall, adversely affecting industry revenue.

Industry�Outlook

Advertisers may be the bright light at the end of the tunnel for the Audio Production Studios industry. Unlike media producers, such as TV, film and music, which face ongoing and serious challenges, advertising is expected to bounce back in the medium term. The effect on sound recorders may be muted slightly by the easy availability of low-cost digital recording equipment, but advertising will likely become increasingly audio-video based, rather than merely print, as the internet becomes a video-based medium. This move suggests that there are prospects for ongoing demand for audio production studios’ services.

In the five years to 2016, revenue for the Audio Production Studios industry is expected to drop 0.1% per year to $732.3 million, including a projected 2.1% decline over 2012. Industry

performance during this period will be affected by changes in consumer preferences in music, advertising and entertainment industries’ budgets and economic conditions. Entertainment industries will face considerable challenges from growing online competition, forcing them to continue cost cutting and take recording and post-production in-house. Meanwhile, advertisers will recover from the current slump and somewhat mitigate the industry’s slide.

� Inconsistent performance in the music industry will have a negative effect on revenue



Music�piracycontinued

music online at no cost. Their albums still required recording facilities, and if this trend becomes the norm, musicians will become an increasingly important source of revenue for the industry.

The structural changes that have occurred in the industry to date will likely continue affecting firms. As software technology improves, greater numbers of musicians will choose to record their own music privately and then potentially employ a recording studio to do mastering, mixing and data conversion. IBISWorld anticipates that

this factor will have a slightly negative impact on overall industry revenue in the early part of the next five years. However, it is forecast to slow in the latter part, as more significant improvements in the general economy boost demand. Additionally, a number of these private studios will become industry establishments, leasing out facilities and selling recording and mixing services as demand improves. As a result, the number of establishments is expected to flatline over the next five years, falling just 0.1% to 5,096 studios in 2016.

Lower�costs�and�higher�profit

While improvements in recording and mixing technology have created a higher level of external competition, they have also reduced equipment and wage expenses for recording studios. These

cost improvements will allow many studios to offer more competitive rates to customers and are expected to facilitate a widening of profit margins toward the end of the next five years.

Entertainment�and�advertising�faring�better

Over the next five years, consumers are expected to continue spending on entertainment products. In fact, DVD movies now account for more revenue than box office releases. This move will lead to film studios placing an increased emphasis on the additional features and sound quality of movies for home viewing purposes. Additional developments in the consumer electronics field, such as 3-D TVs and surround sound, will also affect the type of final products that use sound recording studios.

Advertising revenue is contingent on the overall health of the business sector of the economy. The business sector provides the majority of demand for advertising time; thus, it influences

advertisement production. Current economic indicators point to growth in total media expenditure of about 2.6% per year over the next five years. Coupled with this growth is a reluctance to outsource recording responsibilities when cheaper alternatives exist. As such, demand from advertisers will likely increase only moderately over the five years to 2016.

� Increased spending on DVDs and electronics will support demand for high-quality audio


Industry�PerformanceLife�Cycle�Stage


30

25

20

15

10

5

0

–5

–10–10 100 20–5 155 25 30

%�G

row

th�o

f�pro

fi�t/G

DP

%�Growth�of�establishments

DeclineCrash or Grow?

Potential�Hidden�GemsFuture Industries

Quality�GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

Time�WastersHobby Industries

MaturityCompany consolidation;level of economic importance stable

Shake-out

Shake-out

Quantity�GrowthMany new companies; minor growth in economic importance; substantial technology change

Key�Features�of�a�Decline�Industry

Revenue grows slower than economyFalling company numbers; large fi rms dominateLittle technology & process changeDeclining per capita consumption of goodStable & clearly segmented products & brands

Recordable�Media�Manufacturing

Movie�&�Video�Production

Rectifi�er�&�Fuel�Cell�Manufacturing

Independent�Label�Music�Production

Television�Production

Audio�Production�Studios

Advances in digital technology are making services increasingly obsolete

Consumer spending on entertainment is shifting away from music, as the digital environment gives access to free music

A declining rate of revenue and value added growth indicates the industry’s difficulties



Industry�Life�Cycle The Audio Production Studios industry has entered into the decline phase of its life cycle. Over the ten years to 2016 the industry’s contribution to the overall economy (industry value added) is expected to decline at an average annualized rate of 2.2%, compared with GDP growth of 2.0% over the same period.

The easy and affordable availability of digital recording equipment and software means that the industry has lost appeal for its smaller clients, who are willing to adopt slightly lower quality recordings for the expense saved in not going to a studio. The proliferation of “bedroom” musicians worldwide is also an indication of the success of home-recording software, and is a significant challenge to the industry.

Larger clients, such as major labels and large independents, are also increasingly inclined to build their own studios, also utilizing digital recording technology, which streamlines the post-production process markedly. This threatens to substantially diminish industry viability.

As illustrated in the accompanying table, revenue derived from physical sales of music is falling rapidly, and the rate at which it is occurring is increasing. Meanwhile, revenue and

sales of digital music is increasing at an inverse rate. However, the absolute values derived from digital sales are not counteracting losses made from the decline of physical sales.

This is having severely adverse effects on many downstream music industries, particularly the Major Label Music Production industry, which is expected to record an annualized fall in revenue of 9.0% per year for the five years to 2011. As the Major Label and Independent Label Music Production industries continue to lose revenue, there is expected to be a subsequent, and commensurate, drop in demand for the services of audio production studios. The rapid reduction in demand for CDs in the United States, driven by increasing access to free music available legally and illegally online, as well as a marked shift to purchasing songs in digital format online, has led to diminished revenues for labels, who are then disinclined to spend significant amounts on recording, which is itself becoming easier and cheaper.

The TV and film segment of the industry, coupled with advertisers, have also reduced their use of industry facilities over the five years to 2011. Advertisers, faced with improving technologies, will increasingly record their own work, rather than outsource

Digital�music�sales�(2004-2010)�

YearUnit�Sales�(Millions) (% change)

Dollar�Sales�($ million) (% change)

2004 143.9 N/C 183.4 N/C2005 383.1 166.2 503.6 174.62006 625.3 63.2 878.0 74.32007 868.4 38.9 1,257.5 43.22008 1,112.3 28.1 1,635.4 30.12009 1,236.8 11.2 2,030.7 24.22010 1,265.4 2.3 2,238.1 10.2


�This industry is Declining



Industry�Life�Cyclecontinued

to more costly studios. Additionally, the decline of advertising spending during the recession has caused the TV and film and industries to pursue cost-cutting options that also increasingly reduce outsourcing and bring activities including sound recording and mixing in house. Even as the economy recovers this trend is expected to persist. Like the music industries, the TV and film segments are also confronting the extra difficulty of online downloads and streaming services. As internet capacity increases, consumers will most likely be progressively more able to access content for nothing, damaging industry

revenue, and subsequently, demand for sound recording.

The Audio Production Studios industry, in responding to the current obstacles and difficulties, is shifting its employment focus towards part-time employment, saving costs without having to let go of talented producers and mixers. This is, however, leading to a drop in average wages, discouraging new recording staff from entering the industry, and poses a significant challenge over the next five years. The industry is also increasingly renting and selling facilities for private use to music labels, producers and musicians.

Physical�music�sales�(2000-2010)�

YearUnit�Sales�(Millions) (% change)

Dollar�Sales�($ million) (% change)

2000 1,079.2 N/C 14,323.7 N/C2001 968.5 -10.3 13,740.9 -4.12002 859.7 -11.2 12,614.2 -8.22003 798.4 -7.1 11,854.4 -6.02004 814.1 2.0 12,154.7 2.52005 748.7 -8.0 11,195.0 -7.92006 648.2 -13.4 9,868.6 -11.82007 543.9 -16.1 7,985.8 -19.12008 401.8 -26.1 5,758.5 -27.92009 309.2 -23.0 4,555.9 -20.92010 240.5 -22.2 3,635.1 -20.2



Products�&�Services

Recording studios generally consist of at least two rooms: the studio itself, where the sound for the recording is created, and the control room, which houses the equipment

for recording and manipulating the sound. Recording studios are designed so that they have excellent acoustics and so that there is good isolation between the rooms.

�Products�&�MarketsSupply�Chain�� |�� Products�&�Services�� |�� Demand�DeterminantsMajor�Markets�� |�� International�Trade�� |�� Business�Locations

KEY�BUYING�INDUSTRIES

51211a� Movie�&�Video�Production�in�the�US�This industry comprises establishments primarily engaged in producing, or producing and distributing motion pictures, videos, television programs, or television and video commercials.

51211b� Television�Production�in�the�US�This industry comprises establishments primarily engaged in producing, or producing and distributing motion pictures, videos, television programs, or television and video commercials.

51221� Independent�Label�Music�Production�in�the�US�This industry comprises establishments primarily engaged in record production (e.g., tapes, CDs). These establishments contract with artists and arrange and finance the production of original master recordings.

51222� Major�Label�Music�Production�in�the�US�This industry comprises establishments primarily engaged in releasing, promoting, and distributing sound recordings. These establishments manufacture or arrange for the manufacture of recordings.

KEY�SELLING�INDUSTRIES

33461� Recordable�Media�Manufacturing�in�the�US�This industry comprises establishments engaged in manufacturing optical and magnetic media, such as blank audio tape, blank video tape, and blank diskettes which are used by the sound recording industry.

33599� Rectifier�&�Fuel�Cell�Manufacturing�in�the�US�This industry comprises establishments primarily engaged in manufacturing electrical equipment which is used by the sound recording industry.

Supply�Chain

Products and services segmentation (2011)

Total $735.9m

20%Album production

11%Mastering

services

16%Original music

production

8%Commercial spot

production

5%Duplication

services

15%Audio post production

13%Demo

production

12%Other



Products�&�Markets

Products�&�Servicescontinued

A recording studio can be as simple as a multi-track cassette deck, a microphone, and a second stereo recorder to mix and record tracks. Recording studios become more complicated with multiple recorders, synchronization devices, sequencers, mixers, signal processors, acoustic treatments of the room, and monitor speakers.

General purpose computers are assuming a larger role in the recording process, replacing the mixing consoles, recorders, synthesizers, samplers and sound effects devices. Popular software packages for recording studios include Digidesign Pro Tools, Cubase and Nuendo by Steinberg, Ableton Live, Sound Forge and Apple Logic Pro.

Music recordingIBISWorld estimates that album or CD production accounts for about 20% of sound recording studio output. Record companies and artists form the bulk of clientele for this industry.

In addition, musicians also require other services including: mastering services, original music production, demo production and audio post production services. These categories account for a combined share of 55% of industry output. It is expected that this percentage has been, and will continue

to increase as the large music recording companies shed secondary functions in an attempt to cut costs.

TV and filmOther customers that use sound recording studios include the TV-video and commercial industry. These customers generally use video production and commercial spot production, which accounts for a combined share of 13% of industry output.

Sound production versus postproductionAround 80% of industry revenue is derived from activities in the actual recording of music, effects and speech for various markets, from music to film to video games. The remaining 20% is dominated by postproduction services, such as mixing and mastering, and converting sounds between different media. The industry has long developed a specialization in postproduction, in a successful attempt to vertically integrate two related activities.

OutlookWith the increased demand for digital music formats by the music industry and consumers, IBISWorld anticipates that the audio format conversion segment will account for a larger share of product offering in future years.

DemandDeterminants

The demand for services is derived from individuals who make sound recordings for consumers, record labels, TV, video games, the internet and concerts. The four primary drivers of downstream demand are:

Music recording by record companiesThis, in turn, is a product of the number of new albums being produced by record companies. There is a high correlation between final consumption and the

volume of recordings sold. While the number of records sold does not impact on recording studios revenues directly (who generally earn a fixed fee for service), the greater the profitability of the US music industry the more capital will be available for record production.

Overdubbing and effects for film or TV Like the music industry, the popularity (or otherwise) of a film/TV program does not impact on the revenue generated by



DemandDeterminantscontinued

the recording studio industry. However, the greater the profitability of the US film/TV industry (or the closer it gets to profitability in the case of the film industry), the more capital will be available for local film production, requiring more recording studio services.

Advertising producersThe performance of the advertising industry is very much linked to the performance of the broader economy, in particular the health of the business sector, which funds most advertising. Also relevant is the amount of competition in the marketplace, as greater competition between businesses generally results in greater advertising.

Advertising companies use sound recording studios to produce the sound for TV and radio advertisements.

Technological changeImproving technology is having conflicting effects on growth in industry demand. Recording equipment, once extremely bulky and expensive, is falling in price as it becomes increasingly computerized. As a result, recording studios can lower rates but at the same time artists, record producers, TV and film producers and advertising agencies are able to set up their own audio recording operations causing demand for professional studios and their services to fall.

Major�Markets

The Audio Production Studio Industry derives the majority of its revenue (more than 90% or $697 million expected in 2010) from the hiring of studios, equipment or personnel to recording artists or recording companies as well as to advertising agencies, film producers and TV/Video producers.

Firms in the Audio Production Studio industry have relationships

with firms in the following industries: Record Production; Music Publishers; Agents and Managers for Artists, Entertainers and Other Public Figures; and Independent Artists, Writers and Performers within the United States. Much of the Audio Recording Studios clientele comes from these upstream industries, which support the recording studios.

Major market segmentation (2011)

Total $735.9m

50%Music industry

17%Film producers

16%Advertising

agencies

12%TV and video

producers

5%Multimedia developers




Musicians and record companiesThe industry derives revenue from the hiring of studios and equipment and technical personnel to recording artists or independent recording companies. The charge to hirers is generally on an hourly or daily basis and is dependent on the studio, equipment and personnel required for the recording. There is also significant pre-recording and post-production time involved with mixing and production of the final product.

IBISWorld estimates that the music industry, which encompasses recording artists as well as independent label music production and major label music production companies, make up the majority of sound recording studio users. IBISWorld estimates that they hold a 50% share of the market. IBISWorld expects that the technology that is used in professional studios is becoming increasingly available directly to consumers, and it is likely that this share of the market segment will decline in the future. Many potential customers are acquiring the necessary equipment to record music in their own “home studios” on a semi-professional basis. However, there are an increasing number of artists entering the industry, which is also likely to increase the demand for recording studio services.

Advertising agenciesAdvertising agencies use sound recording facilities for the production of TV and radio commercials. Advertising agencies require a number of sound recording services including which can be performed by this industry. IBISWorld estimates that this segment accounts for about 16.0% of industry revenue. Many advertising agencies rely on sound to effectively convey messages other than simple visual aid.

Film and TV producersFilm producers use sound recording studios throughout the different stages of film production, though most work for the movie industry comes from post-production. In post-production the audio elements of a film are manipulated and pre-recorded sound effects and recorded music is mixed to create the desired effect for the film. TV producers utilize studios for similar services.

IBISWorld projects that the growing popularity of the internet, animated films and entertainment for smart phones and tablet computers will lead to the multimedia development segment making up a greater proportion of industry revenue in the future.

Major�Marketscontinued

International�Trade This industry is comprised of recording and mixing studios which are located within the US, therefore international trade is not applicable.


�Products�&�Markets

Business�Locations�2011

MO1.2

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

Great Lakes

VT0.5

MA1.2

RI0.4

NJ2.6

DE0.1

NH0.1

CT1.0

MD2.1

DC0.1

1

5

3

7

2

6

4

8 9

Additional�States�(as marked on map)

AZ1.2

CA20.8

NV0.6

OR1.4

WA2.3

MT0.2

NE0.3

MN1.7

IA0.6

OH1.5 VA

2.0

FL6.5

KS0.4

CO1.9

UT0.7

ID0.2

TX4.9

OK0.3

NC2.1

AK0.2

WY0.1

TN5.3

KY1.2

GA3.3

IL4.2

ME0.2

ND0.0

WI1.2 MI

2.3 PA2.4

WV0.2

SD0.1

NM0.5

AR0.3

MS0.2

AL0.9

SC0.5

LA0.6

HI0.6

IN1.4

NY15.6 5

67

8

321

4

9


Mid- Atlantic

Number�of�Establishments�by�Region�(%)�

� Less�than�3%� 3%�to�less�than�10%� 10%�to�less�than�20%� 20%�or�more


�Products�&�Markets

Business�Locations The industry is highly concentrated in three regions: the West (25.9% of establishments), the Southeast (23% of establishments) and the Mid-Atlantic (22.3% of establishments). Both the West and Mid-Atlantic regions have more establishments than their populations suggest they might, while the Southeast has a smaller proportion of establishments than its estimated population suggests. This disparity in establishments per capita is indicative of the greater concentrations of the services in the West and Mid-Atlantic, which are the primary hubs of the music, film and TV industries in the United States.

WestWith 25.8% of industry establishments and 17% of the population, the West is the predominant region in the US. The region is dominated by California, and in particular, Los Angeles. California has around 80.3% of the West’s establishments, and 20.8% of the establishments in the US. In turn, California’s sound recording industry is concentrated in Los Angeles. The high proportion of establishments in this region (as with the other significant regions) is primarily due to concentrations of music, film and TV industries that require the sound production and post-production services.

Mid-AtlanticMore than half of the establishments in the Mid-Atlantic are in New York (65.6%). Most downstream industries that require the services of Sound Recording Studios within the region are located in New York, New Jersey, Pennsylvania and Maryland, with particular emphasis on New York City.

SoutheastThe geographic spread of establishments within the Southeast region is widely distributed. Major states include Florida, Tennessee and Georgia; however, many other states hold some significant proportion of the region’s establishments, including Louisiana and Mississippi, where the bluegrass and jazz culture was born, and both have a strong musical heritage. The region has more than 22.0% of total establishments, but, with more than 25.0% of the national population, is somewhat underrepresented.

Other regionsOther regions in the United States tend to have disproportionately small shares of industry establishments, such as the Southwest, with 5.8% of establishments and 11.0% of the national population. This is indicative of a smaller proportion of establishments in the downstream film, TV, music and advertising industries located in these regions.

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Establishments Population

Establishments vs. population



Key�Success�Factors Ability to alter goods and services produced in favor of market conditionsIndustry firms should be up to date with changing tastes in music.

Having a loyal customer baseEstablishing strong links with music publishers and agents or managers to ensure steady flow of recording artists usage of studio equipment and facilities is a critical factor for success in this industry.

Supply contracts in place for key inputsSuccessful firms attain contracts directly with talented artists and record companies.

Having a good reputationHaving a highly skilled and creative production team and strong reputation is essential to firms in this industry.

Market�Share�Concentration

The Audio Production Studios industry has experienced a slight reduction in concentration over the current period, as the adverse conditions facing the industry have led to firms downsizing substantially, while others are folding altogether. The industry has historically always been comprised primarily of small players, but over the five years to 2011, there has been a significant shift away from large studios.

In fact, in 2001, 1.2% of all industry establishments had 50 or more staff, this is expected to have fallen to virtually zero by 2011, as downsizing, assisted by technological advances that allow greater automation, led to larger establishments growing smaller, and the number of small and non-employing firms grew.

In 2000, 87.8% of all establishments had less than ten staff, and 72.8% less than five. By 2011, this is expected to

grow to 96.1% and 86.1% respectively. Meanwhile, firms with more than 20 staff are expected to decrease in their share of total establishments from 11% to 3.4% over the same period.

The four largest companies in the industry accounted for less than 10% of revenue, and only 0.3% of all establishments, indicating the dominance of smaller players in the industry. The preeminence of these groups is expected to fall over the ten years to 2016. During this time the need for large, fully equipped studios is decreasing, mainly due to improvements in technology, allowing individuals to conduct recording and postproduction operations out of private home studios and allowing film and television producers to save money bringing more sound recording and mixing in-house.

Competitive�LandscapeMarket�Share�Concentration�� |�� Key�Success�Factors�� |�� Cost�Structure�BenchmarksBasis�of�Competition�� |�� Barriers�to�Entry�� |�� Industry�Globalization

Level��Concentration in this industry is Low

Establishments�by�employment�size�(2007-2010)�

No.�of�employees2007�(%)

2008�(%)

2009�(%)

2010*�(%)

1 to 4 83.0 84.9 85.6 86.15 to 9 11.5 10.7 10.5 10.510 to 19 3.7 3.1 2.8 2.420 to 49 1.7 1.2 1.1 1.050+ 0.1 0.0 0.0 0.0

*EstimateSOURCE: US CENSUS BUREAU COUNTY BUSINESS PATTERNS

�IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive�Landscape

Cost�Structure�Benchmarks

Wages account for the largest expense item for the Audio Production Studios industry. The nature of the industry requires trained sound technicians and engineers that work closely with recording artists to produce a quality sound recording. Expenditure on wages accounts for an estimated 36.0% of industry revenue. Special skills are required of many staff working in the industry, and these skills are often acquired through experience, rather than formal education.

As such, the demand for skilled, experienced staff can have the effect of driving up wages. This industry in particular has low intake of new staff, as it faces long term challenges, and the presence of many skilled operators is keeping wages high, despite the shift to a far greater amount of part-time employment.

PurchasesThe sound recording industry also requires a significant amount of capital including the actual studio as well as equipment. Purchases represent the second largest expense item for sound recording studios. Participants need to purchase equipment to record audio in addition to the purchase of costly mixing and mastering equipment.

Examples of such equipment within studios include: multitrack recorders,

microphones, studio monitors, mixers, audio interfaces, studio signal processors, stereo master players and recorders, studio racks, cabling, loudspeakers, workstation controllers, amplifiers, outboard effects, and various plug-ins. Purchases are currently at historically high levels, as the rapid shift to digital recording and distribution technologies is forcing studios to invest heavily in new equipment. Purchases are estimated to account for around 33.2% of industry revenue.

DepreciationAt around 12% of total revenue, depreciation costs relate mainly to the diminishing value of the equipment within recording studios. This tends to be high, as technology changes within this industry are frequent. To compete on the highest level, firms require the best quality sound recording equipment which will minimize noise and produce the best quality material.

ProfitsReturns amount to around 4% of industry revenue indicating the low level of profitability in the new environment facing this industry. This figure may vary significantly between individual companies in this industry. This figure has fallen markedly over recent years, as firms struggle to remain profitable as demand

Key�Success�Factorscontinued

Ability to effectively communicate and negotiateIndustry firms must have the ability to produce sound recordings within budget and negotiate with clients on their budgets.

Good project management skillsStrong project management skills are required for pre- and post-production of sound recordings.

Access to highly skilled workforceSound recording studios provide a service in addition to the facilities on offer.

Access to the latest available and most efficient technology and techniquesTechnological efficiency and access to the latest equipment are critical for industry operators.



Basis�of�Competition This industry experiences a high level of competition among a number of small players as there are no major players dominating the market.

Internal competitionParticularly among smaller firms, whose target market is independent music producers and distributors, price competition is fierce, as there is little differentiation between service offerings. All have similar access to state-of-the-art technology.

At the lower end of the market participants experience a greater level of price-based competition. The growth of independent music artists with lower budgets has increased the demand for low cost sound recording studios.

Larger, more established and reputable firms tend to compete on the offer of high-quality recordings and the ability to customize individual recordings to highly individual specifications for each client. In the case of a musical act that expects a substantial national and international release, the extra costs of ensuring the highest-quality recordings are minimal.

Much of the recording industry, particularly music recording, has established connections between artists, advertisers and recording studios, and these relations have a marked influence on decisions regarding contracts. As such, there is a measure of competition in the industry surrounding the development of networks and connections in order to enhance the ability to attract major clients.

Studios that can boast the most recent in sound-recording techniques have a growing competitive advantage, as home recording equipment becomes increasingly powerful. The ability to offer recordings that cannot be obtained on home equipment can be a notable point of differentiation.

The growth of an independent music industry that operates on a substantially lower budget than the major, established, record companies is leading to smaller recording studios endeavoring to garner relationships with these groups exclusively, and to offer cut-price recordings of sufficient quality to release.

Cost�Structure�Benchmarkscontinued

contracts rapidly due to fundamental shifts in the music industry at large.

Other purchases relate mainly to contract workers who are required to

fulfill specials tasks, but who are not employed by the actual studios or agencies. In addition, marketing and promotion costs are part of this expense.

Industry�Costs�and�Average�Sector�Costs■�Profi�t■�Rent■�Utilities■�Depreciation■�Other■�Wages■�Purchases

Industry�Costs�(2011)�

Average�Costs�of�all�Industries�in�sector�(2011)�

4.0Profit

33.236.09.812.03.02.0

14.0Profit

19.219.634.96.9

2.3

3.1


0 100%

Level�&�Trend��Competition in this industry is High and the trend is Steady



Barriers�to�Entry Potential new entrants to the industry must consider the high cost of equipment and initial outlay on capital equipment. High-end recording equipment can cost millions of dollars and usually only the larger players in this industry invest in this technology, while smaller players purchase less expensive, analogue recording equipment, or use free sound recording software. Equipment for mastering, duplication and authoring is also expensive, but may not be prohibitive for new entrants. Also, the costs of soundproofing can be prohibitive.

Access to existing contractsParticularly in the music recording segment, networking and the development of industry contacts can be a crucial factor in gaining contracts. Within certain market segments, i.e. larger, fully equipped studios may offer homogenous services and similar prices, so personal contacts can often be a deciding factor. New players, unless they come from within the industry already possessing contacts, can struggle to gain the eminence in the industry required to influence the awarding of contracts.

ReputationAlong with the cultivation of industry contacts, the development of a reputation as a studio of high quality service provision is essential to attracting large clients. Smaller studios, lacking state-of-the-art equipment, must work particularly hard to gain such esteem, but clients are required to do so. This circular difficulty is a significant barrier to entry.

TechnologyDespite these obstacles, barriers are falling as improving recording technology becomes increasingly affordable, allowing enthusiastic amateurs to enter the industry with home studios, or cheaply constructed studios in areas with cheap rent.

Basis�of�Competitioncontinued

External competitionTechnological innovation is leading to an increasing capability of individuals or groups to produce their own recordings at their homes or at private studios, while still creating high-quality recordings. Coupled with this is increasing access to second-hand recording equipment at low cost. The industry itself has the advantage of entrenched soundproofing at their establishments and expert staff to

assist with the process.Also, improving technology is

allowing industries that were once large clients to conduct their own recording operations, such as TV, film and advertising companies. TV advertising, once completed in post-production by rerecording sound in professional studios, can often now be conducted in dedicated studios owned by the entertainment or advertising company itself.

Level�&�Trend��Barriers to Entry in this industry are Medium and Decreasing

Barriers�to�Entry�checklist� LevelCompetition HighConcentration LowLife Cycle Stage DeclineCapital Intensity MediumTechnology Change HighRegulation & Policy LightIndustry Assistance Low




Industry�Globalization

Participants in the Audio Productions Studio industry provide services for the US market. Currently there is little foreign company involvement in this industry, however, there is an increasing trend for larger participants to open studios overseas. In some instances overseas artists have used US sound

recording studios to make their music recordings. However, as these artists are almost universally on US record labels, there is little indication that, while the overall music market is highly globalized, the recording and production studios industry shares that level of international connectedness.

Level�&�Trend��Globalization in this industry is Low and the trend is Increasing


Other�Companies This industry is highly fragmented and diversified. It is largely made up of independent recording studios and audio post-production studios, so there are no major players in this industry. All industry participants are privately owned and they do not make financial and operational details widely available. The following text gives a description of typical industry players.

Paramount Recording GroupEstimated market share: Less than 3.0%Paramount Recording has a history going back to the late 60’s when such musicians as Bob Dylan, Jimi Hendrix and the Doors recorded tracks at the Hollywood studio. Throughout the 70’s, 80’s and 90’s the studio became a landmark recording studio serving seminal artists in almost every genre. In 2001 the studio expanded acquiring Ameraycan Studios in North Hollywood, CA. The company expanded again in 2004 purchasing Encore studios in Burbank, CA, and Third Stone (also known as Studio Sound Recording) in North Hollywood, CA.

In total the company owns four locations with a total of 12 studio and mixing rooms. The studios are utilized by recording artists as well as movie and TV companies that mix audio tracks and record soundtracks. The company has had great success in providing a range of technology, specialty equipment, experienced engineers and technicians and a range of rental and service rates for clients at their various locations.

Manhattan Sound Recording StudiosEstimated market share: Less than 3.0%Manhattan Sound Recording (MSR) Studios is the result of a merger between two of New York City’s recording studios, Right Track and Sound On Sound. In 2005, Right Track and Sound On Sound joined, expanding on both companies’ reputations for world-class recording.

MSR offers a range of unique rooms, experienced and professional staff, and a broad selection of microphones and outboard equipment, which makes it one of the preferred recording homes for engineers, producers, and artists alike.

MSR Studios is designed to accommodate the production needs of any project. The studios two locations have six recording and production rooms, with all studios encompassing state-of-the-art digital and analog systems, including a 24-bit digital environment, high-end analog consoles, and vintage and contemporary sound equipment. The studios have a variety of consoles, which supports the production of quality sound recording for all styles of music including film and Broadway cast recordings.

Sterling Sound Inc.Estimated market share: Less than 3.0%Sterling Sound has been in operation for more than 30 years. The original studio “1790 Broadway” has been closed and the company relocated to a new facility in Chelsea, NY, in December 2001. The new recording complex contains eight mastering rooms, with separate production/editing suites and fully equipped listening lounges. Each mastering room has stereo and surround equipment in addition to analog transfer consoles.

In 2003, Sterling Sound introduced eMastering, a company owned software application enabling clients to deliver master recordings to Sterling via the Internet. In addition, an “After Hours” program has been developed to cater to artists who are working to a budget. Clients of the studio include Nickelback, Pink, Britney Spears, Ani DiFranco, Jennifer Lopez, Sigur Ros, TV on the Radio and Rufus Wainwright, all of which have been nominated for Grammy Awards for recordings conducted in Sterling Sound studios.

�Major�CompaniesThere�are�no�Major�Players�in�this�industry�� |�� Other�Companies


Capital�Intensity An industry’s labor-capital intensity may be measured by the ratio of depreciation charges to labor costs (i.e. industry wages), which indicates the amount of revenue absorbed by the relative capital and labor inputs to construction. The industry’s capital-depreciation-to-labor-cost ratio is about 0.33:1 in 2011, which is above the average for the total US economy (around 0.2:1).

Digital technology has significantly decreased the relative capital input as opposed to previous analog systems. Changing technology has led to an increase in the need to update equipment, but the low cost of digital recording software has ensured that capital and depreciation costs are falling. Also, while recording software technology is

advancing rapidly, recording equipment such as microphones and headphones are not changing at the same rate.

�Operating�ConditionsCapital�Intensity�� |�� Technology�&�Systems�� |�� Revenue�VolatilityRegulation�&�Policy�� |�� Industry�Assistance

Tools�of�the�Trade:�Growth�Strategies�for�Success


Labo

r�Int

ensi

veCapital�Intensive

Change�in�Share�of�the�Economy

New�Age�Economy

Recreation,�Personal�Services,�Health�and�Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional�Service�Economy

Wholesale�and�Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old�Economy

Agriculture�and�Manufacturing.�Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment�Economy

Information,�Communications,�Mining,�Finance�and�Real�Estate.�To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Recordable�Media�Manufacturing

Movie�&�Video�Production

Rectifi�er�&�Fuel�Cell�Manufacturing

Independent�Label�Music�Production

Television�Production


Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Audio Production

Studios

InformationEconomy

Level��The level of capital intensity required is Medium


Operating�Conditions

Technology&�Systems

A large amount of modern music recordings are conducted with electronic instruments (i.e. synthesizers). Synthesizers allow the production of a wide variety of sounds based on acoustic instruments and electronic tones, which do not have any foundation in traditional instrumentation. These sounds and tones may be alternatively played on a keyboard. A synthesizer will generally produce either one sound or a combination of several other available sounds at the one time. There are also sophisticated rhythm synthesizers (i.e. drum machines).

Recording technologyOther sophisticated recording equipment such as samplers and sequencers are also used. A sampler is capable of capturing a previously recorded sound and supplying it to the synthesizer, which can then use that sound over a full range of pitches. A sequencer can take a small portion of the synthesizer’s output and repeat selected sections precisely when laying down the recording to tape.

At the recording session the work done in pre-production and stored in synthesizers or computers is transferred

to the multitrack recorder. Mixing involves the production of a stereo (two track) recording and this can be drawn from any of the sounds laid down on the master tape. Each track output can be controlled in producing the two-track tape, and volume and other effects, such as echo and reverberation, can be added.

Digital recording versus analogDigital recording is the latest technology available. Prior to this, studios shifted from classic vintage gear to modern classic analogue systems. Until the introduction of digital technology, a recording studio had been required to produce the ultimate recordings because some sounds, particularly vocals, had to be captured by microphone and this required a full studio environment.

Analogue recording involved playing in a soundproofed room, which was recorded to tape via microphone. Today, instruments can be fed directly into recording equipment, reducing the risk of external noise or feedback, reducing the time and cost of recording. These cost reductions, however, tend to be passed on to the consumer, rather than retained by the studio.

Capital�Intensitycontinued

Prior to the introduction of digital technology, recording studios were required to produce an ultimate recording as some sounds, particularly vocals, had to be captured by microphone which required a full studio environment.

This industry is creative and requires the involvement of technicians, engineers, musicians and artist. There is a need for highly skilled and talented staff. Also, the cost of operating a recording studio generally involves recording studio hiring charges, plus fees for musicians, support groups, technicians, producers, copyists and arrangers.

The high capital cost of studios necessitates for the majority of work to be prepared in a pre-production meeting during the pre-production stage. During a pre-production meeting the artist and record company technician review demo tapes and plan the recording sessions. The arrangement of back-up singers and studio musicians are organized as well as the facilities required (e.g. programming equipment and instruments, studios and other personnel such as engineers). The pre-production meeting requires high use of trained staff which is a labor intensive task.

Level��The level of Technology Change is High



Revenue�Volatility Industry volatility is based on the absolute value of differences in revenue. The industry is sensitive to a number of factors including changes in music sales, trends in advertising and film production expenditure and economic conditions. The Audio Production

Studios industry is also sensitive to expenditures in the arts and entertainment sector. The above sectors mentioned have generally experienced low levels of volatility which influences the level of volatility for the Sound Recording Studio industry.

Technology&�Systemscontinued

Currently, all world-class recording studios are equipped with state-of-the-art digital recording equipment. Digital equipment allows for recorded sounds to be captured and translated into computer language information, which constructs a precise digital picture of the sound. In addition to this major world class studios are required to have an SSL computerized mixing console supported by a 24-track/48-track multitape recorder, which uses tape heads that lay down, in parallel, a number of tracks. Digital sound recordings can be reproduced and transferred without taking any associated sound feature from the storage medium. Digital technology has now allowed for sophisticated recordings to be undertaken at a cheaper cost and as opposed to analogue, does not require a purpose built studio.

InternetThe Internet has had mixed effects on the sound recording studio industry, but the overwhelming outcome has been negative. Most participant websites allow for customers to view studio layouts online, and provide a list of services and facilities offered. In some instances participants include lists of equipment available for rental and some costs of various services. Clients are able to compare company offerings and obtain a better picture on what each company provides.

However, the internet’s effects on the music and film industries have caused sharp declines in downstream demand for the industry’s services (music publishers and producers are the industry’s largest clients). More detailed discussion of this can be found in the Major Label Music Production industry report.


Volatility�vs�Growth

Reve

nue�

vola

tility

*�(%

)�

1000

100

10

1

0.1

Five�year�annualized�revenue�growth�(%)�–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue�Chip

* Axis is in logarithmic scale


A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level��The level of Volatility is Low



Industry�Assistance Because participants in the Audio Production Studios industry provide services for the US market tariffs do not apply to this industry.

The Recording Industry Association of America and the Association of Professional Recording Services are two relevant industry associations. They provide assistance, primarily in the form of representation and lobbying on behalf

of companies in musical industries. This has become relevant as the changing nature of the music industry (i.e. illegal downloads of songs and albums) affects the Audio Production Studios industry directly. The RIAA and APRS both act to ensure that intellectual property is protected, maintaining the value of music to the consumer, and buffeting industry growth as a result.

Regulation�&�Policy This industry is not highly regulated or very dependent on legislation though many of its customers are. Some copyright laws that apply to these industries are as follows.

The Audio Home Recording Act of 1992 This legislation exempts consumers from lawsuits for copyright violations when they record music for noncommercial, private use; eases access to advanced digital audio recording technologies; provides for the payment of modest royalties to songwriters and recording artists and companies; and mandates the inclusion of serial copying management technology in all consumer digital audio recorders to limit multi-generation audio copying (i.e. making copies of copies).

The Digital Performance Right in Sound Recordings Act of 1995 This law allows copyright owners of sound recordings the right to authorize certain digital transmissions of their works. As amended the Digital Millennium Copyright Act in 1998, the right now covers cable and satellite digital audio services, webcasters, and future forms of digital transmission.

The Digital Millennium Copyright ActThis law prohibits the manufacture and distribution of services designed for the sole purpose of undermining technology used to protect copyrighted works.

No Electronic Theft Law (NET Act) This law allows individuals of sound recording infringements to be criminally prosecuted even where no monetary profit or commercial gain is derived from the activity.

The main international law that affects this industry is the:

Trade Related Aspects of Intellectual Property Rights (The TRIPS Agreement)This law states that performers have the right to prevent fixation (i.e. to capture in some tangible form such as film or sound recording) of their unfixed performances, the reproduction of that fixation, and the wireless broadcasting of their live performances when done without their authorization.

Producers’ rightsProducers have the right to authorize or prohibit the reproduction of their sound recordings and the rental of their recordings.

The Performance Rights Act Introduced into congress in 2009 and passed both houses by early 2010, this legislation aims to provide compensation for artists and labels when music is broadcast over FM and AM radio dials. Currently only digital broadcasters such as satellite radio, cable radio and online streaming services have to pay performance rights.

Level�&�Trend��The level of Regulation is Light and the trend is Steady

Level�&�Trend��The level of Industry Assistance is Low and the trend is Steady


�Key�StatisticsRevenue�

($m)

Industry�Value�Added�

($m)Establish-

ments Enterprises Employment Exports ImportsWages�($m)

Domestic�Demand

CD�Sales�(Million)

2002 817.6 468.2 5,171 5,097 10,382 -- -- 319.3 N/A 12,044.12003 842.0 476.1 5,435 5,370 10,828 -- -- 322.8 N/A 11,232.92004 880.8 484.7 5,766 5,702 11,130 -- -- 327.9 N/A 11,446.52005 905.0 494.9 5,891 5,830 11,312 -- -- 335.6 N/A 10,520.22006 903.3 484.8 5,827 5,757 11,138 -- -- 326.7 N/A 9,372.62007 886.2 466.0 5,709 5,646 10,880 -- -- 311.8 N/A 7,452.32008 843.2 436.9 5,460 5,346 10,358 -- -- 291.1 N/A 5,471.32009 790.7 414.2 5,345 5,180 10,296 -- -- 279.8 N/A 4,274.12010 761.4 396.2 5,233 5,071 10,234 -- -- 274.4 N/A 3,361.32011 735.9 383.0 5,113 4,955 9,917 -- -- 265.2 N/A 2,689.02012 720.4 377.1 5,016 4,861 9,688 -- -- 261.9 N/A N/A2013 712.9 375.3 4,970 4,848 9,679 -- -- 261.3 N/A N/A2014 711.4 378.3 4,988 4,864 9,719 -- -- 264.5 N/A N/A2015 720.0 383.2 5,067 4,927 9,738 -- -- 268.0 N/A N/A2016 732.3 387.8 5,096 4,992 9,855 -- -- 270.6 N/A N/ASector�Rank 32/33 32/33 12/33 8/33 28/33 N/A N/A 31/33 N/A N/AEconomy�Rank 690/701 680/701 349/700 309/700 644/701 N/A N/A 666/701 N/A N/A

IVA/Revenue�(%)

Imports/Demand�

(%)Exports/Revenue�

(%)

Revenue�per�Employee�

($’000)Wages/Revenue�

(%)Employees�

per�Est.Average�Wage�

($)

Share�of�the�Economy�

(%)2002 57.27 N/A N/A 78.75 39.05 2.01 30,755.15 0.002003 56.54 N/A N/A 77.76 38.34 1.99 29,811.60 0.002004 55.03 N/A N/A 79.14 37.23 1.93 29,460.92 0.002005 54.69 N/A N/A 80.00 37.08 1.92 29,667.61 0.002006 53.67 N/A N/A 81.10 36.17 1.91 29,332.02 0.002007 52.58 N/A N/A 81.45 35.18 1.91 28,658.09 0.002008 51.81 N/A N/A 81.41 34.52 1.90 28,103.88 0.002009 52.38 N/A N/A 76.80 35.39 1.93 27,175.60 0.002010 52.04 N/A N/A 74.40 36.04 1.96 26,812.59 0.002011 52.05 N/A N/A 74.21 36.04 1.94 26,741.96 0.002012 52.35 N/A N/A 74.36 36.35 1.93 27,033.44 0.002013 52.64 N/A N/A 73.65 36.65 1.95 26,996.59 0.002014 53.18 N/A N/A 73.20 37.18 1.95 27,214.73 0.002015 53.22 N/A N/A 73.94 37.22 1.92 27,521.05 0.002016 52.96 N/A N/A 74.31 36.95 1.93 27,458.14 0.00Sector�Rank 3/33 N/A N/A 33/33 1/33 32/33 31/33 32/33Economy�Rank 146/701 N/A N/A 621/701 107/701 638/700 549/701 680/701

Figures are inflation-adjusted 2011 dollars. Rank refers to 2011 data.

Revenue�(%)

Industry�Value�Added�

(%)

Establish-ments�

(%)Enterprises�

(%)Employment�

(%)Exports�

(%)Imports�

(%)Wages�

(%)

Domestic�Demand�

(%)CD�Sales�

(%)2003 3.0 1.7 5.1 5.4 4.3 N/A N/A 1.1 N/A -6.72004 4.6 1.8 6.1 6.2 2.8 N/A N/A 1.6 N/A 1.92005 2.7 2.1 2.2 2.2 1.6 N/A N/A 2.3 N/A -8.12006 -0.2 -2.0 -1.1 -1.3 -1.5 N/A N/A -2.7 N/A -10.92007 -1.9 -3.9 -2.0 -1.9 -2.3 N/A N/A -4.6 N/A -20.52008 -4.9 -6.2 -4.4 -5.3 -4.8 N/A N/A -6.6 N/A -26.62009 -6.2 -5.2 -2.1 -3.1 -0.6 N/A N/A -3.9 N/A -21.92010 -3.7 -4.3 -2.1 -2.1 -0.6 N/A N/A -1.9 N/A -21.42011 -3.3 -3.3 -2.3 -2.3 -3.1 N/A N/A -3.4 N/A -20.02012 -2.1 -1.5 -1.9 -1.9 -2.3 N/A N/A -1.2 N/A N/A2013 -1.0 -0.5 -0.9 -0.3 -0.1 N/A N/A -0.2 N/A N/A2014 -0.2 0.8 0.4 0.3 0.4 N/A N/A 1.2 N/A N/A2015 1.2 1.3 1.6 1.3 0.2 N/A N/A 1.3 N/A N/A2016 1.7 1.2 0.6 1.3 1.2 N/A N/A 1.0 N/A N/ASector�Rank 27/33 29/33 25/33 24/33 26/33 N/A N/A 26/33 N/A N/AEconomy�Rank 670/701 662/701 626/700 617/700 661/701 N/A N/A 663/701 N/A N/A

Annual�Change

Key�Ratios

Industry�Data



Jargon�&�Glossary

BARRIERS�TO�ENTRY Barriers to entry can be High, Medium or Low. High means new companies struggle to enter an industry, while Low means it is easy for a firm to enter an industry.

CAPITAL/LABOR�INTENSITY An indicator of how much capital is used in production as opposed to labor. Level is stated as High, Medium or Low. High is a ratio of less than $3 of wage costs for every $1 of depreciation; Medium is $3 – $8 of wage costs to $1 of depreciation; Low is greater than $8 of wage costs for every $1 of depreciation.

CONSTANT�PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using 2011 as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the ‘real’ growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC�DEMAND The use of goods and services within the US; the sum of imports and domestic production minus exports.

EARNINGS�BEFORE�INTEREST�AND�TAX�(EBIT)� IBISWorld uses EBIT as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding tax and interest.

EMPLOYMENT The number of working proprietors, partners, permanent, part-time, temporary and casual employees, and managerial and executive employees.

ENTERPRISE A division that is separately managed and keeps management accounts. The most relevant measure of the number of firms in an industry.

ESTABLISHMENT The smallest type of accounting unit within an Enterprise; usually consists of one or more locations in a state or territory of the country in which it operates.

EXPORTS The total sales and transfers of goods produced by an industry that are exported.

IMPORTS The value of goods and services imported with the amount payable to non-residents.

INDUSTRY�CONCENTRATION IBISWorld bases concentration on the top four firms. Concentration is identified as High, Medium or Low. High means the top four players account for over 70% of revenue; Medium is 40 –70% of revenue; Low is less than 40%.

INDUSTRY�REVENUE The total sales revenue of the industry, including sales (exclusive of excise and sales tax) of goods and services; plus transfers to other firms of the same business; plus subsidies on production; plus all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); plus capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY�VALUE�ADDED The market value of goods and services produced by an industry minus the cost of goods and services used in the production process, which leaves the gross product of the industry (also called its Value Added).

INTERNATIONAL�TRADE The level is determined by: Exports/Revenue: Low is 0 –5%; Medium is 5 –20%; High is over 20%. Imports/Domestic Demand: Low is 0 –5%; Medium is 5 –35%; and High is over 35%.

LIFE�CYCLE All industries go through periods of Growth, Maturity and Decline. An average life cycle lasts 70 years. Maturity is the longest stage at 40 years with Growth and Decline at 15 years each.

NON-EMPLOYING�ESTABLISHMENT Businesses with no paid employment and payroll are known as non-employing establishments. These are mostly set-up by self employed individuals.

VOLATILITY The level of volatility is determined by the percentage change in revenue over the past five years. Volatility levels: Very High is greater than ±20%; High Volatility is between ±10% and ±20%; Moderate Volatility is between ±3% and ±10%; and Low Volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees of the establishment.

Industry�Jargon

IBISWorld�Glossary

SAMPLER An audio tool that can capture a previously recorded sound and supply it to the synthesizer.

SEQUENCER An audio tool that can take a small portion of a synthesizer’s output and repeat selected sections precisely when laying down the recording to tape.

SYNTHESIZER An audio tool that allows the production of a wide variety of sounds based on acoustic instruments and electronic tones that do not have any foundation in traditional instrumentation.

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51224 audio production studios in the us industry report

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