IFPI: Record companies spend more on R&D than software companies

I received a note this summer regarding my post on digital music sales earlier this year: they noted that the IFPI’s CEO and Chairman IFPI, John Kennedy, said that…

“as an industry, (record companies) spend more on research and development than almost any other sector.

R&D as % of Sales
Aerospace 4.6
Chemicals 4.1
Health 7.2
IT Hardware 9.5
Computer Software 10.3
Pharma & Biotec 15.1
Recorded Music 15

“Percentage spends on marketing are less widely known but I estimate that the music industry spends 15% of its revenues on marketing, and virtually all of this is on new releases. An investment again of billions of euros.”

I missed that article.

So, what makes up the 15% in record company “R&D” costs? Sure, that probably includes A&R (the talent search cost to find and sign), studio costs, rentals, artist development (teaching them how to respond to the press)… but I’m not sure that it’s an apples to apples comparison with the >15% spent by pharma & biotech (by Kennedy’s estimates). I certainly believe the 15% of revenues dedicated to marketing costs.

I read that “life sciences companies spend approximately 40% of their R&D budgets managing manual paper-based processes” (according to statistics published by PhRMA). Perhaps some of that R&D cost should be moved under marketing, sales promotion, employee and artist training and development of riders noting that bowls of backstage M&Ms should the brown ones removed.

(Note: Yes, yes… I know that fulfilling the musician’s rider is usually the responsibility of the show’s promoter: my first real job was doing this kind of stuff for a local promoter at night when I should’ve have been studying.)

To that end, perhaps Microsoft should count free sodas as part of the multi billion dollar a year R&D spend.

I recalled this reference when another reader sent me a picture today (thanks, J) in response to the post on digital music sales. It was generated on the seemingly popular Ronald Mchummer website.

           Good luck, Zune! 

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