BACKGROUND AND RATIONALE:

Introduction

Music is intrinsically linked to culture. In the Philippines, our musical tradition is a story of a young
country struggling to find its identity amidst the strong influences from foreign colonizers, new
technology, and globalization.

Prior to the Spanish period, there were existing indigenous music traditions in the country. However,
during the Spanish regime, the colonial regime established institutions specifically a new government
and a new national religion. Along with the Catholicization of the country, Philippine music during this
period has been heavily influenced by Hispanic and European traditions. Kundiman and haranas were
two music genres that were popular during this period.

The same trend happened during the American period, wherein Filipinos were enamoured with
zarzuelas and vaudeville. Even in the post-World War 2 period, Filipinos patronized American music
traditions like rock and roll, jazz, and Vaudeville.

In between these two colonial regimes, an organic Filipino tradition struggled to emerge. Bayan Ko
was an example of music created to express dissent and discontent from foreign oppression.
However, the Original Pilipino Music (OPM) we know now started in the early-1970s. It was the time
when artists entered the entertainment scene determined to produce original works and they were
backed by young local producers like Alpha Records, Vicor Records, and Dyna Records.

In the past 50 years, recording companies have produced and marketed both local and foreign albums
to the mainstream market. This business has steadily grown for the past five decades. Income
estimates show that the industry has been a growing industry until the early 2000s propelled by
foreign and local sales.

Timeframe Annual Income Estimates

Early 1960’s Php1M

Late 1960’s Php50M

Mid 1970’s Php 80M

Early 1980’s Php150M

Late 1980’s Php400M

1990’s Php1B

2000 Php 2.1B

2010 (physical sales only) Php699M

http://www.pari.com.ph/articles_industry.html
The steep drop in revenues the past decade mirrored developments happening on a global scale.
Worldwide, the shift to digital format and the prevalence of the Internet has caused rapid declines in all
traditional content formats – from books, newspapers, magazines, movies, and music.

While developed countries like the US, Japan, Korea struggled with the same problems of piracy that
the Philippines is still grappling with, they also had the advanced infrastructure to launch and
popularize new business models of monetizing music. Aside from the infrastructure, advanced
countries also had government support in terms of drafting the necessary policies and enforcing anti-
piracy laws.

In the past ten years, the Philippine music industry is facing the tricky and exciting challenge of
producing music in this kind of environment.

The discussion below highlights some of the trends in the local music industry.

Trend 1: There is an ongoing restructuring in the country’s recording industry

1999 is considered the peak of the Philippine recording industry with total industry CD sales reaching
Php2.7 Billion. Since then, album sales have gone down to Php699 Million by 2010. That represents a
75% drop in revenues for recording companies in one decade.

This rapid decline in revenues is felt across the industry. The table below provides a snapshot on the
decline in revenues from some of the major labels in the country.
This overall decline in revenues has led to the following developments in the past decade:
• Record labels have shrunk in sizes/ scope of operations
• Some major recording companies closed offices and limited to licensing operations
Trend 2: Dominance of Foreign Over Local Music

As mentioned in the introduction, foreign musical traditions have always been dominant in the country.
Interviews with OPM experts confirmed this trend. Throughout the almost 50-year history of OPM,
foreign music tended to sell more than local albums in the country.

However, the same experts mentioned that there were a couple of decades when OPM went toe-to- toe
with foreign albums in our country’s history. In the 1970s and in the 1990s, it was estimated that OPM
and foreign music sales were at 50-50.

OPM also benefitted from policy pronouncements by government. During the martial law, Broadcast
Media Council released a couple of resolutions in the 1970s requiring stations to play a specific number
of local songs per hour. By 1986, Corazon Aquino signed Executive Order 255 that mandated radio
stations to play four OPM songs every hour.

But in the 21st century, the trend has shifted back in favour of foreign music.
One of the consequences of the decline in CD revenues is that independent local recording companies
are unable to make enough sales to cover their expenses. Album production and new artist marketing
are endeavours that require a lot of capital and the current environment is not conducive to making a
profit.

This tilted the balance in favour of foreign music in two ways. One, foreign labels have enough capital to
continue launching new albums in this environment. Two, local labels have been more risk-averse in
investing in new local artists.

Interviews with recording company executives surfaced that they have been producing much less
albums the past decade than they have in previous decades. The Filipino Society of Composers,
Authors, and Publishers (FILSCAP) is the country’s collecting agency for royalties on music used in
public performances. Data from the breakdown of FILSCAP collections is a good indicator of how
foreign music has dominated public performances in the country in the past two years.
Trend 3: Technological advances have radically altered the means and ways music reaches the
listeners.

The digital age has altered the traditional value chain of making money from music. The figure below
shows the traditional sequence of actors involved in bringing music to the mainstream market.

Technological shift to digital format, social media, peer-to-peer file sharing challenged (and in some
ways broken down) the previous monopolies held by these traditional players.

Music Creation
The shift to digital format affected record labels the most because it cannibalized its core product,
which is the physical audio CD. Coupled with more accessible sound recording technologies, the
production function has ceased to be a monopoly of record labels. Now, artists can produce their own
work in a format that is ready to be shared to the market.

Marketing and Promotion

Television and radio remain to be dominant forms of marketing and promoting products in the
Philippines. Based on the 2010-2011 Synovate Media Atlas, free-to-air TV has a 98% penetration rate in
the country and is the top earner in terms of ad revenues among all media forms. Second to TV is radio,
with at least Php22.3B in ad revenues on the first half of 2011 alone (based on an AC Nielsen estimate).

However, the numbers tell a different story when it comes to the 15-24 age group. Record company
executives reported that music buyers tend to be the younger people. And in the younger age group,
the Internet is a more significant player than TV and radio.

National Internet penetration rate as of 2011 is 33%. But for the 15-19 age group, the figure is at 65%. For
the 20-30 age group, it is 48% (based on Nielsen Net Index 2010). These Internet users are likely
opinion leaders and trendsetters. In terms of music (as of 2010 Nielsen Southeast Asia Digital
Consumer Report), Filipinos online tend to use the Internet in the following ways:

- 20% listen to Internet radio

- 24% share or post something online
- 65% visit social networking sites
- 37% download or upload music files

This change in media consumption pattern means that the previous monopoly in influence of radio and
TV as nationwide tastemakers has dwindled, at least to the 15-30 year old age group. Online users can
now rely on referrals of friends in social networking sites, discussion forums, and online reviews in
order to discover new music instead of waiting for the airwaves to play a new artist.
Distribution

The 2010 Nielsen Southeast Asia Digital Consumer Report estimates that 37% of Filipinos online
download or upload music files.

This is aligned to PARI’s figures that from 2005 to 2010, digital music revenues have increased 400%.
However, this increase is far from offsetting losses in physical CD sales. And the reason for this is that
95% of music downloaded online is most likely illegal, based on PARI estimate.

File sharing websites and downloading YouTube videos are some of the ways Filipinos access music
freely. Credit cards are not widely used, hence, global trends in selling music online are not yet
applicable in the country.

Traditional brick-and-mortar audio CD stores have either closed down or diversified their product
lines. The age group of 35 and above still go there to buy CDs. But the younger, trendsetting segment is
comfortable with searching and downloading digital music files.

Trend 4: Independent artists and record labels alike are experimenting with different ways to market
music in the digital age.
With the ongoing shifts in technology, value chain, and listener behaviour, independent artists and
record labels are rushing to test different ways of marketing music in this new environment.

Record Label

“It is harder to be a stand-alone record company in this environment.” (Interview with Ramon
Chuaying)
In order to cope with declining revenues, record labels have diversified their income streams. Some of
these income streams are:
- Organizing live performances/ concerts - Artist management (360 contracts)
- New media revenues (e.g. Star Records’ new media revenues rose around 60% from 2009
to 2012)
- Endorsement partnerships

Independent artists

To work around the problem of piracy, local artists have focused their efforts on live performances.
Bands like Parokya ni Edgar have been performing to crowds of 20,000 to 50,000 paying audience. On
the other hand, acoustic performers earn by performing in bars and sharing in sales for the night.

Popular artists are also signed for endorsement deals with private companies.
Independent artists have several options as well to market their music. Some of these avenues are:
- Uploading music on iTunes - Uploading music on
Soundcloud - Selling music on their own websites -
Selling merchandise/ CDs during live performances

Result: An environment not conducive or not able to bring original local music to the mainstream
market #OPMisDead

The current shift in the music industry has been revolutionary. Historically, the recording industry,
both global and local, has experienced times of decline with the entry to new technology in the market
(e.g. shift to compact discs, entry to the music video). However, the changes ongoing now are so
sweeping that previous formulas for taking music to the mainstream market have been debunked.

CURRENT SITUATION:
The trends discussed above have interacted to bring OPM to the place it is in now.

Risk-Aversion to Original Work

With the decline of revenues, record companies have been more risk-averse in terms of selecting and
launching new works to the market. Even in good times, selecting a hit has always been a risky
endeavor. Currently, local record companies have chosen to play it safe by releasing revivals and
compilation albums of already proven hits that cater to the 35 and above market that still listen to
audio CDs. Record labels have been releasing revival albums, focused their efforts more on selling
merchandise and diversifying income streams instead of investing in new artists.

Harder to Breakthrough New Works and New Artists Through the Traditional Chain

Given that the traditional chain to bring new work to the market has been broken and that record
companies do not have as much leeway to engage in prolonged marketing efforts, aspiring artists
have a harder time to break through and reach the mainstream market.

Independent artists like Up Dharma Down and Jireh Lim have been able to reach the mainstream
market using new models. They rely on alternative platforms like Youtube and social media networks
to reach their audience.
CASE OBJECTIVE:
Given the rationale and the current situation of the Philippine Music Industry, the objective is to
create an Integrated Marketing Communication (IMC) Plan that will help rebuild the link from Filipino
Artist to the mainstream market and the next move that the Philippine Music Industry must do in
order to move forward with promoting and reviving OPM in the coming years.

WORKING BUDGET:
The IMC Plan will be given Php 1,000,000.00 to come up with strategies that will cover a
minimum of twelve (12) months to a maximum of fifteen (15) months.

CONTENT:
•Executive Summary (1 page)
•Situational Analysis
•TOWS Matrix
•Key Audiences
•Market Research
•Creative Strategies
•IMC Media Application/Communication Channels
•Budget Utilization
•Timetable
•Measurement of Success
•Appendix

FORMAT:
•1.5 Spacing
•Font size: 12
•Arial
•8.5x11

CRITERIA:
•Relevance strategy to IMC Plan (35%)
•Integration of IMC Plan (35%)
•Measurement of Success (15%)
Creativity (15%)