Record-breaking run at the 'rest home for pop music has-beens'

Business Profile: The head of Sanctuary Group says music industry is as much about touring and merchandise as it is about record sales

Andy Taylor doesn't look very rock 'n' roll. In fact with his big frame and bald head he looks more like a genial publican. But as the head of Sanctuary Group, a music company whose acts include Iron Maiden, the Pet Shop Boys and Elaine Paige, he has been a serious player in the UK music scene for a quarter of a century.

He's an intriguing mix, with a fat cigar in his hand and only a modest interest in music. "I like melodic music, like Dolly Parton and Carole King," he says. And as he reels off facts and figures about the business it makes you wonder whether the industry really is in the parlous state newspaper headlines would have us believe.

EMI reported a tale of woe the other week with lower profits, missed revenue targets and a primal scream about the problems of music piracy. By contrast Sanctuary had popped up just days earlier with a trading statement saying full-year profits would be at the top end of expectations.

"The first point is that the music industry is one thing and the market for recorded music is another," explains Mr Taylor in a booming Geordie accent. "Sales of recorded music only account for about a third of the whole market which also includes income from tours and merchandise as well as from the use of music in commercials and in films. There were some statistics out recently which showed that global income from music was up 9.4 per cent last year."

He denies piracy is a serious problem and says the music majors are using it to hide a more structural issue: lack of decent material by artists with long-term futures.

"I do think it's an excuse. My view is that the reasons (for falling music sales) are economic downturn and lower quality product."

He blames the conglomeratisation of the sector for squeezing much of the creative life from the business. "If you go back to the Sixties, we had bubble gum pop acts then. But we were developing long-term acts too. We had labels like Island and Chrysalis and hundreds of independent record labels driven by entrepreneurs who wanted to break new acts. Then consolidation came and the major record companies bought up the independents. But they squashed the entrepreneurialism by putting it in the structure of a conglomerate. They were still required to show growth, though, so the easiest thing to do was produce short-term product that would drive short-term growth. That's why acts started being broken by in-your-face marketing. It's become like the Christmas toy market."

He claims too many CDs are "filler" with only a few decent songs, so little wonder consumers aren't buying them. "The big problem is people who would see an album with three hit singles and decide to buy it rather than the singles. Quite often they'd be disappointed because the rest of the CD wasn't that great. The internet offers the opportunity to download only the songs they like rather than buy the whole product."

Sanctuary seems to have weathered the storms in the sector with profits tipped to be £13.5m this year compared with last year's £7.7m. Mr Taylor claims Sanctuary is protected from the sector's difficulties by two key features. First, Sanctuary is spread across more than just music sales with sizeable interests in artist management, tour revenue, merchandise sales and DVDs. It has just bought a business which manages Led Zeppelin, who are tipped for a £250m tour next year. This broader approach is something rivals such as EMI are starting to copy.

Second, Sanctuary is not in the Robbie Williams-Gareth Gates market. It specialises in what it describes as "long-term heritage acts" with broad appeal and solid fan bases. So its roster of acts includes The Pet Shop Boys, Guns 'n' Roses, Bonnie Tyler and Gary Moore. An unkind soul might call the company a rest home for rock and pop has-beens but these artists make serious money.

"Only 5 per cent of music buyers are fanatical about music but they are our key market," Mr Taylor says. "If they like an act they'll buy everything they can from them plus merchandise and concert tickets."

Mr Taylor says the artists welcome being signed to a smaller group which can devote attention to them. "They are also reliable and a lot more savvy," he says.

They also don't throw TV sets out of hotel bedrooms anymore or go on week-long benders and miss tour dates. Bruce Dickinson, the lead singer of heavy rock group Iron Maiden is a case in point. He is a qualified pilot for a charter airline who tours with Iron Maiden in his spare time. Indeed the leather-trousered rocker is apparently so sensible these days that he makes his own sandwiches on tour.

The Sanctuary business model is to keep investment low in new acts to minimise risk. "We limit the exposure to £50,000. That doesn't sound much but you can often sign a new act for £5,000-£10,000 and record an album for £10,000."

Sanctuary has helped discover new acts such as The Strokes as part of its joint venture with the Rough Trade record label. "If the marketing requirement is going to be above what we are willing to sanction then we do a deal with a major label for rest-of-the-world rights."

As for the internet, Mr Taylor believes it is an opportunity. "It could bring in people who have never bought much music. For example a housewife who likes crooners like Engelbert Humperdinck. No radio station plays material like that all the time. But the internet could offer a repertoire of thousands of songs she could download and would be happy to pay for. Most people don't want to break the law and would prefer to buy from a legitimate source.

He also believes big pirate markets such as China offer good growth prospects. "At the moment 95 per cent of China's music market is pirated. That could fall to 50 per cent and it would then be one of the biggest music markets in the world."

Have the majors ever made a bid for Sanctuary? "No," he says. "But we might build strong ties with some of the majors in the form of strategic alliances." He admits there have been some talks which could see a major label taking a stake in Sanctuary.

He says he'd like Sanctuary to remain independent, which is hardly surprising given he has run it since 1976 when he founded the business with Rod Smallwood, a pal from university. Mr Taylor, a chartered accountant, looks after the books, while Mr Smallwood is head of artist services. "I was president of the Student Union at Trinity College and we used to run the May balls and things like that and we realised the music industry was so disorganised there was an opportunity there. We did things like the catering at the Reading Festival. Rod used to manage people like Steve Harley and Cockney Rebel." Now he and Sanctuary are well and truly part of the establishment.

ANDY TAYLOR - TRACK LIST

Title: Executive chairman, Sanctuary Group

Age: 52

Pay: £292,000

Career history: Qualified as chartered accountant.

Founded Sanctuary in 1976 with Rod Smallwood after meeting at Cambridge University.

Interests: "I like eating and drinking and walking in The Lakes. I've got a cottage there. I enjoy reading but its mostly trashy stuff like John Grisham."