The entire culture and entertainment sector, particularly the music sector, is paying a high price for the current pandemic. In this ailing sector, the production and trade of musical instruments is a crucial yet endangered industry. This risk has been exacerbated by the health and socio-economic emergency, and directly affects companies and people and, with them, that heritage of knowledge and know-how in the field of musical instruments that our country has been carrying on for centuries.
In order to monitor the state of health of this industry - with about 2,200 companies and 4,400 employees in Italy in 2019 - a virtuous collaboration has been in place for four years between DISMAMUSICA, the national trade association and CERSI, Research Centre for Entrepreneurial Development of the Università Cattolica, based in Cremona. The main result of this collaboration is the annual publication of an Observatory dedicated to the performance of musical instrument manufacturers, publishers, wholesalers and retailers. The 2020 edition was curated by Professor Fabio Antoldi and the researchers Ilaria Macconi and Arcangela Ricciardi.
Unfortunately, the high level of uncertainty in the early months of this year made it impossible to carry out all the activities planned for the 2020 Observatory. The most painful renunciation concerned the survey conducted on a representative sample of musical instruments shops, introduced two years ago to estimate the final value of the Italian market through the direct answers of those who work in contact with musicians and amateurs.
Most of the other research activities were carried out on a regular basis. A special thank you, in this regard, goes to the manufacturers and wholesalers who also this year, in spite of everything, adhered to the historical survey on market sell-in data (DISMA has been carrying it out since the 1980s).
To carry out the analysis, the Business Register, i.e. the register managed by the national chamber system, was interrogated. Thus, the number of companies and employees of the main categories of players in the supply chain in 2019 was reconstructed. Bureau Van Dijk’s AIDA database was then used to extract the balance sheet data of a subsample of operators contacted for the sell-in survey. Data were analysed separately for the categories of manufacturers, publishers and wholesale distributors for the period 2014-2018.
Lastly, again using AIDA, we focused on the economic performance of retailers, representing it separately according to shop size (small, medium, large and megastores). The 2019 revenues of a sub-group of shops were also obtained. It emerged, for the second year in a row, that there was a decline in sell-in (-3.86% in 2018, -2.25% in 2019) and a negative change also for retailer revenues in 2019 (on 2018).
In general, the trends are downward for most of the dimensions considered. After a slowdown in 2018, the closure of retail shops has resumed with vigour. Since 2000, 357 shops have closed, 27.7% of the initial stock. In general, the difficulties of the retail sector were counterbalanced by the strengthening of the production side of the chain, but in 2019, for the first time, the number of producers remained stable. However, they are still in good financial shape, as shown by their balance sheets. The situation is more complex for wholesalers and, above all, for specialised retailers. In particular, it is the smaller shops that pay the highest price in terms of reduced revenues and margins.
CERSI's monitoring of the incidence of sales made by manufacturers and wholesalers to specialised or generalist websites is worth noting. It appears to be increasing: from 6.38% of total sales in 2016 to 15.37% in 2019. It is a phenomenon that seems to feed the small but growing category of instrument repairers in Italy.
Our conclusion is that the sector is grappling with a structural, not a transitory, crisis. It is characterised by a general decline in revenues along the supply chain, worrying levels of gross profitability for many companies and growing disintermediation, induced by e-commerce. This is jeopardising widespread retailing, the role of distributors and profit margins, with depressing effects on the resources of supply chain operators to deal with the pandemic.