The German Federal Association of Music Industry (Bundesverband Musikindustrie – BVMI) reported a slight growth of recorded music sales by 1.2 percent for 2013. The main reason for the first increase of music sales in the past 15 years were growing digital music sales by 11.7 percent from 2012 to 2013. At the same time, the physical music sales moderately declined by 1.5 percent to EUR 1.12bn. Whereas CD sales fell by 1.3 percent to EUR 1.0bn, the sales of vinyl records grew heavily by 47.2 percent to EUR 29.0m in 2013. Since the CD has still a market share of 69.8 percent, one should be cautious to speak about a turnaround of the German recorded music market. A stabilization of the physical music sales is unrealistic and the increase of digital music sales has to over-compensate the loss in the physical market segment. Although the revenue from ad-supported and subscription music services increased by 91.2 percent to EUR 68.0m, the single-track download sales fell for the first time by 4.4 percent to EUR 104.0m in 2013, which makes a turnaround scenario highly questionable.
In the following, the future development of the German recorded music market will be analysed based on the BVMI report as well as on historic empirical data.
The Recorded Music Market in Germany, 2003-2013
The recorded music market in Germany is still dominated by CD sales. In 2013, 88m CD albums and 1.8m CD singles were sold, adding up to a total retail value of EUR 1.0bn. This results in a market share of 70 percent. This is rather high compared to the U.S., where the CD market share lies at 31 percent and even higher than in Japan with a share of 63 percent.
The high market share of music genres with an appeal to an older generation of music consumers could be responsible for the relative stability of CD sales. German Schlager and popular folk music (6.8 percent), classic music (7.2 percent) and German-Pop added up to a market share of 20 percent (BVMI 2014: p. 43). Another evidence that supports this hypothesis is the solid market share of long-play formats of 60.5 percent. In contrast, the singles’ market is dominated by internationals hits with a market share of 62.2 percent (BVMI 2014: S. 44-45). Seven out of the top-10 albums can be attributed to the Schlager and popular folk music segment.
The strength of CD sales is also causal for the relatively modest decline of the German recorded music market since 2003. Even though the sales of music cassettes and CD-singles have collapsed in the past ten years, the CD album sales fell by 30.7 percent from EUR 1.45bn in 2003 to EUR 1.01bn in 2013. The loss of EUR 428m in market value in the physical segment was accompanied by gains of EUR 328m in digital music sales and a further plus of EUR 19m for vinyl sales (fig. 1).
Thus, the still dominant role of the album format stabilized the German market. Whereas other national markets converted from an album to a singles’ market, this phenomenon is only rudimentarily visible in Germany. Although the number of singles (mainly single-track downloads) sold in 2012 doubled to 100m compared to the years before 2005 (fig. 2), the unit sales of long-play formats decreased by 34.2 percent from 165.2m to 108.7m from 2001 to 2013.
In 2013, 45.7m units of CD albums less were sold than in 2001 and the disappearance of music cassettes accounted for another loss of 30m units. Though the decline in unit sales of physical products could not be compensated by additional sales of 18.7m digital albums, the album format remains strong in the German recorded music market (fig. 3).
The digital music market in Germany is characterised by further “anomalies”. On the one hand, the digital accounted for 22.6 percent of total sales, which is rather low compared to other markets. On the other hand, this reflects the different behaviour of music consumers in German. Whereas the single-track download sales dominate the digital music business, download bundles occupy a high share of 46.0 percent (EUR 151.0m) of the digital music sales in Germany. Single-track downloads account for just 31.7 percent (EUR 104.0m) and music subscription and ad-supported streaming services for a modest 20.7 percent (EUR 68.0m). Compared to the U.S. and Japan, mobile music sales never played an essential role in Germany. When mobile music sales peaked in 2008, they accounted for a 12.6 percent market share, whereas mastertones and ringback-tones reached 33.6 percent in the U.S. and 31.8 percent in Japan in the same year. In the meantime, the revenue from download bundles has become increasingly important in the sales-mix, especially since the single-track download sales decreased by 4.4 percent for the first time (figure 4 and 5).
Due to increasing revenues – a plus of 90 percent to EUR 68.0m from 2012 to 2013 – from music streaming (ad-supported as well as subscription) the German digital music market did not stagnate in 2013. This growth can be mainly attributed to Spotify that entered the market in March 2012. As Spotify, other internationally successful streaming companies launched their services late on the German market. In the meantime, however, the German music streaming market is crowded with 17 music subscription services.
In the near future, the growth of the music streaming market in German will slow down. If music streaming will cannibalize download as well as CD sales, prognoses such as made by GfK are hasty (fig. 6).
According to GfK the music streaming market share would rise from current 4.4 percent to 35.1 percent in 2018. Physical music sales would decrease by 20 percent to a market share of nearly 50 percent in the same period. These assumptions are heroic and will only hold true if the music consumption behaviour of the Germans will radically shift towards music streaming. At the same time, the download sales have to remain on the same level as in 2013. In addition, the CD sales may not decline in the same degree as in other markets. The German recorded music market must behave, therefore, very different to comparable European markets. We will see if this is true. However, it seems to be unlikely.
Since the German BVMI reports retail sales figures (incl. value-added tax), the physical sales are not comparable with RIAA shipment sales. The Recordings Industry Association of Japan, in contrast, reports production figures. Nevertheless, digital music sales are directly comparable in Germany, Japan and in the U.S.
Helene Fischer topped the album charts with “Farbenspiel” and her “Best Of” album entered the top-10 too. Andrea Berg accounted also for two top-10 albums with “Atlantis” and “Abenteuer” as well as Santiano with “Mit den Gezeiten” and “Bis ans Ende der Welt”. Heino completed the “Schlager parade” with “Mit freundlichen Grüßen” on rank 10 (BVMI 2014: 48).
German Telekom shut down its streaming portal Musicload in 2013 to enter into an exclusive agreement with Spotify.