The recently published figures of the recorded music market in Germany show a picture of stability. Compared to 2013, the recorded music sales increased by 1.8 percent to EUR 1.48bn as reported by IFPI Germany (Bundesverband Musikindustrie – BVMI) in the latest Yearbook on the Recorded Music Industry in Germany (Jahrbuch zur Musikindustrie in Deutschland). The still fast growing revenues from the music streaming business are the main reason for the modest overall sales growth of 1.8 percent. The revenues from music subscription rose by 77.0 percent to EUR 108.0m compared to 2013. In the same period, however, long-play download sales (mainly digital album sales) declined for the first time – by1.4 percent to EUR 145.0m. The single track download sales again decreased – after a sales decline of 4.6 percent in 2013 – by 7.4 percent to EUR 100.0m. The physical music sales are still declining by 1.7 percent in 2014. Nevertheless physical sales are still dominant on the German recorded music market with share of 74.9 percent (without revenues from neighbouring rights collecting society GVL and from synchronisation). The CD is still the most important audio format of the recorded music market in Germany with sales of EUR 985.0m and a market share of 66.7 percent.
The details of the development of the recorded music market in Germany from 2003-2014 are highlighted in the following analysis.
The Recorded Music Market in Germany, 2003-2014
The physical music market segment
In an international comparison, the German recorded music market is dominated by the physical product. Despite a sales decline of 2.1 percent, the CD is still the main revenue source with a market share of 66.7 percent in 2014. Although roughly a third of the CD market has vanished since 2003, CD sales of EUR 985.0m are by far the most important revenue source for the German recorded music industry. In 2014, 87.1m CD album units are sold compared to 106.3m units in 2003. The renaissance of vinyl also continued in 2014. The growth of vinyl sales by EUR 9.0m (plus 31.0 percent to EUR 38.0m) is of course remarkable, but vinyl sales account for just 2.6 percent of the overall recorded music market in Germany. In 2014, 1.8m units of the vinyl discs were sold – a plus of 28.6 percent compared to the year before. All other physical music formats – except music video DVDs that account for a market share of 5.1 percent (EUR 76.0m) – do not play any significant economic role in Germany.
Figure 1: The recorded music market in Germany, 2003-2014
Figure 2: The share of recorded music formats in Germany in 2014
The digital music market segment
The digital music market in Germany seems to enter into the next structural break. All revenues from downloaded music sales are smaller than a year ago. In 2014, almost 10 percent less single track downloads were sold resulting in 83.6m units compared to 92.8m in 2013. The unit sales decline becomes even more visible by comparing the 2014 figures with the all-time high of 2012. We can see a 14.3 percent decline in this two years’ period. The sales decrease in the single track market segment of 7.4 percent is smaller than the unit sales decline of 10.0 percent due to an average price increase per single track download. Instead of EUR 108.0m in 2013, the single track download sales generated lower revenues of EUR 100.0m in 2014. The digital long-play sales decreased for the first time by 1.4 percent from EUR 147.0m to EUR 145.0m. Since the unit sales of download bundles slightly increased by 1.6 percent, the decrease can be blamed on an average price decline per bundle. The real tones and ringback tones business has become economically irrelevant, after the sales in this segment decreased by a third to EUR 2.0m. This kind of mobile music sales account just for a share of 0.6 percent in the digital music market segment which is on the same level as the digital music video sales.
The winner of 2014 is music streaming. The revenues from music streaming subscription services rose by 77.0 percent from EUR 61.0m to EUR 108.0m in 2014. Since the revenues from ad-supported freemium music streaming is now included in the category “miscellaneous”, we cannot clearly assess its volume and development in the past few years. Despite the massive growth of music streaming in the past three years, the market share of 29.1 percent of the music streaming subscription segment in the digital music market in Germany is still modest. If we include the revenues from the “miscellaneous” category, music streaming accounts for 8.3 percent of the overall German recorded music market. In the U.S., the revenue share of 27.5 percent of music streaming of the total recorded music market is significantly higher than in Germany.
Figure 3: The digital music market in Germany, 2008-2014
Figure 4: The share of music formats in the German digital music market in 2014
Source: After Annual Report 2014 of IFPI Germany (BVMI)
A study by the German market researcher GfK – commissioned by IFPI Germany (BVMI 2015: 27-31) – enables us to understand the driving forces behind the current development on the recorded music market in Germany. According to the GfK study, music streaming is currently no option for the Germans. Just 2.5 million music users in Germany pay a monthly fee for premium services such as offered by Spotify, Deezer, Nuke and Napster. The conclusion can, therefore, be drawn that 1.8 percent of the German population and 4.7 percent of the German online population are paying premium users. Freemium models are much more popular among the Germans than subscription services. Ad-supported services by Spotify & Co. are used by 4.2 percent of the German population. Even more popular are free of charge video platforms such as YouTube, TapeTV and Vevo which are consumed by 11.4 percent of the German inhabitants. The most popular channel, however, to listen to music is still radio. It accounts for a share of more than 50 percent of the German population. Non-interactive online radio (LastFM, Soundcloud, radio.de) is becoming more and more popular by reaching 9.9 percent of the Germans (IFPI Germany 2015: 27). The GfK-study also highlights that 6.4 million consumers from a population of 8.3 million revenue relevant consumers use an ad-supported services compared to 2.5 million who pay for a music subscription. Further 1.5 million users have a trial subscription to a music streaming platform or used them with vouchers.
We can, therefore, conclude that the music consumption behaviour of the music consumers in Germany is more traditional than in other Western European countries as well as in the U.S. The Germans mainly listen to music by radio and they still pay for CDs (hardcore music fans even for vinyl discs) and for music downloads.
This hypothesis can be supported by empirical material highlighted in the IFPI Germany Annual Report 2014. The report cites findings of the GfK Consumer Panel and GfK Streaming Study respectively (IFPI Germany 2015: 36-37) that two thirds of 16.4 million CD buyers in Germany are older than 40 years. The relation is vice versa if we look at the users of freemium streaming models. 64.5 percent out of 8.2 million freemium music streamers are younger than 40 years. It is further remarkable that the age cohorts that are under 40 years old are by far the most important users of music subscription services. 73.4 percent out of 2.5 million music subscribers are younger than 40 years. The dominant usage group of music streaming platforms – music subscription as well as ad-supported services – is the age cohort of 20-29 years old music users. Thus, we can currently observe a “digital divide” between the generations younger than 40 years from those who are 40 years and older.
Figure 5: The age cohorts of paying music consumers in Germany by music consumption channels/formats, 2014
A generation gap does not only exist in the usage of music formats/distribution channels, but also in the consumption pattern of different music genres (IFPI Germany 2015: 35). The age cohorts from persons 40 years and older are dominant with a share of 81.0 percent in the genre segment of Schlager/popular folk music as well as in the classical music segment with a share of 90.0 percent. In the pop & rock music genre the age cohorts 40 years + are slightly over represented with a share of 61 percent, whereas in the dance music genre the music consumers younger than 40 years have a market share of 70.0 percent.
Since no data is available on the music format use of the different age cohorts, we cannot directly conclude if the CD is more popular among the older music consumers and music streaming among the youngsters. Nevertheless, we can draw tentative conclusions by referring to the music charts.
Classical music, Schlager/popular folk and German-Pop, which are preferred by older music consumers, have a joint market share of 21.8 percent that is similar to the rock music segment (21.9 percent market share) and international pop (25.5 percent). “Farbenspiel” by the German Schlager star Helene Fischer was topping the long-play sales charts in Germany in 2014. In addition, Fischer’s “Best-of” album ranked 8th in the long-play charts in the same year. Apart from Helena Fischer we can find several Deutsch-Pop artists in the 2014 album charts: Herbert Grönemeyer with “Dauernd jetzt” on #5, Unheilig with “Gipfelstürmer” on #10 as well as with “Best of Unheilig” on #15, Peter Maffay with “Wenn das so ist” on #6 and Udo Jürgens and friends with “Mitten im Leben – the Tribute Album” on #18. The Austrian “Alpine rocker” Andreas Gabalier usurpated chart rank 12 with “Home Sweet Home”. In total, we can find just a few international pop and rock acts in the German album charts and the most successful of them are already veterans such as AC/DC with “Rock Or Burst” on #2 and Pink Floyd with “The Endless River” on #3. In contrast to the album charts, the singles’ chart is dominated by current international pop and rock hits – apart from Helene Fischer’s No.-1 hit “Atemlos durch die Nacht”. We can, therefore, assume that international pop and rock hits are more often streamed and downloaded than Schlager/popular folk as well as classical music.
If we put together the data from the empirical material, we can conclude that the older music consumers (age cohorts 40+) still purchase physical sound carriers that leads to a relative stability on the German recorded music market. The younger music consumers (age cohorts under 40 years), in contrast, tend to digital music consumption and are starting to use music streaming services. In order to stabilize the recorded music market in the future, it is inevitable to offer still CDs for older music fans as well as attractive digital music services for the younger generation. Therefore, the current dispute on ad-supported freemium music services is counter-productive from a German music market’s perspective. The recorded music market is not that stable as the figures might suggest at first glance. There is still the danger for a further sales decline in Germany if we look at other large music markets such as France, U.K. and the U.S., where the digitization of the recorded music market is already on a much higher level.
IFPI Germany (BVMI), 2015, Annual Report 2014: Music Industry in Figures 2014, Berlin.
 A change in the reporting of digital music sales by IFPI Germany (BVMI) does not allow a direct comparison of the 2013 and 2014 figures. Whereas revenues from ad-supported and subscription services were added in 2013, the latter is now a separate category. The ad-supported music streaming revenue now can be found in the category “miscellaneous” together with revenues from ad-supported video platforms (e.g. YouTube, TapeTV, Vevo) and other download sales. The re-arrangement explains to a certain degree the increase of 75.0 percent from EUR 8m to EUR 14m in the category “miscellaneous” in 2014.