Towards a music streaming economy – an international market analysis

The music business year 2018 was shaped by the ongoing streaming boom. In April, Spotify has been listed as a stock market company and shortly thereafter the International Federation of the Phonographic Industry (IFPI) reported a 41.1 percent increase of global music streaming revenue to US $6.6bn for 2017. Music streaming has become the most relevant revenue source with a market share of 38 percent in the phonographic industry (compared to physical sales 30 percent, downloads 16 percent, performing rights 14 percent and synchronisation rights 2 percent).

In 2011, the global revenue from music streaming was comparatively low with a market share of 4.1 percent and a revenue of US $600m. However, the countries, for which IFPI provides data, have not developed uniformly as highlighted in the following analysis.

Book review: The Economics of Music by Peter Tschmuck

My new book “The Economics of Music” is now avaiable in the bookstores. “The Economics of the Music” is a concise, scientifically grounded textbook on the economic fundamentals of the music industry in particular and the music economy in general. It aims to highlight the economic principles that govern the music business by analysing music as an economic good that is protected by copyright law. The book therefore includes a chapter on the microeconomics of music as well as a chapter on the economics of music copyright that is mainly based on findings of institutional economics. The main parts of the book focus on the different sectors of the music industry – music publishing, sound recording, the live music market, and secondary markets such as media and advertising – in order to explain the network of actors in those sectors and how these markets are organised and linked. The music labour markets are treated in a separate chapter. It highlights different income streams for musicians, occupational careers in the music business, and music-related occupations in the wider music economy (education, advocacy, lobbying, etc.). Since digitization has a tremendous impact on the music business, a final chapter on the “Digital Music Business” highlights the new rules, structures, and processes that were established by the digital revolution in order to foreground the structural break the music economy underwent. The last chapter, therefore, refers back to the opening chapter on “A Short Economic History of the Music Business,” which provides an overview from music patronage  to the current digital music economy.

Peter Tschmuck, 2017, The Economics of Music. Newcastle-upon-Tyne: Agenda Publishing.

Hardback £55.00 | $70.00 ISBN 9781911116073

Paperback £16.00 | $23.00 ISBN 9781911116080

e-book £16.00 | $23.00 ISBN 9781911116097

Buy a book copy here: Agenda Publishing

Music Business Research 2016 – in retrospective

Dear readers of the music business research blog,

2016 seems to be the pivotal year in the recorded music industry. Although no annual statistics have been published until yet, we can take it for granted that the positive trend of 2015 continued in 2016. In 2015, the global recorded music market expanded by 3.4%. The US-market slightly grew by 0.9% and the German recorded music sales even increased by 4.4%.

The booming music streaming market was of course the main driver for the economic recovery of the recorded music business in 2015 and we can expect a further growth in 2016 and the upcoming year. The revenue growth of the streaming business compensated for the decline in CD sales, despite decreasing music download sales as highlighted in “The fate of the CD – an international CD-market analysis”. However, an in-depth analysis of the statistics unveils very different market dynamics in various countries. Whereas music streaming is the main business of the recorded music industry in Scandinavia, CD sales are still relevant in Germany and in Japan (see “The Music Streaming Market Revisited, 2011-2015”).

The Music Streaming Market Revisited, 2011-2015

Last year, I posted an analysis of the international music streaming for 2014 based on IFPI numbers. Since then the global streaming market was highly dynamic and therefore I updated my analysis and included also earlier data. In 2015 the global streaming revenue (subscriptions and ad-supported streaming revenue) increased by 42.5 per cent (IFPI 2016: 17) and had a volume of US $2.89bn. The music streaming market is almost as big as the music download market (US $2.97bn) (IFPI 2016: 49). Music streaming, therefore, accounts for 42 per cent of the global recorded music market. However, the market share of music streaming differs between countries. Whereas in Sweden the music streaming market share is 66.5 per cent of the overall recorded music market, in Germany just 11.4 per cent of the recorded music revenue comes from music streaming sources. And Japan, the second largest recorded music market in world, lags behind with meagre 4.6 per cent. In the following, please read an analysis of the international music streaming for the time-span from 2011-2015.

Animation of the international music streaming markets, 2011-2015

The Recorded Music Market in Brazil, 2000-2013

Brazil is the ninth largest phonographic market in the world according to the latest IFPI report, despite the fact that the revenue from recorded music sales has decreased by 58 percent since 2000. However, the Brazilian market for recorded music is more or less stable for six years now due to relatively high music video sales and the considerable growth of the digital music segment. Thus, the digital music sales have increased by 82.2 percent from BRL 24.3m to BRL 136.7m with music streaming playing an increasingly important role in the sales mix. In the following I highlight the Brazilian recorded music market by figures reported by the Associação Brasileira dos Produtores de Discos (ABPD).

The Recorded Music Market in Japan, 1990-2013

Compared to other markets, the world’s second largest recorded music market is very different – at least in respect to digitization. Whereas the digital music segment is booming in other large markets, it is shrinking in Japan according to the latest report of the Recording Industry Association of Japan (RIAJ). In 2013, the total digital music sales were ¥ 41bn (EUR 290m) compared to ¥ 54bn (EUR 383m) a year before – a drop of 23 percent. The main reason for this surprising decrease is a shrinking mobile music market that lost 56.7 percent of its volume from 2012 to 2013. The drop was even more dramatic if we look back to 2008, when mobile music sales accounted for ¥ 79.9bn (EUR 566.0m) – fivefold in value than in 2013. The main driver for the sales drop was not – as might be supposed – the shrinking market for mastertones and ringback tunes, but tremendously falling single track download sales on mobile phones. Whereas mastertones and ringback tunes sales decreased by 75.9 percent and ¥ -21.8bn (EUR -154.4m) respectively from 2008 to 2013, the decline of mobile single tracks download sales was even more severe with 83.7 percent and ¥ -39.9bn (EUR -282.6m) respectively in the same period. We have to take into consideration, however, that RIAJ does not count downloads from smartphones and tablets as mobile music downloads, but as desktop downloads from the Internet, which strongly increased in the past few years. The value of single track downloads on the Internet was ¥ 14.8bn (EUR 104.8m) in 2013and Internet album download sales were at ¥ 14.8bn (EUR 104.8m) resulting in a growth of both segments of about 150 percent compared to 2008. Since the current value of Internet music downloads is much lower than the former volume of the mobile music segment, the total digital music sales have decreased in the past five years. In addition, the Japanese music streaming market is still underdeveloped. Spotify is expected to launch its service this year and other streaming services still evaluate the market potential in Japan.

Since the physical recorded music market in Japan also declines, the total music sales has been falling for more than a decade. RIAJ, however, does not report sales figures for physical music formats, but production values. Thus, we cannot assess the total music sales for Japan, but only the overall production value of CDs, vinyl discs and other physical formats such as music cassettes, SACDs and music DVDs. Thus, we can observe that the production value of physical music carriers has nearly halved since 2000.

The Japanese recorded music market, thus, is characterised by particularities which will be highlighted in the following analysis.

Is Streaming the Next Big Thing? – What Consumers Want

The question if streaming is the next big thing for the music industry will be eventually answered by the music consumers. Several studies were conducted in past few years – most of them commissioned by music industry bodies – to assess the future potential of music streaming. It is essential for music streaming services and the copyright holders (labels and music publishers) if consumers are aware of streaming services, if they are using them frequently and if they are prepared to convert from Freemium to subscription models. Therefore the results of the studies are important indicators for the future development of the music industry. Although they provide different and even contradictory results – due to a different methodology – they help us nevertheless to understand music consumption behaviour in the digital age. In the following I would like to review some of the studies published in the past three years.

Is Streaming the Next Big Thing? – An International Market Analysis

After years of recession optimism is back in the phonographic industry. In the current Recording Industry in Numbers by the International Federation of the Phonographic Industry (IFPI 2013) the first but small increase of 0.9 percent in global recorded music sales were reported since 1999.The decreases in CD sales and in other physical formats could be compensated by increases in digital music sales. The revenue streams of music streaming services seem to play a crucial role in the recovery. Spotify, Deezer & Co. report annually growing number of users, which makes streaming the fastest growing segment in the phonographic market.

In a series of blog posts entitled “Is Streaming the ‘Next Big Thing’?” I would like to highlight the boom of music streaming services and their business models. But I also ask whether and how labels and publishers as well as artists benefit from the growing streaming music market. In part 1 the development of the digital music market in different countries with special regard to the music streaming market is analysed in detail.

The UK Music Business 2010 – A Summary of Will Page’s and Chris Carey’s ‘Adding up the UK Music Industry 2010’

It’s now the third time that Will Page and Chris Carey from PRS for Music added up the UK music industry. The main result is that total UK music revenues fell 4.8 percent to £3.775bn in 2010 compared to £3.964bn the previous year. This figure includes the retail value of recorded music (-7.9% to £1.237bn) as reported by the British recorded music industry body (BPI), the estimated revenue of live music (-6.8% to £1.480bn), the adjusted collections by PRS for Music (-1.3% to £0.425bn), the adjusted collections by PPL and VPL (+18.9% to £0.079bn), the estimated inter-company B2B revenues (+7.2% to £0.218bn), the publishers’ direct revenues excluding income streams from PRS for Music (+0,6% to £0.242bn) and advertising and sponsorship revenue (+4.2% to £0.094bn).

Will Page and Chris Carey, „Adding Up the UK Music Industry 2010“, Economic Insight, Issue 23, 04.08.2011