Posts Tagged ‘recorded music market

30
Nov
16

The fate of the CD – an international CD-market analysis

In March 2010, my first blog post in the music business research blog was entitled “The CD is Dead! Long Life the Music Download?” – with a question mark. The prophecy has become partly true. In some markets, e.g. in Sweden, the CD is only a by-product such as vinyl with a combined market share 12.4 percent (IFPI 2016: 92). In other countries, e.g. Germany, the CD is still economically relevant. Physical sales in Germany accounted for 60.0 percent in 2015 – with 83.6m CD units and 7.6m other physical units sold (ibid: 81). However, the CD is on the way to insignificance and will end up as a nostalgic collectors’ item. The following economic analysis of the international CD market shed light into the dynamics of different markets and explains, why some markets are still driven by CD sales.

 

The fate of the CD – an international CD-market analysis

According to IFPI numbers, the global recorded music market decreased by 44.2 percent since 1999 to US $15.0bn in 2015. This tremendous revenue loss reflects the change from a physical to a digital music market. In 2014, the global digital music sales overtook physical sales accounting for a share of 45.8 percent of total recorded music sales (in trade value).

 

Figure 1: The global recorded music market (in million US$ trade value), 1997-2015

fig-1-global-recorded-music-market

Source: After IFPI Recording Industry in Numbers, 1998-2015 and IFPI Global Music Report 2016.

 

The CD-market segment

The decreasing CD sales caused the recession on the recorded music market. Whereas the CD unit sales boomed in the first half of 1990s with annual growth rates of about 20 percent, growth slowed down in the second half of the 1990s indicating the end of the CD’s life-cycle. CD album sales peaked in 2000 with 2.4bn copies sold. Since then the CD market decreased by 74.2 percent to 569m units sold in 2015. However, the downturn accelerated since 2005. Whereas the global CD market volume decreased by 20.6 percent from 2000 to 2005, it halved from 2005 to 2010 and further decreased by 41.3 percent from 2010 to 2015.

 

Figure 2: The global CD market segment from 1991 to 2015 (unit sales in million)

fig-2-global-cd-market-segmentSource: After IFPI Recording Industry in Numbers, 1992-2015 and IFPI Global Music Report 2016.

 

A closer look at national recorded music markets unveils different dynamics. Whereas Sweden lost 90.0 percent of CD unit sales from 2000 to 2015, the decrease of 59.3 percent in Germany was less severe in the same period. Outside Europe and North America some CD markets even have grown since 2000 such as India (+137.8 percent). However, India started at a very low sales level in 2000, when music cassettes still dominated the (legal) market. After a few years of growth, the CD segment halved from 2012 to 2015 from 41.6m units sold to 21.4m (IFPI 2016: 98). Thus, with a time-lag India follows the trend in large recorded music markets, which were literally smashed since 2000: France (-70.0 percent), UK (-72.6 percent), Brazil (-82.5 percent), and USA (‑87.3 percent).

 

Figure 3: The change rates of the CD market in selected countries, 2000-2015

fig-3-change-rates-of-the-cd-market

Source: After IFPI Recording Industry in Numbers 2000 and IFPI Global Music Report 2016.

 

Different market dynamics

A differentiated look at three periods – 2000 to 2005, 2005 to 2010, and 2005 to 2015 – highlights different dynamics on national CD markets. Some countries such as the USA and Spain follow the global trend with modest annual average decreases from 2000-2005, accelerated loss rates from 2005 to 2010, and a slowed decrease since 2010. Other countries such as Brazil, Germany, and South Korea suffered from the most severe decreases in the period from 2000 and 2005 but recovered in the following decade. In South Korea, the CD segment even grew by an average of 1.7 percent from 2005 to 2010 and by 3.7 percent since 2010. Some countries experienced a growth of CD sales from 2000 to 2005 – India, China, South Africa – but with more or less severe losses in the following decade. However, a majority of countries such as Australia, UK, and France faced accelerated losses since 2000. Sweden is a special case. CD unit sales fell by 9.8 percent per year from 2000-2005. From 2005-2010 the annual loss of the Swedish CD market slowed down to 1.7 percent. In the following five years the CD market in Sweden collapsed with an annual decrease rate of 27.5 percent due to the widespread success of music streaming.

 

Figure 4: The average annual change rates of the CD market in selected countries, 2000-2015

fig-4-average-annual-change-rates-of-the-cd-market-new

Source: After IFPI Recording Industry in Numbers, 2000-2015 and IFPI Global Music Report 2016.

 

The analysis highlights that specifics of the national markets – such as availability of CD players, Internet and smartphone penetration, consumer behaviour, demographics, and cultural characteristics – caused different market dynamics. Thus, there is no simple explanation for the recession of the CD market.

 

Sweden and Germany in comparison

Despite the fact that Germany’s population is twice as large than in Sweden, both countries can be characterised by similar economic and technological indicators. The GDP per capita is about US$ 48,000 and the share of internet users, broadband connections and active tablets per head is similar. The total music revenues per capita in Sweden (US$ 18.6) and Germany (US$ 16.2) does not significantly differ. The only striking difference occurs in smartphone penetration. In Sweden each inhabitant owns a smartphone, whereas in Germany smartphone penetration is 84.4 percent. Nevertheless, Sweden and Germany are on a similar economic and technological level.

 

Figure 5: Sweden and German in comparison

fig-5-sweden-and-german-in-comparison-new

After: IFPI Global Music Report 2016: pp. 81 and 92.

 

Thus, other factors have caused the different market dynamics in both countries. A view on the Swedish and German recorded music charts of 2015 helps to understand the differences.

 

Figure 6: The Swedish and German top-10 charts

fig-6-swedish-and-german-top-10-charts-new

After: IFPI Global Music Report 2016: pp. 81 and 92; red indicates the same international products in both charts.

 

A comparison shows that more or less the same international hits dominate the top-10 of the Swedish and German single charts. A look at the album charts of both countries, unveils a significant difference in music taste. Only two international albums (by Adele and Ed Sheeran) can be found in both charts. Whereas the Swedish album chart is dominated by international products, the German hit list is dominated by domestic products, especially Schlager/popular folk music and Deutsch pop – the boundaries of both genres is blurring anyway. Particularly Schlager/popular folk music is popular among elderly people, who still buy CDs.

The current report of IFPI Germany (2016: 30) states that the generation 50+ has the highest sales share with 38.3 percent of total recorded music revenue in Germany. The report confirms that the oldest age cohort accounted for 64 percent of sales in the Schlager segment and for more than 66 percent in classical music segment, which is also highly relevant for the CD market. If we add the age cohort (40-49 years) to the picture we can see that the generation 40+ generated almost 68 percent of all CD-sales in 2015 (IFPI Germany 2016: 32-33). By comparing the economic relevance of album and therefore mainly CD-driven genres – Schlager/popular folk music, Deutsch pop, classical music, jazz –, which accounted for 21 percent of overall recorded music sales in Germany (ibid: 39) – with the music consumption behaviour of the older age cohorts, we can conclude that elderly music consumers account for the still relatively high sales share of the CD-format in Germany. Thus, we can expect a further decline of the CD segment in Germany, which could result in decreasing overall recorded music sales if the growth of streaming revenue cannot compensate for the loss in CD sales as well as download sales. Whereas in Sweden recorded music revenue will further grow as long as the streaming boom continues.

Thus, the comparison of the Swedish and German CD markets highlights that there is no uniform a simple explanation for market dynamics and we have to take into consideration macroeconomic, technological, demographic and cultural factors to assess the future development of different national recorded music markets.

 

Sources:

IFPI, 2016, The Global Music Report 2016, London.

IFPI Germany, 2016, Musikindustrie in Zahlen 2015, Berlin.

 

30
Jun
16

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

Continue reading ‘The Music Streaming Market Revisited, 2011-2015’

30
Jun
15

Music Streaming Revisited – the International Music Streaming Market 2014

Music streaming is on the rise. In the recent IFPI report “Recording Industry in Numbers 2014” IFPI CEO Frances Moore is cited with “Streaming is now a mainstream part of the modern music industry.” (IFPI 2015: 5) Indeed, global subscription streaming revenue increased by 39.0 per cent and ad-supported streaming revenue by 38.6 per cent in 2014. In 2014, the global music streaming market (ad-supported as well as subscription) has a volume of US $2.2bn, which is even bigger than the single track download market (US $1.9bn) (IFPI 2015: 9). Music streaming, therefore, accounts for nearly a third 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 70 per cent of the overall recorded music market, in Germany just 6.3 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 3.1 per cent.

In the following I would like to highlight the economic relevance of the music streaming market segment in an international comparison.

Continue reading ‘Music Streaming Revisited – the International Music Streaming Market 2014’

01
Jun
14

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).

Continue reading ‘The Recorded Music Market in Brazil, 2000-2013’

09
Apr
14

The Recorded Music Market in Germany, 2003-2013

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.

Continue reading ‘The Recorded Music Market in Germany, 2003-2013’

31
Mar
14

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.

Continue reading ‘The Recorded Music Market in Japan, 1990-2013’

18
Aug
12

Australian Music Business – an analysis of the recorded music sales 2000-2011

In this blog the early music industry in Australia was analysed in great detail (The Early Record Industry in Australia – part 1, part 2, part 3, part 4, part 5 and part 6). In a four part series on the Australian music business I would like to highlight the recent economic situation of the Australian music industry. In the first part of this series the charts of the Australian Recording Industry Association (ARIA) are analysed to understand the consumers’ taste downunder especially in respect to the Australian national repertoire. In the second part the question is answered, which labels benefit from the chart successes of international and domestic artists. In a third part the development of the recorded music sales in Australia from 2000 to 2011 is analysed to give an explanation for the ups and downs in the observed period. In the fourth and last part of the series the economic role of collecting societies in Australia is highlighted especially from the licensing income’s perspective.

In the following the Australian recorded music market is analysed in detail to answer the question why the market was hit by the recession not earlier than 2006.

Continue reading ‘Australian Music Business – an analysis of the recorded music sales 2000-2011’




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