2012 global recorded music revenues are up. Yes, UP.
The recorded music industry has finally some good news to celebrate – with global recorded music revenues increasing for the first time since 1999.
The jump may be slight (revenues were up just 0.3% from 2011 to a value of $16.5bn), but the symbolism here is powerful. The IFPI was somewhat circumspect in its wording in today’s Digital Music Report 2013, saying in a press release that “The global recorded music industry is on a path to recovery”. Having been in free fall for over a decade, the decline may have stopped, but there is still a lot of lost ground to reclaim.
Digital saves the day, but downloads still do the heavy lifting
Digital, of course, was presented as the hero of the hour, finally reaching a point where its early promise is being fulfilled. “It used to be said that digital was killing music,” noted Edgar Bergen (President and CEO of International at Sony Music) during this morning’s press briefing. “Digital is now saving music.”
The news comes as we approach the 10th anniversary of the iTunes Store (it opened in the US in April 2003), with Apple being the service that has had the biggest impact on these global figures. At the press briefing, Francis Keeling (Global Head of Digital Business at Universal Music Group International) said that Apple (“still our biggest business partner”) accounts for between 60% and 70% of global digital revenues.
Since Apple’s impact a decade ago, the digital market has expanded and diversified and this is, in part, behind today’s tentatively upbeat news. The remaining 30-40% of labels’ digital business fluctuates depending on the market – but YouTube was assertively positioned as definitely within “the top five” revenue sources globally.
The other positive spin on the IFPI numbers is that digital is still not running out of steam. It grew 9% last year to a value of $5.6bn (now making up 34% of total label income worldwide), fuelled in a large part by the diversity of available services and their expansion into new markets. Two years ago, notes IFPI, “the major international download and subscription services” were live in just 23 markets; today they are present in over 100 (with over 500 different legal services available around the world now). That said, it has been a slow and painful process for digital to get to this point.
Subscription services are, however, the sharpest risers
Downloading remains the lion’s share of the digital business, increasing by 12% last year and accounting for 70% of all digital revenue. The growth of streaming, however, is accelerating and the number of people paying for subscription services increased by 44% last year to 20m individuals (up from 8m in 2010).
How those streaming numbers break down across services is not clear, but it all hints at significant growth in emerging markets. At the last count, Spotify, for example, had 5m subscribers globally, Rhapsody/Napster had 1m, Cricket’s Muve service in the US had just over 1m and Deezer claimed over 2m paying subscribers. Collectively they account for around half of the global subscription market, but the likes of MelON in South Korea as well as Saavn, Gaana and Dhingana in India are arguably among the bright hopes.
As a sign over how far subscription services have come, IFPI projects they make up 10% of total digital revenues.
2013: when digital goes mainstream internationally?
The report adds that digital has achieved an important tipping point in a number of markets, now accounting for over half of all recorded music income. The markets to go predominantly digital include the US, Sweden, Norway and India. It also adds (drawing on Ipsos data) that in France, South Korea and Sweden, streaming is over-indexing compared to downloading. What was coming here was hinted at earlier in the year when both Norway and Sweden published recording revenue increases for 2012 (up 7% and 13.8% respectively).
IFPI chief executive Frances Moore said, “These are hard-won successes for an industry that has innovated, battled and transformed itself over a decade. They show how the music industry has adapted to the internet world, learned how to meet the needs of consumers and monetised the digital marketplace.”
She also described 2013 as the year of “digital music going mainstream” with Keeling adding that “2012 was the year of the cloud […] 2013, we think, is going to be the year of curation” (something services like Spotify and Daisy/Beats are going to build their year around).
This year could be the toughest yet for physical sales… but optimism remains
Beyond the cautious “Record Business Possibly Saved” headlines, there should be a real sense that this is merely a (much delayed) start and must be considered as such. A lot of work has still to be done in rebuilding the business, a job that will become all the harder with HMV in the UK closing a significant number of stores this year as it looks to stabilise and Virgin Megastore having disappeared from Paris at the end of last year.
Digital has been under enormous pressure for a decade as CD sales fell, but the problems the UK’s last major high street music chain is currently going through could add new complications just as the record business thinks it has crawled clear of the quicksand.
Berger was, however, bullish in his assessment of what 2013 holds. “We are clearly on the way,” he said, “and I truly believe this is the start of a global growth story.”
Not forgetting the P-word and the G-word
The IFPI pointed, inevitably, to ongoing piracy issues and the need for closer cooperation between ISPs, search engines and advertisers to help cauterise online piracy. Refreshingly, however, the majority of the report focused on the positives and how digital services, against the odds, have started to rebuild a business that many presumed was in terminal decline.
When quizzed on the role of Google as both friend and enemy of the record business, Keeling said: “We have a great relationship with Google. We have a great relationship with YouTube.” He also pointed towards Google Play as another area where labels are working with the search giant, suggesting that these proactive relationships will, in time, have a knock on effect on Google’s search algorithms where the industry focus is less on demoting illegal sites in search results and more on promoting legal ones to the top.
Not all markets are built the same
For the moment, not all markets are heading in the same direction. The IFPI notes that when the full 2012 figures are in, it will show eight of the top 20 markets (Australia, Brazil, Canada, India, Japan, Mexico,Norway and Sweden) recording growth. Of course, this leaves key markets (and, it must be noted, major global exporters of music) the UK and the US still to recover.
In brief, then: an uptick in revenues has finally happened but major markets are still dragging the average down.