The numerically inclined admire symmetry and for the global recorded business we now have a situation where digital income is exactly the same as physical income on a global basis. Each held a 46% share of the world market last year (the other 8% was made up of performance rights and synchronisation). Overall, global income was down just 0.4%, suggesting years of decline are flattening out.
Digital contributed $6.85bn to labels’ bottom lines last year. This is part of a steady growth curve for non-physical income, jumping from $4.4bn in 2009. Of course, digital became the dominant revenue source in markets like the US and South Korea years ago, but now it means this year will be a tipping point one whereby digital becomes the key source of recorded music income globally.
On top of this, the IFPI adds that streaming is now the primary source of digital income in 37 markets.
Digital was up 6.9% in value across all formats. This is not phenomenal growth, primarily because there is a tension between downloads shrinking (falling by 8% overall, but by 10.9% for single tracks and 4.2% for digital albums) and streaming having to shoulder losses from both downloads and CDs (down 8% too). There is complex push and pull dynamic here that can only accelerate this year.
Streaming revenues were up 39% to $1.57bn, meaning that streaming is now 22.9% of total digital income. This is up from an 18% share in 2013. Spotify, Deezer, Rdio, Napster, Tidal and others now have 41m paying subscribers, which is up from 8m in 2010 and 28m in 2013.
In terms of digital revenue by sector, downloads continued to hold the lion’s share (52%), with subscription streams around half the size (23%) while ad-supported streams (which, as it includes YouTube, has the biggest userbase) had just 9%. Poor old mobile personalisation, once the great hope circa 2000, has withered to a 3% share of total digital income.
Music Ally, however, has crunched the numbers on streaming music services and found that the ARPU (average revenue per user) between the likes of Spotify at one end of the scale and YouTube at the other has never been more pronounced. And neither has it been in greater need of fixing. With YouTube users each contributing the equivalent of just one download purchase each a year to label income, this is clearly unsustainable.
Two of the majors started the year by publicly questioning just how much they can allow “free” to continue existing, meaning the debates here will only be amplified in light of the IFPI’s numbers.
We will dissect precisely where that ARPU crisis is manifesting itself and how the record business needs to address it in tomorrow’s Music Ally Report.
Digital revenue 2014 – $6.85bn
Digital’s share of overall revenue – 46%
Global digital revenues by sector
Permanent downloads – 52%
Subscription streams income – 23%
Ad-supported streams income – 9%
Mobile personalisation – 3%
Other – 12%
Source: IFPI (April 2015)