The latest report trying to tell the big-picture story of the music ecosystem comes from financial firm Citi, whose ‘Putting the Band Back Together’ study promises that it’s “remastering the world of music”. Its team of analysts has been crunching numbers to size up the US music industry, blending in recorded-music, concerts spending, radio advertising and publishing.
So, while industry body the RIAA’s official 2017 figures focused purely on recorded music – an $8.7bn market last year in estimated retail value, up 16.5% on 2016 – the number that Citi provides is much bigger. “In the US, the music industry generated $43 billion in revenue, matching the prior peak in 2006,” is its headline claim. “While business-to-business (B2B) revenues (Music Publishing and Licensing) and music ads (AM/FM, YouTube) are flattish, consumer outlays (Concerts, Subscriptions) are at all-time highs.”
There’s already been some attention for another calculation in the report: that artists capture 12% of these overall music revenues. And while some of that attention is essentially ‘that little?’ Citi suggests that this is actually an improvement, since that in 2000 artists’ share of the loot was just 7%, and that the strength of the concert business is what’s driving that upwards. It’s also that which is swelling the figure for ‘consumer outlays’ on music – more than $20bn in 2017 according to Citi, once tickets are factored in.
While much of the report is taken up by explaining how the mechanics (and, indeed, mechanicals) of the music-industry work, there’s a good section on potential structural-changes in the future. “We expect the traditional labels to ‘follow the money’ with their diversification strategies and the most likely route is to move further into live events, including concert promotion, ticketing, and even owning venues,” suggests Citi.
But… “Paid subscription services are unlikely to generate sizeable profits as stand-alone businesses. Low entry barriers and rivals willing to subsidise the service will likely keep margins slim. This will prompt these firms to migrate to other segments of the value chain… the last potential move would be for an existing distribution platform to move into the concert business. This would create a vertically integrated music firm touching virtually all segments of the value chain”.
With its playlist-branded concerts, Spotify is already doing this, alongside its Fans First promotional concerts. The company has been focusing on partnerships for its wider ticketing activities to this point however. The current jumpiness among labels about Spotify’s direct licensing deals with artists, meanwhile, shows that this element of value-chain migration (as Citi puts it) is already a topic for debate within the industry.