Analysis

Analysis: the music industry enters 2020 on a wave of growth – and optimism


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Barring a major surprise, 2019 will have been the fifth straight year of growth for the global recorded music industry. Over those five years, its annual revenues have grown from $14.2bn to $19.1bn, taking it almost back to its 2004 level. If 2019 matched 2018’s 9.7% growth, we could be talking about $21bn last year.

The indications are good, from the quarterly figures published last year by the major labels, to the RIAA’s mid-year stats showing 16% growth for the US recorded music market, via record-setting revenues for collecting societies and steady subscriber growth for the big, global streaming services.

We’re still a way off the revenues that the industry was recording in the peak-CD pre-Napster era, but Goldman Sachs is predicting that streaming alone will be worth $37.2bn a year to the industry by 2030, while Midia Research reckons consumer-spending on streaming (as opposed to trade revenues) could reach $45.3bn by 2026.

One of 2019’s most positive trends were the figures coming out of markets that were either slow to benefit from the streaming upswing, or those that have experienced bumps along the way.

France, for example, only saw 1.8% growth in its recorded market in 2018, but then 12.7% growth in the first half of 2019. In Germany, revenues fell slightly in 2018 but grew by 7.9% in the first half of 2019. Spain, meanwhile, saw 5.9% growth in 2018 trumped by a 27% spike in the first half of 2019.

We’re also starting to see real momentum in territories like Latin America, China, India and southeast Asia, as well as some positive early-shoots in Africa. Without wishing to go overboard on the back-clapping, this is all the fruits of some hard work put in by rightsholders and DSPs alike over the past decade.

It’s also, as people have been dutifully pointing out, not a moment for complacency. With money flowing in to the industry, it’s a time for bold investments in artists and technologies alike; for experimentation, not caution.

“We should never be complacent and think that happy days are here to stay. You should always be looking to evolve, to anticipate the needs of the market and the changes in the market and to serve your audience and serve your fans,” Warner Music Group’s Stu Bergen told us in April, as the IFPI announced its latest figures.

There remain some important challenges. Our recent report where startups shared their experiences of working with major labels shone a light on the mismatches that can still emerge between rightsholders’ welcoming words for innovation, and the process of turning that encouragement into actual deals.

Another is the tension and suspicion that can still drive the industry’s perception of the motivations of music streaming services. Is Spotify’s podcast push just a way to drive down music royalties? Will music lose out in multi-media bundles? Should DSPs be doing more to reverse falling average revenue per user (ARPU) and restrict family plans?

There are real concerns here that should be taken seriously, but they can sometimes feel like they’re coming from a position of distrust: that DSPs’ motivations and/or perception of the value of music may not be aligned perfectly with the music industry and its creators.

That’s why you hear quotes like this, from WMG boss Steve Cooper in May: “We’re going to continue to push back against the devaluation of our artists’ and songwriters’ music from freemium models, mismanaged family plans and other customer acquisition strategies employed by streaming platforms at the expense of creators and content producers.” And he’s been a strong supporter of streaming.

Five years of growth will hopefully give the industry the confidence to look beyond overly-simplistic criticism of or demands from its digital partners. For example, looking at Netflix and thinking ‘It put up its prices and subscriptions still grew: Spotify should put up prices too!’ may be less useful than taking a deeper look at Netflix, with its multiple tiers ($8.99, $12.99 and $15.99 a month) with their differentiated features. Rightsholders have already licensed Amazon’s spin on that strategy, but there may be more to explore.

Another challenge posed by impressive growth at the industry level comes when some people within that value chain feel hard done by: that they’re not getting their fair share of this tasty new streaming pie.

You can see this in the always-simmering debate about whether recordings get too big a share of the pie, and songs (compositions) get too little. Labels versus publishers feels like a battle that’s ready to break out again, fuelled by those booming industry totals and major-label revenues. DSPs are, unsurprisingly, keen not to have to pick a side.

Another mismatch comes when the strong growth for the industry and key rightsholders rub up against the financial worries of individual artists and songwriters. Streaming’s scale is such that it can make a new artist very rich, very quickly, but creators lower down the popularity charts may have different feelings as they look at their royalty cheques.

Spotify’s recent ‘Wrapped 2019’ promotion saw fans sharing stats on how much they’d been listening to their favourite artists, and artists sharing figures on their overall streams. The Wrapped ‘cards’ were ubiquitous on social media for a couple of days, but there was also a backlash: critics pointing out that a big number of streams can seem rather more paltry when converted to projected royalties.

Figuring out how to turn the burgeoning industry-wide growth into something that works for the ‘middle class’ of musicians, as well as the top stars and the rightsholders, remains an important challenge for the industry. As with any growing economy, it’s vital to constantly ask who might be being left behind, and how they can be brought back on for the ride.

One more positive aspect of the industry’s growth is the way it’s helping the artist/rightsholder relationship to evolve. Bad deals may not be a thing of the past yet, but artists’ and managers’ awareness of the money flowing into the industry is often stiffening their resolve to seek ownership of their rights – and that flow is also funding new kinds of companies willing to grant that.

As Bergen said, sustained industry growth should never be an excuse for complacency, and in many cases, that growth will directly drive the efforts to modernise industry structures, develop new models and return more agency to creators. Fixing our problems from a position of strength and confidence is much more preferable than from the position of decline and panic that is still fresh in the industry’s memory.

But let’s also celebrate that strength. According to the IFPI’s ‘Music Listening 2019’ study in September, 89% of respondents were using some kind of legal, on-demand music-streaming service, including 64% who listen to legal, on-demand audio-streaming services.

That’s a world away from 2008, when the same body was claiming that 95% of music downloads were illegal, and when the idea of even a year of growth, let alone five in a row, felt like a huge fantasy.

This is an edited version of a piece that originally appeared in Music Ally’s Trends of 2019 report, published in December 2019.

Stuart Dredge

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