Fourth consecutive year of growth for the global recorded music industry

By Emmanuel Legrand

With total revenues up 9.7% to $19.1 billion, the global recorded music industry has experienced in 2018 its best year in over a decade. Industry revenues have now been growing for four years in a row, boosted by strong performances from streaming, which have offset the decline of both physical products (except vinyl) and downloads, according to the International Federation of the Phonographic Industry's ‘State of the Industry Report’ covering 2018.

  Total streaming revenues grew 34.0% to $8.9bn and now account for 47% of total revenues. Paid subscription streaming revenue, up 32.9%, was the main source of growth, and represented 37% of total recorded music revenue, thanks to 255 million users of paid streaming services at the end of 2018. IFPI noted that almost all markets reported growth in paid audio streaming. Revenues from advertising-supported streaming services accounted for 10% of total revenues.

Digital accounts for 59% of revenues

  Physical sales represent 25% of global revenues, downloads and other digital formats 12%, performance rights 14% ($2.7bn, up 9.8%) and synchronisation 2%. All formats combined, digital accounted for 58.9% of total revenues, at $11.2bn in 2018, up 21.1% year-on-year. Downloads sales fell by 21.2%.

  Revenue from physical sales declined 10.1%, although revenues from vinyl grew for the thirteenth consecutive year, up 6% in 2018 and representing a 3.6% share of the overall market. However, the IFPI said  that while the majority of markets saw a decrease in physical format revenues, a small number of markets "bucked the trend," posting growth. Such was the case in India (+21.2%); Japan (+2.3%) and South Korea (+28.8%). Physical revenues "still constitute a significant percentage of the market" in some countries, representing 71%, 47% and 35% of the market in Japan, Poland and Germany respectively.

  For the fourth consecutive year, Latin America was the fastest-growing region (+16.8%) pushed forward by strong performances in Brazil (+15.4%) and Mexico (+14.7%). The Asia and Australasia region (+11.7%) has now become the second-largest region for combined physical and digital revenue, ahead of Europe. South Korea (+17.9%), Japan (3.4%) and Australia (2.9%) all had strong growth rates. China rose to tenth to seventh position between 2017 and 2018.

USA drives digital growth

  North America remained the world's largest music region, with double-digit growth (+14%) thanks to a dynamic US market (+15), while Canada remained flat (+0.5%). The market enjoyed significant streaming growth (+33.4%), but physical revenues were down 22.0% year-on-year and their decline accelerated between 2017 and 2018. The US market has turned into a predominantly digital market (74.2% of recorded music revenues), with paid streaming accounting for well over half (59.4%) of digital revenue.

  Europe's sales only grew by a mere 0.1%, despite significant gains in streaming. Paid streaming in Europe rose by 29.2%, but the decline rate of physical revenues (-19.4%) and downloads (-24.3%) was substantial. Sweden and Norway grew 2.8% and 1.7% respectively, but Germany was the only top 10 European market to experience a decline in revenues (-9.9%).

  According to the IFPI, the German situation is partly due "to its continued transition away from a physical-led market." Germany was overtaken by the UK (+3.1%) as the largest market in the region. Performance rights revenue in Europe fell sharply by  6.7%, and contributed to the region's overall slower growth.

  Frances Moore, chief executive of IFPI, said: "Record companies continue their investment in artists, people and innovation both in established markets and developing regions that are increasingly benefiting from being part of today’s global music landscape."

Recognising music's value

  The IFPI said that the growth of the industry was fragile and that to ensure that the return to growth remained sustainable, "the right public policy and legal framework must be in place." The organisation will be pushing for five key points to guarantee that music markets will continue to enjoy growth:

> Public policies "must recognise that music has value – cultural and economic alike – and that creators have a crucial role to play."

> Copyright frameworks "must be clear and provide for legal certainty" to allow everyone to understand how music can be used. 

> Owners of rights in recorded music "must be free to license their rights on terms that are freely negotiated between the parties."

> Rules "must ensure that all services engaging in distributing music online, regardless of their mode of operation, negotiate licenses with right holders on fair terms."

> Music "must have fair and effective ways to tackle illegal services that seek to exploit the work of artists and profit through large-scale copyright infringement."

  Moore concluded: “As music markets continue to develop and evolve, it is imperative that the appropriate legal and business infrastructure is in place to ensure that music is fairly valued, and that the revenues are returned to rights holders to support the next cycle of development.”