By Emmanuel Legrand
Seven takeaways from the recorded music market figures.
1 - Streaming is the dominant source of music consumption in most of the top markets and even those where consumers have continued to support CDs (Japan and Germany), the transition has started to happen. "Music isn’t 'transitioning to digital' – it is leading a digital-first business," wrote RIAA Chairman and CEO Mitch Glazier in a blogpost.
2 - Subscriptions are the drivers of revenues. If the adoption rate continues, especially in emerging markets, the music industry will have significant pockets of growth for the years to come.
3 - Streaming subscription rates have room for growth. Rates have not evolved in the past five years, with a dominant model of all you can eat for 9.99 (add your own currency here). As pointed out by BPI chief executive Geoff Taylor in the interview below, streaming subscription rates are also another pocket of growth for the industry, should streaming services decide to apply a realistic adjustment to inflation.
4 - Physical sales still represent a significant share of the business, even if it is declining, but don't seem to phase out, thanks to vinyl. CD sales have definitely passed a threshold and are in danger of reaching a point of no return in most countries (save Japan), but vinyl has continued its pretty healthy run and now exceeds CD sales in most countries. This trend seems to show no signs of fading.
5 - New platforms are popping up, especially in emerging markets and existing services such as TikTok need to be licensed. All these platforms will provide a reservoir of new revenues for the industry. Digital services could also help the industry grow the market by extracting more revenues out of their users, by using the China model. As noted by RIAA's Glazier: "Music is by far the biggest draw to tech platforms, gaining views and listens that generate enormous revenues for distributors, but in many cases this happens without an appropriate share for creators."
6 - YouTube remains the elephant in the room. Video streaming lags way behind audio streaming revenues, yet YouTube is used by over two billion people. This will give more credence to those who want to see the value gap addressed. BVMI's Florian Drücke noted that in Germany video streaming has "grown significantly," but from "a very low starting level" and only contributed to 2.9% of the industry revenues... “This once again explains one of the industry’s current priorities, namely the implementation of the Copyright Directive, which is intended to ensure that user upload platforms give creative professionals and their partners a fair share of the revenues," said Drück. “We know from past years how fragile the digital licensing business is and how important resilient framework conditions and their enforcement are in this respect.”
7 - The other elephant in the room is how this wealth is being shared. Artists and songwriters keep pointing out that the system does not necessarily work for them. Streaming is a low margin-high volume business. A better sharing of the proceeds from digital use with artists seems to be needed. Some companies such as BMG and most indies have fairer and more balanced contracts when it comes to digital. And within the digital pot, there could be better ways to split the revenues, for example in looking at the possible benefits of a user-centric model to pay rights holders for the use of music by streaming services. Deezer is leading the way in France and maybe this will become the real life test in 20202 for this innovative way of remunerating rights holders.