THE UPWARD trend in streaming was quantified by industry body the IFPI, which published its annual Global Music Report in April, collating figures for recorded-music revenues from sales, streams, performance rights and sync in 2016.
The headline figure was a 5.9% rise in global revenues to $15.7bn in 2016, following a 3.6% increase the previous year. That is still far off the $23.8bn of revenues in 1999 — a figure that didn’t include performance rights or sync — but the return to growth is fuelling a buoyant mood within the music industry, as well as a determination to keep that momentum going.
Streaming is the driver of this growth. In 2016, revenues from paid subscriptions and free, ad-supported streaming services grew by 60.4%, while those from physical music sales fell by 7.6%, and downloads by 20.5%. Digital now accounts for 50% of global recorded-music revenues, while streaming already accounts for 59% of that digital income for labels. Within that, paid subscriptions are the key to the market’s surge.
The industry ended 2016 with 97 million people paying for a streaming subscription, and 112 million using one, thanks to the growth of ‘family plans’ where one account-holder pays for an entire household.
The streaming market is often presented as a head-to-head battle between Spotify and Apple Music, with their 50 million and 20 million subscribers respectively: both milestones from late 2016, so certainly higher now. However, the market is also enlivened by Amazon’s emergence targeting an even-more mainstream audience; US service Pandora’s move into premium subscriptions and plans to expand globally; ongoing competition from mid-tier global players including Deezer, Google Play, Tidal and Napster; and strong local services, for example Saavn in India to QQ Music in China.
“Streaming as a digital content platform remains a fast-growing industry and this will continue for the foreseeable future, as the rate of adoption and people’s willingness to pay for a subscription service increases,” says Hans-Holger Albrecht, CEO of streaming service Deezer.
However, he also predicts that the intense competition at a global scale will lead to some consolidation in the market. “As the industry grows, so will the competition. It is our expectation therefore that we will continue to see the bigger players outspend the smaller players, which will ultimately force consolidation,” Albrecht says. “Whether we have the same number of streaming companies as individual entities at the end of this year remains questionable.”
While the IFPI’s headline figures were global, the underlying trends vary by region. One source of optimism is that even the most mature streaming markets, which could be seen as nearing saturation point, are still growing.
Spotify’s homeland of Sweden saw recorded-music revenues grow by 6% in 2016, according to the IFPI, while Norway’s grew by 12.3% that year. “It is hugely encouraging that countries such as Norway and Sweden, which are the most advanced premium subscription markets in the world, are still seeing growth in streaming revenue,” says Magnus Ribbeklint, vice-president of marketing at Warner Music Nordics. “Services are still signing up new users and converting existing customers to premium services, but they are also fuelling growth through offerings such as family plans. We’re seeing incredibly high levels of engagement from music fans who are benefiting from ever-improving levels of curation on digital services.”
At the other end of the scale, emerging markets are also fuelling the industry’s positive mood around streaming. Latin America was the continent with the highest level of growth in 2016, with revenues rising by 12% — that’s also driven by streaming. And Brazil and Mexico are two of Spotify’s top four markets by usage now, with plenty more room for growth. “There’s still a huge addressable global market to be turned on to streaming in established and developing markets, so we have a long way to go,” says Jules Parker, European director of publisher and songwriter relations at Spotify. “These are early days for streaming, despite its influence on the global music industry.”
Deezer’s Albrecht agrees that Latin America (LatAm) and the Asia Pacific (APAC) regions will be key. “We can also expect stronger growth from LatAm and APAC with more people willing and able to adapt their music catalogue and to tailor their offerings,” he says.
Streaming’s growth is also sparking excitement about the speed with which artists from one part of the world can break globally, particularly when they have the backing of the most popular curated playlists on the streaming services. “In my opinion, 2017 to 2020 will be a most amazing time for new and emerging artists. It is my most fervent belief that the next hit can come from virtually anywhere,” says Devraj Sanyal, managing director and CEO for Universal Music Group (UMG) India and South Asia. “We are already working with some of the greatest producers and songwriters in the world for our local artists to create the next generation of music for the global market, which traditionally has always been led by artists from the US, UK, France and Europe.”
For all this optimism, there are of course still controversies around the impact of streaming, particularly when it comes to free, advertising-supported services like YouTube.
Google’s video service continues to be an important partner for the music industry, as shown when Ed Sheeran recently launched every song from his new album Divide as a YouTube video on its release day, quickly racking up more than one billion views. YouTube also said in December 2016 that it had paid out more than $1bn to the music industry from advertising in the previous 12 months.
However, music rightsholders and industry bodies continue to protest that YouTube should be paying more, and that its ‘safe harbour’ legal protections should be removed, to force it to license music in the same way that Spotify, Apple Music and other services do.
Some executives hope the music industry does not turn its back on the fans, who are using ad-supported services rather than paying for a subscription. “The hardest group for streaming services to monetise are the consumers who are not interested in a subscription due to the perceived value vs costs,” says SoundCloud’s European director of content partnerships Raoul Chatterjee. “For these people, the ad-supported arena still has a huge role to play. Optimising the mix of content, ad loads and targeting on these services is essential to give consumers some access but, ideally, leave them wanting more.”
Other streaming trends you can expect to hear discussed on and off-stage at Midem include a drive to sign more mainstream music fans up to subscriptions, with Amazon at the forefront. “We think there are many areas of streaming music that the mainstream listener wants, but most importantly we think simplicity is key,” says Rishi Mirchandani, director of content acquisition at Amazon Music.
Amazon is also playing a key role in one of the key hardware trends of 2017: the popularity of ‘smart speakers’ like its Echo devices and the Alexa assistant, which can serve music up in response to voice commands. “Alexa, and the Echo, has changed the way people access and listen to music in the home. They have brought music listening back into the home, as a communal experience,” says Mirchandani. “We created a more natural music listening experience, with unbelievably simple interactions for customers to discover and listen to what they want.”
Services including Deezer, Tidal and Qobuz are also hoping to make higher-quality ‘hi-res’ streaming more popular, and thus more lucrative for the music industry. Qobuz, for example, has launched a tier of its service called Sublime+ which offers a mixture of high-res streams and downloads, and costs €349.99 a year. “In every market you have two trends: a trend for lower-quality and cheaper prices, but this co-exists with another trend: for more educated or more passionate users, sometimes with more money but not always, who look for better quality,” says Qobuz CEO Denis Thebaud.
Perhaps the most important streaming trend is the way the subscription-fuelled growth in industry revenues is spurring labels to devote more resources not just to digital innovation and partnerships, but to the traditional, creative elements of their businesses.
“Investment in A&R and marketing by record companies is crucial to drive future growth. We have the medium through streaming services to reach fans, but we need to ensure that we are constantly supplying great new music for them to enjoy, to keep their level of engagement up,” says Warner Music Nordic’s Ribbeklint. “I am optimistic that if we continue to discover and break interesting local and international artists then we will see growth ahead.”
That said, from Chance the Rapper’s famous Apple Music partnership to go-it-alone grime artists and YouTube-native musicians, streaming services are also fuelling opportunities for artists outside labels. “These days you can get your music straight from the studio to the consumer,” says British artist Adian Coker, who is one of the Midem Artist Accelerator finalists in 2017. “The tastemakers and gatekeepers aren’t as all powerful as they were, so it gives artists direct access to consumers and fans… Anything that removes obstacles for artists releasing music and creates more opportunities is definitely a good thing.”
This and more in the Midem 2017 News Magazine :
Download it in full at the top right of the page →
And/or read it below :
Discover more Music Industry Trends at Midem!