Twenty years in the past, the Worldwide Federation of the Phonographic Trade’s (IFPI) On-line Music Report first talked about music streaming as a doubtlessly related income for the phonographic trade, which on the time was nonetheless dominated by recorded music gross sales. Nevertheless, it was not till 2010 that music streaming grew to become commercially related, and within the years that adopted it grew to become virtually the one income for the file trade. This weblog collection traces the historical past of the music streaming financial system and its main gamers from the Nineties to the current day. Within the first half, the income growth of music streaming within the worldwide phonographic market is summarised in figures and analysed in additional element.
The Music Streaming Financial system – Half 1: The Worldwide Music Streaming Growth
In January 2004, the Worldwide Federation of the Phonographic Trade (IFPI) took a better have a look at the digital music enterprise for the primary time with its On-line Music Report.[1] That is no coincidence. In 2003, Apple opened its iTunes music obtain retailer to the general public, first to its Mac prospects and later to PC customers. The IPFI report subsequently focuses on the obtain enterprise. Nevertheless, it additionally mentions music streaming providers corresponding to Napster 2.0, Rhapsody, MusicMatch and OD2, which will probably be mentioned in additional element later. Nevertheless, the technical circumstances for mass music streaming didn’t exist in 2003. Broadband web was nonetheless in its infancy, 3G cell phone expertise had simply been launched and the smartphone wouldn’t be launched for one more 5 years.
It’s subsequently not shocking that the gross sales figures for music streaming weren’t even included within the IFPI’s Recording Trade World Gross sales 2003 Report, which was revealed in April 2004.[2] In a brief paragraph entitled ‘Digital Music Gross sales’, it was simply talked about that gross sales of US $30 million have been achieved with music downloads within the USA in 2003, which have been already exceeded in March 2004 with US $50 million.[3] Nevertheless, music streaming was not talked about as soon as in your entire report.
Nevertheless, the US was the primary marketplace for which digital music revenues have been out there. The 2004 annual report of the Recording Trade Affiliation of America (RIAA) reported for the primary time the distributions of the newly shaped SoundExchange gathering society, which collects royalties from non-interactive streaming providers corresponding to Pandora in addition to webcasters and satellite tv for pc radios, within the modest quantity of US $6.9 million. For 2005, the RIAA’s annual report additionally included figures for on-demand music streaming, which totalled $149.2 million, or about 14 % of all digital revenues and 1.2 % of complete revenues. The report additionally included SoundExchange distributions, which rose to $20.4 million.[4]
Within the mid-2000s, subsequently, the music streaming market was nonetheless in its infancy, removed from with the ability to compensate for the downright collapse of gross sales within the US file trade after 2005. The principle cause for this recession within the US music market was the large stoop in CD gross sales yr after yr, as proven in determine 1.
Determine 1: Recorded music gross sales within the US, 2004-2023
Supply: Recording Trade Affiliation of America (RIAA), U.S. Music Income Database, n.d., accessed: 2024-06-11.
Between 2004 and 2008, the yr wherein Spotify was launched in Europe, phonographic gross sales within the USA fell by greater than half from US $11.4 billion to US $5.5 billion, as a result of as a substitute of 767 million CDs in 2004, solely 385 million – half as many – have been bought 4 years later. An analogous image emerged within the different main music markets: France (- 43 per cent), the UK (- 25 per cent) and Japan (- 18 per cent). Germany was the one nation to flee comparatively unscathed with a drop in CD gross sales of 8 per cent between 2004 and 2008.[5]
In distinction, digital revenues within the US grew quickly between 2004 and 2008, from $191 million to round $2 billion, pushed primarily by the booming obtain enterprise. Revenues from on-demand music streaming, however, stagnated at $200 million within the US between 2006 and 2010, accounting for simply 3 % of complete recorded music revenues in 2010. Solely SoundExchange’s distributions from licensing non-interactive streaming providers and satellite tv for pc radios, totalling $100 million in 2008, improved the steadiness sheet barely. Nonetheless, revenues from the obtain enterprise have been 5 occasions greater than these from music streaming. This modified dramatically in 2010, when US streaming revenues grew by 28 per cent. This was adopted by years of excessive double-digit progress in on-demand music streaming revenues, plus funds from SoundExchange.
Nevertheless, the rising use of streaming providers cannibalised music obtain gross sales, which peaked in 2012 after which fell sharply. By 2023, album and single downloads collectively generated much less income than CD gross sales within the US.[6]
Determine 2: Digital music gross sales within the US, 2005-2023
Quelle: Recording Trade Affiliation of America (RIAA), U.S. Music Income Database, n.d., accessed: 2024-06-11.
In the meantime, income from music streaming has exploded. In 2015, paid subscriptions not solely surpassed $1 billion for the primary time, but additionally generated virtually as a lot income as obtain gross sales. When SoundExchange royalties for non-interactive streaming providers and satellite tv for pc radios are added, music streaming within the US has already generated considerably extra income than the obtain enterprise. Since 2015, the on-demand streaming phase has grown by a median of US $1 billion per yr and, at US $10.2 billion in 2023, was by far crucial income driver for the US recorded music trade, adopted by income from vinyl gross sales (US $1.4 billion) and SoundExchange distributions at round US $1 billion. CD gross sales (US $537 million) and obtain gross sales (US $396 million) have been far behind. A comparability of 2010, 2015 and 2023 reveals how dramatically the digital music market has modified.
Determine 3: The digital market within the US, 2010, 2015 and 2023
Supply: Recording Trade Affiliation of America (RIAA), U.S. Music Income Database, n.d., accessed: 2024-06-11.
Whereas obtain revenues (albums and singles) collectively had a market share of virtually 70 per cent in 2010, this had shrunk to round 31 per cent 5 years later and to only 2.7 per cent an extra seven years later. Revenues from ad-supported and paid streaming, however, rose from 6.7 per cent in 2010 to just about 53 per cent in 2015 and greater than 90 per cent in 2023. Solely SoundExchange revenues nonetheless have some relevance in 2023, with a share of 6.8 per cent. Nevertheless, they’re much more vital at 15.3 per cent in 2015 and seven.8 per cent in 2010.
Document gross sales within the US reached a file excessive of $17.1 billion in 2023, properly above the historic excessive of $14.6 billion in 1999. Nevertheless, when inflation is taken into account, the US file trade’s inflation-adjusted income in 1999 was considerably greater at $26.7 billion. Nonetheless, music streaming has been accountable for the growth within the US recorded music market for the reason that mid-2010s.[7]
In fact, this growth was not confined to the US, but additionally affected all different markets for which the IFPI recurrently collects gross sales figures. Nevertheless, market dynamics diversified from nation to nation. The 2 charts beneath present how shortly the music streaming financial system took maintain in virtually each nation between 2011 and 2019. For every nation, the share of digital gross sales within the complete market and the share of streaming revenues within the digital market phase have been recorded. This reveals wherein nations the music streaming financial system has established itself extra shortly than in others. In 2011, most nations have been nonetheless dominated by bodily gross sales, because the digital share of complete gross sales was lower than 50 per cent. Which means that CDs and vinyl information accounted for greater than half of all gross sales within the recorded music market, together with many European nations corresponding to Germany, the UK and France, which have been the third to fifth largest recorded music markets on the earth in 2011. Nevertheless, the streaming share of the digital market in France was already at 34 per cent, though virtually 80 per cent of complete gross sales have been nonetheless generated by CDs. That is most likely because of the streaming service Deezer, which launched in France in 2007.
The presence of Spotify as an area streaming service additionally explains Sweden’s main place in music streaming in 2011, with streaming revenues already accounting for over 82 per cent of the digital market, though the digitisation charge of slightly below 50 per cent was not the best on the earth. The scenario was related in Norway, the place WiMP had been out there since 2010 and, alongside Spotify, helped streaming revenues account for round 63 per cent of the digital market in 2011, though virtually half of all revenues have been nonetheless generated by CD gross sales. Though the world’s largest music market, the US, went digital in 2011 with a share of virtually 58 per cent because of iTunes, streaming nonetheless performed a minor position within the digital phase at 18 cent. China stood out in 2011 with essentially the most developed digital market at 73 per cent, excluding the excessive proportion of unlawful gross sales. And virtually 45 per cent of digital revenues have been from streaming. Lastly, there’s an fascinating group of nations whose markets have been nonetheless dominated by bodily gross sales, however the place streaming accounted for 60 to 70 per cent of digital gross sales. These embrace Spain and Brazil, two comparatively giant music markets, in addition to small nations corresponding to Finland, Singapore and Taiwan.
Determine 4: The worldwide music streaming markets 2011
Supply: After IFPI Recording Trade in Numbers 2011.
Determine 5: The worldwide music streaming markets 2019
Supply: After IFPI World Music Report 2019.
Eight years later, in 2019, the scenario was utterly completely different. Practically 80 per cent of all nations had a streaming share of the digital market above 80 per cent, with markets differing solely within the diploma of digitisation. Some markets, corresponding to France, Germany, Austria and South Korea, nonetheless had a major share of recorded music gross sales, whereas within the Scandinavian nations and plenty of Asian and South American nations there have been nearly no CDs bought, with vinyl being the closest factor.
A particular case is Brazil, which has quickly reworked itself from a recorded music market to a streaming market. Whereas the share of bodily gross sales in Brazil was nonetheless properly over 80 per cent in 2011, it had shrunk to lower than 1 per cent eight years later. That is primarily because of streaming gross sales, which already dominated the digital phase in 2011 with a share of slightly below 71 per cent. In 2019, 99 per cent of digital gross sales got here from music streaming.
Nevertheless, there are additionally nations the place the streaming financial system isn’t as dominant, corresponding to Japan, the place music streaming accounted for less than 28.6 per cent of complete gross sales in 2021. With a whopping 58.4 per cent share, Japan was the world’s largest bodily music market in 2021, with $1.8 billion price of CDs and vinyl bought.[8]
South Korea can also be a particular case, having moved quickly in direction of a streaming financial system till 2015, however with a really erratic evolution thereafter. On account of a pointy enhance in bodily gross sales, largely pushed by the superfan phenomenon in Okay-pop, the digital market share fell once more from 2016 to 2018, solely to rise once more in 2019, with downloads hovering in that yr. A yr later, nevertheless, bodily gross sales rose once more, however downloads have been massively pushed again by streaming, catapulting South Korea into the streaming financial system from one yr to the following. By 2021, CD and vinyl gross sales as a proportion of complete gross sales have been falling once more in favour of rising streaming revenues, however the bodily market was nonetheless comparatively giant.
Nevertheless, essentially the most digitised music market is the Individuals’s Republic of China, which already had a big digital market phase in 2011, initially dominated by music obtain revenues. The share of music streaming revenues within the complete market rose sharply till 2014, earlier than one other obtain growth in 2015. After that, nevertheless, China shortly moved into the streaming financial system and by 2019 was virtually solely recording streaming revenues.
Determine 6: Music streaming markets in Brazil, China, South Korea, United Kingdom and US, 2011 to 2021
Supply: Worldwide Federation of the Phonographic Trade (IFPI), 2022, World Music Report 2021, London: IFPI.
The event of the streaming financial system within the US and the UK has been comparatively secure, with the UK’s share of the bodily music market at all times bigger than that of the US. Nevertheless, in 2020 and 2021, there was additionally a development in direction of extra bodily gross sales in each nations, which meant that the digital share of the overall market fell barely. Total, nevertheless, it may be stated that regardless of completely different paths, virtually all main markets, except Japan, have arrived within the streaming financial system and have been capable of overcome the recession within the recorded music trade. Nevertheless, the foundations for this fast course of, with streaming as virtually the one income, have been laid earlier than 2010, in 2008 to be exact, when music streaming appeared economically irrelevant and Spotify, the eventual undisputed market chief, had began its operations in Sweden and several other different nations. This would be the topic of the second a part of the collection.
Sources
Worldwide Federation of the Phonographic Trade (IFPI), 2004a, IFPI On-line Music Report, London: IFPI.
Worldwide Federation of the Phonographic Trade (IFPI), 2004b, IFPI The Recording Trade World Gross sales 2003, London: IFPI.
Worldwide Federation of the Phonographic Trade (IFPI), 2012, IFPI Recording Trade in Numbers 2011, London: IFPI.
Worldwide Federation of the Phonographic Trade (IFPI), 2020a, IFPI Recording Trade in Numbers 2019, London: IFPI.
Worldwide Federation of the Phonographic Trade (IFPI), 2020b, IFPI World Music Report 2019, London: IFPI.
Worldwide Federation of the Phonographic Trade (IFPI), 2022, IFPI World Music Report 2021, London: IFPI.
Wlömert Nils & Dominik Papies, 2015, “On-demand streaming providers and music trade revenues – Insights from Spotify’s market entry”, Worldwide Journal of Analysis in Advertising and marketing, vol. 33(2), pp 314-327.
Endnotes
[1] Worldwide Federation of the Phonographic Trade (IFPI), 2004a, IFPI On-line Music Report, London: IFPI.
[2] Worldwide Federation of the Phonographic Trade (IFPI), 2004b, IFPI The Recording Trade World Gross sales 2003, London: IFPI.
[3] Ibid., p 3.
[4] US figures might be researched from 1973 to the current within the RIAA’s implausible interactive U.S. Income Music Database. Along with the nominal values, you may as well see the inflation-adjusted values: Recording Trade Affiliation of America (RIAA), U.S. Music Income Database, n.d., accessed: 2024-06-11.
[5] The calculations are primarily based on the knowledge offered by the Worldwide Federation of the Recording Trade (IFPI) in its annual studies for 2005 and 2009.
[6] A examine investigating the cannibalisation impact of music streaming on obtain gross sales was revealed by Wlömert and Papies in 2015: “On-demand streaming providers and music trade revenues – Insights from Spotify’s market entry”, Worldwide Journal of Analysis in Advertising and marketing, vol. 33(2), pp 314-327.
[7] Recording Trade Affiliation of America (RIAA), U.S. Music Income Database, n.d., accessed: 2024-06-11.
[8] Worldwide Federation of the Phonographic Trade (IFPI), 2022, World Music Report 2021, London: IFPI, p 161.