Does music streaming have the potential for a new ‘Golden Age’ for the recorded music industry?

The opinions about streaming as “saviour” or as “killer” of the recorded music industry couldn’t be more diverse. Some participants of the industry see a huge long-term potential in streaming. Other participants compare the instant license opportunities of selling music on CD or as digital download with the payout rates of streaming. Fair enough, the (low) payment rates of streaming services require ongoing negotiation from the music industry in order to ensure a reasonable income for all participants of the music industry. Additionally, making a living from current music releases has become a difficult task, as music streaming must be a long-term calculation, instead of the instant income of sales. But this shall not be discussed in this article. This article only takes a look on the big global market figures.

Let’s see if there could be a bright future – a new “Golden Age” for the music industry with streaming…

At the beginning of 2017, it was reported that the global premium subscribers of music streaming services have reached the milestone of 100 million people. The market share of streaming has reached 19 % of the recorded music revenue in 2016. The recorded music market generated 15 billion US-$ in 2016 in total, as reported by the IFPI. Therefore, music streaming made 2,9 billion US-$ revenue in 2016. So, the average subscriber accounted an income for the recorded music industry of 29 US-$ per year. If you think, this is dramatically low yearly spending for music: Yes, indeed, for a music lover.

However, it needs to be taken into account for this amount that this is only income for music streaming services. It doesn’t include physical sales, digital sales, other music licenses. Even when these income streams are declining in total, the physical sales still generate more than 50 % of the income worldwide.
Additionally, it needs to be clarified that these 29 US-$ is the value which arrives in the recorded music industry; not the amount which is paid by the consumers to the streaming services.

To put this amount of 29 US-$ per streamer into the context of the average value per person for the music industry, the Japanese Recording Association (RIAJ) regularly published interesting figures in the past: Based on their figures for 2010 from 2012, the average value of one person was significantly lower in some leading countries: USA 11,7 $, Germany 20,8 $, UK 22,3 $ (exception: Japan 32,3 $). In 2010, the global recorded music revenue was 16 billion US-$, therefore slightly higher than in 2016.

Anyway, a more interesting calculation should be done to put the music streaming income into the context of the peak of the golden age of the recorded music industry.

The peak of the recorded music revenue  has been back in 1999 with a global total of 38,7 billion US-$ (resource: IFPI), which is more than twice of 2016. In 2001, the Japanese Recording Association published the average value per person for the first time, when the total market generated 33,4 billion US-$ (still way higher than today: 15 billion US-$).

Let’s take a look on the detailed figures of the Top10 markets of 2001:

Value of purchase per person: USA 47,35 $, Japan 41,43 $, UK 47,27 $, Germany 25,7 $, France 30,86 $.

Calculating an average value per person for the Top5 of 2001 (USA, Japan, UK, Germany), we get a result of 41,55 $ per person.

To achieve this average value per person with streaming only, it is required that only 70 million additional persons subscribe to a premium account at Spotify, Apple or another streaming service and use it in the same way, as the current 100 million users do. Still, this is a calculation with streaming income only, no physical sales, no other digital income!

Even when I doubt predictions about the development of the music industries, let’s take a look on the recent prediction of MIDia Research, how the streaming subscriber numbers may evolve over the next few years:

Based on these numbers, the mentioned 170 million subscribers are reached in 2018. Let’s assume that the global market reaches 221,5 million subscribers in 2020 and the average value of a subscriber will be reduced to 20 US-$: this would generate an income of 44,3 billion US-$…. significantly more than the peak in 1999, with streaming only!

Reasons why the average value could be lower:

  • the streaming services, especially Spotify, negotiate lower payout rates due to their market power
  • the heavy users of streaming are probably already acquired as premium subscribers. So, the normal users are acquired with reduced fees and possibly generate fewer streams

However, reasons against a lower average value:

  • the consumers enjoy the benefits of the streaming service more than today, with the personalised playlists, and use the service more than before
  • the consumers prefer using the streaming service to radio
  • the mobile data volume, speed and availability of public wifi increases which causes higher usage of streaming services

Actually, it is difficult or nearly impossible to predict the future, but additional 70 million music streaming subscribers are definitely achievable in the next years! Additionally, physical music sales and other income from music won’t be killed by music streaming.

Therefore, a new “Golden Age” is definitely a possible future for the recorded music industry, in my opinion!

What do you think?

 

 

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