Streaming drives reversal of music industry decline

Revenue growth in the beleaguered business for the first time in two decades...

Streaming drives reversal of music industry decline

[Pixabay]

Increasing digital music revenues are behind the first growth in the music industry since 1995.

An increase of 3.2% globally saw earnings reach $15 billion, with the digital success more than balancing out declining CD sales.

The findings of a new report by the International Federation of the Phonographic Industry (IFPI) showed 2015 to be a historic year, as digital music takings also surpassed those from physical formats for the first time.

The global take from streaming subscriptions, downloads, and advertising on the likes of YouTube, was 45% of the total, with the likes of CDs and vinyl accounting for 39%.

It was the massive surge in streaming, however, that made the real difference.

The subscription value of the likes of Spotify hit $68 million in 2015, a growth of a massive 66% on the previous year.

Streaming revenues were up 45.2% overall, while download sales dropped 10.5%.

At the launch of the report on Wednesday, Edgar Berger, chairman and CEO of International at Sony Music, said:

"The music industry has successfully emerged from digital disruption, and the future is bright.

"The three biggest markets in the world – the US, Japan and the UK – are up. And so are Asia, Europe, North America and Latin America – the latter by 11.8%. Around the world, seven countries are showing double-digit growth. And the main driver is streaming".

The IFPI estimates that 68 million people worlwide now pay to stream music, a 27m increase on 2014. That figure was a mere 8m in 2010.

Two companies are dominating the streaming side of things, with Spotify boasting 28m subscribers by the end of 2015 and relative newcomer Apple Music reaching 10 million in the same time.

Noteworthy anomalies were two of the biggest music markets, Japan and Germany - they still get 75% and 60% of their music sales from CDs respectively.

Sounding a cautious note, IFPI head Frances Moore said:

"3.2% sounds very good, but you’ve got to remember that we’ve had almost two decades of decline. During that two decades of decline we’ve slumped by something like 35%.

"Music consumption is exploding worldwide, and it’s a 3.2% increase. The question could be why is it not higher?".

The IFPI also expressed concern about the "value gap" between free, ad-supported streams and the money they generate for record companies and labels.

It claims that subscribers contributed an average revenue per user (ARPU) of $29.41 last year, but the 900 million free users had an ARPU of just $0.70.generated just $634m – an ARPU of $0.70.

As Berger put it:

"The single biggest source of online music is generating only 4% of our revenue. This is a gigantic mismatch between volume and rewards".