Business News Labels & Publishers Retail

End of year record sale stats: Streams boom and downloads peak in Sheeran’s year

By | Published on Thursday 1 January 2015

Ed Sheeran

So, few surprises in the end of year sales figures from the UK record industry: streaming boomed, downloads peaked, CD sales continued to decline, and overall the year belonged to Ed Sheeran or – if you wish to look at the wider entertainment retail sector – to Disney’s ‘Frozen’ franchise.

The big news story of the year, of course, is that download sales have peaked as an increasing number of digital music consumers shift over to streaming services. We knew iTunes music income was now in decline in the US and on a worldwide basis, and this morning figures from the UK’s Entertainment Retailer’s Association confirmed, as we suspected, that that was the case here too.

The UK download sector brought in 14.9% less in 2014 than 2013 at £338.1 million, while streaming revenues shot up 65.1% bringing in £175 million for the record industry (though, it is worth noting, for the time being the download space is still bringing in nearly double the revenues generated by the streamers). With physical sales slipping 4.9% that means that overall the UK record industry saw its sales dip 1.6%.

That’s an overall figure that can be taken as a positive or a negative. It means that, despite all the hype around the streaming sector, the booming subscription services aren’t quite making up for the decline in CD and download sales. But on the upside, after a decade plus of significant shrinkage, the UK recorded music market – like the worldwide sector – has been bumping along at a pretty flat level for a couple of years now.

Optimists in the record industry reckon there is still a long way for the rapidly evolving streaming sector to go (though a pessimist might add that there’s a long way for the download services to concurrently fall as well). The optimists are right of course, though the biggest growth potential is in the mid-market subscription space that no one has really yet cracked, and which Spotify and YouTube’s freemium services are arguably hindering (more on which here). But while there may be a rocky ride ahead, it seems reasonable to assume we are only just seeing the start of the streaming music boom.

That said, the record industry’s streaming success story is in part aided by the fact that about 90% of the money being paid by the streaming firms into the music community is going to the labels. That is going to be a big talking point in 2015 as the music publishers push for a bigger cut of the pie, while recording artists might make a claim that they should be seeing an automatic cut of Spotify income like they do with royalties that come in via collecting society PPL. So, additional growth in streaming monies may be countered for the labels by them being forced, ultimately, to share more of the loot with other stakeholders.

Which might give the pessimist more ground, though it’s worth noting that these annual record industry figures never include the monies the labels now routinely earn from the other commercial activities of artists in which they have invested, such as merchandise, brand partnerships and cuts of live income. Factor those into the mix and the record label sector would be posting overall growth.

But back to recorded content, and figures from label trade group the BPI break things down by units, using a methodology that equates streams and single track downloads with album sales. Interestingly, while ERA’s retail value figures show that physical still brought in slightly more cash in 2014 as the digital sector wobbled with the download-to-streaming shift, when it comes to the unit-based consumption figures digital is outperforming physical.

Streams almost doubled in quantity in 2014 and accounted for 12.6% of consumption overall, with digital albums down 9% and accounting for 25.3% of total units, single track downloads down 14.2% and accounting for 13.3%, and physical albums sales down 6.9% and accounting for 48.8% of consumption overall. Of course even taking consumption rather than retail value figures, that physical still nearly accounts for half the sector will surprise some. And while vinyl sales were at their highest since 1995, it should be noted that the vast majority of those physical purchases were CD.

For their part the BPI notes that while the domestic recorded music market at large may have been pretty static in 2014 revenues wise, British talent shone through, with the ten best selling artist albums of the year all coming from UK artists for the first time ever. And while there was much talk in the summer months about the UK industry lacking any million selling albums this year, in the end there were two (two more than 2013) in the form of Ed Sheeran’s ‘X’ which, thanks to pre-Christmas purchasing, has now topped 1.7 million sales, and Sam Smith’s ‘In The Lonely Hour’.

If you take all home entertainment products into account, Sheeran had the fourth best selling release of the year (in terms of units shifted), behind games ‘Call Of Duty: Advanced Warfare’ and ‘FIFA 15’ and the ‘Frozen’ DVD. The ‘Frozen’ soundtrack was also one of the best various artist music releases of the year too.

Commenting on all of this, BPI boss Geoff Taylor told reporters: “The remarkable success of British artists in 2014 is exciting news for the future. Our record labels are backing home-grown talent like Ed Sheeran, Sam Smith and George Ezra, who in turn are catching fire around the world. With major new premium services from Apple and YouTube set to boost subscription streaming even further in 2015, we believe the UK’s world-leading music industry is strongly positioned for future expansion”.

Meanwhile ERA chief Kim Bayley said: “2014 was a remarkably successful year for retailers and digital services as they continued to invest in the future of the entertainment business. More than half of entertainment revenues now come from retail channels which did not even exist a decade ago. Too often the debate about the future of entertainment is portrayed as a battle between physical and digital. This second successive year of growth demonstrates entertainment is becoming a mixed, multi-channel economy in which streaming, digital and physical formats can both prosper, each satisfying different consumer needs”.