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Goldman Sachs’ latest prediction of a rosy future for streaming boosts major label valuations

By | Published on Wednesday 30 August 2017

Goldman Sachs

The bankers at Goldman Sachs are optimistic about the potential of the streaming music market, even if you’re not. Analysts at the bank have been monitoring the streaming sector via their ‘Music In The Air’ series of reports, and they now reckon that annual worldwide revenues from music streaming could be up to $28 billion by 2030, based on estimates that 847 million people could be paying to stream music by then.

The business model currently being employed by the likes of Spotify and Apple Music requires massive scale in order for those services to become profitable. By which we mean significant numbers of paying subscribers, premium rather than ad-funded free streaming being where most of the money is generated. But Goldman Sachs seems to be of the opinion that the streaming market can continue to grow sufficiently – more than eight-fold in terms of paying users – to allow such scale.

That optimistic level of growth would also be great news for the music rights companies too, of course, and most notably the two major global players Universal Music and Sony Music. Both have had their valuations increased by Goldman Sachs based on the latest streaming music forecasts – to approximately $23.5 billion and $19.5 billion respectively.

Though, of course, while it’s true that the music right firms see the majority of the money that is generated by streaming, the income seen by the likes of Universal and Sony has to be shared with artists and songwriters.

More of the streaming money goes to the label side of the business, and under traditional record deals the label keeps the majority of that income. Though the growth of the label services sector and possible new investment options for artists may force even the majors to offer even new talent more favourable terms in the future.

Meanwhile lobbying is ongoing – within the industry and the political community – to review the legacy deals of heritage artists where the labels get to keep the vast majority of the money based on contracts written before anyone considered how much easier it would be to exploit catalogue in the streaming age.

That, plus continued uncertainties about the reach of the contract termination right under US copyright law, could all hit the bottom line of the majors, even if and as streaming income continues to boom.