CMU Trends Labels & Publishers

Trends: The recorded music year just gone – market by market

By | Published on Sunday 15 February 2015

Musical World

The International Federation Of The Phonographic Industry will this year publish its round up of the year just gone in recorded music, and its annual review of the digital music sector, on 14 Apr. It’s the first time both reports have come out together, which may or may not be significant.

Certainly we expect the biggest headlines in the 2014 report to focus on a booming streaming sector and a peaking download market, though the IFPI’s annual review is also interesting in that it usually reminds us just how important the CD remains for the industry at large, and tells us which emerging markets we should be keeping an eye on.

But ahead of all that it is worth reviewing the record industry stats that have already emerged from the national trade bodies in key Western markets, which demonstrate some general trends, but also that some significant country-by-country differences remain.

In the UK, the big headline of 2014 from record industry trade body the BPI was that, when it comes to ‘consumption’, digital is now out-performing physical. Though perhaps more interesting – in a year dominated by a streaming boom and the vinyl revival – is that, when you look at overall revenue, physical is still slightly ahead of digital, and the vast, vast majority of it comes from CD sales.

But when you focus on the digital stats alone the key trends of last year were less surprising: as expected, download sales were down in 2014, generating 14.1% less than in 2013, while streaming income shot up by a massive 65.1%.

Though, for the time being at least, download sales still remain way more lucrative, bringing in £338.1 million compared to the £175 million generated by the various kinds of streaming platform.

And with the booming streaming sector having to compensate for declines in both physical and download income, overall the UK record industry saw income drop 1.6%.

The top line trends seen in the UK – downloads peaked, streaming boomed, physical fell overall despite a nominal vinyl revival – were mirrored in the US too.

Though there had been so much doom and gloom spoken about the state of the American download market earlier in 2014 that the year-end stats from industry monitor Nielsen weren’t as bad as you might have expected.

The continued slide of the CD market was more pronounced Stateside, with another 14% slip, equating to 140.8 million units, while downloads were down 9.4%, as iTunes – for a time the supreme dominant force in digital music in the US – saw its music sales decline.

That is almost certainly linked to the boom in streaming music in the States, where Spotify-style services saw healthy growth in 2014, as did the Pandora-style platforms that are much more significant in the US due to the SoundExchange licensing system that makes it easier for such set-ups to get to market.

While the ‘streaming booms but download peaks’ trend seems to be delivering slight declines in most markets, Germany again shirked the trend in 2014 by scoring a slight growth in revenues for the second year running, according to initial figures from the country’s record label trade group BVMI.

Germany, of course, remains a resolutely physical market, with a massive 75% of income still coming from CDs and vinyl. And while CD sales are declining in the country, they are doing so slowly, with just a 1% slip in the last twelve months, compared to 2% the previous year.

Meanwhile the digital market saw 12% growth overall, with the streaming sector – which had a delayed arrival in Germany due to licensing issues, mainly on the publishing side – seemingly accounting for most of that increase.

All of which means that the German record industry saw overall income grow by 1.8% on 2013 to about €1.48 billion.

In France there was a more familiar pattern, in that CD and download declines resulted in an overall drop in income, despite the streaming boom. CD sales were down 11.5% and downloads 14%, while streaming services generated revenues 35% higher than in 2013.

And whereas in the US and the UK downloads – while now in decline – remain the biggest digital revenue stream overall, in the main because iTunes reached such impressive heights before it peaked in those markets, in France streaming monies are already outperforming downloads.

Though not enough to compensate for the CD and MP3 declines, meaning the French industry overall saw revenues drop 5.3%, according to figures from trade body SNEP.

Just as with Germany, Italy continues to generate significantly more revenue through CD sales than digital, and it also saw overall revenues rise in 2014, by 4%, according to figures from local trade group FIMI.

Though, as with most markets, the rise was mainly due to a booming streaming sector, which brought in 80% more last year than in 2013. That impressive level of growth now puts streaming ahead of downloads in terms of revenues generated.

Download income was down 15%, while physical sales were down 5%, so that CDs and vinyl now account for 62% of the recorded music market in total.

And so to the Nordics, and Sweden, which has been ahead in terms of the shift to streaming for a number of years now.

Though a significant slide in CD sales was the standout figure in this market in 2014, according to IFPI Sweden figures, with physical sales down by a third overall, despite an increased interest in vinyl pretty much in line with the US and UK.

The overall negative impact of that, however, was lessened by the fact that physical is such a small part of the overall Swedish record industry these days, where streaming – and Spotify in particular – totally dominates (generating just shy of 80% of income).

Overall Swedish record industry revenues were down 0.4%.

And finally let’s check in on Australia. Oh look, CD sales are down again, downloads have peaked but streaming is booming. Though the Australian market is feeling the strain of revenue shifts more than most, with overall income down 9.6%. The country’s trade body was left grasping for a sliver lining by noting that at least the slip in 2014 was less than in the previous year, when incomes fell 11.6%.

In the detail we discover that physical product was down 18.3% overall, despite the customary vinyl revival and, weirdly, an uplift in CD single sales. In digital, which now accounts for 59% of Australian income overall, revenues from streaming more than doubled. Though that’s principally because streaming has only really taken off down under in the last eighteen months, and such a leap couldn’t compensate for the physical slip and a drop in download income.

So, pending the global view due from the IFPI in April, from the markets that have already reported we can probably say that 2014 was a shaky though not entirely disastrous year for the record industry at large. That glimmer of hope in 2012 that the sector was back in growth – albeit nominally – was possibly premature, though across the board we are not seeing the kind of declines of a decade ago.

The big question for the record companies today is will further expansion of the streaming sector – likely to the detriment of the physical and download market – ultimately send the industry back into substantial growth, or will it simply compensate for further CD and MP3 revenue declines and then flatten out?

Very possibly the latter. Which is why multi-revenue stream deals remain key for labels that invest in new talent, while other stakeholders who rely entirely on copyright income probably need to increase their slice of the pie.

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