How Streaming Affects Music Revenue Growth

The Dutch music industry trade body the NVPI has announced that recorded music revenues were up by 1.9% in the first half of 2013. This follows first half rises for Norway (17%), Sweden (12%) and Germany (1.5%) which in turns comes on the heels of full year growth in 2012 for markets such as Brazil, Sweden and Norway (all markets with strong subscriptions and ad supported sectors). This is undoubtedly positive news and indicative of the proverbial corner being turned. However it is still too early to draw definitive conclusions about the impact of streaming on music revenue (and let’s stop calling it ‘sales’, a tag that hardly fits on-demand subscriptions).

Music revenues have been in decline for so long that sooner or later the bottom has to be reached, else the market would diminish into obscurity. We are now somewhere close to that bottom but we need to be careful not to read too much into 1st half sales. Music revenue is heavily concentrated into the last quarter of the year due to festive period gifting. But gifting is becoming increasingly eaten away at by digital for many reasons, not least of which is that gifting an iTunes voucher just isn’t the same as actually giving an album. So if digital is able to sustain growth across growth markets for a second successive year then we can start talking about the sustained revenue growth potential of streaming.

Even if that growth is sustained though, another speed bump is on its way: the post-CD revenue collapse. The CD is still by far the world’s biggest music revenue source. If you strip out the US and UK, digital accounted for just one qyarter of global music sales in 2012. Viewing the music world through the Anglo-American lens can give a distorted view of things. In Japan, the world’s second biggest music market, physical accounts for 80% of revenue, in Germany, the fourth largest, it is 75%. Currently the trend in most markets is that many CD buyers are simply falling out of the habit of buying music rather than going digital. If that trend continues for a sizeable chunk of the music buyers that currently account for three quarters of non-US and UK music spend, then a big dip in revenues should be anticipated.

Source: hypebot.com

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