Streaming drives first significant rise in music industry revenues since 1998

China leads rise in sales of licensed music, with near-64 per cent increase, as global digital-music sales outstrip physical album sales for first time; industry still a third smaller than 20 years ago

PUBLISHED : Thursday, 21 April, 2016, 8:01pm
UPDATED : Thursday, 21 April, 2016, 11:40pm

The recorded music industry has enjoyed its first significant growth since the dawn of the internet age, as streaming led digital to overtake physical sales, according to a global trade body.

Recorded music revenue expanded by 3.2 per cent in 2015 worldwide to US$15 billion, fuelled by an extraordinary growth in subscriptions to streaming services, according to the International Federation of the Phonographic Industry.

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The growth is the first uptick in the music industry at a more than marginal level since 1998, when sales grew 4.8 per cent year-on-year.

But the industry is still down by one-third since the late 1990s, when internet service became mainstream in developed countries and listeners flocked to music sites, both legal and illicit.

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The rapid growth of streaming – which allows unlimited, on-demand music online – led digital music to surpass sagging physical sales for the first time last year.

The industry federation estimated that 68 million people around the world had digital subscriptions, compared with just eight million in 2010 when it first started keeping statistics.

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Streaming revenue grew by 45.2 per cent in the past year alone, nearly matching sales from digital downloads on iTunes and other sites.

Yet the industry did not cast an entirely rosy picture, saying revenue was still far below potential.

“The value of music is still not being fully recognised. Today, there is a real spirit of optimism across our industry, but we are a long way from declaring ‘mission accomplished’,” says Stu Bergen, the chief executive for international and global commercial services at Warner Music Group.

Without singling out YouTube by name, the industry federation took aim at “user-upload platforms” as a persistent drain on the industry.

About 900 million people essentially listen to music free of charge through advertising-supported sites, yet the revenue generated for the music industry is barely a quarter of that through streaming subscriptions, the annual report said.

The industry’s growth came amid a massive spike in licensed music sales in China, where revenue grew by nearly 64 per cent.

China has long been notorious for piracy but major labels have made inroads and tech giant Apple has rolled out its new Apple Music streaming platform in the world’s most populous nation.

But Edgar Berger, chairman and chief executive of international for Sony Music, says China should be one of the top markets for music consumption – as it is for movies – and not number 23 as at present. “The biggest potential in the world for music growth is in China,” Berger says.

The labels credited China’s government with keeping its word on stepping up the legal framework against piracy. Frances Moore, chief executive of the music federation, voiced hope that China would also move ahead and set up its first system of performance rights, through which broadcasters pay to use songs.

The health of the music industry varied widely by country, the result not only of business trends but of the particular crop of local artists.

Japan, the largest market after the United States, saw its music sales grow by 3 per cent – reversing a steep decline in several years that contributed to dragging down the global industry.

The growth was the result in part of the introduction of streaming including Apple Music to Japan, where in sharp contrast to global trends three-quarters of sales are CDs or, to an increasing extent, vinyl.

Latin America was the fastest-growing region, with revenue jumping 11.8 per cent on soaring interest in streaming. Argentina alone saw sales rise by more than one-third, although Brazil, the region’s largest country, which has been beset by economic uncertainties, saw a small dip.

France and Germany were the other major markets that saw contractions, although in Italy sales jumped by 25 per cent.

Agence France-Presse