The MBW Review gives our take on some of the music biz’s biggest recent goings-on. This time, we follow very positive recent financial results at all three majors with a prediction of what 2016 holds for the whole industry. The MBW Review is supported by FUGA.
Drake: feel free to pop the cork on another bottle.
Early indications are that the global recorded music business is set for its first significant recovery in over 15 years in 2016 – as streaming keeps growing in markets where many predicted it had hit its limit.
Half-year 2016 data collated by MBW shows significant growth in no less than 12 key nations, indicating that a revenue increase in the region of 5% should hold true for the worldwide label business across 2016.
The global growth in H1 was led by The Netherlands, where recorded music revenues jumped 23.2% year-on-year, up to €72.3m ($76m), in the six months to end of June.
According to local trade group NVPI, streaming was the driver: the format saw 52% year-on-year revenue growth in Jan-June in The Netherlands, resulting in €40m ($42m) of revenue.
Physical sales also grew 2.4% in The Netherlands in H1 to €27.8m ($29m) as downloads declined 13.2% to €4.5m ($4.8m).
Holland is not the only EU nation where streaming is proving itself to still have legs.
Sweden’s recorded music market grew 8.6% in the first half of 2016 to 547.3m SEK ($63m), according to IFPI – with streaming revenues jumping 9.6% to 507.5 SEK ($55m).
As such, streaming accounted for 85.8% of total music sales in Sweden in H1. Download fell by another 24% to just 10.16m SEK ($1.1m).
It’s was a similar story in Norway, where IFPI stats show recorded music revenues grew 7.8% in H1 this year, up to 333m NOK ($39m).
“in the three markets where you would expect to see evidence of Spotify reaching saturation point and revenues flattening off… the opposite is happening.”
Will page, Spotify
Streaming, which claimed an 83% share of H1 revenues in Norway, grew by 12.1% year-on-year – up from 248m NOK ($29m) to 278m NOK ($33m).
“What’s notable is that Sweden, Norway and the Netherlands are three of our most established markets, yet they are now growing at an accelerating rate” said Spotify Director of Economics Will Page.
“Think of it this way – in the three markets where you would expect to see evidence of Spotify reaching saturation point and revenues flattening off… the opposite is happening.”
Other high points for the global recorded music business in H1 included the UK, whose market grew 10.9% in the first half of the year, according to BPI figures seen by MBW – up to £319m ($402m).
UK streaming subscriptions jumped 78% year-on-year in H1 to £112.68m ($142m), according to the stats.
Overall UK streaming revenues (including ‘free’) grew 67.3% to £127.9m ($161m) in the period – making up 40.1% of the market’s total.
Interestingly, sales of physical formats actually grew 4.9% in the UK in H1, topping £104m in revenues.
However, downloads dropped by 22.7% to £85.7m ($108m).
Then there’s the big one.
On a like-for-like wholesale basis, the USA’s recorded music market grew 5.7% in H1 according to the RIAA, generating $2.4bn.
On a retail basis, it was up 8.1% to $3.43bn.
Paid for on-demand Streaming made up $1.013bn of this US retail figure, jumping 112%.
Revenues from permanent digital downloads (including albums, single tracks, videos, and kiosk sales) declined 17% to $1.05bn for the first half of 2016.
There were also big overall wholesale value H1 gains in Finland (+9.4% – IFPI), Canada (+7.3% – Nielsen) and France (+6% – SNEP) in the six months – while Belgium (BEA) grew 6.5% on a retail basis.
Spain’s revenues jumped 4.1% in Jan-June this year, up to €73.5m. According to local trade group Pro-Musicae, digital rose 22.5%, with streaming accounting for €40.1m.
And the recorded music market in Brazil, one of the world’s fastest-growing streaming markets, grew 10% by value in H1, according to local trade body Pro-Musica.
Digital revenues in the South American territory were up 32.5% overall, accounting for 70% of the total figure.
Streaming revenues in Brazil shot up by an impressive 121% in H1.
There was one very significant decline amongst all the good news in Jan-June, though – Japan.
According to RIAJ figures crunched by MBW, Japan’s total audio recorded music market was worth 113.45bn Yen ($1.12bn) in the first six months of this year – down 2.4% on H1 2015 (116.22bn Yen).
Of that H1 2016 figure, 25.66bn Yen ($254m) or 22.6%, was made up of digital revenues – which were up 12% on the prior year.
Subscription streaming generated just 9.34bn Yen ($92.5m) in H1 2016, only worth 8.2% of total revenues – but was up 85% year-on-year.
Japan’s physical market (not including music video) fell 6% in the period to 87.78bn Yen.
Meanwhile, Germany posted yet another overall revenue rise of 3.6% (IFPI DE) in H1 – but physical sales in the market looked less robust than they have for a long time.
Germany’s CD albums market dropped 10.5% to €371.9 in Jan-June, according to BVMI/Ovum – although vinyl sales grew 43.7% to €30.6m.
Once again, streaming was the success story, with subscriptions in Germany storming up 97.6% to €173.5m.
The declines seen in physical revenues in both Germany and Japan in 2016 underlines an important risk, as CD sales in these two countries alone contributed $2.6bn in value to the global business last year.
Putting that figure in context: $2.6bn is actually worth more than 2015’s entire global value of paid subscription and freemium streams combined ($2.3bn).
Overall, then, the picture for 2016 is a rosy one – suggesting the recorded music business’s decline may have finally ‘bottomed out’, and that its annual income is set for an uptick in the coming years.
MBW expects the IFPI to report an annual global income for 2016 in the region of $15.8bn.
However, there’s still a long way to go for the global recorded music industry to reach the heights of 1999, when its worldwide annual revenue blasted above $26.5bn.
Can streaming really take the business back to those heights?
The MBW Review is supported by FUGA, the high-end technology partner for content owners and distributors. FUGA is the number one choice for some of the largest labels, management companies and distributors worldwide. With a broad array of services, its adaptable and flexible platform has been built, in conjunction with leading music partners, to provide seamless integration and meet rapidly evolving industry requirements. Learn more at www.fuga.comMusic Business Worldwide