Streaming Now Recording Industry’s ‘Mainstream Model,’ IFPI Chief Says
Global digital music delivery sales rose 4.3 percent in 2013 to $5.9 billion, due mainly to “steep growth” in subscription services and “stable income from download sales in most markets,” IFPI said Tuesday in its annual state of the industry report (http://bit.ly/1lLJw8r). “Globally, digital now accounts for 39 per cent of total industry global revenues and in three of the world’s top 10 markets, digital channels account for the majority of revenues,” said IFPI, formerly the International Federation of the Phonographic Industry.
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Overall global music sales, including those of packaged media, fell 3.9 percent to around $15 billion, hurt mostly by a 16.7 percent free-fall in Japan, the world’s second-largest recorded music market, IFPI said. “Japan remains a market in transition,” IFPI said, “with legacy mobile products and physical format sales only now starting to decline, while streaming and subscription services are still establishing themselves.”
Within digital, subscription services are now “part of an increasingly diverse mix of industry revenue streams,” IFPI said. Sales from music subscription services grew 51.3 percent in 2013, exceeding $1 billion for the first time and “growing consistently across all major markets,” it said. The “subscription model” is prompting more consumers to shift “from pirate services to a licensed music environment that pays artists and rights holders,” it said. Globally, about 28 million consumers became “paying subscribers” to subscription services in 2013, vs. only 8 million in 2010, it said.
Sales from ad-supported streaming services such as Vevo and YouTube are also growing, rising 17.6 percent in 2013, IFPI said. “Music video revenues in particular increased as the industry extended the monetisation of YouTube to more than 50 countries, adding 13 territories in 2013,” it said. “Vevo has performed strongly, hitting 5.5 billion monthly views in December 2013, a 46 per cent year-on-year increase, and attracting 243 million unique viewers worldwide.”
Record companies “have adapted their business to a model increasingly based on access to music, and not only ownership of music,” IFPI said. “This reflects in the growing share of subscription and streaming revenues as a percentage of digital revenues globally.” It estimated the recording industry worldwide now draws about 27 percent of its digital sales from subscription and ad-supported streaming services, up from 14 percent in 2011.
Amid the ongoing growth in streaming, however, digital downloads remained a “key revenue stream” in 2013, with about two-thirds of overall digital sales, IFPI said. It said download services are “helping to propel” digital delivery growth in developing markets such as Hong Kong, the Philippines, Slovakia and South Africa.
Despite the overall transition to digital, packaged music still accounts for “a major proportion of industry revenues in many major markets,” though its share is decreasing, IFPI said. Globally, physical formats were 51.4 percent of recorded music sold in 2013, down from 56.1 in 2012, it said. Though vinyl sales were only a small fraction of the overall industry total, they've increased in recent years in some key markets, it said. U.S. vinyl sales increased by 32 percent in 2013, while they rose 101 percent in the U.K., it said.
"It is now clear that music streaming and subscription is a mainstream model for our business,” IFPI CEO Frances Moore said in the report. “Ad-supported and subscription streams are rising in most markets, helping grow overall digital revenues for record companies and artists.” Emerging markets in particular “have huge potential, and, through digital, the music business is moving to unlock it,” she said. Most of these markets “are seeing Internet and mobile music penetration soaring, with rising demand for handheld devices,” she said. “The great news is that a wide variety of licensed music services are available to meet this demand. Emerging music markets also need new ways of thinking in the digital world, particularly in countries with undeveloped payment systems and low credit card usage.”
"Rampant digital piracy” remains the “still one overriding obstacle to market development in most emerging markets,” Moore said. “This is a top priority for IFPI and our national groups around the world. Our focus on creating a fair playing field, supported by strong laws and effective enforcement, remains undiminished.”