Revenue: Read how Digital music revenues overtook physical for the first time

– Digital revenues contribute 45 per cent of industry revenues; overtake physical’s 39 per cent share

– Streaming revenues up 45.2 per cent, helping to drive 3.2 per cent global growth

–  Music consumption is exploding globally, but the “value gap” is the biggest brake on sustainable revenue growth for artists and record labels

The global music market achieved a key milestone in 2015 when digital became the primary revenue stream for recorded music, overtaking sales of physical formats for the first time.

Digital revenues now account for 45 per cent of total revenues, compared to 39 per cent for physical sales.

IFPI’s Global Music Report 2016 also reported a 10.2% rise in digital revenues to US$ 6.7 billion, with a 45.2 per cent increase in streaming revenue more than offsetting the decline in downloads and physical formats.

Total industry revenues grew 3.2% to US$ 15.0 billion, leading to the industry’s first significant year-on-year growth in nearly two decades.  Digital revenues now account for more than half the recorded music market in 19 markets.

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However, there is a fundamental weakness underlying this recovery. Music is being consumed at record levels, but this explosion in consumption is not returning a fair remuneration to artists and record labels.   This is because of a market distortion resulting in a “value gap” which is depriving artists and labels of a fair return for their work.

IFPI Chief Executive Frances Moore said: “After two decades of almost uninterrupted decline, 2015 witnessed key milestones for recorded music:  measurable revenue growth globally; consumption of music exploding everywhere; and digital revenues overtaking income from physical formats for the first time. They reflect an industry that has adapted to the digital age and emerged stronger and smarter.

“This should be great news for music creators, investors and consumers. But there is good reason why the celebrations are muted: it is simply that the revenues, vital in funding future investment, are not being fairly returned to rights holders.  The message is clear and it comes from a united music community: the value gap is the biggest constraint to revenue growth for artists, record labels and all music rights holders. Change is needed – and it is to policy makers that the music sector looks to effect change.”

The Global Music Report 2016 outlines the state of the recorded music market worldwide and highlights innovation and investment within the industry as it advances into the digital era.

Streaming remains the industry’s fastest-growing revenue source

Revenues increased 45.2% to US$ 2.9 billion and, over the five year period up to 2015, have grown more than four-fold.

Helped by the spread of smartphones, increased availability of high-quality subscription services and connected fans migrating onto licensed music services, streaming has grown to represent 19 per cent of global industry revenues, up from14 per cent in 2014.  Streaming now accounts for 43% of digital revenues and is close to overtaking downloads (45%) to become the industry’s primary digital revenue stream.

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Premium subscription services have seen a dramatic expansion in recent years with an estimated 68 million people now paying a music subscription.  This figure is up from 41 million in 2014 and just eight million when data was first compiled in 2010.

Downloads remain a significant offering, accounting for just 20% of industry revenues.  Income was down 10.5% to US$ 3.0 billion – a higher rate of decline than in 2014 (- 8.2%).  Full album downloads are still a major part of the music fans’ experience and were worth US$1.4 billion.  This is higher than the level of sales in 2010 (US$983 million) and 2011 (US$1.3 billion).

Performance rights revenue grew. Revenue generated through the use of recorded music by broadcasters and public venues increased 4.4% to US$2.1 billion and remains one of the most consistent growing revenue sources. This revenue stream now accounts for 14% of the industry’s overall global revenue, up from 10 per cent in 2011.

Revenues from physical formats declined, albeit at a slower rate than in previous years, falling by 4.5% compared to 8.5% in 2014 and 10.6% in 2013.  The sector still accounts for 39% of overall global income and remains the format of choice for consumers in a number of major markets worldwide including Japan (75%), Germany (60%), and France (42%).

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