CONNECTING WITH MUSIC CONSUMER INSIGHT REPORT SEPTEMBER 2017

1 MUSIC CONSUMER INSIGHT REPORT 2017

INTRODUCTION AN EXCITING WORLD FOR MUSIC FANS This report provides a snapshot of how fans around BUT CHALLENGES REMAIN the world are connecting with recorded music. The FOR THE MUSIC COMMUNITY nature of this engagement continues to grow and This report also provides a window into the challenges evolve, reflecting the enormously rich and exciting facing today’s global music community. Research on opportunities today’s fans have to listen to streaming and the dominance of YouTube is in multiple ways, whenever and wherever they wish instructive for the ongoing debate on the Value Gap. to do so. User upload services, such as YouTube, are heavily used by music consumers and yet do not return fair value Streaming continues to be embraced by music fans to those who are investing in and creating the music. around the world who are increasingly engaged with The Value Gap remains the single biggest threat facing these on-demand licensed digital services. We also the music world today and we are campaigning for a see fans accessing music in multiple formats, with this legislative solution. varying across countries and cultures. Furthermore, the report also highlights the challenge THE NEXT GENERATION of the availability of unlicensed music. Copyright ARE ENGAGING WITH MUSIC infringement is still growing and evolving, with stream Young fans are also showing high levels of engagement ripping the dominant method. The industry is taking with music. Despite having enormous amounts of action against these sites and fighting for the rights of media content competing for their time and attention, those creating music. With the wealth of licensed music “RECORD COMPANIES UNDERSTAND they are taking music to their hearts and recognising available to fans, these types of illegal sites have no its value. As they emerge as the next generation of justifiable place in the music world. THAT AT THE HEART OF THIS music fans this is an encouraging sign. As the recorded music industry grows and adapts, RECORD COMPANIES ARE AT THE HEART OF THIS ENGAGEMENT fans around the world are listening to and engaging ENGAGEMENT IS GREAT MUSIC - with music in many exciting ways. Record companies Record companies and their partners are at the heart of this exciting world of music engagement. They understand that at the heart of this engagement is great SOMETHING THEY CONTINUE TO have invested in and built out the systems that have music - something they continue to believe in, invest in, enabled the licensing of over 40 million tracks and develop and fight to protect. BELIEVE IN, INVEST IN, DEVELOP the existence of hundreds of digital services. Perhaps even more fundamentally, record companies are there FRANCES MOORE, at the very start of music’s journey to fans; discovering, CEO, IFPI AND FIGHT TO PROTECT.” nurturing and promoting artists and their music. FRANCES MOORE, CEO, IFPI

3 MUSIC CONSUMER INSIGHT REPORT 2017

VIDEO STREAMING MAKES UP MORE THAN MUSIC CONSUMPTION HALF OF ON-DEMAND MUSIC STREAMING TIME... IN 2017 22% FREE AUDIO STREAMING ON AVERAGE, 23% PAID AUDIO STREAMING CONSUMERS LISTEN 55% VIDEO STREAMING (INCLUDING USER UPLOAD TO MUSIC IN SERVICES SUCH AS YOUTUBE)

USER UPLOAD SERVICES ARE THE DOMINANT 46% FORM OF VIDEO STREAMING. YOUTUBE ALONE 4 ACCOUNTS FOR 46% OF ALL TIME SPENT 45% YOUTUBE LISTENING TO ON-DEMAND MUSIC. ENGAGE IN LICENSED DIFFERENT HOWEVER, USER UPLOAD SERVICES ARE NOT AUDIO STREAMING RETURNING FAIR VALUE TO THE MUSIC COMMUNITY. (UP FROM 37% IN 2016) LICENSED WAYS

85%85% 40% OF 13-15 YEAR-OLDS OF CONSUMERS ACCESS AREOF STREAMING 13-15 YEAR-OLDS UNLICENSED MUSIC MUSICARE (AUDIO/VIDEO) STREAMING MUSIC (AUDIO/VIDEO)

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01 6% OF INTERNET USERS CONSUME ICENSE MUSIC INCLUDES:6% OF INTERNETAUDIO STREAMING, USERS VIDEO CONSUME STREAMING, ICENSE PHYSICAL PURCHASE, MUSIC DIGITAL DOWNLOADS, AND RADIO INCLUDES:6% OF INTERNETAUDIO STREAMING, USERS VIDEO CONSUME STREAMING, ICENSE PHYSICAL PURCHASE, MUSIC DIGITAL DOWNLOADS, AND RADIO INCLUDES: AUDIO STREAMING, VIDEO STREAMING, PHYSICAL PURCHASE, DIGITAL DOWNLOADS, AND RADIO 6% OF INTERNET USERS CONSUME ICENSE MUSIC MUSIC 8%INCLUDES: AMONG AUDIO 1624 STREAMING,s VIDEO STREAMING, PHYSICAL PURCHASE, DIGITAL DOWNLOADS, AND RADIO 8% AMONG 1624s 8% AMONG 1624s

8% AMONG 1624s CONSUMPTION 45% ENGAGE IN ICENSE AUIO STREAMING 45% (UP ENGAGE FROM IN37% ICENSE IN 2016) AUIO STREAMING 45% (UP ENGAGE FROM IN37% ICENSE IN 2016) AUIO STREAMING (UP FROM 37% IN 2016) MUSIC CONSUMERS ARE 45% ENGAGE IN ICENSE AUIO STREAMING HIGHLY ENGAGED WITH (UP FROM 37% IN 2016) 75% ICENSE AUIO STREAMING LICENSED MUSIC 75% ENGAGEMENTICENSE AUIO (PAST STREAMING 6 MONTHS) 75% 66% 66% ENGAGEMENTICENSE AUIO (PAST STREAMING 6 MONTHS) 66% 66% ENGAGEMENT (PAST 6 MONTHS) 75% 66% 66% 5% 5% 55% ICENSE AUIO STREAMING 5% 55% ENGAGEMENT (PAST 6 MONTHS) 66% 66% 48% 55% 46% 46% 48% 43% 5% 46% 46% 41% 41% 48% 43% 3% 55% 46% 46% 41% 41% 43% 3% 41% 41% 48% 3% 46% 46% 43% 41% 41% 3% 18% 18% 18%

MEICO SEEN BRAI SOUTH KOREA SPAIN US FRANCE ITA UK AUSTRAIA GERMAN CANAA 18%JAPAN MEICO SEEN BRAI SOUTH KOREA SPAIN US FRANCE ITA UK AUSTRAIA GERMAN CANAA JAPAN MEICO SEEN BRAI SOUTH KOREA SPAIN US FRANCE ITA UK AUSTRAIA GERMAN CANAA JAPAN MEICO SEEN BRAI SOUTH KOREA SPAIN US FRANCE ITA UK AUSTRAIA GERMAN CANAA JAPAN

OF INTERNET USERS OFHAE INTERNET PAI FOR USERS ICENSE RECORD COMPANIES AND PARTNERS HAVE INVESTED IN AND OFHAEMUSIC INTERNET PAI IN THE FOR USERSAST ICENSE SI 50% HAEMUSICMONTHS. PAI IN THE FOR AST ICENSE SI BUILT OUT THE SYSTEMS THAT HAVE ENABLED THE LICENSING OF 50% OFMUSICMONTHS. INTERNET IN THE USERSAST SI 50% HAEMONTHS. PAI FOR ICENSE MUSIC IN THE AST SI OVER 40 MILLION TRACKS 50% MONTHS. Base: All Respondents accessing licensed music in the past 6 months (n=11,776) 2016: (n=11,710) AND THE EXISTENCE OF HUNDREDS OF DIGITAL SERVICES. *Consumption of licensed music includes radio ** Includes those paying for physical, downloads and paid audio streaming IFPI data 7 MUSIC CONSUMER INSIGHT REPORT 2017

02 METHODS OF MUSIC CONSUMPTION GLOBAL MUSIC METHODS USED BY INTERNET USERS IN THE LAST SIX MONTHS 44% 32% CS LISTENING ARE PURCHASING 28% ONOAS PHSICA COPIES OF MUSIC OR PAI 17% IN METHODS 2017 ONOAS

MUSIC CONSUMERS ARE ENGAGED WITH MULTIPLE METHODS OF LISTENING 45% 39% FREE TO LICENSED MUSIC USE AUIO STREAMING 27% PAI SERICES FOR MUSIC

75% USE IEO STREAMING SERICES FOR MUSIC

BROACAST 87% 68% RAIO ON AVERAGE, CONSUMERS LISTEN TO ARE ISTENING TO INTERNET 35% RAIO MUSIC IN 4 DIFFERENT LICENSED WAYS MUSIC ON THE RAIO

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03 TOP 10% OF MUSIC CONSUMERS AROUND THE WORLD: MUSIC SHARE OF TIME SPENT LISTENING TO LICENSED MUSIC SOURCES IN A TYPICAL WEEK

18% % RAIO AUDIO % CONSUMERS STREAMINGPURCHASE MUSIC % % IEO STREAMING 40% AUIO STREAMING 20% GLOBAL % VIDEO % AROUND STREAMING % % 22%

PURCHASED MUSIC 5% THE WORLD 19% % % %21% 30% RADIO10% % HIGHLY ENGAGED MUSIC GERMANY 54% JAPAN CONSUMERS AROUND THE % 17% 44% WORLD ARE LISTENING TO % MUSIC IN DIFFERENT WAYS % % We took the top 10% of music consumers % from each of the thirteen countries to see 12% 16% 20% how music listening changed from country 29% % % to country. The charts show the distribution % in four selected countries as well as a MEXICO 20% SOUTH global snapshot taken from all thirteen. KOREA 29% 52% GLOBAL GERMANY 22%JAPAN MEXICO SOUTH KOREA

PROPORTION LISTENING TO MUSIC ON SMARTPHONES

GERMANY JAPAN MEXICO SOUTH KOREA GLOBAL 76% 74 % 62% 82% 90% GLOBAL GERMANY JAPAN MEXICO SOUTH KOREA 76% 74 % 62% 82% 90%

Base: Heavy music consumers defined as the top 10% of music consumers in terms of the amount of hours listened to in a typical week 11 MUSIC CONSUMER INSIGHT REPORT 2017

04 SMARTPHONE USAGE SMARTPHONE USAGE FOR FOR MUSIC WORLDWIDE MUSIC ACROSS AGE RANGE

MUSIC 2016 2017 2016 2017 1624 MEICO 77% 91% CONSUMPTION: 79% BRAI 69% 85% 84%

SOUTH KOREA 75% 80% SMARTPHONE 2534

USING A SMARTPHONE ITA 68% 73% 67% TO LISTEN TO MUSIC IS

INCREASING RAPIDLY SPAIN 65% 72% 78% WORLDWIDE 3544 The increase in smartphone usage for SEEN 64% 68% music in 2017 is seen across all age groups from 16-54 52% US 54% 63% 64% GERMAN 52% 61%

4554 AUSTRAIA 52% 59% 42% UK 55% 59% 53%

FRANCE 48% 57% 5564

CANAA 40% 52% 32% 90% OF PAID AUDIO STREAMERS USE 30% A SMARTPHONE FOR MUSIC LISTENING JAPAN 39% 44% Base: All Respondents using a smartphone to listen to music in the past 6 months (n=11,776) from all 13 countries surveyed (US, Canada, GB, France, Germany, Spain, Italy, Sweden, Australia, Japan, South Korea, Brazil, Mexico) 13 MUSIC CONSUMER INSIGHT REPORT 2017

05 YOUNG MUSIC YOUNG MUSIC CONSUMERS CONSUMERS 53% 85% OF 1315 EAR OS ARE PURCHASING YOUNG PEOPLE WORLDWIDE ARE STREAMING MUSIC PHSICA OR PAI ARE HIGHLY ENGAGED WITH (AUIOIEO) MUSIC ONOAS LICENSED MUSIC 13 – 15 year-old internet users are OF 13-15 YEAR OLDS STREAMING MUSIC... demonstrating high levels of music engagement - giving an insight into 38% 37% 19% the ‘next generation’ of music consumer UP FROM 79% 67% 54% IN 2016 IEO AUIO ONOAS CS IN

OF THE AUDIO STREAMERS...

OF THE PAID AUDIO STREAMERS... 33% PA FOR THEIR ON MUSIC STREAMING 37% SUBSCRIPTION PAI 63% FOR 1664 EAR OS

36% ARE PART OF A FAMI SUBSCRIPTION PAN 62% 22% FOR 1664 EAR OS “MUSIC IS IMPORTANT TO ME” FREE 71% OF 13-15 YEAR OLDS AGREE (70% OF 16-24)

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06 VIDEO STREAMING MAKES UP MORE THAN VIDEO HALF OF ON-DEMAND MUSIC STREAMING TIME…

55% IEO STREAMING SER P STREAMING SERES S S TBE 23% PAI AUIO STREAMING THE VALUE GAP 22% FREE AUIO STREAMING USER UPLOAD SERVICES, SUCH AS YOUTUBE, ARE HEAVILY USED FOR MUSIC, YET DO NOT RETURN FAIR VALUE FOR THIS MUSIC TO THOSE 46% YOUTUBE INVESTING IN AND CREATING IT. HOEER, USER UPOA SERICES THIS IS A FUNDAMENTAL CHALLENGE USER UPOA SERICES ARE NOT RETURNING FAIR AUE FOR THE MUSIC COMMUNITY WHICH ARE THE OMINANT FORM OF TO THE MUSIC COMMUNIT. IEO STREAMING. OUTUBE ESTIMATE ANNUA REENUE PER USER IS CAMPAIGNING FOR A LEGISLATIVE AONE ACCOUNTS FOR 46% OF SOLUTION TO THIS ISSUE KNOWN A TIME SPENT ISTENING TO ONEMAN MUSIC. AS THE ‘VALUE GAP’. US$1 US$20 IFPI DATA – FOR MORE INFORMATION VISIT Source: IFPI Data – ifpi.org/valuegap WWW.IFPI.ORG/VALUEGAP OUTUBE USAGE FOR MUSIC B COUNTR 7% 5% 0% 0% 86% 84% 82% 82% 81% 7% 7% 77% 72% MEICO BRAI ITA SPAIN SOUTH KOREA CANAA GERMAN USA FRANCE SEEN UK JAPAN AUSTRAIA

HIST SOME USE OF OUTUBE MUSIC 85% OF YOUTUBE USERS USED THE SITE FOR OUTUBE FOR 76% USERS ISTEN TO MUSIC MUSIC IN THE LAST MONTH, TRANSLATING TO ISCOERING MUSIC THE AREA KNO.

Estimated users calculated using figures published stating 1.5 billion logged in viewers visit YouTube every single AN ESTIMATED 1.3BN USERS month. https://youtube.googleblog.com/2017/06/updates-from-vidcon-more-users-more.html#gpluscomments Base: All past month YouTube users (n=8220) from all 13 countries surveyed (Mexico, Brazil, Italy, Spain, South Korea, 17 Canada, Germany, US, France, Sweden, GB, Australia, Japan). MUSIC CONSUMER INSIGHT REPORT 2017

07 COPYRIGHT INFRINGEMENT IS EVOLVING RAPIDLY STREAM RIPPING IS THE DOMINANT METHOD UNLICENSED AND CONTINUES TO RISE 35% RISING TO RISING TO OF A INTERNET 53% 35%USERS ARE STREAM MUSIC AMONG 1624s RIPPINGOF A INTERNET (UP FROM 53% 30%USERS IN ARE2016) STREAM AMONG 1624s COPYRIGHT INFRINGEMENT RIPPING (UP FROM CONTINUES TO BE A MAJOR 30% IN 2016) ISSUE FOR THE MUSIC COMMUNITY With the wealth of licensed music available to fans, these types of illegal sites have no WHO IS STREAM RIPPING? SEARCH ENGINES PLAY justifiable place in the music world. Stream rippers are more likely to be young, A KEY ROLE IN COPYRIGHT WHOmale, and IS STREAMfrequently engageRIPPING? in other piracy SEARCHINFRINGEMENTS ENGINES PLAY Streammethods rippers such asare bittorrent more likely and to cyberlockers. be young, A KEY ROLE IN COPYRIGHT male,They commonly and frequently use stream engage ripping in other to piracy obtain INFRINGEMENTS methodsindividual such tracks. as bittorrent and cyberlockers. They commonly use stream ripping to obtain individual tracks. MAE 40%

FEMAEMAE 30% 40%

FEMAE 30% 1624 53%

2534 1624 45% 53%

3544 32% 54% 2534 45% OF THOSE ONOAING 4554 25% 3544 32% 54% UNICENSE MUSIC ASO OFUSE THOSE GOOGE ONOAING TO FIN 45545564 18% 25% UNICENSEUNICENSE MUSIC MUSIC ASO 5564 18% USE GOOGE TO FIN 40% OF CONSUMERS UNICENSE MUSIC

ACCESS UNLICENSED MUSIC Base: All Respondents (n=11,776) from all 13 countries surveyed (US, Canada, GB, France, Germany, Spain, Italy, Sweden, Australia, Japan, South Korea, Brazil, Mexico) 19 MUSIC CONSUMER INSIGHT REPORT 2017

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This report is based on research that was conducted with internet users predominantly aged 16 – 64 in 13 of the world’s leading music markets (Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, Sweden, United Kingdom, and OVERVIEW & United States). These territories account for 85% of the global recorded music market [Source: IFPI].

The research builds on similar work conducted by Ipsos Connect in previous years, METHODOLOGY allowing patterns of growth to be established and key trends identified.

IFPI COMMISSIONED IPSOS CONNECT TO CARRY OUT GLOBAL RESEARCH INTO THE BEHAVIOUR OF TODAY’S MUSIC CONSUMERS.

NOTES ON THE SURVEY The internet penetration across the countries surveyed music services compared to other markets. In addition, averages around 90% of the national population with the younger age profile of survey participants in Mexico the exceptions Brazil (67.5%) and Mexico (56.0%). In (aged 16-50) compared to other countries (aged 16-64) countries with a lower internet penetration, it is generally will increase service usage levels in Mexico as younger considered that online surveys are less typical of the people are more likely to be users. In addition, the surveys wider internet user population – survey participants in Mexico and Brazil only represent urban internet users, are thought more likely to be early adopters of digital which is also likely to increase usage levels. services. This is reflected in this study where these countries show high levels of usage for various digital

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