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thereport ISSUE 387 | 13 APRIL 2016 Contents 08 Beyond Music – Bot to trot 09 Pinboard: Stats, deals, startups and more 11 Country profile: Thailand Global recorded music revenues grow in 2015 Back from the dead 2 ISSUE 387 13.04.16 COVER FEATURE irst, the good news. Last year saw digital revenues overtake physical sales for the first time, with the Global recorded music revenues grow in 2015 overall growth driven by an uptick Fin streaming subscriptions. The IFPI’s report hailed 2015 as “the industry’s first significant year-on-year growth in nearly two decades”. Now the bad news. The body and its major-label members are training their fire on a “value gap” between the amount of free, ad-supported, on-demand streams on services like YouTube and the money those streams generate for the industry. “3.2% sounds very good, but you’ve got to remember that we’ve had almost two decades of decline,” said IFPI boss Frances Moore at the IFPI’s press briefing in London yesterday (12th April). “During that two decades of decline, we’ve slumped by something like 35%. Music consumption is exploding worldwide, and it’s a 3.2% increase. The question could be: why is it not higher?” There is a complex tension here that the record industry is trying to navigate. On the one hand, it wants to celebrate growth but, on the other hand, it knows that the value gap is something that is going to take a long time to tilt in its favour. We have spoken to the digital heads at all three majors as well as Spotify’s director of economics to ask them what can be Back from the dead done to grow the market further and how realistic it is to get YouTube and others to Since 2000, the record industry has (almost) got used to having its nose bloodied each time the IFPI annual evaporate this value gap. figures roll round. Decline, doom, gloom. The odd year of miniscule growth was never a trigger for brazen Michael Nash, EVP of digital strategy, Universal Music Group, is confident the optimism, but last year something incredible happened – the market grew by 3.2%. It hasn’t undone almost industry can get to “hundreds of millions of two decades of pain, but it’s enough to get labels feeling bullish. Subscription streaming was the hero of the paying subscribers” as opposed to the tens report year but the villain behind a massive value gap between paid and free went unnamed – yet everyone knew of millions currently. it was YouTube. Last year was all about the war on free. In 2016, can the war on the value gap be won? Stu Bergen, CEO, international & global commercial services at Warner Music the 3 ISSUE 387 13.04.16 COVER FEATURE 20bn 17.9 GLOBAL RECORDED MUSIC INDUSTRY REVENUES 2005–2015 (US$ billions) 16.2 Physical Digital Performance rights Synchronisation 15bn 14.0 11.8 10.3 10bn 8.9 8.1 7.5 6.7 6.7 6.1 6.1 5.8 5.5 5.8 4.9 4.1 4.3 5bn 3.7 2.9 2.1 1.8 2.0 2.1 1.1 1.3 1.3 1.4 1.4 1.6 1.0 1.0 1.2 0.3 0.3 0.3 0.3 0.3 0.4 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Group, is also bullish there is more growth IT’S STREAMING WOT WON IT EDGAR BERGER, chairman and CEO of international, Sony Music Entertainment to come. “I don’t think we have reached As with recent figures from the RIAA in the the saturation point – or anywhere near it,” US, the IFPI’s report hails streaming as the Can the market for subs grow much Rdio folded at the end of last year. Will he argues, but says that “awareness is the driving force behind the industry’s growth, further in 2016? we see more closures this year as biggest challenge – more than price point”. with it more than making up for the decline I cannot comment on any of our Apple and Spotify soak up most of Building on this, Edgar Berger, chairman in both physical and download sales. That’s partners directly, but we are excited the new subscribers? and CEO of international at Sony Music proper multi-tasking. to see companies like Apple entering There is no dramatic change Entertainment, says the focus this year has Streaming revenues grew 45.2% in the streaming market and that certainly [compared] to previous years. When to be on how the industry can “re-educate 2015 to a value of $2.9bn – “the industry’s helps grow the market overall. industries grow up, there is a shake out. a generation that has got used to not fastest-growing revenue source,” in the Over the years, that is just happening; but paying”. IFPI’s words, although sceptics will point Apple is aggressively promoting the family it’s just the normal course of business in any Finally, Will Page, director of economics, out that given that the other sources are package subscription. That pushes up the industry. Spotify, says that the real markets to look physical and download sales, this field of volume of users but lowers the ARPU. Is that a at to understand what is happening here growing (recorded) revenue sources is a long-term worry? Has YouTube Red got a proper chance in the are Canada, Mexico and New Zealand – field of one. The question is about what we do to re- market and can it fix these value gap criticisms countries that had long been presumed to (Yes, you can split vinyl out from the educate a generation that has got used to not the IFPI spent a lot of its report bemoaning? be in freefall but totally bucked the trends overall ‘physical’ figure to provide another; paying. As part of that, of course, streaming All I am saying is that we welcome any paid last year. The streaming effect, in his mind, but, much as we love that trend, it’s still a services are offering family plans. All of them subscription service that has a viable economic has long passed being just a Scandinavian niche in the grand scheme of things.) [not just Apple Music] do. There is always a model. I am not going to comment beyond report or Northern European phenomenon. The message from the IFPI and its balancing act between being inclusive and not that on any of our partners because that’s not Before that, here are the key themes and labels is positive on streaming, however. driving down the overall value too much. the purpose of the report. talking points that emerged from the report. “The music industry has successfully the 4 ISSUE 387 subscribers in 2015. We did, however, to slide. Digital now accounts for 45% of 13.04.16 COVER FEATURE GLOBAL REVENUES BY pose this question to all three major industry revenues, overtaking physical SEGMENT 2015 (US$ billions) representatives after the event (see boxes). sales for the first time. Indeed, this was emerged from digital disruption, and the Left unaddressed, too, was the question a tipping point foreshadowed in financial future is bright,” said Berger at the report’s 14% of whether or not there will be a ceiling results from labels like Universal and launch. on this growth in $£€9.99-a-month on- Warner published earlier in the year. “The three biggest markets in the world 2% demand subscription streamers (although Yet the flipside to streaming’s growth – the US, Japan and the UK – are up. And we did raise this in the Q&As). In 2015, is the continued decline of the CD and so are Asia, Europe, North America and Spotify and Apple Music’s competition downloads market, which may spur Latin America – the latter by 11.8%. Around spurred sharp growth, but how long can thoughts of a ticking clock for music the world, seven countries are showing 45% that continue? ownership. double-digit growth. And the main driver is 39% There are hopes for new rivals like That’s not how the IFPI sees it: it noted streaming.” SoundCloud Go and YouTube Red – despite that two of the world’s biggest music Physical Digital That emphasis on the global recovery the other issues around their free tiers – as markets – Japan and Germany – still get came through clearly. “One of the most Performance rights well as Pandora’s global expansion plans, 75% and 60% of their respective music striking features of our industry’s recovery and the potential for growth from Deezer, sales from CDs. But these increasingly look is its global nature,” added Bergen. Synchronisation Rhapsody and other players in the market. like anomalies. “The largest growth came in markets as Even so, labels know they cannot afford The physical market was down 4.5% last diverse as China, Argentina and Sweden. to rest on their laurels and celebrate the year, but this was termed “a slower rate Technology and digital deal making have just 8m in 2010. It’s a good growth curve, 27m new subscribers from 2015: if that than in previous years” by the IFPI (8.5% in opened markets previously rife with piracy but there are caveats. growth stalls in 2016, they will have some 2014 and 10.6% in 2013). Take your pick of as well as emerging economies like Russia, First, the lion’s share of streaming serious thinking to do about how the whether this is a sign that things are going China and Brazil.” subscription growth is coming from just market evolves.
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