CONTENTS 4 25 Introduction Moving to a global release day in 2015 Plácido Domingo, chairman, IFPI Frances Moore, chief executive, IFPI 27 Country case studies 6 Brazil: a top performing market Market overview China: moving towards paid services An evolving portfolio business Germany: streams grow, CDs resilient Regional picture 32 10 Music and the wider economy Most popular artists and global bestsellers of 2014 The broader effect of investment in artists IFPI Global Recording Artist of the Year 2014 Music helps drive social media Top selling global albums & singles of 2014 Music and economic growth How streaming is changing the charts Tomorrow’s world 14 34 Key recording industry trends in 2014 Labels working with artists: four case studies Subscription drives the music portfolio David Guetta: using data intelligently New global services, more reach Lucas Lucco: artist and digital native Smartphones and partnerships drive growth Sam Smith: innovative promotion Getting subscription to the mass market Wakin Chau: interactive digital promotion Streaming revenue models Streaming services compete on curation 38 Payment options diversify Tackling digital piracy Downloads decline Consumer attitudes towards piracy Video streaming surges Website blocking Search engines 20 Advertising and payment providers New IFPI data shows artist payments Piracy and apps as share of revenues are up IFPI’s content protection work 22 41 Fixing the ‘value gap’ in digital music Digital music services worldwide Cover Taylor Swift photo by Sarah Barlow + Stephen Schofield Robin Schulz photo by Geturshot.com Wakin Chau photo courtesy of Rock Group One Direction photo by RJ Shaughnessy Lucas Lucco photo by Guto Costa Ed Sheeran photo by Ben Watts Katy Perry photo by Cass Bird This report includes new findings from a consumer study carried out by IPSOS in January 2015 across 13 of the world’s leading music markets (Australia, Brazil, Canada, France, Germany, Great Britain, Italy, Japan, Mexico, South Korea, Spain, Sweden, United States), www.ifpi.org commissioned by IFPI. @ifpi_org Designed by design to communicate © IFPI 2015 All data, copy and images are subject to copyright and may not be reproduced, transmitted or made available without permission from IFPI. 3 INTRODUCTION PlÁcido domingo chairman, ifpi Respect for copyright, growth for artists Welcome to the latest edition of IFPI’s annual Digital Yet this can only happen if copyright is respected Music Report. It sets out how the music industry has by all those involved in the digital marketplace that is adapted in the digital age and the challenges and oppor- increasingly where music is distributed. Just because tunities it faces today. something is now distributed online, rather than There is no doubt that technology is improving through stores, does not mean that it is no longer access to culture, connecting artists with amazing au- valuable. diences. As someone who is passionate about ensuring We need a world where copyright is respected access to culture, I welcome this digital revolution. and music is valued – where artists, songwriters and record producers are fairly compensated when their music is played. Where investment in new artists can “We need a world where copyright increase once again, bringing greater choice to music fans everywhere. This is a future for music that I is respected and music is valued.” believe is worth fighting for. And it is one that is achiev- able if our politicians show leadership and vision when it Yet the rights of creators must be fairly pro- comes to the world’s cultural industries. tected and rewarded in the digital world. When I travel the world and meet policymakers, I urge them to pro- mote and protect copyright, not to weaken it. I explain that if they do not respect the role of copyright, and ensure their laws protect it online, then they will see in- vestment in culture threatened. I passionately believe that artists should be fairly remunerated for their work. I want to see young tal- ented performers from all backgrounds enjoy the same sort of opportunities I had in my early life to develop my career. 4 Frances moore Photo by Graham Flack Photo by chief execUtive, ifpi Charting a path to sustainable growth The recorded music business has always led the Another issue is the so-called ‘value gap’. This way for creative industries in the digital world. That is a fundamental flaw in our industry’s landscape leadership continues today as the music industry’s which sees digital platforms such as Daily Motion digital revolution continues through new phases, and YouTube taking advantage of exemptions from driven by the consumer’s desire for access to, rather copyright laws that simply should not apply to them. than ownership of, music. Laws that were designed to exempt passive hosting As this edition of IFPI’s Digital Music Report companies from liability in the early days of the in- shows, the state of the recording industry is in many ternet – so-called ‘safe harbours’ – should never be ways cause for great optimism. Consumers are bet- allowed to exempt active digital music services from ter served than ever before – and the consumer having to fairly negotiate licences with rights hold- research shows it. They have instant access, at any ers. There should be clarification of the application time and in any place, to a vast record collection of of ‘safe harbours’ to make it explicit that services more than 43 million tracks. Licensed music services, that distribute and monetise music should not ben- numbering more than 400 globally, are competing efit from them. fiercely for consumers by offering ever improving choice and curation of music. Digital services have gone global, enabling the recording industry to reach “Music companies are charting a path to sustainable markets that it could not monetise through physical retailing. Global digitisation has brought licensed year-on-year growth. That path was never going to services to some 200 countries. Not everything has changed, however. Our be straight, but we are making great strides along industry’s core business remains investing in art- ists. And, despite many years of declining industry it, embracing new models, licensing, investing and revenues, record companies continue to be the pri- mary investors in new talent: over the last five years improving consumer choice.” more than US$20 billion globally has been invested in artists. By meeting the needs of the consumer, by Music companies are charting a path to sus- embracing change and by being resilient investors tainable year-on-year growth. That path was never in music, record companies are putting our business going to be straight, but we are making great strides back on the road to recovery. Digital music revenues along it, embracing new models, licensing, invest- grew 6.9 per cent globally in 2014. They were pow- ing and improving consumer choice. The next step ered by continued strong growth in subscription is to achieve sustained growth and a fair reward for revenues, up 39.0 per cent. rights holders. This is the most important issue for So is it ‘mission accomplished’ for the inter- our sector in 2015. national recording industry? The answer is no – far from it! The headline statistics of 2014 speak for themselves, with overall revenues still largely flat, down by 0.4 per cent. This reflects stabilisation – but not yet year-on-year sustainable growth. Over the last four years the number of paying subscrib- ers globally has increased by more than five-fold to 41 million users. There is potential to attract many tens of millions more and for digital services to gain greater scale, whether via bundling partnerships with ISPs or more varied payment models tailored to specific consumer groups. The industry has already created a vast customer base for licensed services, but more needs to be done. 5 Market verview US$6.85 bn T The industry’s digital revenues in 2014 share oF industry revenues 2014 46% 46% Digital Physical 8% Performance Rights and Synch global digital revenues 2009–14 (US$ billion) 6.9 6.4 6.0 5.3 4.7 4.4 2009 2010 2011 2012 2013 2014 John Legend Source: IFPI photo by Matthew Williams 6 However, the growth of subscription and fell. Japan saw digital growth for the first YouTube alone has more than one streaming was not quite able to compen- time in five years, with a sharp rise in sub- billion users and music related content sate the two other key elements of the in- scription revenues helping digital revenues makes up a very large proportion of its use. dustry’s current transition: a global decline rise by 4.9 per cent. Overall, the Japanese Consumer research published for this report in both physical format sales (-8.1%) and market saw a decline of 5.5 per cent in 2014, by Ipsos, conducted across 13 of the world’s download sales (-8.0%). As a consequence, considerably less sharp than the 16.7 per- leading music markets in 2015, shows that overall recorded music revenues in 2014 fell cent fall in 2013. Germany painted a more 57 per cent of internet users have accessed slightly by 0.4 per cent to US$14.97 billion. positive picture, with growth in revenues music or music videos on internet video of 1.9 per cent. Physical sales remain more sites such as YouTube in the last six months, robust than elsewhere and subscription ser- compared to 38 per cent for music stream- “The music industry is vices are seeing strong advances. The top-10 ing sites such as Spotify and 26 per cent for market with the strongest overall growth download services like iTunes. The research managing the transitions was South Korea (+19.2%).