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ISSUE 356 | 10 DECEMBER 2014

Contents thereport 06 Beyond : 2014 review 07 Pinboard: Stats, deals, startups and more 2014 in review 09 Country profile: 2014 by region 2

ISSUE 356 Taylor Swift caused a media tsunami – the precise sort of mainstream act Spotifygates 10.12.14 COVER FEATURE Spotify needs on its side was actually pulling the rug from under its feet” 2014 both was and wasn’t Spotify’s year. In November, it announced that it had managed to reach 50m users, of which 12.5m are subscribers. Great news. Except that it only published these figures when on the defensive after Taylor Swift pulled all of her music from the service and announced that, because Spotify would not budge on its position that all music has to be available to both free and paying users without windowing, the model was unworkable and untenable. For her. Not necessarily for everyone else. (That said, a number of holdouts – most significantly the Ministry Of Sound label, which was threatening legal action over similarly themed UGC playlists – came on board and licensed its music. So respite of sorts.) The spat last year with Thom Yorke had fruitier language that the Swift dispute (“the last desperate fart of a dying corpse”), but that only made mild media ripples. Taylor Swift caused a media tsunami – the precise sort of mainstream act Spotify needs on its side was actually pulling the rug from under its feet. This caused others to, whispering off the record, accuse Spotify of arrogance and of belligerently refusing to change its stance on anything. in review This year was one of mounting worries for Spotify as , which launched The who, what, when, where, how and why at the start of the year in the US but caused the Swedish service to barely , suddenly of the past 12 months found itself bought up by Apple as part of a $3bn acquisition of its parent company. Taylor Swift put the boot into Spotify as she didn’t want her music to be reduced to the level of free. The public put the boot into U2 and iTunes for forcing a whole on 500m users for free – but There will, without their consent. Thom Yorke turned his back on both iTunes and Spotify and gave his album to justifiably, be BitTorrent to test its new payment gates. Meanwhile Play Music and others paid handsomely for a lot of dry exclusives. It was, all told, a very confused year but also one in which high-def audio properly marched report mouths in Sweden towards the mainstream, analytics and playlists came of age and streaming got added into more throughout next year” charts, rubberstamping its steady rise. Here, then, is the story of 2014 in digital music. the 3

ISSUE 356 There are suggestions that Beats Music subscriptions (or tri- 10.12.14 COVER FEATURE als) could be bundled into iOS 8 and possibly at a price point that could have its rivals claw at their own faces in anguish” Spotify, still running at a loss and still to IPO, suddenly had to take Beats very, very seriously as it has the backing of the its high-definition service (WiMP HiFi) to the The biggest buy up, of course, was Apple most cash-rich company in the world which UK and US – but under the name . It spending $3bn to buy Beats. While most of needs to transition itself from downloads to got something of a soft launch at the end of that was for its headphones business, it was subscription streaming. If anyone can start been targeting a niche such as professional the year, putting trial versions in the hands also an investment to fast-track iTunes into a serious price war and fund a loss-making DJs. This year saw an explicit play for a more of professionals and key the subscription space – a place it needs to service for not just years but decades, mainstream user. influences to help build the buzz, a strategy be, and quickly, as the wheels start to fall off it’s Apple, with suggestions it could drive There couldn’t be a ‘more 2014’ story not dissimilar to how Spotify entered the the downloads business that has served it prices down to $5 a month. Spotify perhaps than that of Pono – Neil Young’s new music market in 2008. so well for the past decade. Since the deal in anticipated this at the start of December service: celebrity, classic rock, technology, Also of note were upping its May, things have been quiet, but there are when it began offering users in the US a audio quality and crowd-funding all wrapped streaming quality to 320kbps, under the suggestions that Beats Music subscriptions three-month trial of its premium service for up in one. It comfortably sailed past its Artists For Quality initiative pushed by Bob (or trials) could be bundled into iOS 8 and just $0.99 a month. Kickstarter target by raising $6.2m in April, Weir of The Grateful Dead. Finally, Technics possibly at a price point that could have its Plus Apple has never had to deal with the making it the third most successful project announced that its 24-bit download service, rivals claw at their own faces in anguish. level of public spats with artists that Spotify on the platform’s (albeit brief) history. It still Technics Tracks, would arrive in early 2015. Other notable acquisitions include has been fielding in recent years. A streaming has to launch commercially, but Music Ally So what was previously considered a niche is Spotify buying The Echo Nest as it looks to service which is now part of a company with was able to test the player and was genuinely now becoming a very busy space. It is unlikely dramatically improve its recommendations huge financial resources that can tap into a enthused by what it heard. the truly mainstream consumer (for now) will to try and give it a serious advantage over powerful mobile OS and which has arguably care that much about such offerings, but the its rivals. In a similar vein, Rdio bought the best artist relationships in the world? heartland is really heavy consumers of music TastemakerX and acquired Sitcher There will, justifiably, be a lot of dry mouths in with significant disposable income who would (more of which below). Sweden throughout next year. not regard £240 a year as excessive if they believe the pay off in audio quality is there. One louder: streaming Spotify has yet to make its move here, but will goes high-def be keenly watching its rivals and considering In the streaming space, Deezer finally how it can possibly add a new upsell tier in The BPI reported that UK vinyl sales in 2014 made it to the US – but initially as Deezer the new year. crossed 1m units – the highest sales for Elite, its premium audio incarnation targeted the format since 1996. More ammunition explicitly at the audiophile market (and with The big sell off, buy-in for the audiophiles who like to applaud the a monthly price tag to match). The company and shut down “fuller” and “warmer” sound of the format has said it will roll Elite out in other markets compared to the “cold” and “thin” sound of but has no confirmed date for this. It was For a part of the market where services and streams. interesting that it debuted in the US with a either run at a (mounting) loss or see The digital business, however, began service costing twice as much as its main meagre profits (unless you’re Apple), digital seriously putting audio higher up its agenda rivals each month, but argued that the initial music is a place where huge acquisition While the majors (and indies) all have a – and also using it as a super-premium market it was after was about bringing non- deals are still being done. But equally, stake in Spotify, they are expanding their offering that significantly increases ARPU. streamers across for the first time rather than for those who can’t manage to convince investment portfolios by taking a stake in

report Higher audio quality – such as FLAC on trying to poach users from Spotify, Rdio, VCs or incumbents of their commercial other digital music services and in May, services like and – has been Rhapsody and others. potential, a huge amount of road kill also Warner, Universal and Sony bought shares in around for a while but, for the most part, has Norwegian company WiMP also exported piled up this year. estimated at $3m, with a keen eye the 4

ISSUE 356 Analytics are giving the industry whole new ways 10.12.14 COVER FEATURE to understand what is happening as well as ways to

on it heading for an IPO and them receiving a respond to that data and prepare for the future” substantial (and swift) windfall. Sadly, if inevitably, some services hit the Real-Time Charts to expand its existing social Yorke and Moby who wanted to be seen to wall or were offloaded by parent companies media-based charts – a clear and assured be breaking with convention despite their keen to move on. These included budget rubberstamping of analytics as a core part of advancing years. subscription service Bloom.fm that had an the music industry that has a clear consumer- Yorke’s BitTorrent Bundle was the interesting tiered offering but was perhaps facing benefit. Tomorrow’s Modern Boxes album, which just too early as there is clearly a need driven, in the main, by local services until Other services, in the light of artist came in a reduced free version but also the to break from the £9.99 monthly offering now. criticisms, are starting to open up their data. full version for $6 dollars. Within a week, it which will not appeal to a truly mass and The oscillation of digital music services Spotify had already done this by making its was claiming to have done over 1m downloads mainstream audience. between success and failure will continue play counts public and this year Pandora (although a precise breakdown of free Another big closure this year was next year. The harsh reality is that more announced that it would open up its backend and paid was not clear). Yorke positioned Samsung pulling the plug on its Music Hub casualties will mount in the coming 12 interface so that artists could see rich listener it as a way of “bypassing the self-elected offering while there was something of a digital months and we may even see some of the data based around their music. SoundCloud gatekeepers” (presumably he meant Spotify blood bath in Australia this year with the loss, smaller services merge as a last roll of the also expanded its own data offering by letting and iTunes but, as with many of his online within a few months of each other, of both dice to stay both relevant and in business. artists on its Pro Unlimited tier access fan proclamations, it is never quite clear) and Songl (which was set up by Sony, Universal Most services are running on huge and bold location analytics to help them plan their urged other acts to follow his lead. and Southern Cross Austereo) and Telstra’s promises but, unless they get into the same marketing and touring activities with greater Big Pond Music. postcode as profitability soon, a form of fiscal precision. As part of cuts, Microsoft (after buying euthanasia will be the bitter reality. While some will complain that there is an Nokia’s phone business) decided to spin unhealthy reliance on data and this should MixRadio off as a standalone music service. Analytically retentive not override “gut instinct” (especially when Its precise future is not 100% clear but the making A&R decisions), the fact remains that team behind it says it has big plans for Previously the preserve of arithmi-geeks, analytics are giving the industry whole new its evolution so we’ll class it as down but analytics really flexed their muscles ways to understand what is happening as well definitely not out. this year and will continue to shape as ways to respond to that data and prepare Some services were granted a Lazarus developments (and investments) next year. for the future. It’s a trend that is only going moment, the biggest being Dhingana which Former Warner Music executive Lyor to grow to become more refined and more was shuttered but then acquired by Rdio, Cohen’s new label venue, 300, was a swift precise in the coming years. Soon after his album release threw the using it as a plank for the Western service to mover here at the start of the year, partnering spotlight on BitTorrent, the service opened expand into the huge Indian music market with (a platform that has struggled BitTorrent comes of age up its paygate model to all acts, saying that which is brimming with potential but has been to crack music as the Twitter #Music white it would take just 10% of resulting revenues elephant revealed) to tap into the social Thom Yorke might hate Spotify, but he as its cut, a considerably more attractive deal network’s data to inform its A&R and threw his all (well, his latest solo album) than the 30% that is seemingly taken as the marketing decisions. into BitTorrent to test out its pay gates – industry standard today. In a similar move to 300, Warner itself and also, we presume, to make a political signed its own partnership with Shazam to point. For some, BitTorrent is a byword for Playlist for today use its trending information to shape its own infringing content online but the service

report artist investment decisions. On top of this, has been aggressively trying to position The streaming industry is obsessed with Billboard partnered with Twitter in March to itself as a key marketing channel for music cracking recommendation and discovery create the self-explanatory Billboard Twitter this year. This clearly attracted the likes of as the idea of 25m+ tracks is regarded as the 5

ISSUE 356 10.12.14 COVER FEATURE Slowly, but steadily, streaming is being added to differ- ent charts around the world and is equally slowly, but steadily, shifting the industry away from its obsession with unit sales as the key way to measure success”

an indication of things to come in this space. added to different charts around the world As noted above, Rdio bought TastemakerX and is equally slowly, but steadily, shifting the and Deezer bought Stitcher this year to industry away from its obsession with unit super-charge their own recommendation sales as the key way to measure success. tools and algorithms while Google bought Sure, CD sales and downloads account for the to add more power to bulk of revenue – but they only tell part of the (who were paid a handsome advance and Music’s elbow. story and, in the coming years, that part of guaranteed huge marketing spend) thought The growing trend will be to blend the story they tell will steadily erode away. they had scored the marketing coup of the algorithmic recommendations with human year; but it backfired in a very public manner curation and this will be a very public The chequebook’s as users felt unhappy that the album was battleground for services in the next in the post pushed to them whether they wanted it or few years. As they have all (bar the odd not. Apple had to quickly issue a workaround exception or holdout) pretty much the same Taylor Swift and Thom Yorke might not delete option for those who wanted no catalogues, being the best at guiding users want to be on Spotify and AC/DC and The trace of their album in their account. A lot of through this all and, more importantly, Beatles (for now) might not want to be on lessons were learned here – but most notably holding their attention (i.e. ensuring they any streaming service; but for other acts – that just because something is exclusive it overwhelming for a lot of users and they keep paying their monthly subscription) is and for certain big – a new form of does not follow that it’s desired. need some form of expert curation to guide going to be absolutely key to their survival. chequebook marketing is starting to impact While – generally – exclusives are a good them through. here. way to coax users onto digital platforms, Playlists are increasingly regarded as the Chart bypass Spotify already has notable exclusives in there is a real risk that could quickly descend best way to do this and also as a way to lock place with Metallica (who, rumours suggest, into an arms race where a handful of marquee users into particular service – something that The UK singles chart followed the lead managed to negotiate a stake in the service acts use services’ desperation for a USP to Sean Parker said back in 2010 was an explicit of markets like Sweden and the US by in exchange for their music) and Led Zeppelin. get special advances or marketing spend part of Spotify’s strategy to get users “by the counting streams – making this the first For the upper end of acts, this could become commitment. So not only will this irk other balls”. time the British charts have been based on more commonplace and more aggressive in (smaller) acts, it will also create confusion and The major labels all have their own playlist anything other than sales. Currently 100 2015. frustration among consumers who are paying platforms in the shape of Digster (Universal), streams is treated as the equivalent of one The indications are already there, with for one service but finding that certain acts Filtr (Sony) and PlaylistMe (Warner) and see sale and, soon after the chart rules were , at the end of the year, are lured to other services with the waft of a them as a powerful way to break new acts. changed, became the first securing a month-long exclusive on the new chequebook. Some of Lorde’s breakthrough success, for act to chart on streaming data alone, with Take That album in the UK – a concerted At a critical stage in streaming’s evolution example, was put down to ‘Royals’ appearing ‘All About That Bass’ entering the top 30. play to use the act to target a mass market this could be read as not just risky but also on Sean Parker’s Hipster International playlist Both Australia and Germany moved audience who perhaps haven’t fully engaged as “punishing” consumers who are willing to on Spotify and labels are increasingly keen in a similar direction this year by adding with digital before. pay for a subscription but just happened to to capitalise on their reach and to help them streaming to their singles charts while the US It must be said, however, that getting the pick, for certain favourite acts, the “wrong” fast-track their marketing of acts. They are moved into the next phase of its evolution by, exclusive does not always have the desired platform. If streaming sells itself as being

report also looking to third-party playlisting services like Sweden, adding streams to the albums results as the giveaway of U2’s Songs Of able to access all the music in the world with Warner’s acquisition of UK company chart too. Innocence to 500m iTunes customers in on one platform, to renege on that seems Playlist.net (formerly ShareMyPlaylists) being Slowly, but steadily, streaming is being September showed. Apple and the band dangerously anti-user. :) the 6

ISSUE 356 10.12.14 BEYOND MUSIC 2014: from mobile games to book rows

A look back at some of the key trends in the world outside music

ll year, Music Ally has been casting its eye beyond the world of music, looking to understand what’s happening in sectors as varied as Abook publishing, games and television, as well as non-music apps and social services. Here’s a reminder of some of the key trends we covered.

Mobile games hits

We wrote about European mobile games developers Supercell and King – and the money they were making from a handful of Facebook in particular. Why? Because and teachers all over the world or consulting biggest channel on YouTube in October – as games. Supercell reported $892m of revenues news publishers were waking up to the fact a doctor face-to-face – just by putting on well as the emergence of Vice as a serious in 2013 from just two games: Clash Of Clans that a growing number of people – millennials goggles in your home,” he wrote. And by the player in the online news space. and Hay Day. in particular – were getting their news from end of 2014, music was on the agenda for With 132 staff, that meant $6.75m of their Facebook feeds. Yet for publishers, the Oculus too. Hachette v revenues per employee, with an overall net algorithm that narrowed down around 1,500 profit of $464m. But rival King did even better: possibles to 300 stories shown in the average YouTubers’ rise Finally, we looked outside music to the $1.88bn of revenues in 2013 from Candy Crush news feed was a complete mystery. long-running dispute between book Saga and other games, with a net profit of The music industry has been closely publisher Hachette and Amazon as they $567.6m. Sweet success that fuelled its IPO. Virtual reality enmeshed with YouTube for some time now, negotiated new distribution terms with but the rise of YouTubers and multi-channel some hardball tactics. Certainly on the part News algorithms We also explored the implications of networks has been a very interesting non- of Amazon, which saw ditched discounts Facebook’s decision to pay $2bn for virtual music trend in 2014. We tracked the rise of and longer restocking times for key We attended a fascinating session at the reality startup Oculus VR and wondered channels like PewDiePie, the Swedish gamer Hachette titles. SXSW Interactive conference in March whether it would have uses beyond that who ended the year with more than 32m But the row quickly blew up into focusing on the algorithms used by Facebook company’s initial focus on gaming. We subscribers and monthly views regularly over something more: the kind of angst from to decide what stories to show users in their noted that, as Mark Zuckerberg announced the 400m mark. authors over Amazon’s dominant role in news feeds as well as those used by Google the deal, he was already talking about non- Other trends we tracked included the the books industry that we’re seeing from

report to rank its search results for topical stories. games uses. boom in children’s viewing – even the musicians over Spotify’s streaming payouts, Both were causing concern for online news “Imagine enjoying a courtside seat at a hypnotic Disney Toys Collector toy unboxing even if the latter still isn’t quite as meaty an publishers. game, studying in a classroom of students channel, which dethroned PewDiePie as the industry gorilla as Apple. :) the 7

ISSUE 356 10.12.14 TOOLS Pinboard » Deals Tweets

SONOS SPOTIFY #MusicAlly Spotify is offering US @rosiedimont users three I think my months of Spotify access to its account’s Connected audio company Sonos has raised Premium tier been hacked $130m in new funding. This brings its total for $0.99 a month (thereafter they will, unless again, someone played Ed funding to date to $455m. they cancel, convert to paying $9.99 a month). Sheeran at 3am last night...

@LisaDavisMusic SAAVN MIXRADIO Musicians Indian streaming educate music service Saavn yourself about has partnered with the business Twitter to create side of music. How can you a tweet-powered pick a legitimate manager request radio offering Now a standalone company, MixRadio will be without it. for its users. pre-loaded on the Adidas miCoach Smart Run smartwatch, giving users access to its playlists. @alexhern I want to set up two identical BEEP SAMSUNG MUSIC HUB retail firms, but base one Beep, a company Having been closed of them in San Francisco, that turns traditional earlier this year in other give it an over-designed speakers into wireless- territories, Samsung is website, and see what pulling the plug on its enabled ones, has raised happens. $4m in its recent funding Music Hub service in round. It previously Australia (the last market it was standing in) on 31st raised $1.6m back in Follow Music Ally report December. June. on Twitter... twitter.com/musically the 8

ISSUE 356 » Stats TOOLS 10.12.14 Pinboard CHILD INTERNET USE: YOUTUBE VERSUS DOWNLOADING/STREAMING 56% NEW SERVICE MUSIC ROYALTY CO 53%

Use YouTube 29% once a week Download/stream music once a week 18% Source: Ofcom 11% 9% 5% 6%

3-4 years old 5-7 years old 8-11 years old 12-15 years old

AUSTRALIAN PIRACY AND RHAPSODY USERS AND DIGITAL CONSUMPTION MOBILE STREAMING What is it? A name that does what it says on the tin, if we ever 29% Source: Choice Australia saw one. Music Royalty Co (MRC) has backing from independent group Cooking Vinyl, and is aiming to help music companies – labels and publishers initially – stay on top of the mass of data and payments coming out Source: of streaming companies. 16% Rhapsody 12% It’ll be handling audits, US mechanicals, PPL registrations and full accountancy services, but with an emphasis on the new world of streaming. “The explosion in data analysis caused by streaming means there’s never been a more important time for companies to get Illegal General People who never their royalty processes straight,” said its boss, Ray Bush. downloaders population illegally download Users only report With Kobalt pushing a similar message of transparent who also pay who pay for who pay for Users streaming from accountancy for its and label-services for digital music digital music digital music streaming on mobile computer and/or mobile clients, this has the makings of a mini-trend. the 9

ISSUE 356 Here we pick a selection of insights and facts from some of the most interesting 10.12.14 MARKET PROFILE 2014 review markets we have covered this year, including updates on the most relevant figures.

which we understand has ranked amongst setback of 2.7%. Digital revenues grew only the most explosive launches in the company’s 2.7% to $2.7bn, while physical sales fell 11.9% to history in terms of growth. $1.35bn. Music Ally noticed a very impressive growth in the use of Spotify in the country Mexico in 2013 and all eyes will be on how Apple incorporates Beats Music into its range of The second largest market in services. America, Mexico is often the first in which In addition to the growth of on-demand big international music services test the streaming services – whose data is now waters in the region. First iTunes and now factored into the chart (as Spotify show encouraging developments are YouTube streams) – Pandora and Sirius XM towards stabilising music sales. According are increasingly established in the US. In April to local trade body Amprofon, the first half 2013, the former announced it had 70m active of 2014 saw streaming revenues grow 130% listeners in the US, while the latter ended 2013 to MXN 175m ($12.9m). Digital sales grew with 25.6m subscribers. 13.9% year-on-year to MXN 428m ($31.6m), while physical income totalled MXN 296.8m Africa also because of how they are increasingly ($21.9m). Asia Pacific KENYA ingrained in consumers’ habits and culture. The three most important factors about Australia Although the Kenyan music market is 2014’s half-year results are: that digital After experiencing a return to growth in clearly challenging, the potential is very growth made up for the physical decline 2012, the Australian recording industry saw interesting indeed – particularly for those Americas (total revenues grew 0.1% year-on-year); that a significant decline in 2013, struggling seeking to make a bigger play in Africa. Brazil this performance might lead to 2014 being between a weaker calendar of releases and The lack of an established trade body Brazil’s music industry continues to be a the first full year in which the market is a market that is not transitioning quickly for the Kenyan recorded music industry challenging one, with music sales falling in predominantly digital; and that streaming is enough to digital formats. According to makes it hard to measure the exact size of 2013 after a short period of growth. Digital quickly becoming a key driver behind these local trade body ARIA, recorded music the market or understand how the different formats failed to make up for the decline transformations. sales in Australia fell 11.7% in 2013 to AU business models compare. However, in CD purchases and online file-sharing $351.6m in wholesale value ($325.8m). industry insiders claim that incumbent local remains rampant. The entry of new players US Physical sales saw a staggering drop of operator Safaricom could be generating brings hope to the on-demand streaming 25.5% to AU $159.3m, while digital formats approximately KSH 300m ($3.4m) in market while the live music sector is as As the world’s most influential music grew only 4.3% to AU $192.2m. ringback tones (RBT) per month and that buoyant as ever. market, and the largest together with Advertising and particularly the RBT market totals approximately In 2013, following two years of consecutive Japan, the US is undergoing its second subscriptions were the key drivers of $54.4m in face value per year. growth, Brazil’s recorded music industry saw digital transformation. Downloads have digital growth last year, with wholesale The local consensus is that if Kenya is to a disappointing decline of 4.2% in annual been showing signs of retreat before values totalling AU $12.3m (a 34.7% move away from RBT towards fully-fledged revenues, which totalled BRL 431.4m ($194.2m) effectively replacing CDs – still a significant annual increase) and AU $8.6m (+308%) digital music services, getting the mobile in trade value as per global industry trade revenue stream – while access models are respectively. Both revenue streams are

report companies on board will be crucial. This is body IFPI. The biggest development this year not yet making up for it. clearly way behind downloads, but the not only because of the role they can play in for the digital music business in the country According to IFPI, recorded music sales movements in the market seen last year subsidising services, data and handsets, but has been the rollout of Spotify, something in the US totalled $4.02bn in 2013, an annual herald the shape of things to come. the 10

ISSUE 356 10.12.14 MARKET PROFILE 2014 review continued...

Japan fuelled by enormous growth in smartphone decline in both physical and download digital income, while download sales fell 9% The Japanese record industry went through sales, from 20m units in 2013 to 70m in sales. According to local trade body NVPI, to €6.3m. a tough period in 2013, facing sharp sales 2014, with an estimated 150m handset sales recorded music sales totalled €130.2m While this year’s performance so far brings declines, a lack of concrete developments in 2015; driven in part by Google’s rollout of in 2013. Digital revenues grew 56.4% to a breath of fresh air to the Spanish market, on the digital front and an apparent sub-$100 smartphones. €54.1m, making up for the 19.2% physical the reality is still rather harsh. Local sources reluctance from local labels towards India, then, is a music market very much decline to €76.1m. Streaming was the key concur that the growth is attributable to a international streaming services. in transition; one that has its problems and its driver, seeing an impressive increase of stronger than usual release calendar, coupled In the last five years alone, digital quirks. It also has considerable opportunities: 113.5% to €38m (including subscriptions with how low the market had fallen in the first revenue in Japan has fallen 54.3%, mainly local sources expect the music industry to and advertising), while downloads fell 5.5% place. Given the damaged state of the local as the country has not managed to replace grow by 12-15% annually for the next two-to- to €15.5m. economy however, growth news is certainly its very own mobile format, chaku-uta. three years. Regardless of the repertoire consumed, the welcomed in the industry. Although online download revenues have general consensus is that the Dutch market been growing, driven by iTunes (surpassing is inevitably (and quickly) moving towards Sweden chaku-uta income for the first time last Europe access models. While Spotify may currently year), this is clearly not enough to take Germany be leading the pack, the fact that the market After years of consecutive growth driven by digital back to its heyday. Backed by the vitality of its CD market, the is in a state of flux leaves a lot of room for streaming, Sweden is now showing signs of International streaming services have German recording industry continues to disruption. Beyond pure audio streaming slowing down. been finding it hard to bring local labels experience a period of relative stability as services and much like in the rest of the world, The music industry hopes that the on board. An industry insider told Music it figures out how to sustain physical sales YouTube and are also regarded as key introduction of higher value services will Ally that music companies in Japan find whilst migrating audiences from downloads digital partners in the Netherlands, bringing bring new life to the market. Spotify’s payments formula esoteric and to streaming services. not only significant revenues but also a must- With the country having become such a its payouts low, exacerbated by some According to local trade body BVMI, have layer of marketing. success story for the music industry (and, weariness in dealing with a foreign service. recorded music sales in Germany grew 1.2% more specifically, for Spotify), alarm bells The reluctance of local labels to bring their in 2013, totalling €1.45bn in trade value and Spain rang earlier this year when IFPI Sweden catalogue to the likes of Spotify would be making it the largest market in Europe, riding announced a year-on-year decline in sales of particular concern to any access-based on a combination of strong physical sales and Following more than a decade of steep in the first half of 2014. service looking to launch in Japan, especially an expanding digital market. Totalling €1.12bn, decline, the challenging Spanish market Indeed, recorded music income totalled given that domestic repertoire is by far the physical revenues fell only 1.5% from 2012; this finally saw a return to growth this year. SEK 486.9m ($68.2m) between January and most consumed in the country. was made up for by digital formats growing Streaming consumption appears to be June this year, falling 2.54% from the same 11.6% to €328m. This confirms the sustained growing rapidly, but with subscription period in 2013. India strength of CD sales in Germany, while on the conversion rates seemingly low, doubts With Sweden being a mature streaming digital side downloads are clearly plateauing remain regarding long-term prospects. market with a high average disposable According to the IFPI, India saw its as consumers move to streaming services. Local trade body Promusicae announced income, there are arguments for the country recorded music market fall by 23.3% in that in the first six months of 2014, revenues to have an untapped potential for new trade value to $102.6m in 2013. Digital Netherlands increased by 6.2% compared with the same types of services and tiers (specialised ones, sales fell 23.8% to $67.4m, while physical period in 2013, reaching €58.1m. Physical premium audio, lyrics add-ons, etc.). This is revenues also saw a decline of 22.5% to A poster child for the recorded music sales grew 6.5% to €32.1m, while digital still far from being demonstrated, however

report $35.2m. The enduring popularity of RBTs industry, the Netherlands bucked the trend revenues saw a 5.9% increase to €26.1m. in the meantime perhaps the recent is typical of an Indian digital music market in 2013 by riding on the strong growth of Advertising and subscription revenues grew introduction of Spotify’s new family plan will that is dominated by mobiles. This is being streaming revenues, making up for the 14% to €18.8m, accounting for 72.8% of all expand the service’s mainstream audience. :) the 11 Music Ally is a music business information and strategy company. We focus on the change taking place in the Music Ally is an ISSUE 356 industry and provide information and insight into every aspect of the business, consumer research analysing 10.12.14 example of perceptive the changing behaviour and trends in the industry, consultancy services to companies ranging from blue journalism at its chip retailers and telecoms companies to start-ups; and training around methods to digitally market your best, with unrivalled artists and maximise the effectiveness of digital campaigns. We also work with a number of high profile music Andrew Fisher, events around the world, from Bogota to Berlin and Brighton, bringing the industry together to have a good CEO, Shazam coverage of the commonsense debate and get some consensus on how to move forward. Entertainment digital music sector”

ANTHONY CHURCHMAN CLAIRE MAS Contact: music:)ally Business development Training & development Studio 11, Holborn Studios, 49-50 Eagle Wharf Rd, [email protected] [email protected] London N1 7ED Tel: +44 (0)20 7250 3637 EAMONN FORDE KARIM FANOUS b www.MusicAlly.com e [email protected] Reports editor Head of research [email protected] [email protected] Registered company number: 04525243 VAT number: 858212321 LEO TOYAMA PAUL BRINDLEY

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