In this presentation, David Price, Director of Insight and Analysis at IFPI, and Josh Friedlander, SVP of Strategic Data Analysis at RIAA, will present and discuss the latest revenue trends in the music industry. In April 2018, IFPI published the Global Music Report, the definitive source of revenue data for the worldwide music industry, and analysis will focus on fresh data and analysis from this report and from the RIAA.
Friedlander will show how far audio streaming – particularly paid subscriptions – has transformed the U.S. music market in recent years. Price will move this analysis to the global landscape — Is audio streaming a solution for the music industry across the world? How does the industry in the US differ from neighbors like Canada and Mexico? What’s the potential success in countries like China, India, and Russia and how can record companies and artists best capitalize on those prospects?
3. U.S. Music Business: 2 Consecutive
Years of Growth
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$BILLIONS
$15
$10
$5
3
Source: RIAA
4. 2016 Growth Continues into 2017
2013 2014 2015 2016 2017
U. S. RETAIL
Physical Digital Download Streaming Synchronization
$BILLIONS
$7.0 $6.7
$8.7
2 Years: +30%
$6.7
$7.5
4Source: RIAA
5. First Year With ~ 1 Trillion Streams
Ad-Supported
Video
26%Ad-Supported
Audio
8%
Subscription
Audio
31%
Internet Radio
35%
5
By number of streams
Source: Nielsen SoundScan, BuzzAngle,
Pandora public filings, RIAA estimates
6. Streaming Continued to Be Primary
Revenue Driver
2013 2014 2015 2016 2017
TOTAL U.S. STREAMING REVENUES
Paid Subscriptions Ad-Supported On-Demand (Audio & Video) SX Distributions & Direct Payments
$1.5
$1.8
$2.3
$4.0
$5.7
$BILLIONS
2 Years: +143%
6Source: RIAA
19. Published April 24th 2018 and covers calendar
year 2017.
Free State of the Industry overview
supplemented by Data and Analysis section.
Data and Analysis section contains insight and
detailed revenue data across all recorded music
formats, including streaming, digital
downloads, and physical.
Individual data pages for more than 50 markets
worldwide.
20. 2017: Global Recorded Music
Industry
growth
compared to
2016
8.1%
global trade revenues for
the recorded music
industry in 2017
$17.3bil
Third consecutive year of
global growth after fifteen
years of declining revenues
21. 25.2
23.4 23.8
21.9
20.1 19.5
18.1
16.3
14.1
11.9
10.4
8.9 8.2 7.6 6.7 6.0 5.7 5.5 5.2
0.4
1.0
2.0
2.7
3.4
3.7
3.9
4.2
4.4
4.3
4.0 3.8
3.2
2.8
0.1
0.2
0.2
0.3
0.4
0.4 0.6 1.0
1.4
1.9 2.8 4.7 6.6
0.6
0.7
0.8 0.9
0.9
1.0
1.2
1.3
1.3
1.4 1.4 1.6 1.8
1.9
2.0
2.3
2.4
0.3 0.3 0.3
0.3
0.3
0.4
0.3
0.3
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Global recorded music industry revenues 1999-2017 (US$ billions)
Total Physical Digital (excluding streaming) Total Streaming Performance Rights Synchronisation Revenues
Modest growth after a long
decline
PHYSICAL
Sales of all physical formats,
including CD and vinyl
DIGITAL
Permanent downloads, mobile
revenues - EXCLUDES streaming
PERFORMANCE RIGHTS
Music used in broadcast and
public performance
SYNCHRONISATION
royalties from recorded music use
in television, films, or games
$17.27
billion
STREAMING
Audio and video streaming
revenues, paid and ad-supported
22. Recorded music revenues by region
North America
36.8%
Europe
33.2%
Asia
22.7%
Australasia
2.8%
Latin America
4.1%
Rest of the
World
0.4%
Asia &
Australasia:
25.5%Each major region of the world reported
revenue increase in 2017:
North America: +12.8% $6.35bn
Europe: +4.3% $5.73bn
Asia: +4.5% $3.92bn
Australasia: +13.4% $484.4m
Latin America: +17.7% $709.4m
REVENUES INCREASED WORLDWIDE
REVENUES AS
PER CENT OF
GLOBAL TOTAL
23. Subscription
audio streams
$5,224 million
Ad-supported
audio streams
$548 million
Video streams
$857 million
8.3%
8.0%
6.1%
12.8%
10.5%
8.7%
78.8%
76.1%
85.0%
76.8%
71.3%
80.7%
12.9%
15.9%
8.9%
10.5%
18.2%
10.6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Global
North America
Europe
Asia
Latin America
Australasia
Ad-supported Audio Streams Paid Subscription Audio Streams Video Streams
Streaming Revenues by Format
Global Revenue Breakdown
Total: US $6.63 billion
24. The value gap
Audio streams (paid and ad-supported) Video streams
AUDIO AND VIDEO STREAMING USERS Vs REVENUES 2017
Users (millions) Revenue (US$ millions)
272m
USERS
1,300m
USERS
US $5,569m
US $856m
25. 1 - USA
+12.8% - $5.92bn
4 - UK
+9.2% - $1.31bn
2 - JAPAN
-3.0% - $2.73bn
8 - AUSTRALIA
+13.4% - $412.9M
6 – SOUTH KOREA
+45.8% - $494.4m
9 - BRAZIL
+17.9% - $295.8m
5 - FRANCE
+1.7% - $925.1m
7 - CANADA
+14.0% - $437.2m
10 - CHINA
+35.3% - $292.3m
Top ten markets
Growth in:
• 8 of top ten markets
• 17 of top twenty markets
• 50 of sixty-one markets tracked
3 - GERMANY
-1.5% - $1.32bn
26. Free State of the Industry overview:
ifpi.org
Full Data and Analysis report:
gmr.ifpi.org
david.price@ifpi.org
Who we are.
Joke about seeing Sloan – they were missing guitarist but the show went on anyway. Well, David Price from IFPI was not able to make the trip (under the weather) but I’ll do my best to fill in with an overview of Global data as well as US data. But please save the really hard questions for him!
All data will be available so you don’t need to take too many notes.
First I’ll give a total market overview, then we’ll zoom in on what we’re seeing from the Nashville market.
Perspective on where we are. Still 40% below industry high from 1999
Plateau from 2010 to 2015. Now 2 years of growth off that low. A lot of data I’ll present here shows the 2 year change.
If you can think back to where we were in 2008, that’s the same level we’re at today (no inflation adjustment)
That means it took 10 years for the industry to get back to where it was.
The trends we saw in 2017 were very much a continuation of what we saw in 2016.
Up 16.5%, vs up 10.5% last year = +30% over 2 years.
This is the strongest growth we’ve seen since the mid 1990’s
In one way 2017 was a milestone year. Across all types of music streaming, there were about One Trillion (with a T) streams in the US last year. That’Pandora and internet radio still the largest source, but subscription streams grew to almost a third of the market, and are already bigger than YouTube/Vevo streams
=There’s a lot to take in on this slide so we’ll spend some time on it.
Overall – streaming up 43% in 2017 alone, more than doubled in just 2 years.
Subscription the major driver. $4 billion alone from paid subscriptions (give service examples)
Ad-supported on demand (YouTube, Vevo, free Spotify)– growing, but still a very small part of the market – just 8% even though it accounts for hundreds of billions of streams annually- think back to previous slide – about 1/3 of all streaming by volume. (in last 3 years video growing faster than audio)
Digital and customized radio (includes satellite radio, internet radio like Pandora and others)– actually down 5% YoY. Switch from SX distributions to now including direct payments. SX down 26%, but mostly made up for by direct payments from services like Pandora. We group that revenue together because it’s reflecting the same end user experience, it’s just the revenues flowing in different ways.
Stop for questions about streaming revenues?
Here’s a comparison of the market makeup today versus the last time it was at about this level– a decade ago in 2008.
Then – still 2/3 physical, and steaming was a tiny sliver.
(click) – Now, streaming about 2/3 of the market, and digital downloads - which had been as large as half the total market, just 15% - smaller than physical.
Huge transformation in short period of time
Full paid Subscriptions more than tripled in 2 years!
As the market has developed it’s become more complex, so we separately track what we call:
Limited tier subscriptions (less functionality, or more limitations - Pandora Plus, Amazon Prime)
growing it’s share. From 10.5% in 2016 to 14.5% in 2017
Subscriptions in the US have absolutely taken off. More than tripled since 2015 – meaning services are adding approx. 1 million new subscriptions per month!
Since AppleMusic launched in mid 2015 the growth accelerated.
Note this is subscriptions, not subscribers – family plans only count as one. Also, this excludes what we call “limited tier subscriptions” like Pandora Plus and Amazon prime. We do include the revenue but we don’t have a user count (yet)
Comparison - -Netflix streaming ~ 53 million in US
SiriusXM -~ 27 mil in US
That’s a mouthful – technical way of referring to services like YouTube, Vevo, free Spotify, and others that are on-demand but free to the user.
These services account for 100’s of billions of streams, remember the slide earlier, but only 8% of total revenues, and just 12% of streaming revenues
This is the last major streaming category. Includes services internet radio services like Pandora and Iheart, and Satellite radio SiriusXM.
Another are where the market has evolved – this tracks revenues that used to all flow through SX, but now some of it is paid directly from services to labels. We combine them to get an appes to apples market comparison.
Down 5% total in 2017
Directly Paid revs more than doubled in 2017. 8% of revs in 2016, vs 29% in 2017.
Without direct payments, SX down 56% in 2017 alone, down 19% vs 2016
So if streaming was the good news, than unit sales has all the bad news.
Digital Downloads continued to decrease quickly – both albums and tracks down about 25% yoy
And in the physical world it’s not much better. Physical was flat around midyear, but declined in 2H for net decrease of 4% versus prior year. Returns likely played a part in that, as SoundScan has units down as well for the year.
This is always a fun part to talk about.
Vinyl continues to be the only bright spot in physical, up 9% in 2017.
Just 5% of market overall, but ¼ of the physical market
Stop here for general market questions??
I promised you wouldn’t have to write any of the numbers down. We have an updated database of all this data going back to 1973 in the works for our website. This will let you select formats and years interactively, and should be ready very soon.
Also on the website, we have some complementary data that will tell you more about who is consuming music. This is thanks to Russ Crupnick, who will be presenting here later today.
Before we talk about global numbers, one more new thing to share.
RIAA data focused on recorded music, but that’s just one part of the music industry. What about digital services, radio, touring, music teachers, musical instruments, many other parts?
We asked an economist to look at all this, and he found that the music industry creates $143 billion in economic value for the US Economy. And it supports 1.9 million jobs.
He also looked at states that were major music centers. It shouldn’t surprise this crowd that he found that in Tennessee music contributes to the state economy at 4 times the national average rate.
Apologies again that David could not be here. IFPI is the global trade group for the recorded music industry, and they do a similar market anlaysis for all the major global music markets.
Just like for the US, IFPI publishes this data on their website. Data is complied for more than 50 countries.
A key thing to note is that in contrast to RIAA data, all IFPI figures are at trade value – the amount received by the record companies at wholesale.
Everything presented here is converted into US $dollars to make comparisons easier
Headline – revenues up 8%
Just as with US, lets put that growth into perspective.
Blue: physical revenues, generally continuous decline from a market peak in late 1990’s.
Then Red, represents digital downloads. This starts to offset but never replaces the decline in physical
Then in Yellow, streaming which starts off quite small, but explodes from 2015 onwards to become the largest single revenue source for the recorded music industry in 2017.
IFPI also captures performance rights, which in countries other than the uS includes revenues from broadcast radio, and has been growing at a steady pace
Revenues grew in regions all over the world, but it was not the same everywhere. North America, largely driven by US, grew 13%, Europe and Asia grew at lower rates.
This also shows a sense of scale for global revenues. Basically the US makes up about 1/3 of the market, Europe makes up another third, and then the rest of the world accounts for the final third.
Much like in the US, streaming was the major driver of the global recovery Across all regions, paid subscriptions made up the vast majority of streaming revenues, while ad-supported services made up much smaller shares.
..... which brings us to what has become known as the value gap.
This is the mismatch between the value that some digital platforms return to music creators, thanks to some outdated laws that allow companies to take advantage of loopholes.
On the left, you can see that subscription services generated about $5.5 billion in revenues for music from about 270 million paying users. But on the right, more than a billion users of ad supported services generated only a fraction of the return, for essentially the same type of interactivity.
There’s a large section in the GMR about the value gap that I encourage anyone interested in the topic to read
There’s a ton of more country specific data in the full IFPI report. We obviously don’t have time (or I’d say even the attention span) to go into the many markets that the report covers, but I encourage you to take a look at this resource.
The links are on all the usual places you’d expect.
One more thought before we finish.
Backup to think about the broader market again. Of course we’re all interested in the ups and downs year to year, but as I think you can see from this presentation, this process has gotten more and more complicated. There’s far more to explain now than there used to be.
This is complex because the industry has become more complex, and that’s made it more of a challenge for all of us to explain to outsiders and to each other what’s going on and how the industry is doing.
I hope I was able to make all of you a little more knowledgeable today.
Thank you for your interest. I’m happy to try to answer any questions you have about this info.
