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DIGITAL MUSIC REPORT 2014 24-03-2014

DIGITAL MUSIC REPORT 2014

MUSIC SUBSCRIPTION REVENUES HELP DRIVE GROWTH IN MOST MAJOR MARKETS
 
·         Subscription services’ revenues up 51 per cent in 2013, helping global digital revenues grow by 4.3 per cent
 
·         Europe sees growth for the first time in 12 years.  Revenues stable in the US and up in Latin America.
 
·         Sharp drop in Japan sees overall global industry revenues decline by 3.9 per cent
 
·         Global revenue excluding Japan fell by 0.1 per cent
 
·         IFPI’s Digital Music Report highlights growth potential of emerging markets
 
 
London, 18th March 2014 –  Music fans’ growing appetite for subscription and streaming services helped drive trade revenue growth in most major music markets in 2013, with overall digital revenues growing 4.3 per cent and Europe’s music market expanding for the first time in more than a decade.
 
The US recorded music market continues to stabilise, growing by 0.8 per cent in trade revenue terms with strong demand for streaming services.  Europe has returned to growth after 12 years, with all top five markets – France, Germany, Italy, Netherlands and the UK – seeing an increase in revenues.  Latin America saw a 1.4 per cent growth, with strong digital revenues helping offset declining physical sales.
 
IFPI’s Digital Music Report is published today, showing the global music business offering consumers an ever more diverse range of licensed music services.  Revenues from streaming and subscription services leapt 51.3 per cent globally crossing the US$1 billion threshold for the first time.
 
Despite positive trends in most markets, overall global music trade revenues fell by 3.9 per cent to US$15.0 billion in 2013.  The result was heavily influenced by a 16.7 per cent fall in Japan, which accounts for more than a fifth of global revenues.   Japan remains a market in transition, with legacy mobile products and physical format sales only now starting to decline, while streaming and subscription services are still establishing themselves.
 
Excluding Japan, the overall global recorded music market was broadly flat, declining in value by 0.1 per cent.
 
Frances Moore, chief executive of IFPI, says:  “Even accounting for the difficult situation in Japan, the global recording industry is in a positive phase of its development.  Revenues in most major markets have returned to growth.  Streaming and subscription services are thriving.  Consumers have a wider choice than ever before between different models and services. And digital music is moving into a clearly identifiable new phase as record companies, having licensed services across the world, now start to tap the enormous potential of emerging markets.”
 
Subscription and streaming surging
 
The digital market has continued to diversify with revenues from subscription services, such as Deezer and Spotify, growing by 51.3 per cent, passing the US$1 billion mark for the first time. Global revenues from subscription and advertising-supported streams now account for 27 per cent of digital revenues, up from 14 per cent in 2011.
 
It is estimated that more than 28 million people worldwide now pay for a music subscription, up from 20 million in 2012 and just eight million in 2010.
 
Music subscription, which has helped transform Sweden and Norway in recent years, is now having similar positive impact in Denmark and Netherlands.
 
Record companies continue to license many new services, with Beats Music and iTunes Radio recently launching in the US. The industry hopes and expects these services to spread quickly around the world.  There are some 450 licensed services internationally, including global services such as Spotify, which expanded into 38 new markets in 2013, Deezer, Google Play and regional services such as Muve in the US and Asia’s KKBOX.
 
 
Downloads and physical formats remain important
 
Digital downloads remain a key revenue stream, accounting for a substantial two-thirds of digital revenues (67 per cent).  Downloads are helping to drive digital growth  in some developing markets, including Hong Kong, the Philippines, Slovakia and South Africa.  Revenues from downloads globally fell slightly by 2.1 per cent in value, the decline being offset by increases in streaming and subscription revenue.
 
Physical format sales still account for a major proportion of industry revenues in many major markets.  They account for more than half (51.4%) of all global revenues, compared to 56 per cent in 2012.  Although global physical sales value declined by 11.7 per cent in 2013, major markets including Germany, Italy, the UK and the US saw a slow-down in the rate of physical decline.  France’s physical sales grew by an estimated 0.8 per cent, helped by a local repertoire boom.
 
While vinyl sales account for only a small fraction of the overall industry revenues, they have seen an increase in recent years in some key markets.  In the US, vinyl sales increased by 32 per cent in 2013 (Nielsen Soundscan), and in the UK, they increased by 101 per cent in 2013 (BPI).  
 
Performance rights and synchronisation income growing
 
Revenue from performance rights – generated from broadcast, internet radio services and venues – saw strong growth.  Performance rights income to record companies crossed the US$1 billion threshold for the first time in 2013 to hit US$1.1 billion.  This was an increase of 19 per cent, more than double the growth rate in 2012, accounting for 7.4 per cent of total record industry revenue.
 
Income from synchronisation deals, in which music is placed in advertisements, films or television programmes, declined by 3.4 per cent in 2013, and now accounts for 2.1 per cent of total industry revenue.
 
Emerging Markets
 
A key theme of today’s report is the huge potential of emerging markets following the expansion of licensed digital services in the last three years. Many smaller emerging markets are starting to post significant increases in revenues as digital channels open new opportunities in countries that had a weak physical retail infrastructure.  Markets posting significant increases in digital revenue included Argentina (+69%), Peru (+149%), South Africa (+107%) and Venezuela (+85%).
 
The report also highlights innovative approaches to tap the huge growth potential of emerging markets. Case studies include new pre-paid subscription models bundled with devices in Brazil; the licensing of formerly-unlicensed major internet companies in China; and the opening of new operations in Africa.
 
2013 Global Recording Artists Chart, Albums and Singles Charts
 
Reflecting the increasing diversity of digital channels, IFPI launched its inaugural Global Recording Artist Chart in January 2014.  The chart captured the popularity of artists across multiple licensed channels, including streams on access services such as YouTube and Spotify as well as ownership services such as download stores and physical sales across 2013.  It was topped by UK-Irish band One Direction - driven by the global success of their third album Midnight Memories and hit singles Best Song Ever and Story Of My Life.

For more information and specifications, download the full Digital Music Report 2014.