IFPI Global Music Report: Digital is king for first time ever

After close to two decades of almost consecutive decline, the recorded music business’s official worldwide income took an upturn to US$15bn, the first significant growth seen since 1995. The 3.2% increase on 2014 reverses the previous year’s 0.3% market decline.

What’s more, for the first time in history, digital revenues now account for more than half the global recorded music market. The 10.2% increase in global digital revenues to US$6.7 billion, was driven by streaming; the sector’s revenue rose 45.2% in 2015.

The new statistics were delivered in the International Federation of the Phonographic Industry’s (IFPI) annual Global Music Report, issued overnightfrom London. IFPI’s report takes into account record sales, steaming income (ad-supported and premium), performers rights revenue generated by the use of music by broadcasters and public venues and sync revenues.

“The industry had slumped by over one third with the last real growth around 1998,” said IFPI chief executive Frances Moore during a conference call from IFPI’s London headquarters last night.

In 1998 the global music market grew by 4.8%, showing the music industry has officially emerged from digital disruption.

Moore was joined on the call by senior executives from the three major record companies: StuBergen, CEO, International and Global Commercial Services, Warner Music Group, Edgar Berger, Chairman and CEO, International, Sony Music Entertainment and Michael Nash, Executive Vice President of Digital Strategy, Universal Music Group.

Globally, performance rights revenue grew by just 4.4% to US$2.09 billion in 2015. In 2014 those revenues for producers and performers grew by 11%, and 10.9% in 2013. However, global revenues to performers and producers have more than doubled over the last decade. Performance rights revenue now accounts for 14% of the industry’s overall global revenue, up from 10% in 2011.

Interestingly, China’s music market had the biggest growth in 2015 with 63.8%. This is despite is placing 23rd in the world for top music markets (US, Japan and UK took out the top three spots, respectively) and also despite the territory not having any performance rights in place – a matter IFPI is currently lobbying for.

“Once European artists had aspirations of breaking America, now they talk of breaking China,” said Bergen.

Mexico was also another anomaly in 2015, its paid subscription uptake tripled and with 21 streaming services available, the streaming market in the territory is both experimental and competitive.

Global physical revenues are down 4.5% to represent 39% of total revenues, with digital now the primary revenue stream for recorded music.

Synchronisation revenue was up 6.6% compared to the 7.6% rise in 2014. The revenue from the use of music in advertising, film, games and television programmes now represents 2% of global revenues.

As reported by TMN this week, digital accounted for 62% of the overall Australian market by value in 2015, continuing its rise from 59% in 2014. IFPI has reported 2015 saw Colombia, New Zealand, Philippines and Taiwan have digital revenues also cross the 50% threshold.

Along with Japan and South Korea, Australia is considered one of the leading markets in Asia, helping to reverse a 1.6% decline in 2014 to post a 5.7% growth.

IFPI reports Australia’s growth increased by 6.1% when countering in public performance and recorded music sales.

Australia is one of 18 countries which have integrated audio streaming into the official singles charts; the others are: Austria, Canada, Czech Republic, Denmark, Finland, Germany, Ireland, Italy, the Netherlands, New Zealand, Norway, Slovakia, Spain, Sweden, Switzerland, UK and USA.

While Australia’s growth is impressive – the recorded music market’s growth to $333.5m is the first upwards trend in three years – Latin America is for the fifth year the region with the highest level of growth in terms of revenues. In 2015 its music market grew by 11.8% with digital revenues rising more than four times the global average at 44.5%. It also reported a80.4% growth in streaming revenue.

The major contributor in the rise of global digital sales, and in recorded music revenue as a whole, is streaming. IFPI reports ad-funded streaming models comprise the biggest on-demand music audience in the world, with over 900 million users; yet the US$634 million advertising-supported revenue sector makes up only 4% of global music industry revenues.

“A large share of music consumption digital platforms today is not fairly remunerating artists in music,” said Edgar Berger, Chairman and CEO, International, Sony Music.

IFPI chief executive Frances Moore said change is needed to create a fair correlation between the consumption of music and the value that it is generating.

“We have got the stage now where we need the help of policy makers […] It’s a real structural problem and it can only be solved by legislation,” she said.

Last year when Moore delivered the 2015 Digital Music Report she announced she believed there was a ‘value gap’ in the globe’s digital industry, where she believed there was a flaw in thelegislative environment surrounding the value that certain digital platforms extract from music, and the value that is returned to rights owners. She said some major digital services (including YouTube and DailyMotion) are able to circumvent the normal rules that apply to music licensing via misapplied safe-harbour rules that were introduced in the US 20 years ago in the early days of the internet.

Speaking tonight, Moore said the European Commission had identified the ‘value gap’ as a problem in December 2015 when it published the reform: Towards a modern, more European copyright framework. The Commission plans to make its first proposals on how to deal with the “value gap” public in 2016.

“If we’re going to see year-on-year growth we need to solve the problem of the ’value gap’,” she said.”[…] This isn’t just harming record companies and artists it’s also harming other companies that are playing by the rules. […] We need now to look to policy makers, politicians, and it has to be done by legislation.”

Moore’s comments are particularly timely as YouTube readies its subscription service. The streaming giant is negotiating licensing deals with labels and according to a reportby MBW,Universal has “put together both an ‘on YouTube’ strategy and an ‘off YouTube’ strategy– the latter very much an ‘in case of emergency’ fallback”.

“We’re reporting meaningful growth for the first time in 20 years,” added StuBergen, CEO, International and Global Commercial Services, Warner. “[…] But the value of music is still not being fully recognised.”

Moore said submissions were made to the European Commission just last week, including from around 400 artists and 17 organisations who asked for the problem to be dealt with.