Ovum report highlights three streaming trends for 2016

The shift by consumers to accessing music than buying it, has caused one of the biggest shake-ups in recorded music distribution for a century, says global analyst firm Ovum.

“The recorded music sector of yesterday is quite simply that, a bygone era that is being swept away by shiny new industry players,” says its Head of Music Practice, Simon Dyson.

He adds, “Music retailers will never sell as many CDs or downloads as they did last year and so services along the music value chain that want to be part of this rapid evolution in recorded music must simply embrace the change and make access work for their business.”

Dyson is the author of Ovum’s latest report 2016 Trends to Watch: Music.

It stresses the importance of noting that none of the music subscription services are “anywhere near breaking even, and the need for scale is far more important than the color of the balance sheet ink.”

The report highlights three streaming trends to watch for in 2016:

* Streaming will drive digital music growth in 2016, but will not offset the fall in sales of CDs and downloads.

* There’ll be more casualties among music streaming services.

* The fiery debate as to who benefits most from music streaming will remain a divisive one.

According to 2016 Trends to Watch: Music, while spending on music subscription services is growing, “There will be no growth in overall consumer spending on recorded music in 2016.”

Ovum’s latest forecasts suggests that global retail sales of recorded music will show it edged down 0.5% in 2015 and will fall a further 0.2% in 2016.

In 2015, subscriptions alone will be expected to account for 28% of digital spending and 15% of the combined digital and physical spending total. This figure was just 3% five years ago.

What we will see coming to the fore as a result of streaming are countries like China and India who are shaking off the shackles of music piracy. They will start to make substantial contributions to sales figures of recorded music.

“Streaming services in India are already reporting high user metrics and the early results elsewhere suggest streaming is not only guiding the recorded music industry’s future in Western countries, but is also opening doors to the less developed markets,” the report contends.

According to other reports, music streaming in India is heating up for different reasons to the West. Mobile is the primary method of internet access for millions of Indians, and the smartphone is the single entertainment hub for many. With the rising sales of smartphones (64.3 million in the fourth quarter of 2014), 500 million of Indians are forecast to have internet access by 2020. Five years ago, that figure was only 90 million, or less than 10% of a population of over a billion.

Australian streaming service Guvera is a prime example of India’s embracing of music streaming. It launched there in November 2014 with 20 million western and local tracks, and within a year had 6.5 million come on board. That is half of its 15 million user base, and more than 1.4 million Australian subscribers.

The Chinese music market too is growing, according to Forbes last year. Of a population of almost 1.4 billion, 471 million were listening to music online and lead to a gross of $3.9 million in 2014. The figure is expected to grow as more Chinese streaming services hit the market to join market leaders as Tencent, Alibaba and China Mobile.

Ovum’s report also suggests that a trend in 2016 is that while competition intensifies among the major global streaming services, who are essentially offering the same features, expect acquisitions and closures as a result.

“The shift from music ownership to access is not an overnight proposition and consumers will take their time to change the habits of generations. But it remains the recorded music industry’s best bet for returning consumer spending to levels not seen for more than 15 years,” concludes Dyson.