Report: Music sales reach digital tipping point

2015 will become the first year when global digital sales top physical sales.

A forecast from global analyst firm Ovum reports that in six years spending on digital downloads and streaming services will account for almost three-quarters of all sales.

Record labels will reportedly come out on top as we shift from ownership (physical sales) to access (digital sales and subscriptions).

While the overall annual difference in global retail sales won’t change by more than a percentage point – with the biggest movement predicted in 2020 when it’s expected to dip 1% – record companies should still benefit from the dip in consumer spending as they increasingly reduce manufacturing and distribution costs.

Music Practice Leader for Ovum, Simon Dyson and author of the report said: “The gross income record companies expect to make from physical format sales this year is around US$5.2bn and this will fall to just under US$3bn in 2020. EBITDA is also forecast to decrease, from US$520m to US$300m.”

Record companies’gross income earned from downloads is estimated at US$2.6bn this year and US$1.4bn in 2020. Record companies’ revenue from combined sales of physical formats, downloads, and income from access services will dive from US$10.2bn this year, to US$9.8bn in 2020.

The streaming sector will dominate retail spending over the next six years, however it willstruggle to balance the estimated declines in physical and digital formats.

The report from Ovum reiterates reports from the IFPI, who said streaming services now account for 27% of all global digital revenues, Merlin, who said 55% of its members’ business revenue now comes from digital services, and Infiniti Research, who said the global streaming market will increase by 12% in the next five years.

Global recorded music retail sales, 2010–20