UGC will be worth $6 billion to the music industry in two years [report]

User generated content is growing so rapidly that it will be worth US$6 billion to the global music industry by 2022, with rightsholders to share in $3.2 billion.

But the industry is missing out on fully exploiting this major revenue even as every consumer sees themselves as a content creator, according to The Rising Power of UGC report by UK’s MIDiA Research in partnership with Audible Magic.

The report looks at how UGC contributed over $1 billion to global music revenues in 2019, and the continued growth of UGC creation and consumption.

It stresses that a new, simpler licensing frameworks, especially for music, is needed for social media and UGC platforms.

Companies such as Lickd are working with labels to create such models.

Opportunities are being lost because ad-funded models are not working, subscription revenues are in decline, and ways to monetise fandoms have not been successful.

The rising power of UGC is reflected by the sharp growth in social media platforms in 2020.

They total 7.7 billion users, of which Australian users made up 18 million in January 2020, with local penetration at 71%, according to SM Perth.

Last year social media generated global ad revenue of $119 billion – a figure set for $5.907 billion in 2022 based on current growth rate.

MIDiA forecasts that UGC revenue from advertising will be worth $4.05 billion in 2020 or $2.2 billion for music rights holders – calculated to be $3.2 billion by 2022.

The expansion of global social media ad revenue hinges on Chinese platforms like TikTok, which account for 50% of growth between 2019 and 2022.

The report said YouTube dominates music consumption across most markets globally.

“UGC and user interaction is one of the key reasons it continually outranks Spotify and other audio streaming services. TikTok is the most notable new player, creating a vast global audience of creators with music as the backdrop.

“Whereas YouTube relies upon a minority of users to create content for the majority, TikTok has created an environment where the majority of the audience become potential creators.”

This is a market which is hugely addressable, urges MIDiA, while in-app purchases and virtual merch are emerging forms of monetisation.

Mark Mulligan, MIDiA Research’s managing director said: “As music subscriptions edge towards maturity in many Western markets, the music industry needs new growth drivers.

“UGC has long been under-monetised for rights holders but its potential now is bigger than ever.

“We are entering into an era where we are all becoming creators, whether that be editing digital photos, making a lip sync video or even creating a mashup.

“Music continues to be the soundtrack to both our lives and to UGC content. We sit on the cusp of the next chapter in music consumption and monetisation.”