IFPI publishes Digital Music Report 2015

The new report shows an industry in continuing transition, with consumers embracing the music access models of streaming and subscription. Another steep increase in subscription revenues (+39%) offset declining download sales (-8%) to drive overall digital revenues, while the numberof paying users of subscription services rose 46.4% to an estimated 41 million.

Subscription services are now at the heart of the music industry’s portfolio of businesses, representing 23% of the digital market and generating US$1.6 billion in trade revenues. The industry sees substantial further growth potential in the subscription sector, with new services advancing in 2015 led by three major global players: YouTube’s Music Key, Jay Z’s TIDAL and Apple’s expected subscription service.

Frances Moore, chief executive of IFPI, said: “The recorded music business has always led the way for creative industries in the digital world. That leadership continues today as the music industry’s digital revolution continues through new phases, driven by the consumer’s desire for access to, rather than ownership of, music. It is a reflection of how much we have adapted that digital revenues today are, for the first time, on a par with physical.

“The headline statistics of 2014 speak for themselves, with overall revenues still largely flat, down by 0.4%. Music companies are charting a path to sustainable year-on-year growth. That path was never going to be straight, but we are making great strides along it, embracing new models, licensing, investing and improving consumer choice.”

The global recording industry is a portfolio business of different consumer channels and business models. This is underlined by the enduring nature of the physical format, still 46% of the market, and the still substantial share of digital revenues (52%) accounted for by downloads. Physical sales still dominate in a number of key worldwide markets including France (57%), Germany (70%) and Japan (78%).

Within the physical business, vinyl sales continue to revive with revenues increasing 54.7% and now accounting for 2% of global revenues. This underlines the industry’s commitment to consumer choice and to delivering music to fans in the widest possible range of formats.

Elsewhere in the industry, performance rights income increased by 8.3% and now accounts for 6% of total industry revenues or US$948 million. Synchronisation revenues increased by 8.4% in 2014 to represent 2% of the market, with big gains in markets such as France (+46.6%), Germany (+30.4%) and Japan (+33.5%).

Key trends in digital music

• Consumers engage with licensed services: Exclusive IFPI-commissioned research demonstrates consumer engagement with licensed digital music services is high. The study, undertaken by Ipsos across 13 of the world’s leading music markets in 2015, shows 69 % of internet users accessed a licensed digital music service in the last six months. Significantly more people say that they use these types of services more than they did 12 months ago, compared to those who say that they use them less. Awareness of licensed services, such as iTunes, Spotify and YouTube, is high and some 38 % of respondents agree strongly or agree a little that they are happy to access music online, rather than own a CD or digital file. However, IFPI estimates (based on comScore/Nielsen data) that 20% of internet users (down from 26% in 2013) still regularly access unlicensed services such as P2P file-sharing networks, cyberlockers and aggregators.
• The rise of streaming: The defining positive characteristic of international music markets in early 2015 is the continued surge in consumer uptake of streaming services. Much of this is driven by young consumers with little or no experience of owning music and, therefore, less geared to traditional ownership models.
• Potential for growth: Within the streaming sector, there is substantial untapped potential for growth within the paid-for category. The Ipsos research shows that 35% of consumers have accessed free music streaming services in the last six months, compared to 16% using paid-for music subscription services. While consumer use of free and paid-for services varies markedly between countries, there are showcase markets, such as Sweden and South Korea, proving that consumers will pay in large numbers for premium music subscription.
• Bundling partnerships: Leading telecoms companies are now offering bundled music services to their customers as standard. These partnerships combine the marketing muscle and billing infrastructure of the telcos with the catalogue and curation of digital music services. Such offerings are playing a significant role in opening up emerging markets.
• New payment models: Digital services are increasingly tailoring their offerings to reach different segments of consumers. At one end of the spectrum, UK service MTV Trax offers users access to up 100 tracks for £1 (US$1.49) a week, while at the other Deezer Elite offers users a high-quality audio experience for US$20 a month.
• Artist royalties: The rise of streaming services has also prompted wider discussion around the issue of artists’ royalty payments in the digital environment. In order to better inform this discussion, IFPI conducted research in 2014 to obtain an accurate picture of how royalty payments have changed as the market has shifted from physical sales to digital channels. Industry data compiled by IFPI from the three major companies (covering local sales for locally signed artists in 18 major markets outside Japan and the US in the five year period to 2014) shows that while sales revenue fell 17%, total artist payments – in the form of royalties and unrecouped advances – declined much less in real terms (down 6%) and increased significantly as a share of sales revenue, by 13%. Over the five year period, the data shows that total payments by record companies to local artists totalled more than US$1.5 billion across the 18 markets.
• Another new development is the industry’s decision to synchronise all global singles and albums releases so that they go to market on the same day. From 10 July 2015, Friday will become the new Global Release Day, meaning music fans in different countries will be able to buy and listen to new artist releases at exactly the same time. The move meets consumer demand for equitable access to new music worldwide and provides new marketing opportunities for record labels at the weekend.

Click on the attachment below to download the full report, or visit http://www.ifpi.org/digital-music-report.php