TZ - IFPI Digital Music Report 2014

18.3. 2014, London

Music subscription revenues HELP drive growth in most major markets

•  Subscription services’ revenues up 51 per cent in 2013, helping global digital revenues grow by 4.3 per cent
•  Europe sees growth for the first time in 12 years.  Revenues stable in the US and up in Latin America.
•  Sharp drop in Japan sees overall global industry revenues decline by 3.9 per cent
•  Global revenue excluding Japan fell by 0.1 per cent
•  IFPI’s Digital Music Report highlights growth potential of emerging markets

Music fans’ growing appetite for subscription and streaming services helped drive trade revenue growth in most major music markets in 2013, with overall digital revenues growing 4.3 per cent and Europe’s music market expanding for the first time in more than a decade.

The US recorded music market continues to stabilise, growing by 0.8 per cent in trade revenue terms with strong demand for streaming services.  Europe has returned to growth after 12 years, with all top five markets – France, Germany, Italy, Netherlands and the UK – seeing an increase in revenues.  Latin America saw a 1.4 per cent growth, with strong digital revenues helping offset declining physical sales.

IFPI’s Digital Music Report is published today, showing the global music business offering consumers an ever more diverse range of licensed music services.  Revenues from streaming and subscription services leapt 51.3 per cent globally crossing the US$1 billion threshold for the first time.

Despite positive trends in most markets, overall global music trade revenues fell by 3.9 per cent to US$15.0 billion in 2013.  The result was heavily influenced by a 16.7 per cent fall in Japan, which accounts for more than a fifth of global revenues.   Japan remains a market in transition, with legacy mobile products and physical format sales only now starting to decline, while streaming and subscription services are still establishing themselves.

Excluding Japan, the overall global recorded music market was broadly flat, declining in value by 0.1 per cent.

Frances Moore, chief executive of IFPI, says:  “Even accounting for the difficult situation in Japan, the global recording industry is in a positive phase of its development.  Revenues in most major markets have returned to growth.  Streaming and subscription services are thriving.  Consumers have a wider choice than ever before between different models and services. And digital music is moving into a clearly identifiable new phase as record companies, having licensed services across the world, now start to tap the enormous potential of emerging markets.”

Subscription and streaming surging

The digital market has continued to diversify with revenues from subscription services, such as Deezer and Spotify, growing by 51.3 per cent, passing the US$1 billion mark for the first time. Global revenues from subscription and advertising-supported streams now account for 27 per cent of digital revenues, up from 14 per cent in 2011.

It is estimated that more than 28 million people worldwide now pay for a music subscription, up from 20 million in 2012 and just eight million in 2010.

Music subscription, which has helped transform Sweden and Norway in recent years, is now having similar positive impact in Denmark and Netherlands.

Record companies continue to license many new services, with Beats Music and iTunes Radio recently launching in the US. The industry hopes and expects these services to spread quickly around the world.  There are some 450 licensed services internationally, including global services such as Spotify, which expanded into 38 new markets in 2013, Deezer, Google Play and regional services such as Muve in the US and Asia’s KKBOX.

Downloads and physical formats remain important 

Digital downloads remain a key revenue stream, accounting for a substantial two-thirds of digital revenues (67 per cent).  Downloads are helping to drive digital growth  in some developing markets, including Hong Kong, the Philippines, Slovakia and South Africa.  Revenues from downloads globally fell slightly by 2.1 per cent in value, the decline being offset by increases in streaming and subscription revenue.

Physical format sales still account for a major proportion of industry revenues in many major markets.  They account for more than half (51.4%) of all global revenues, compared to 56 per cent in 2012.  Although global physical sales value declined by 11.7 per cent in 2013, major markets including Germany, Italy, the UK and the US saw a slow-down in the rate of physical decline.  France’s physical sales grew by an estimated 0.8 per cent, helped by a local repertoire boom.

While vinyl sales account for only a small fraction of the overall industry revenues, they have seen an increase in recent years in some key markets.  In the US, vinyl sales increased by 32 per cent in 2013 (Nielsen Soundscan), and in the UK, they increased by 101 per cent in 2013 (BPI).

Performance rights and synchronisation income growing

Revenue from performance rights – generated from broadcast, internet radio services and venues – saw strong growth.  Performance rights income to record companies crossed the US$1 billion threshold for the first time in 2013 to hit US$1.1 billion.  This was an increase of 19 per cent, more than double the growth rate in 2012, accounting for 7.4 per cent of total record industry revenue.

Income from synchronisation deals, in which music is placed in advertisements, films or television programmes, declined by 3.4 per cent in 2013, and now accounts for 2.1 per cent of total industry revenue.

Emerging Markets

A key theme of today’s report is the huge potential of emerging markets following the expansion of licensed digital services in the last three years. Many smaller emerging markets are starting to post significant increases in revenues as digital channels open new opportunities in countries that had a weak physical retail infrastructure.  Markets posting significant increases in digital revenue included Argentina (+69%), Peru (+149%), South Africa (+107%) and Venezuela (+85%).

The report also highlights innovative approaches to tap the huge growth potential of emerging markets. Case studies include new pre-paid subscription models bundled with devices in Brazil; the licensing of formerly-unlicensed major internet companies in China; and the opening of new operations in Africa.

2013 Global Recording Artists Chart, Albums and Singles Charts

Reflecting the increasing diversity of digital channels, IFPI launched its inaugural Global Recording Artist Chart in January 2014.  The chart captured the popularity of artists across multiple licensed channels, including streams on access services such as YouTube and Spotify as well as ownership services such as download stores and physical sales across 2013.  It was topped by UK-Irish band One Direction - driven by the global success of their third album Midnight Memories and hit singles Best Song Ever and Story Of My Life.

Source: IFPI 

One Direction also topped the 2013 global albums chart with Midnight Memories.  The album was the fastest selling of 2013 in the UK and sold more than a million copies in its first five weeks of release in the US.  It topped the charts in dozens of countries worldwide, from Australia to Sweden.

Source: IFPI 

The 2013 global singles chart was topped by Robin Thicke, the American-Canadian singer whose Blurred Lines topped the charts in 14 countries.  The song was taken from his sixth studio album, also called Blurred Lines.

Source: IFPI.  Units include single track downloads and track equivalent streams 

Strong local repertoire sales

Investment in local repertoire remains the lifeblood of the international music industry.   Album charts in individual markets demonstrate the continuing strength of local repertoire as a share of overall music sales.  In many markets, local artists account for the vast majority of the top selling albums of 2013.  In France, for example, 17 of the top 20 selling albums of 2013 were local repertoire, up from 10 in 2011.  In Germany, seven of the top 10 selling albums in 2013 were local repertoire according to GfK figures.  Data from 13 non-English language markets confirms the trend.

Source: IFPI 

Consumers engage with licensed services

Record companies are licensing a diverse range of services, successfully meeting different consumer preferences. This is illustrated in research undertaken by Ipsos MediaCT covering ten markets in four continents. The research shows that 61 per cent of internet users used a licensed music service in the last six months.  It also shows that consumer satisfaction with digital services remains high.  Three-quarters of customers (76%) describe them as “excellent” or “very good.”

Making the internet a better place for digital commerce

The music industry is a business whose success depends on certainty in the legal environment and on copyright law.  This is a constant and ever-changing challenge - the music market internationally continues to be distorted by unfair competition from unlicensed services.

IFPI estimates, based on comScore/Nielsen data, that 26 per cent of internet users worldwide regularly access unlicensed services.  This estimate applies only to desktop-based devices: it does not include the emerging and as yet unquantified threat of smartphone and tablet-based mobile piracy as consumers migrate to those devices.

Digital piracy is the biggest single threat to the development of the licensed music sector and to investment in artists.  It undermines the licensed music business across many forms and channels – unlicensed streaming websites, peer-to-peer (P2P) file-sharing networks, cyberlockers and aggregators, unlicensed streaming and stream ripping and mobile applications.

IFPI’s report highlights five key areas where the recording industry is focusing its fight against piracy:

• Internet service providers (ISPs) have a demonstrable effect on reducing copyright infringement, when required to act.  European countries where ISPs are required by courts to block access to infringing sites saw Bit Torrent usage fall by 11 per cent during 2013 (comScore/Nielsen).  Countries without the block saw Torrent usage rise by 15 per cent over the same period.

• Search engines remain the largest referrer of traffic to unlicensed services and a recent study by MillwardBrown for MPAA showed that 74 per cent of people using unlicensed services for the first time found them through search engines.  Google’s policy to demote results from unlicensed services in results has not been effective. IFPI is pressing the case that search engines have both the technical expertise and a social responsibility to help tackle the problem.

• Litigation has played a key role when required. Recent litigation against isoHunt, Megaupload, Rapidshare and Hotfile has seen those companies either close or put in place measures to reduce the illegal use of their services.

• Legislation is the foundation of the industry’s operating environment. Priorities highlighted include proposed laws to introduce performance rights in markets such as China and Singapore; and the industry’s campaign  on copyright reform initiatives in Europe and Australia in order improve online copyright enforcement.

• Advertising is a major source of funding for unlicensed music services worldwide: a recent study by the Digital Citizens Alliance suggested that unlicensed services earned US$227 million in 2013 from piracy.  A successful project in the UK to tackle the problem led to the City of London Police launching a permanent programme to curb advertising on pirate sites.  Voluntary discussions based around codes of conduct are taking place in several other markets. 

 

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EDITORS NOTES

1.      World market revenues by format: 2012 & 2013 (US$ millions)

 2.      Growth in major global markets ($US millions)

3.       Subscription service growth:  Paying Subscribers 2010-2013 ($US millions)