April 15, 2020
In figures recently released by MIDiA, the global media insights firm, 2019 global recorded music revenues reached a massive $21.5 billion. This number represents a consistent 5-year growth, moving on from the downturn experienced since the CD era. Previously an ailing industry now the music industry is on a growth trajectory. With Goldman Sachs predicting the industry to reach a staggering $131 billion by 2030, what are the drivers of this ongoing growth?
Consumers desire to spend money on music
In recent years, people have been willing to spend a significant part of their annual budgets on music, whether it be through streaming subscriptions or live events. IFPI’s Music Listening 2019 Report shared that 54% of those surveyed say they “love or are fanatical about music”. Music is seen as an important part of peoples’ lives and as a result, they are willing to part with their money to access it. In their report, Goldman Sachs stated that the valuable demographic of 18-34 spend an average of $163 each year on music (Source: Music Neilsen US, 2015). Music is very important to this market, leading to a surge in streaming subscriptions and growth in the live music sector. This does not seem to be slowing down as countries report record revenues, such as Germany who in 2019 surpassed a record $1 billion in music revenues.
Live events continue to grow in popularity
In a 2018 PWC report, the live music industry was predicted to reach $31 billion by 2022. With the average concert ticket price in the US at $96 (Statistica, 2020) and the number of festivals growing, consumers are willing to part with their cash to see their favourite artists from across the world. Much of this market is driven by the access consumers have to global artists through streaming platforms. Artists now tour consistently to play concerts for their fans across the world, with big earnings on offer. Judging by the speed at which major festivals such as Glastonbury sell out, this demand has not slowed down.
Streaming increases scale – Access over ownership
Despite increasing revenues from the live music sector, music streaming is the revenue source which has completely transformed the industry. Consumer behaviours have changed and people no longer require ownership of physical music. Now the instant and convenient access to an extensive current library of music are paramount to consumers. The recurring monthly subscription of approximately $10 has become a nominal payment that consumers may not even think about. There is no longer decision making for the consumer beyond which platform to choose. In the eras of physical music and downloads, people had to choose which album they purchased. Now they can access huge databases of songs. This has also led to the globalization of music with people accessing music from regions outside their own. For example, both Latin (Spanish and Portuguese speaking countries) and KPop (South Korea) music have amassed large global fanbases, driving revenues for these artists.
In July 2019 Spotify’s premium subscribers accounted for 108 million users globally, accounting for almost half of their total subscribers. Streaming platforms are generating passive recurring income from monthly payments. This has attracted a plethora of technology companies to launch their own streaming platforms. This has increased the complexity of music matching, with each processing data differently.
Social media’s influence on the charts
While streaming is at the core of music’s growth, some factors create dynamics within this industry. Social media’s influence on music revenue is greater than ever. Understanding the importance of this, global music groups such as Universal Music Group have developed partnerships with social media companies. Popular social media applications have integrated music into its platforms, allowing copyrighted music to be integrated into user generated content, which is influencing the charts. For example, TikTok, the world’s fastest growing app, is allowing users to rapidly influence the popularity of a song through its viral dance challenges. Recently the song Say So provided American rapper Doja Cat with her first top 20 hit, it climbed the chart following a viral TikTok dance challenge. As a nod to TikTok’s influence, the dance was featured in the subsequent official music video.
Smartphones and smart speakers
Another factor is the impact of technology. Smartphones have had one of the more significant impacts on music streaming and revenues. IFPI shared that 27% of music listeners did so on a smartphone. There is also a rising popularity in smart speakers which stream music. In 2019, 146.9 million smart speakers were sold globally (Forbes, 2020), with Amazon the market leader. With Amazon Music as the native application on these speakers, this is growing the tech giant’s market share. Also, the ease of access contributes to the growth of streaming.
CMOs own technology has a massive impact on revenue distribution
With the music industry set to reach a predicted $131 billion by 2030, driven by a number of factors, music data volumes will inevitably increase. The technologies and systems used by CMOs will be a vital component of global music revenue distribution.
If you are a CMO leader reviewing your current technology, talk to The Matching Engine Team about our cloud-based application. It is built with industry dynamics in mind, this application prepares your technologies for the future of music. Ensure revenues reach the artists with The Matching Engine.
Talk to The Matching Engine Team today.