Streaming music prevails in US market
While physical products still generated pretty much the same revenues for UK record labels as all the digital services combined last year, and downloads brought in nearly double the monies paid into the music community by the streaming services, in the US the shift from physical to digital, and download to stream, is now happening much more rapidly, with 2014 figures showing revenues getting ever closer to being split three ways between physical, downloads and streams.
Of course, downloads peaking, streaming booming and CD sales continuing to decline was the trend in most countries last year. But of the more significant recorded music markets, that trend has had the biggest impact in the US; hence all the sudden panicking in the mainly US-headquartered major labels over whether the current streaming business models are working. It is worth noting that the fact 27% of US recorded music revenues now come from streaming services is in no small part down to SoundExchange, and the fact that American labels have long been forced to licence services of the Pandora model (ie with limited interactivity). According to the Recording Industry Association Of America, monies from the rights body that collects royalties from services operating under the uniquely American compulsory licence very nearly equalled revenues from fully on-demand streaming services like Spotify, which are licensed by the labels directly.
The existence of SoundExchange also means the likes of Sirius – a satellite radio service – are counted under the streams tally, and it skews the subscriptions-to-ad-funded comparison a little. Directly-licensed freemium services brought in about a third of what was made from directly-licensed subscription services last year, despite having many more users, but that doesn’t include ad-funded services using SoundExchange licenses, such as Pandora. Elsewhere, RIAA figures show download revenues down 8.7% so that they represent 37% of the wider market, while CD sales were down 12.7% meaning that, despite the ‘vinyl revival’, physical product accounted by 32% of income. The streaming boom, therefore, is now having to compensate for continued declines in both CDs and MP3s. Though it is worth noting that overall the US recorded music market was more or less flat last year (total sales slightly down, wholesale revenues slightly up).
So, in 2014 at least, streaming growth was more or less compensating for other declines. Though, of course, the labels still seek growth. And concerns remain that there is a limited number of people who can be persuaded to sign up to $10 a month subscription services, and that we need to find another way to get money out of those consumers shifting from paid-for downloads to free streams. Which brings us back to the discussion-du-jour, can mid-market streaming services ever get off the ground while freemium is so good? Though if we could just find a way to monetise that specific debate, everyone would be quids in.
Source: CMU
