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STREAMING PUSHES GLOBAL MUSIC INDUSTRY UP 5.9%

At IFPI’s announcement of record music financials from 2016, from left, CEO Frances Moore, WMG’s Stu Bergen, Sony’s Dennis Kooker and UMG’s Michael Nash, share a crumpet and a cuppa.

The annual global recorded music industry grew 5.9% to $15.7b in 2016—the highest rate of growth since IFPI records began in ’97—as digital income, fuelled by streaming subscriptions, rose 50%. Numbers were revealed at an event in London today where UMG’s Michael Nash, Sony’s Dennis Kooker and WMG’s Stu Bergen discussed the challenges that lie ahead.

At the end of last year, 112m paying streaming subscribers worldwide helped to drive record streaming revenue growth of 60.4%. Streaming revenue now accounts for a 59% share of the digital pie. Downloads were down 20.5%, while overall digital revenue was up 17.7%.

Compare this to the U.S. 2016 stats, as reported via BuzzAngle Music in January: Overall consumption ticked up nearly 5%, as a record high in audio streams (250.7 billion, up a whopping 82.6%) offset declines in sales. New releases, we remind you, made up 20% of sales but only 8.5% of streams. 

Back to the world. Physical declined at a faster rate than in 2015 to 7.6% in 2016, accounting for 34% of the global market. Performance rights grew 7% and account for 14% of the overall market. Sync has a 2% share that was up 2.8% in 2016.

For the second consecutive year, Latin America was the region with the highest uptick in revenue, rising 12% thanks to streaming. North America was up 7.9%, Asia and Australasia 5.1% and Europe 4%.

While 2016 saw the second year of consecutive growth, IFPI CEO Frances Moore warned that it comes after 15 years of decline, when the industry lost 40% of its revenues. To achieve continued growth amidst “limitless potential,” Moore said a solution must be found to the “value gap.” While streaming services like Spotify and Apple Music are offering the industry $20 per user per year, platforms that host user-generated content such as YouTube are returning $1.

Moore said Safe Harbour legislation must be updated, and negotiations with YouTube should be on a “willing buyer and willing seller basis.”

 “Not with one hand tied behind your back where [YouTube] says, I’ve got your music, it’s up there already,” she said. “Either you take what I give you, or send me a notice, I’ll take it down eventually, and it will go up again five minutes later. We are asking for an even playing field.”

The recommendations in the European Commission’s copyright proposal puts the obligation on services such as YouTube to take a “proper” license— the "first steps" toward a solution should the EC decide to turn the proposals into legislation, Moore concluded.

UMG’s Nash said the industry must "seize the initiative to drive further transformation, align our business model with the technology industry and continue to expand the ways our artists can engage with our fans."

He said: "We must remind ourselves the only reason we saw some growth over the past few years is that music has been among the fastest adapting sectors in the digital world. We are far more digital than virtually every other media segment. We have fully embraced the reality that our success is dependent on the harmonious convergence of media and technology."

When questioned about the future of exclusives, Nash said such deals “neglect to address the complexities of a global marketplace. Our general position is that our artists and labels want to have the broadest possible audience for their new music. We think that the best thing in terms of supporting a competitive and vibrant ecosystem is to work with all our partners on the distribution of our major new projects.”

Sony’s Kooker didn’t rule out the idea of exclusives for Sony in future. “As we think through our strategy and go to market for every single release, what we may find is that we would take different approaches depending on the artist and the [state of the] market in which they are most popular.”

Stu Bergen noted that exclusives “are not necessarily in the best interest of growing the entire sector of paid streaming.”

All three labels stated there is tremendous potential in growing the number of paid streaming subscribers worldwide. Research, Nash noted, suggests there will be 5b active smartphones worldwide over the next few years, with “potentially enormous growth between where we are with 100m subscribers and that scope of consumer penetration of supporting technology.”

“You’re going to see a substantial percentage of the consumers that have supporting technology adopting streaming services over time,” Nash said. “What we thought the market potential would be is expanding year over year as the consumer adoption of streaming subscription exceeds expectations.”

Kooker added, “I truly believe that we can get the majority of people into a paying type of proposition if we are smart about it and creative in the way we approach the consumer.”

 

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