Streaming Tech catapults global music growth, but complicates monetization
Revenue from streaming music platforms is flowing upwards internationally, says the new Global Music Report from trade organization IFPI. But growth is also complicating the emerging business models.
Subscription and advertising revenues from digital services like Spotify, Apple Music and Deezer jumped 45.2% to US$2.9bn last year. This propelled the total digital music revenues (including downloads) to US$6.7bn.
About 68 million people worldwide paid for subscription-supported music services, from 41 million in 2014.
Not only has the surge in streaming consumption pushed digital music to represent more than 50% of recorded music sales in 19 different countries, it has also helped increase total income from music (including CD sales) to a 3.2% increase to US$15bn.
IFPI says this is the “first significant year-on-year growth in nearly two decades” for the embattled music business, which has been hurt by online piracy and outdated copyright legislation since its heyday in the late 1990s.
“(The year) 2015 has been the tipping point,” stated Frances Moore, IFPI’s CEO during an April media briefing. “We’re now in a predominantly digital business. For the first time, digital has overtaken physical sales. For the first time in two decades, there is sign of growth in the music market and the main driver is streaming.”
But with these advances in music sales come questions about the long-term implications for the sector.
Is that recovery here to stay or are there other developments that could drag it back into decline mode? Moore has no illusions about the business’ continuing challenges. The recent increase has yet to catch up with the total slump over the past two decades.
“Overall, we’ve slumped by 35%,” she said. “We’ve done everything possible in the industry to help ourselves. Now we really do need policy makers to help.”
IFPI is one of several organizations representing rights owners, including those in other media, entertainment and creative industries, that have called for the European Commission to update the EU’s 2001 Copyright Directive. They insist the Commission needs to seal loopholes that enable some digital platforms to pay less in royalties than others.
For example, subscription-funded Spotify is said to pay about US$18 per user, while YouTube pays less than US$1.YouTube and other ad-funded platforms argue that Safe Harbor provisions in EU and US legislation mean they are not officially commercial streaming music platforms.
“There is a gross mismatch and it’s a structural problem that needs to be addressed by legislation,” Moore stated.
The Commission is scheduled to publish its proposals for a revised directive this September.
The importance of streaming to the potential prosperity of several music ventures was highlighted at a debate during Smart Radio: Playlists 2, part of the London-based Music 4.5 conference series organized by European consultancy firm 2Pears.
Streaming technology has allowed digital music playlists (curated lists of recorded tracks) to thrive as a format for artists, fans, labels, radio and TV broadcasters and streaming platforms to promote new releases, concert tours, favorite genres or simply to create entertainment content by sharing the lists with their social media followers.
In fact, as Simon Rugg, national accounts manager at PIAS UK, reminded Music 4.5 audience, playlists on services like Spotify can influence the fate of artists’ releases.
“Playlists are not just about the followers you have, but about the number of active users you have,” Rugg advised. “It is a great place to help an artist’s track to move to other playlists. And the role of (specialized) curators has become more important.”
This was supported earlier this month when Spotify announced its listeners play more than 1 billion streamed playlist tracks weekly.
On the other hand, many Smart Radio speakers said YouTube’s dominance in streaming music in terms of audience reach has not necessarily fully compensated artists and other rights holders.
Streaming video technology could affect the future of playlists as online music-video consumption grows faster than audio streaming consumption, said Francois Planquette, another Music 4.5 speaker.
YouTube is no longer an ideal music-video promotion tool despite reaching 1 billion-plus registered users, said Planquette, the development director at Playzer, the Paris-based multi-platform music-video streaming service.
“YouTube is playlist unfriendly, especially with its annoying ads, which mean the videos are not fun to watch,” he declared.
“This is frustrating at a time when artists create four videos per album, compared to one to two videos in the past. Some artists like Justin Bieber have a video for every album track. So, we thought, why shouldn’t fans have video playlists too?”
The Playzer app is embedded on the digital TV services offered by French telecoms giant Orange in France. For a weekly subscription of €1.99, viewers can create their own music-video playlists from a catalog of 70,000-plus licensed video clips.