The Music Industry is dead, or is it? 

The truth about the current state of the music industry.

Advertisements

20170702_152643

Over the last few years, time and time again, we have seen and heard stories proclaiming the death of the music industry. Record companies are reporting plummeting sales and artists are lamenting lost earnings.

So, how true is that? Is the music industry dead?

It’s true that CD sales are down and the format that many expected to replace it, downloads, is also suffering.

However, that fact alone doesn’t mean the industry is dying, because the music business is more than selling music to listeners.
The basic principal of any business is supply and demand, if there is a demand, and you can provide the supply at a price that is both profitable and affordable then you have a viable business. The demand for music has not fallen, quite the opposite.

The main issue faced by the music industry was that the revenue from new formats, such as downloads and streaming, did not rise at the same rate that the revenue from traditional formats declined.

Over the last few years though the picture is changing and the revenue from these new formats is rising and the decline of the other formats is slowing down and some, such as vinyl, are enjoying a renaissance.

Globally the music industry grew by 5.9% last year, the biggest growth since 2011.

A bar centering on the glasses

The music industry in the UK contributes around £4 billion a year to the economy, again this is a figure that is rising, not falling.

In fact it’s outperforming the UK ecomony itself in terms of growth. Between 2012 and 2015 the UK GDP grew by 10%, the music industry’s contribution to the GDP grew by 17% in the same period.

The money generated by streaming is also sharply rising, jumping from £168m in 2014 to £251m in 2015, in the UK alone. As Spotify’s business model is currently to pay out a percentage of the revenue received, rather than a flat per play rate as many people think, increased subscriber revenue means better rates for the rightsholders and artists.

Does that sound like an industry that’s dead or in decline?

So why do we keep hearing and seeing stories saying it is declining?

Well, I think we have to look at who is saying this and where they are.

Most, if not all, of the stories I read come from high profile established acts, they are usually signed to a major label and have been around for quite a few years.

What they are saying is that their own profits from music are falling. They’re comparing what they used to make to what they earn now, they’re not looking at or commenting on the industry on the whole.

They also tend to be US citizens who record in USA, copyright law in USA differs from much of the rest of the world and this affects things such as neighbouring rights.

In the UK any business, or broadcaster, using music commercially or publicly is required by law to purchase licenses for both the composition and the sound recording elements of recorded music. In USA they are not required to purchase a license for the sound recording, and the collection of fees for usage of sound recordings is limited to just online radio and some streaming services.

This type of revenue makes up less than 10% of the overall earnings from neighbouring rights in the UK, so even though neighbouring rights in USA is worth $1billion per year it could be over $10billion if USA changed their laws to match those in UK and the EU.

Also, the music industry in USA hasn’t performed as well and although it is growing again, it still hasn’t recovered from the sharp decrease in the late 90’s.

Total revenue from U.S. music sales and licensing plunged to $6.3 billion in 2009, according to Forrester Research. In 1999, that revenue figure topped $14.6 billion. It took until 2012 for the growth of digital music to outpace the decline of physical.

Now just 44% of U.S. Internet users and 64% of Americans who buy digital music think that that music is worth paying for, according to Forrester.

In the UK 48% of internet users purchase music in some format and 82% of people who use streaming services also purchase downloads and physical formats. So not only is the growth of digital outpacing the decline in other formats in the UK, the consumers seem more than happy to continue buying music even when they have streaming subscriptions.

The other factor to consider is market share, throughout the 80’s and 90’s the charts were dominated by artists from USA.  8 of the 10 top selling albums of the 1980’s were by American artists, 7 of the top 10 selling albums of the 1990’s were by American artists.

Only 4 of the top ten selling artists of 2016 were from USA, so it seems that American artists no longer dominate global music sales. Perhaps it is this fact, more so than the rise of digital music, that is causing so many high profile artists from USA to proclaim the death of the music industry, at least as they know it anyway.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s