Digital boom for global music business despite online piracy

[Len]

The global music industry soared a record 8.1 percent last year as digital sales for the first time made up the majority of revenue thanks to the streaming boom, the industry said Tuesday.

Recorded music grossed $17.3 billion in 2017 with digital music — until last year roughly equal to physical sales worldwide — amounting to 54 percent of the revenue, the IFPI global body said in its annual report.

The growth marks the third consecutive year of expansion and the fastest pace since the International Federation of the Phonographic Industry (IFPI), began compiling data, the group’s CEO Frances Moore told reporters on a conference call.

But the industry still is only worth about two thirds of its value in the 1990s before the rise of the internet and the scourge of pirated music sent the music business into a 15-year slump, Moore said.

The resurgence is almost entirely due to the rapid growth of streaming services including Spotify, Deezer and Apple Music, which have given the industry a badly needed new source of revenue.

The report said that 176 million people around the world paid for streaming subscriptions by the end of last year, with 64 million joining throughout the year — and there is plenty of room to grow on a global level.

Physical sales tumbled again but one bright side was vinyl, which remains a sliver of the market but grew 22.3 percent as records find a renewed market among audiophiles.

Stu Bergen, the CEO for international and global commercial services at the Warner Music Group, warned that the music industry should not become “complacent” and pledged that record labels would invest their revenue to develop new talent.

“We’ve fought too hard to get here and, after 15 years of decline, there’s still plenty of room to grow,” Bergen said on the conference call.

– Spotify keeps expanding –

The IFPI released its data hours before Spotify announced a major expansion of its free, advertising-backed level, which the Swedish company sees as crucial to its hopes of making streaming universal, especially in emerging economies.

The industry voiced guarded optimism about China, where revenue jumped 35.3 percent as international labels increasingly penetrate the billion-plus market.

The growth, however, comes from a small base, with China only the 10th largest music market.

In one point of concern, Japan — the world’s second largest music market — saw revenue decline by three percent.

The slump was paradoxically due to the continued strength of CD sales in Japan, where physical music makes up 72 percent of the market, with digital revenue not providing the same injection of growth as elsewhere.

“It’s just a question of time. It’s a traditional society and the move toward digital is slower than in some countries,” Moore said.

Latin America saw the biggest growth among regions.

Revenue there jumped 17.7 percent on the back of streaming and particularly strong showings in Brazil, Chile and Peru.

The report, however, warned that more needed to be done to reach Latin American music consumers who lack credit cards — generally a requirement to subscribe to streaming services.

The IFPI also repeated its longstanding complaints about a structural “value gap” that allows YouTube to pay less back to artists, owing in part to laws in the United States that shield internet companies from responsibility for content uploaded by users.

The report estimated that record companies earned $20 per year from each Spotify user, while YouTube, owned by search engine giant Google, paid less than $1.

“We can’t deliver the path to recovery alone. There is a structural fault in the market,” Moore said.

Despite the industry’s efforts to expand in emerging economies, the top 10 most popular artists of 2017 were all Western, led by English singer-songwriter Ed Sheeran.

He led with the record-breaking success of his third studio album ÷ (Divide) and its singles including the global smashes Shape of You, Castle on the Hill, Galway Girl and Perfect.

Released in March 2017, Ed Sheeran’s ÷ was the global best-selling album of last year and has been certified as multi-Platinum in 36 markets. Shape of You was the best-selling single globally of 2017 and has been certified as multi-Platinum in 32 markets. It is the first time that the IFPI Global Recording Artist of the Year has had both the best-selling album and single of the year.

Ed Sheeran is the fifth recipient of the IFPI Global Recording Artist of the Year Award; the unique and authoritative accolade that reflects an artist’s worldwide success across digital and physical music formats, from streams to vinyl. Previous recipients of this prestigious award are One Direction (2013), Taylor Swift (2014), Adele (2015) and Drake (2016).