September 5, 2017 monokrome

The End to the Comedown From Hell?

The year is 1997. Everyone is on pills, a computer beat worldwide chess champion Garry Kasparov and Aqua’s ‘Barbie Girl‘ has been at the top of the charts for an entire month – probably because everyone is on pills…
This may sound like a terrible time for music but actually, the music industry was enjoying global revenues of around
$40 billion with label executives earning banker-sized bonuses. HMV and Virgin Megastores populated the high-street, enjoyed double-figure growth and the RIAA introduced the ‘Diamond’ certification for albums that sold more than 10 million copies. It seemed like the party would go on forever. And then ‘piracy’ rocked up, unplugged the speakers and switched on the lights. For the industry, what followed was the kind of awful comedown that would even give Bez the shivers.

Of course, you know all this. Recorded music sales plummeted, as did the value of the industry and even Saint Steve Jobs couldn’t save the industry with his magic iPod, yada yada yada… Then came Spotify, with the answer to ‘How can we beat free?’ – ‘We have to be better than free.’ And so, since Spotify’s inception in 2006 and with the arrival of some big competitors, streaming services provided the industry with some much needed paracetamol (cash, I mean cash) to start bringing it round. After the all-time low of 2014 ($14.97bn) the value of the global music industry has been on a slow but steady increase. According to the IFPI, global recorded music industry revenues increased 5.9% in 2016, up to $15.7bn.

With the arrival of offline-playing, the introduction of windowing and the rising influence of playlists, more and more people are using streaming services, either ad-supported versions or as subscribers, and this has been a major contributor to the recovery of the music business. As major contributors to major label revenue, more power than ever lies with Spotify, Apple Music and other streaming services . At the end of August, Universal Music Group posted their numbers for the first half of the year – more than $1bn from recorded music streaming alone. That’s $6m per day, all from streaming. And that’s just one of the big three.

A quick look at all 3 majors’ figures shows exactly how much streaming platforms are aiding the recovery of the big labels. In the first 6 months of the year, Warners, Sony and UMG generated just under $2.4bn in revenues from streaming platforms – over $90m a week between them – with UMG taking 44% and Sony and Warners taking 28% each.

Goldman Sachs’ recent ‘Music In The Ear’ report predicts that streaming revenues will rise 500% by 2030 pulling in $28bn. The report also alleges that the number of total paid streaming subscribers will hit 847m in the same time-frame – a jump of more than 700m from the end of 2016.

Whilst pretty much everyone in the industry would rejoice at such an upturn in the fortunes of the music business, it may be too soon to hail streaming as the miracle cure. As pointed out in a recent Forbes article, Goldman Sachs will be representing Spotify on the New York Stock Exchange, giving them a vested interest in making a ‘healthy’ prediction for a company that is yet to turn a profit. So, whilst crazier things have happened, growth of that scale would be unprecedented and is far from certain given how many disruptive influences the industry has had to endure in the last decade alone.

And whilst such an increase in the overall value of the music industry would be widely welcomed, there will be concerns that the vast majority of that revenue will go straight to those who are already doing well, namely the three majors, without any real guarantees for artists and songwriters. Unless record deals and the laws surrounding them are regularly revisited for the digital age, these figures may not be quite so awe-inspiring for the music creators themselves.

If these figures are to be believed, then clarity from the labels on the structure of their business and the nature of their deals will be vital for the industry to bounce back to full effect. The big players will need to embrace new technologies that address the disparity between the labels and their artists. Otherwise we may well have another Bez-sized headache to take care of…



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