The Music Industry in 2016

The Music Industry in 2016

The music industry is constantly evolving and changing, and 2016 was no exception.  In October, the United States Department of Commerce released its 2016 Top Markets Media and Entertainment report.  Here are the major findings:

Overall, the music industry declined to $15.01 billion from $15.06 billion in 2015.  This decline is expected to be short lived: by 2019, the market is forecasted to be valued at $15.84 billion.

Digital Downloads and Streaming

Digital downloads are declining, and in coming months, growth will be nearly nonexistent, report says.

Meanwhile, streaming continues to grow, increasing at a compound annual growth rate (CAGR) of 11%.

In 2018, streaming will surpass digital downloads and will account for 55.1% of all digital music revenue the following year.

The music industry has been putting pressure on streaming services to limit their free subscription tiers, arguing that free music makes it more difficult for artists and songwriters to make a living.  The streaming services, however, say free tiers help bring in new users.

Live Music

Live music accounted for $9.3 billion in revenue in 2015 and the bulk of the revenue, $7.2 billion, was from ticket sales.  Sponsorships accounted for the remainder.

Over the next five years, live music revenue is expected to grow by 3 billion with concert ticket revenue growing faster than the sponsorship one.

Technology has played a major role in the music industry this century.  In the live music category, smart wristbands have changed concert goers experiences.  The wristbands offer cashless on-site payment and easy access to events.

In addition to concerts, every year there are countless music festivals, conferences and trade shows.  Globally, MIDEM is the largest trade show while in the U.S., the South By Southwest is the largest festival and conference.

Physical Sales

Physical music sales continue to decline, a trend that began a decade ago as they dropped from $2 billion to $1.4 billion.

Last year, Americans spent more on digital music than CDs and albums for the first time.  In other markets, this transition already had happened, in Europe for example, the majority of music sales comes from streaming.

Big Dogs Rule the Pack

The largest music markets continue to be dominated by three publishers and record companies.   In addition, they all have a stake in streaming music services.

Concerts are dominated by a handful of live promotion companies that vary by country.  New markets are opening, allowing artists to perform in nations they previously could not, thanks to partnerships and acquisitions.

Growth on a regional and national level is determined by the major companies, however, the American Association of Independent Music and the indie associations have recently witnessed a global growth despite the significant challenges they face.

Challenges and Concerns

Twenty-six percent of internet users have accessed unlicensed music services on a regular basis, according to comScore/Nielson.  This percentage, however, only takes into account services accessed by computer and is probably much higher when mobile devices are counted.

“Digital piracy is the biggest single threat to the development of the licensed music sector and to the investment of artists.  Piracy undermines the licensed music business across many forms and channels: unlicensed streaming websites, peer-to-peer, file-sharing networks, cyber lockers and aggregators, unlicensed streaming and stream ripping and mobile applications,” said the International Federation of Phonographic Industries.

The report says that the top music licensing markets are Germany, the UK, Canada, Brazil, Mexico and India.   The next growth market is difficult to predict.  Many factors influence growth including intellectual property laws, technology and consumer spending.

Another concern to the market is the two copyrights – one for notes and lyrics and one for the recorded version – that govern the industry.  These copyrights determine royalties.  There has yet to be a consensus over the Digital Millennium Copyright Act, and so long as users seek free music, they are less likely to buy it.

Buddy Iahn

Author: Buddy Iahn

Owner & Founder of The Music Universe and Atolma Productions.

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