Home » 11 July 2019 » Evolution of music streaming economies and the decline of physical sales – An analysis

Evolution of music streaming economies and the decline of physical sales – An analysis

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The music business year 2018 was shaped by the ongoing boom in the music streaming economies. In April, Spotify had been listed as a stock market company and shortly thereafter the International Federation of the Phonographic Industry (IFPI) reported a 41.1 percent increase of global music streaming revenue to the US $6.6 billion for 2017.

In 2019 music streaming has become the most relevant revenue source with a market share of 47 percent in the phonographic industry (compared to physical sales 25 percent, downloads 12 percent, performing rights 14 percent and synchronisation rights 2 percent).

In 2011, the global revenue from music streaming was comparatively low with a market share of 4.1 percent and revenue of US $600 million. However, the countries, for which IFPI provides data, have not developed uniformly as highlighted in the following analysis.

In 2011, 83 percent of all markets were dominated by physical sales (CD, DVD, vinyl) with a market share of more than 50 percent. In particular, the GSA market countries had a digital market share below 25 percent. In Japan, France, Italy, Brazil and in the Netherlands CD sales were the most important revenue source for the recorded music companies too.

In the UK; Australia, Canada, Denmark, and Ireland the digital music market was already established with a share of more than 30 percent, but physical sales were still dominant. Just in a few countries/regions – China, Ecuador, India, Caribbean & Central America (excl. Mexico), Norway, South Korea, Thailand, and the USA – digital accounted for more than 50 percent of the overall revenue in 2011.

 

Streaming economies

 

However, music streaming was not relevant in most of the digitized music markets. Thus, in the US, South Korea, and China album and single track downloads were the most relevant revenue sources. Just in three countries – Sweden, Norway and Ecuador – a relevant streaming segment had evolved with a digital music market share of more than 50 percent.

In other countries music streaming was also the most important digital revenue source, but with strong physical sales and a market share of 50+ such as in Brazil, Bulgaria, Czech Republic, Finland, Singapore, Taiwan, and Turkey. Hong Kong had a special position in 2011 with an 83.9 percent streaming share of the digital market which was even higher than in the music streaming pioneering country Sweden.

In 2017, the overall picture was totally different from 2014. Nearly 85 percent of all countries in the sample were digitised (digital market share of more than 50 percent) due to a well-developed music streaming market with a digital market share of more than 80 percent such as Scandinavia (Denmark, Finland, Norway and Sweden) and Latin America (Brazil, Chile, Columbia, Ecuador, Mexico and the Central American countries).

 

 

In Asia, countries including India, the Philippines and Singapore had highly relevant music streaming markets as well as China and Thailand with a streaming market share of about 80 percent and more. Whereas in Malaysia and Indonesia digital music revenue was still dominated by music download sales.

 

Streaming economies

 

The US had a special position with a streaming market share of more than 60 percent, but with considerably high download sales. Whereas physical sales were not relevant anymore with an overall market share of less than 20 percent in the US in 2017.

In further countries – especially in Europe and Asia – streaming was the most important digital revenue source, but with a still important physical music market of 20 to 50 percent market share such as in Bulgaria, Czech Republic, Hungary, Ireland, the Netherlands, Portugal, Slovakia, Spain and Turkey as well as in Hong Kong, South Korea and Taiwan.

A smaller group of countries had digitised markets (market share of more than 50 percent), which were dominated by music streaming but with a relevant download segment such as Australia, Belgium, Canada, Greece, South Africa, Switzerland, and the UK.

In a few countries, physical sales were economically relevant despite high music streaming market shares such as in the Baltic States (Estonia, Latvia, and Lithuania), Croatia, France, Italy, and Poland.

Austria and Germany had medium streaming economies share in the digital segment and still considerably high physical sales. And Japan had the largest physical economy worldwide with a 75 percent market share of the physical product along with comparably low music streaming revenues that account for less than 50 percent of the digital music sales.

It can be summarized that all countries are on the way to music streaming economies, but in very different stages of the development. Whereas more than a quarter of all countries – especially in Scandinavia – had pure music streaming markets, other countries either had a relevant physical market segment (Canada, Switzerland, UK) or download segment (Indonesia, Malaysia, and the US). Finally, there are a few countries with a still important physical market such as Austria, Germany, and Japan.

 

Streaming economies

 

Streaming markets differ

The analysis also highlights that the streaming economies differ among countries. However, we have to consider that the IFPI revised the statistics for music streaming in 2016.

In the years prior to 2016, IFPI included paid subscriptions as well as the freemium streams income from Spotify & Co. in the category “subscription streams” and all revenue from audio or video streams monetised solely by ad-supported models in the category “ad-supported streams”.

In 2016, IFPI introduced three different streaming categories: (1) “subscription audio streams” which includes revenue from paid subscription services and premium tiers of services such as Spotify and Deezer; (2) “ad-supported audio streams” which includes income from free tier of audio subscription services such as Spotify and Deezer and (3) “video streams income” which includes revenue from video streams monetised by advertising or subscription models such as YouTube, YouTube Red and VEVO.

Therefore, the streaming categories introduced in 2016 do not correspond exactly to either of the two categories used in 2015 and in the years before. Nevertheless, a year-to-year comparison of 2011, 2014 and 2017 highlights a change of music streaming consumption behaviour in the different territories from ad-supported music streaming to subscription streams.

In conclusion, music streaming has boomed in the past few years and most of the countries included in the IFPI reports have turned into music streaming economies. Nevertheless, some countries had a still relevant physical market (e.g. Austria, Germany, and especially Japan) or download market (e.g. Indonesia, Malaysia, South Korea, and the US). Thus, different types of streaming economies exist side by side which can be explained by peculiarities in different countries.

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