The good times are rolling in the music business once again.
According to IFPI stats released yesterday (April 25), the global recorded music industry witnessed a 5.9% rise in revenues in 2016 – with $15.7bn flowing back to labels and artists in the year.
That growth was propelled almost entirely by streaming platforms, which pumped $4.56bn towards rights-holders in the 12 months, up 60.4%.
These positives, however, have been welcomed with caution: not least as 2016’s financial haul is still almost 40% off the pace of the industry’s annual revenue peak of $23.8bn in 1999.
In addition, the fabled ‘value gap’ has raised its head yet again: over 900m people used online video streaming services last year, reported IFPI, which paid out $553m – a per-head annual average of just $0.61, or $0.05 per month.
Yesterday at the release of the IFPI Global Music Report, UMG’s EVP of Digital Strategy Michael Nash commented on where the recorded music industry finds itself today – and the challenges it faces to recapture its potential.
Read his comments in full below.
As you’ve heard from my colleagues, we’ve accomplished quite a lot over the past year:
• We grew our revenues and enhanced the value of artists’ work;
• We drove our digital transformation through innovation;
• We connected fans with the artists and music they love in compelling new ways;
• And, we invested in music’s future.
Those achievements made 2016 a year of solid accomplishment. But to declare “Mission Accomplished” is to fundamentally misunderstand the mission itself.
After all, the overriding strategic objective is to ensure that as our business continuously evolves, artists are given the broadest range of opportunities – in a marketplace where their music is fully and fairly valued.
Not just for 2016 or 2017, but for the future.
To breathe a sigh of relief and rest on our laurels, as if we’ve arrived at our destination, would be to completely misread the landscape. The digital transition is not a journey with a beginning, middle and end – physical to download to streaming – it is an ongoing transformation driven by a rate of technological change that shows no signs of decelerating.
“the overriding strategic objective is to ensure that as our business continuously evolves, artists are given the broadest range of opportunities – in a marketplace where their music is fully and fairly valued.”
You can view this in many ways. We see great opportunity.
This isn’t “Mission Accomplished,” but it’s also not “Mission: Impossible.” It won’t be easy – it will require hard work and real investment – but this sustained transformation presents enormous opportunity.
Why? First and foremost because, technology is making music more accessible globally than ever before.
The rapid rise of streaming – the main reason why consumption of music is exploding – is fueled by a mega-trend, mass consumer adoption of network-based services (AKA “the cloud”).
This is particularly evident with massive mobile content consumption on billions of smart phones.
We are witnessing a wave of innovation amplifying this mega-trend. For example, the recent development of voice-controlled smart speakers may establish an entirely new usage model in the home. And in the future, voice-control has the potential to greatly enhance the streaming music experience in the car.
Technology is not just increasing accessibility, it is creating new modes of consumption. And it is changing what is being consumed.
The very concept of music-based entertainment is being broadened – beyond records and songs – into new audio-visual and interactive formats including mobile messaging, live streaming, Virtual Reality and Augmented Reality.
I’m confident we’ll be here a few years from now discussing categories that haven’t even been invented yet.
We don’t have a crystal ball, but one thing is clear: music companies need to seize the initiative; drive further transformation; align business model innovation with technology innovation; and continue to expand the ways our artists can engage with their fans.
We must constantly remind ourselves that the only reason we saw growth the past two years – after some 15 years of substantial decline – is that “music” has been among the fastest-adapting sectors in the digital world.
“We are far more digital than virtually every other media segment. We have fully embraced the reality that our success is dependent on the harmonious convergence of media and technology.”
We are far more digital than virtually every other media segment. We have fully embraced the reality that our success is dependent on the harmonious convergence of media and technology.
However, our success relies on more than just our own transformational initiatives. Achieving a vibrant and sustainable future will require resolution of the market distortion known as the “value gap.”
The disparity between the immense scale of music consumption on services that rely on user-uploaded content, and de minimus revenue returned by these platforms to those who create and invest in music, is growing.
The scope of this inequality casts a shadow across the landscape that cannot be ignored. The longer this value destruction is permitted to continue, the greater the threat to the music ecosystem – with real costs to creators, fans and digital services themselves.
The “value gap” must not be permitted to derail our mission. We have worked too hard to get here.
Our digital transformation has required enormous effort, and significant investment on our part. Not only in our artists. Not just in the systems directly supporting the digital business. But more broadly in fundamentally reorganizing, retraining and redirecting our entire enterprises to succeed and thrive in this exciting digital future.
That work and investment is starting to pay off, as we witness the vitality of a new business landscape made up of hundreds of licensed digital services around the world, providing tens of millions of songs, to hundreds of millions, even billions, of consumers.
This dynamic, innovative digital music ecosystem would not exist without our dedicated, passionate commitment, a commitment that extends back to the previous decade when many pundits predicted our demise.
We got here through years of hard work. We must keep that in mind and not be lulled into complacency. We are at an early stage of a fragile recovery, in a business environment that is constantly evolving.
We must be unrelenting in our efforts to develop and embrace transformational opportunities.
For even as technological change proceeds unabated, we can continue to successfully evolve if we focus on our core objective: to support, nurture and develop artists – by giving them the broadest range of opportunities… in a marketplace where their music is fully and fairly valued.Music Business Worldwide