For the First Time Ever, Streaming Surpasses CDs as the Largest Music Format Worldwide

While CDs will likely go the way of the dodo very soon, the music industry remains in full recovery mode.

According to a new report by the International Federation of the Phonographic Industry (IFPI), the global recorded music market grew 8.1% in 2017.  This marks the third consecutive year of growth.  In addition, streaming music revenue has surpassed sales from physical formats – namely CDs – for the first time ever.

“Mommy, what’s a CD?”

In its Global Music Report 2018, the IFPI found that revenue from subscription streaming music services surged over 41% last year to $6.6 billion.  Streaming revenue now accounts for 38% of the total global market for recorded music.

Underscoring what other research firms and major label financials have shown, physical format revenue fell once again.  Down 5.4% to $5.2 billion, sales from physical formats now account for just 30% of the total global market.  In addition, download revenue sharply fell 20.5% to $2.8 billion.

Streaming revenue helped offset both formats’ respective declines.  At 54%, total digital income last year accounted for more than half of all revenue.

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Julie Bergan Courtesy of Warner Music Group / IFPI

The industry’s third consecutive year of growth follows 15 years of significant revenue decline.

Despite sharp growth in streaming music, total revenue for 2017 is still only 68.7% of the market’s peak in 1999.  In both 1999 and 2000, physical format sales were the only source of income that the IFPI recorded.  The organization started tracking performance rights revenue in 2001, and digital and streaming music revenue in 2004.

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Image by IFPI

Performance rights revenue grew 2.3% last year to $2.4 billion.  It now accounts for 14% of total industry revenue overall.

In addition, synchronization revenue – revenue from the use of music in advertising, films, games, and television programs – increased 9.6%.  Synchronization maintained its 2% share of global recorded music revenue last year.

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Image by IFPI

2017 Figures by Region

Asia and Australasia saw overall revenue grow 5.4%.  As with the US, this marks the third year of consecutive growth in the region.  Digital revenue sharply rose 22.4%, though digital downloads fell 7.5%.  Streaming revenue also grew 38.2%.  It grew the most in India (60.8%), South Korea (47%), and the Philippines (24.3%).  Underscoring the country’s struggling music market, revenue in Japan – the region’s largest market – declined 3%.  Unlike the US, the slower rise in digital revenue (8%) hasn’t yet offset the declining physical market (-6.1%).  The Chinese music market, on the other hand, experienced a 35.3% growth, thanks primarily to a 26.5% rise in streaming revenue.

Latin America continues its upward trajectory with a 17.7% growth in revenue.  The region showed the highest level of growth around the world, driven by a 48.9% increase in streaming revenue.  As with the US, streaming offset a sharp 41.5% decline in physical revenue.  Growth was most apparent in Peru (21.7%), Chile (14.3%), Colombia (10.5%), and Mexico (7.9%).  After a 3% decline in 2016, the region’s largest market, Brazil, returned to impressive growth (17.9%).

At 4.3%, Europe experienced the slowest growth rate.  The European music market had grown 9.1% in 2016.  Accounting for 43% of the market, digital revenue in the region grew 17.5%.  Streaming revenue rose 30.3%, with revenue from paid subscription audio streams accounting for 70% of total digital revenue.  The region’s largest markets – Germany, the UK, and France – all saw growth in streaming revenue (46.2%, 41.1%, and 24.1%, respectively).  Physical revenue declined 7.4%, and revenue from digital downloads fell 21%.

The value gap still exists, and yes, it’s still YouTube’s fault.

User upload services – namely YouTube – continue to rank as the worst-paying service across the globe.

In the report, the IFPI notes that these services remain the biggest “challenge facing the music industry.”  Showing one clear example of the video platform’s poor payouts, the organization estimates that Spotify pays around $20 yearly per user.  YouTube, on the other hand, pays under $1 annually.  For both paid and ad-supported audio streams, streaming revenue totaled $5.6 billion.  With 1.3 billion users, video streams – again, from YouTube – only brought in $856 million.

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Image by IFPI

In fact, the IFPI found that video streaming makes up more than half of on-demand streaming time.  Paid audio streaming makes up for 23%, and ad-supported streaming 22%.

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Image by IFPI

So, what’s the solution?  According to the organization, actively campaigning for a legislative solution around the world.

The music industry remains on the slow path to recovery.

Hans-Holger Albrecht, CEO of Deezer, remained optimistic about the role of streaming music platforms in the industry.  In a statement to Digital Music News, he explained,

The latest data from IFPI clearly shows that streaming continues to be the biggest driver of and contributor to the growth of overall recorded music revenue, despite the fact that streaming penetration is still relatively low around the world.  We are proud to contribute to this positive trend.

IFPI Chief Executive Officer Francis Moore cautioned, however, that the music industry remains in recovery mode.

The industry is on a positive path of recovery but it’s very clear that the race is far from won.  Record companies are continuing in their efforts to put the industry back onto a stable path and, to that end, we are continuing our campaign to fix the value gap.  This is not just essential for music to thrive in today’s global market, but to create the right – fair – environment for it to do so in the future.

You can check out the full IFPI report here.

 


Featured image by Pimthida (CC by 2.0)

2 Responses

  1. lawl

    jo when I was selling CD’s to acquaintances and friends I made the fastest 200€ ever. took me only 2 days to gather for 200€ of orders.