For the first time since 1999 the recorded music industry showed an increase in sales in 2012 over the previous year. This is being hailed as the start of the road to recovery, but the rise is a mere 0.3 per cent over 2011, so is this something to celebrate or a dead cat bounce?
- Global recorded music industry revenues increased by an estimated 0.3 per cent in 2012, to US$16.5 billion.
- Digital revenues increased by an estimated 9 per cent to US$5.6 billion in 2012, now accounting for around 34 per cent of global industry revenues.
- Download sales increased in volume by 12 per cent globally in 2012 and represent around 70 per cent of overall digital music revenues
- The number of people paying to use subscription services leapt 44 per cent in 2012 to 20 million. Subscription revenues are expected to account for more than 10 per cent of digital revenues for the first time in 2012.
Charting the digital and non-digital sales revenues, the digital sales look to be steadily increasing year-on-year whilst the decline in non-digital sales seems to be levelling off. If both of these trends continue, then indeed it is possible that 2012 will be the turning point in the fortunes of the global recorded music sales industry.
Digital revenue does not only come from downloads. It has been boosted by innovative new offerings such as subscription services such as Spotify, licensed video services (e.g. YouTube) and digital radio that can adapt its playlists to tailor the experience to the user (Last.fm, Pandora).
Non-digital, physical formats still account for more than 50% of the market. Some of this seems to be a cultural preference. For example, in Japan CDs and DVD music video sales increased strongly, despite a weak digital sector. And across the world, deluxe box sets are now an established gift option (does it show our age to reveal that we gratefully received the latest Rolling Stones box set for Christmas?)
The IFPI report also highlights that music is driving growth in other markets, notably technology, helping to sell smart phones, tablets, and demand for fast broadband services. It is also a significant driver in the take-up of social media:
- 20m subscribers to streaming services such as Spotify
- 7 in 10 Google image searches are for artists
- 9 in 10 most “liked” people on Facebook are artists
- 7 in 10 most followed people on Twitter are artists – with 4 beating President Obama in followers
- 9 in 10 most viewed YouTube videos are music with PSY’s Gangnam Style overtaking Justin Bieber’s Baby last November to become the most watched YouTube video ever (>1 billion views within just five months of its release date)
Therefore music is a strong leveraging asset for many players in the digital economy, across many industries, not just music.
The report highlights that there are still many challenges to the recorded music sales industry. Piracy continues to be a major problem, with as many as 32 per cent of internet users still accessing unlicensed music sites. Whilst there has been global growth in 2012, many key markets are still in decline. For example, here in the UK whilst digital sales outstripped physical formats for the first time last year (Q1 2012), reaching 55.5% of revenues, the decline in CD album sales has not been matched by the increase in digital album sales. However, we are keen digital adopters, with one of the widest varieties of music streaming services, providing £49 million revenues in 2012, and we have downloaded 114 million digital albums to date.
It is also comforting to note, that the UK has 5 entries in the 2012 global Top 10 album chart, with Adele holding the first place for a second year. Her domination has decreased however, since she only appears once and has a lower percentage of the total Top 10 album sales (22% in 2012 vs 40% in 2011). One Direction have two entries in the top 10 in 2012 which was recognised by being awarded with a new Global Success Brit Award last month.
It is ironic that when digital was just starting it was seen as real threat to ‘real’ music, but now it has finally taken off it is the thing that is saving it.
With growth forecast in tablet and smartphone use, as well as the promise of increased digital uptake in Brazil, India, and South Korea amongst others, maybe after years of decline, this is really the start of a new era for the recorded music industry.
Finally, the Business Analytics blog will not be updating for the next three weeks whilst we upgrade our systems, but please return after that to see what we have been up to while we were offline.