The Great Music Industry Power Shift

The long drawn out demise of recorded music revenue is well documented, as is the story of artists, labels and managers all trying to make sense of a world in which music sales can no longer be counted upon.  But the contraction of recorded revenue has occurred at the exact same time that the live music sector has undergone a renaissance.  The net effect, when coupled with publishing revenue holding its own and  the growth of albeit modest, merchandise revenue, is that the global music industry has largely held its own, contracting by just 3% between 2000 and 2013 (see figure).  Compare and contrast with the 41% decline in (retail) recorded music revenue over the same period.  Indeed it is the 60% growth in live revenue that has done most to offset the impact of declining music sales.

Perhaps most significantly of all, the contrasting fortunes of the music industry’s two main revenue streams is that the share of total revenues accounted for by recorded income has dropped from 60% in 2000 to just 36% in 2013.  The balance of power has firmly shifted away from labels to the live value chain.  Yet it is not as clear a picture as might first appear:

• Recorded music is still the main way people interact with music:  Whether it be on the radio, YouTube, Spotify, an iTunes or a CD, the vast majority of consumers spend the vast majority of their music consumption time with the recorded product not the live product.  In fact just 15% of people regularly go to gigs.  And even for these consumers live is, in terms of total time spent, just a small fraction of their music consumption.  So labels are faced with paradox of making less money from artists yet those same artists still needing the recording in order to drive live and merch income.  This is why we ended up with 360 deals.
• Much of the market growth didn’t make it down to artists: The live music value chain is an incredibly complex one with multiple stakeholders taking their share (ticketing, secondary ticketing, venues, booking agents, promoters, tax, expenses etc.).  The share of live revenue that artists make from live has declined every year since 2000.  The impact on the total market is that  total artist income (i.e. from all revenue sources) has declined every year too since 2009.

The Next Music Industry

It is probably fair to say that we are approximately half way through a huge period of transition for the music industry.  The realignment of revenue is merely a precursor to the new business models, products and career paths that will emerge to capitalize on the new world order.  It is in this next phase that the real ‘fun’ will start.  Expect every traditional element of the industry to be challenged to its core, expect dots to be joined and old models to be broken.  But be in no doubt that what we will end up with will be an industry set up for success in the digital era.

NOTE: the figures quoted in this post are taken from a forthcoming MIDiA report: The Superstar Artist Economy: Artist Income and the Top 1%.  The report is a follow up to the previous MIDiA report ‘The Death of the Long Tail’