The paradox of small

When the history books are written about our current times, the rise of creator culture will likely go down as one of the most impactful paradigm shifts. It is a dynamic that extends far beyond music, but it is impacting the music industry more directly than it is other entertainment industries – in large part because the music business is not yet set up for the economies of micro audiences. Until it is, artist royalty woes will remain a festering wound that risks infecting the entire business. The solutions will require a combination of a new approach to monetisation and a realistic understanding of what streaming can truly deliver to an artist community that is continuing to grow faster than streaming revenues.

More mouths to feed

Despite the challenges of the pandemic, streaming revenues grew by 20% in 2020, with subscriber numbers growing even faster. Over the same period, the number of releasing artists grew by more than a third. The arithmetic is brutally simple: more new artists than more new music revenue meant lower average income per artist. As economist Will Page puts it, there are more mouths to feed. Even within the fast-growing artists direct segment, where revenues grew dramatically faster than the overall market (34%), the average income per artist grew by just 2% to $234 a year – that’s right, just $234 a year, across all recorded music formats. And of course, that figure is heavily skewed up by a few thousand ‘superstar’ independent artists, with the vast majority earning far, far less.

Big numbers, small income

With artists direct numbering five million in 2020, never have there been so many people releasing their music to the global public. This creator revolution is unprecedented and represents five million dreams being chased. But with just $234 of annual income up for grabs, the reality is that nearly all of those dreams will be unfulfilled. It has always been thus with music, but the difference now is that expectations have been raised, with matters compounded by the fact that streaming numbers can appear big but deliver only small revenues. For example, a self-releasing artist that racks up 100,000 streams might only take home $500, which could easily feel like a very modest return to an artist that does not have a comprehensive grasp of how streaming royalties work.

The 0.05%

This is the paradox of small: more artists can reach global audiences and drive sizeable streaming metrics but have little or no realistic prospect of meaningful income. Much of the streaming income debate has revolved around the plight of the middle class artist but the bigger dynamic at play is the creation of the amateur enthusiast class. In the old music business, these artists lived in a different world from professional artists. They played in local bars and sold a handful of CDs there that they recorded in a local studio. Now they use the same creator tools as the pros and have their music on the same platforms. This can give the impression of playing in the same league as the pros, but they’re not. If they are good enough, do the right things and get the breaks then they can get into that league, but that will only happen for 0.05% of them.

Dreams just out of reach

Having dreams appear to be within touching distance but somehow never quite within grasp is fertile ground for breeding discontent and resentment. The parts of the music business that trade on this segment (artist platforms, digital distributors, streaming services, creator tools) have a duty of care that must move beyond its current remit of trading on artists’ dreams.

Fixing streaming royalties will not change things. Even if you doubled royalty rates, 100,000 streams would still only generate $1,000 for an independent artist. Meanwhile, it would result in streaming services losing 40 cents on every dollar earned, and that’s just to cover the royalty rates, i.e., not even considering things like having a product, staff, offices, marketing or operations.

Looking elsewhere for income

Streaming royalties are never going to add up for most independent artists, in the same way radio would never do so. And this is not just a self-released artist problem: most artists will never get paid ‘enough’ money from streaming, and trying to make streaming royalty mechanisms do so is tilting at windmills. As I have previously written about, the music business needs to build out its ancillary revenue streams for music creators. There are already lots of options, such as:

  • Selling song writing services on Soundbetter
  • Selling beats on Splice
  • Selling merch on Bandcamp
  • Selling subscriptions on Twitch
  • Selling royalty free music on Artlist
  • Sell live stream concert tickets with Driift
  • Selling artist subscriptions on Fan Circles
  • Selling digital collectibles on Fanaply

Record labels, management, distributors, streaming services, and creator tools companies all need to invest in helping their artists build their fan bases and income on such platforms. This investment in their creators’ incomes will ensure that they are better able to continue to make the music that fuels the business models that all those other entities have learned to make work in a way most individual creators have not and cannot.

Streaming services must fix the problem… or someone else will

Nevertheless, the market also needs something more – a platform glue that binds together creation, audience and consumption. Contrast a music artist with a games streamer. A games streamer creates, streams, finds and monetises their audience all within one platform (e.g., YouTube or Twitch). A music artist, however, creates music in one platform, takes it to another for distribution which then feeds it into streaming platforms where the artist has no direct relationship with their audience. There are exceptions to the rule (Bandlab, Soundcloud and YouTube especially) but they are just that: exceptions, not the rule.

Either streaming services need to start backing up their creator-first language with creator-first tools, or instead watch from the side lines as someone else does it for them. Whoever leads the charge, the paradox of small will finally become slightly less of a paradox.

Recorded music revenues hit $23.1 billion in 2020, with artists direct the winners – again

The global pandemic caused widespread disruption to the music business, in particular decimating the live business and impacting publisher public performance royalties. Although the recorded music business experienced a dip in the earlier months of the pandemic, the remainder of the year saw industry revenue rebound, making it the sixth successive year of growth. Global recorded music revenues grew 7% in 2020 to reach $23.1 billion in record label trade revenue terms. The growth rate was significantly below the 11% increases seen in both 2018 and 2019, and the annual revenue increase was just $1.5 billion, compared to $2.1 billion in 2019. These metrics reflect the dampening effect of the pandemic. Global revenue was down 3% in Q2 2020 compared to one year earlier, but up to 15% growth in Q4 2020, suggesting a strong 2021 may lie ahead if that momentum continues.

Streaming growth driven by independents (labels and artists)

Streaming revenues reached $14.2 billion, up 19.6% from 2019, adding $2.3 billion, up from the $2.2 billion added in 2019. So, 2020 was another year of accelerating streaming growth and, given that Spotify’s revenue growth increased by less in 2020 than 2019, this indicates that it is for the first time meaningfully under-performing in the market, due to the rise of local players in emerging markets and strong growth for YouTube. For the first time, the major labels under-performed in the streaming market – but not all majors were affected in the same way. Sony Music Entertainment (SME) was entirely in line with streaming market growth, Universal Music Group (UMG) slightly below and Warner Music Group (WMG) markedly below. Independent labels and artists direct both strongly overperformed in the market, collectively growing at 27% and thus increasing their combined streaming market share to 31.5%.

Market share shifts

The major record labels saw collective market share fall from 66.5% in 2019 to 65.5% in 2020. While this shift is part of a long-term market dynamic, most of the dip was down to WMG reporting flat revenues for the year. SME gained share and UMG remained the largest record label with 29.2% market share. Independent labels also saw a 0.1 point drop in market share, but there was a very mixed story for independents. MIDiA fielded a global survey of independent labels and the data from that helped us track the contribution of independents. Independent labels as a whole grew by 6.7% (i.e. slightly below the market), but within the sector there was a massive diversity of growth rates, with smaller, newer indies tending to grow faster than the market (some dramatically so) and larger, more established indies growing below the market rate. There were also many independents (of all sizes) that saw revenues fall in 2020.

The unstoppable rise of independent artists

In 2019, artists direct were the stand-out success story, massively outperforming the market. History repeated itself in 2020 with artists direct growing by a staggering 34.1% to break the billion-dollar market for the first time, ending the year on $1.2 billion and in the process increasing market share by more than a whole point, up to 5.1% in 2020. The continued rise of independent artists reflects the clear and pronounced market shift towards this new, emerging generation of artists. With lots of private equity money now pouring into creator tools companies like Native Instruments, expect this space to heat up even further in 2021. The recorded music business is changing, and it is changing fast.

Creator tools: The music industry’s new top of funnel

For most of 2020, MIDiA has been working on a major piece of work around the fast-growing creator tools space. The themes we had already started working on became rocket propelled with the onset of the pandemic, with an unprecedented volume of artists starting to engage with music production tools, services and hardware. Even before COVID-19, the creator tools space was set to transform the entire music business; now that future has become the present. This landmark report ‘Creator Tools – The Music Industry’s New Top of Funnel’ is immediately available to MIDiA Research clients here (more details of the report can be found at the bottom of this post).

Music production used to be a siloed segment of the music industry that revolved around studios, hardware and packaged software – at best a cost centre for labels. Now that is all changing. A new wave of creator tools companies are meeting the needs of a new generation of artists with innovative and intuitive music production solutions. Adding to an already vibrant marketplace, this new breed of production tools and services, often subscription-based, are reinventing the creative process and will reshape the long-term view of what a music company is. 

This is set to be the most dramatic product strategy shift the music industry has experienced in decades catalysed by the COVID-19 pandemic. 68% of independent artists reported making more music and 36% doing more online collaborations during lockdowns.

There are 14.6 million digital music creators globally, of which 4.7 million are self-releasing ‘artists direct’, up 31% from 3.6 million in 2019.

The emergence of a subscription economy

In the same year, music software, sounds and services generated $884 million, with plugins and VSTs the largest single segment at 43%. Building on this ‘COVID bounce’ total revenues will reach $1.86 billion by 2027. Though music software is the most widely-adopted creator tools category among independent artists, sounds and services will be the two largest drivers of future growth. 

Subscriptions models will also be key, with new models, more self-sufficient tools and the rise of SAAS services making the market majority subscription by 2026, with subscription services reaching $870 million by 2027, up 477% from $151 million in 2019. The shift from software sales to SAAS models means these companies are collecting crucial creator data before they even get to the distribution or release stage, giving these companies the ability to identify the likely hits before they even get into streaming services. This is the music industry’s new top of funnel. Meanwhile at the other end of the funnel, Apple (Garage Band, Logic) and Spotify (SoundBetter, Soundtrap) are well placed to push up the funnel, with the foundations of what tomorrow’s record label will be. Sony Music’s move to invest in creation app Tully is the start of what will rapidly become a creator tools arms race. Expect Splice and LANDR to become sought after by both labels and streaming services. 

Creative feedback loops

The new breed of creator tools is also fostering creative feedback loops between other creators and in some cases with audiences—a dynamic MIDiA expects to become a mainstay of the future production landscape as digitally-native Gen Z and younger millennials mature in their production capabilities. The creator tools that build around such creative feedback loops will be those that resonate most with the young generation who will be the creators and fans of tomorrow’s music business. 

Snap’s acquisition of collaboration app Voisey illustrates how this is so much more than just a music tech play. We are on the cusp of a consumer revolution also. Just like TikTok made amateur video making a mainstream consumer activity as Instagram did photography, so this new generation of apps and games are aiming to do the same with music. Warner Music’s Tones and I making a soundpack available for fans to create music with inside Roblox’s Splash is an early indication of how music making is about to go mainstream.

Just as samplers and DAWs transformed music making, so this new approach to production will change the future of how music is made and in turn, how it sounds. Music production product strategy is at a pivot point, where a new breed of user experience-led propositions will rise to prominence. The smart services that have already empowered their users to go from zero to 100 more quickly than ever before, will grow their offerings in line with their user base’s growing capabilities. The business of music has always shaped the culture of music, but perhaps never more so than how the creator tools revolution will reshape the future of what it means to be a fan, an artist and a music company.

If you are not yet a MIDiA client and would like to learn more about how to get access to the ‘Creator Tools – The Music Industry’s New Top of Funnel’ then email stephen@midiaresearch.com

Report details

Pages: 48

Figures: 15

Words: 7,500

Vendor profiles: 12

Products tracked: c.2,000

Excel includes:

Music Software, Sounds and Services Revenue

Creator Tools Value Chain

Software Tracker Summary

Software Tracker – Plugins

Software Tracker – VSTs

Software Tracker DAWs

Software Tracker – Rent-to-own

Software Tracker – Platforms

Software Tracker – DJ Tools

Creator Tools Company Directory

Methodology Statement

COVID-19 hit major labels much harder than it did Spotify

COVID-19 was always going to have a significant impact on the music business, and with the Q2 results for all of the major music companies now in we can start to look at just how big that impact has been so far. Year-on-year (YoY), combined major label recorded music revenues fell by 7.8% on a current currency basis while major publisher revenue fell by 1.6% over the same period (though slow reporting for income such public performance means that the full impact on publishing is yet to be seen). The figures in themselves are disappointing for an industry that has grown acclimatised to growth but the factors driving this are global economic and health policy ones. As we identified back at the start of June, income streams such as physical, public performance and ad supported are all vulnerable to lockdown impact. The only truly resilient revenue source so far is paid subscriptions. The dependency on streaming has never been higher but there are questions here too.

q2 2090 major label streaming music revenues

Major label streaming revenue fell by 0.6% in Q2 2020 compared to the previous quarter. Although it was up YoY by 6.3%, (and even allowing for seasonality), there was already a clear slowdown in growth before COVID-19 kicked it into reverse. When markets mature, the margins between growth and decline are small. So, factors such as the weakening digital ad market pushing down ad-supported revenues can be the difference between being in the red or in the black. The music business is going to have to get used to ad-supported under-performing because advertising is always an early victim of recessions.

Despite all of this gloom, the likelihood is that by the end of the year, there will have been sufficient return to growth in many sectors and regions, meaning global recorded music revenues will be higher in 2020 than 2019 – not by much, but up nonetheless.

However, the streaming slowdown emphasises just how important it is for the industry to establish a series of potential plan Bs to streaming’s plan A, and fast.

spotify revenues compared to major label revenues q2 2020

Q2 2020 wasn’t bad news for everyone in streaming. In fact, Spotify actually increased its revenues both quarter-on-quarter (2.2%) and annually by 13%, i.e. double the rate the majors grew their streaming revenue. The result is that by Q2 2020, Spotify’s total revenue was only 5% smaller than the entire major labels’ streaming revenue combined. All this was despite Spotify’s ad-supported revenue falling by 11%. Spotify’s revenues are slowly but surely becoming uncoupled from that of the majors. Although factors such as timing of revenue recognition and payments to rightsholders will play a role, the key inference is that independents grew faster than majors on Spotify in Q2, continuing the 2019 trend. Although, the term ‘independent’ is becoming progressively less useful as the market internationalizes; in addition to independent labels and artists we are seeing growing impact from regional, non-western ‘majors’ e.g. T-Series, India; Avex, Japan; YG Entertainment, South Korea.

The three key takeaways from all this are:

  1. Streaming revenue growth was already slowing. COVID-19 shows us just how important it is to push new growth drivers
  2. Spotify is already working on its new growth driver (i.e. podcasts) and though the slowdown in the digital ad market will dent momentum, podcasts will further decouple Spotify revenue from that of the majors
  3. The more likely scenario remains that streaming and label revenues will pick up before year end, but if the recession deepens and swathes of millennials lose their jobs, then subscription revenue could be hit, which brings us back to takeaway #1

The IFPI Confirms 2019 was the Independents’ Year for Streaming

UPDATE: this post has been updated to correct an erroneous data point. Previously it stated that independent market share was 41%. It has been corrected to 29%

Recently I wrote about how a little-known Spotify statistic revealed that independents (labels and artists) outperformed the majors on its platform in 2019. The IFPI’s latest global revenue estimates provide further evidence of 2019 being a stellar streaming year for independents. As we have two sets of fixed reported figures (major label reports, and the artists direct sector reported by MIDiA) we can simply deduct these figures from the IFPI’s streaming figures to reveal what the IFPI estimates independent label revenues to be. The tl;dr: Independents grew by 39% while majors grew by 22%, which means that the independents’ global share of streaming revenue increased by two whole points from 27% to 29%.

ifpi midia 2020 streaming

The IFPI reported global streaming revenues of $11.2 billion, however these figures include YouTube but not Pandora ad supported revenues. So, to match up the IFPI’s definition with how the record labels report the revenue we need to add in Pandora ad revenue which takes us to $11.9 billion which is almost exactly what MIDiA reported two months ago.

Although independent labels and artists grew fastest in relative terms in 2019, the majors grew most in absolute terms, adding nearly twice as much net new revenue ($1.5 billion compared to $0.8 billion). The majors remain the powerhouse of the streaming economy but independents are rapidly making this space their own. If they were to add another four or five points of share across 2020 and in 2021, then independents would be represent a third of the entire streaming market. But a crucial consideration is that these figures are on a distribution basis, so the major revenue includes independents they distribute. According to the last WIN study, the independent market share went up another c12%. On that basis, by 2021, the independent label share of streaming could be approaching 50%. That would be a genuine paradigm shift, the clear announcement of a newly aligned music business.

Soon we’ll be writing on how the majors can turn this around. Watch this space.

Independents Grew Fastest on Spotify in 2019, But There’s a Twist

Tomorrow (Wednesday 29th April) Spotify announces its Q1 2020 results, at which point we will find out whether it had a COVID-bounce like Netflix did (adding 15.8 million subscribers in Q1) or whether growth slowed. But before that, there is one little detail from Spotify’s 2019 Annual Report which warrants a closer look. Hidden away in the commentary there is this innocuous looking line:

“For the year ended December 31, 2019 [Universal Music Group, Sony Music Entertainment, Warner Music Group, and Merlin] accounted for approximately 82% of music streams.”

The same line is in Spotify’s 2018 Annual Report with the figure at 85%. So, the majors and Merlin indies saw their share of Spotify streams decline by three percentage points in 2019. That in itself is interesting and builds on the narrative of the streaming tail getting longer and fatter, with the superstars losing share. But with a little creative thinking we can do a lot more with this three percentage points shift.

Using MIDiA’s label market shares data for FY 2019 we can do a full breakdown of Spotify’s streaming revenue. Applying shares for streaming volumes to streaming revenue, and shares for the total streaming market to Spotify is not methodologically pure and has margins of error, but it is a broadly sound approach and lets us do the following:

  • First we apply the percentage share to Spotify’s annual revenue
  • Next, we take the majors’ share of streaming revenues for 2019 and apply them to Spotify’s streaming revenue
  • We can then deduct the majors from the majors + Merlin total to leave us with Merlin’s revenue
  • Then we apply the independent artists streaming share to the Spotify revenue which leaves us with one remaining segment: ‘other independent labels’

spotify streaming griowth by label type

What emerges is a hierarchy of dramatically different growth rates, ranging from just 11% for Merlin labels through to a dramatic 48% for independent artists and an even more impressive 58% for ‘other independent labels’. This provides further evidence of the way in which (much of) the independent sector continues to thrive during streaming’s continuing ascendancy.

spotify streaming growth by label type

Most intriguing is the 58% growth for ‘other independent labels’. I am using the quote marks because this is essentially an ‘all others’ bucket and so captures music entities that don’t fit the traditional classification of ‘label’. This includes AI generative music and of course library music companies like Epidemic Sound.

It is of course important to consider that growth rates are not absolute growth – the majors still added much more new Spotify revenue in 2019 (€1 billion) than all of the rest put together. Nonetheless, the difference in growth rates is stark and only Spotify will be able to answer questions about how much of this is organic versus how much of this is driven by the way that it engineers its recommendations and programming.

Whatever the causes, the effect is clear: streaming benefits everyone but it benefits some more than others.

Recorded Music Revenues Hit $21.5 Billion in 2019

With IPOs from Warner Music and Universal Music pending and continued institutional investment into music catalogues, the music business is firmly in the sights of big money. The performance of the recorded music business in 2019 is going to heat up interest even further. The global recorded music industry continued its resurgence in 2019 with a fifth successive year of growth. Global revenues grew by 11.4% in 2019 to reach $21.5 billion, an increase of $2.2 billion on 2018. That growth was bigger than 2018 in both absolute and relative terms. Whichever way you look at it, growth accelerated, and – crucially – this growth was achieved even though streaming revenue growth slowed.

recorded market shares infographic

These are the key trends that underpinned growth:

  • Independence is on the rise: The major record labels retained the lion’s share of the overall market in 2019, accounting for 67.5% of the total – down half a point from 68.0% in 2018. The remaining 32.5% accounted for by independent labels and artists combined was up 0.5 points from 2017 and 4.6 points from 2015. Artists direct – i.e. artists without record labels – was again the fastest-growing segment of the market, growing by 32.1% in 2019 to reach $873 million, representing 4.1% of the total market, up from 1.7% in 2015.
  • Big year for Universal: Universal Music Group was the big winner among the majors, growing both faster than the other two majors and the total market to reach 30% market share. Universal also added more revenue in 2019 ($729 million) than Warner Music and Sony Music combined ($650 million).
  • Race for 2nd heats up: In 2015 Warner Music’s recorded music revenue was just 67% of Sony Music’s, and at the end of 2019 that share had increased to 93%. Just $279 million separated Warner and Sony at the end of 2019. Based on 2019 growth rates, Warner would be level with Sony by the end of 2022.
  • Still stream powered: Streaming was again the key source of growth, up 24% year-on-year to reach $11.9 billion, representing 56% of all label revenues. But growth is slowing; streaming revenue grew by $2.3 billion, which was $64 million less than in 2018. The reason that the total market was able to grow as fast as it did in spite of this is because downloads and physical fell by $0.4 billion less than in 2018. So, ironically, it was the improved performance of legacy formats that enabled streaming’s performance to be good enough to drive 11.4% growth. 

Despite the inevitable slowdown in streaming revenue growth, the recorded music market managed to not only consolidate on its strong 2018 performance but improve upon it in 2019. The continued boom in recorded music revenues is accompanied by a growing complexity to the underlying business, with increased diversification of business models and artist/label relationships. Over the next few years continued revenue growth will be both accompanied and driven by business model innovation and disruption.

The Frank Ocean Days May Be Gone, but Streaming Disintermediation Is Just Getting Going

Aaron_Smith
At the start of this month Apple struck a deal with French rap duo PNL. PNL are part of a growing breed of top-tier frontline artists that have opted to retain ownership of their masters. In our just-published Independent Artists report (MIDiA clients can read the full report here)we have sized out the label services marketplace, and when it is coupled with artists direct (i.e. DIY) the independent artist sector was worth 8% of the entire recorded music business in 2018.

While that number may sound relatively modest, it is growing fast and represents the future. Traditional label deals are not disappearing, but they are becoming just one component of an increasingly complex recorded music revenue mix. This is the industry context that enables initiatives such as Apple’s PNL deal and both Spotify and Apple backing Aaron Smith, who incidentally is signed to artist accelerator Platoon, which is a company that Apple acquired in December 2018.

Independent artists open up new opportunities for streaming services

When Apple did its exclusive with Frank Ocean back in 2016it caused such an industry backlash that UMG head Lucian Grainge banned his labels from doing exclusive deals and the movement seemed dead in the water. If there was any doubt, Spotify kicked up so much label ill will when it launched its Direct Artists platform that it officially shuttered the initiative in July. However, now we are seeing that there many more ways to skin the proverbial cat. It is perfectly possible to disintermediate labels without having to actually disintermediate them. Doing an exclusive with an independent artist or giving him / her priority promotion is doubly effective for streaming services as:

  1. Record labels have no right to complain because independent artists have just the same right of access to audiences as label artists
  2. The more exposure independent artists get, the more their market share will grow, which will lessen record labels’ market share, which makes it harder for them to resist and easier for the streaming services to start making bolder moves down the line

Ambiguity will be the shape of things

Even this structure plays into the traditional view of labels versus the rest. The new truth is much more nuanced. For example, when Stormzy was duetting with Ed Sheeran at the Brits, signed on a label services deal to WMG’s ADA, was he a Warner artist or an independent artist? He was, of course, both. The evolution of the market will be defined by progressively more of this ambiguity, which will give streaming services equally more ability to not only play to these market dynamics but to stress-test the boundaries. The simple fact is that streaming services will become ever-agnostic with regards to artists’ commercial partnerships and in turn they will become a more important component of the value chain. Apple Music did the PNL deal because they had much more commercial flexibility dealing with an independent artist than dealing with a label artist. At some stage, labels will have to decide whether they want to revisit the exclusives model. Without doing so, they may not get a seat at the new table.

Artists Direct and Streaming the Big Winners in 2018

With less than two weeks of 2018 left, the die is largely cast for the year, but we’ll have to wait at least a couple more months for the major labels to announce their results (though WMG still hasn’t declared its calendar Q3 results), and then another month or so for the IFPI numbers. So, in the meantime, here are MIDiA’s forecasts for 2018 based on the first three quarters of the year and early indicators for Q4.

midia research 2018 music revenues and market shares

To create our end of year revenue estimate, we collected data from record labels, national trade associations and also confidential data from the leading Artist Direct / DIY platforms. We plugged this data into MIDiA’s Music Market Share model and benchmarked against quarterly and full year 2017 growth.

The headline results:

  • Recorded music revenue will hit $18.9 billion this year: This represents an increase of 8.2% on 2017 which is a slight lower growth rate than 2016–2017, which was up 9%. However, net new revenue ($1.4 billion) – is almost exactly the same amount as one year previously. The recorded music market appears to be settled into a steady, strong growth pattern.
  • Streaming revenue up to $9.6 billion: The 41% growth rate of 2017 may be gone, replaced by 29%, but the absolute amount of new revenue generated was, as with the recorded music total, the same as 2017 $2.2 billion. There was enough growth in the big mature streaming markets – the US especially – to ensure that streaming continued to plot a strong course in 2018. Though the fact that total revenues grew by $0.8 billion less than streaming revenue, indicates the pace at which legacy formats continue to decline.
  • Artists Direct the big winners: MIDiA was the first to quantify the global revenue contribution of the Artists Direct (i.e. Independent Artists, DIY etc.) last year when we published our annual market shares report. Now we can report that the spectacular growth registered by this segment continued in 2018. Total Artist Direct revenue was $643 million, up an impressive 35% on 2017, i.e. more than three times faster than the market. Unlike the rest of the market, Artists Direct revenue growth is accelerating in both percentage and absolute terms, with market share up from 2.7% in 2017 to 3.4% in 2018. (It’s worth noting that only a portion of Artists Direct revenue is measured by the IFPI. Categories such as at-gig CD sales aren’t captured by either the labels or measurement companies that national trade associations depend upon to measure the market. So, expect the IFPI’s global recorded music total to come in closer to $18.6 billion).

It was another great year for the recorded music business, with streaming consolidating its role as industry engine room. Here are the key takeaways for 2019:

  • Global recorded revenues will grow once again in 2019 – this rebound has a good number of years left in it. Even if label revenues hit $25 billion (where the market was at in 2000 before the decline) in real terms (i.e. factoring in inflation etc.), that would actually be around half the actual value. While it is not realistic to expect a $50 billion market, getting towards the inflation-reduced $25 billion is certainly a realistic target.
  • Streaming growth will slow in the big mature markets (US, UK), but impact will be offset by growth in markets such as Japan, Germany, Brazil, Mexico. Overall market growth, though still strong, will be slower.
  • 2019 will be a coming of age year for Artists Direct, label services companies, JVs and other alternative models that have been establishing themselves in recent years. It’s never been a better time to be an artist, as long as you and / or your management are clued up enough to know what to ask for.