MIDiA music forecasts: the new era of growth

MIDiA has just published its latest music forecasts, available to clients in full here. Here are some of the highlights.

2021 was a huge year for the recorded music business with retail values up 23% to reach $51.9 billion (retail values include masters, publishing, and retailers / DSPs). Label trade revenue was up 20% to reach $22.9 billion. Part of the reason for the wide gap between retail and label growth was the rise of non-DSP streaming that sees a much higher share go to publishing than for DSP streaming. Non-DSP streaming was worth $3.0 billion in 2021 across masters, publishing, and platforms. Production music (a segment missed out of most other market estimates) was another strong performer, generating around one billion dollars.

MIDiA forecasts global recorded music revenues to reach $89.1 billion by 2030 in retail terms. That is an increase of 72% on 2021. The $37.2 billion that will be added by 2030 will be more than was added between 2014 and 2021, meaning the music business is not even yet halfway through a long-term rebound phase. While there is a well-reasoned argument that music revenues are still not back to pre-Napster levels, the coming years should right that anomaly (rampant inflation permitting). 

Streaming will be 82% of 2030 music revenues and it is therefore streaming market dynamics that will underpin overall market growth: 

Subscriptions: Increased ARPU in Western markets and increased subscribers in emerging markets. Europe and North America will represent just 23% of subscriber growth between 2021-2030

Non-DSP: Emerging social, games, and metaverse platforms will offer new licensing opportunities. Non-DSP provides a licensing and business model framework for future emerging consumer technologies, such as Web 3.0, giving rightsholders crucial revenue diversification as subscriptions mature

Emerging markets: Asian markets in particular will become the engine room of subscriber growth. The Asia-Pacific region alone will have 0.5 billion subscribers by 2030. China accounted for 39% of global subscriber growth in 2021

The US: Even though the US will lose a share of subscriber growth by 2030 (due to China’s growth), it will drive the largest share of subscription revenue growth and will remain the world’s largest market by 2030 in revenue terms

Label trade subscriber ARPU will grow by more than 7% globally by 2030, lifted by price increases equivalent of 17%, but offset by reduction due to the growth of multi-user plans and a drop in label share.

Bull or bear?

With the influx of capital into the music business in recent years (IPOs, catalogue acquisitions, etc.) there is more attention on the space than ever. 2021 was the year in which the music business met those inflated expectations with exceptional performance, underpinned by the early fruits of a new and diversified commercial strategy that is ready to soundtrack the future of the web. 

It was a combination of these factors, forecasting non-DSP for the first time, and accounting for the exceptional performance of China in 2021, that led to MIDiA significantly increasing its forecasts by around 25%. We believe this significant increase (our biggest ever) reflects the new potential of the global music business as it enters a new chapter that will be shaped by non-DSP, Web 3.0, and emerging markets.

But – and it wouldn’t be MIDiA without a ‘but’ – this bullish outlook coincides with the global economy on the brink of entering a tailspin. So, to be prudent, MIDiA’s forecasts also include a detailed bear scenario dataset with label trade revenues slowing to just 3% for 2022, and from there, adding just another 14.3% by 2030.

We think this bear scenario is unlikely to play out, despite being within the realms of possibility. Should the global economy slow, then the likelihood is that while music will prove not be ‘recession proof’, it will neither be recession vulnerable.

If you would like to learn more about MIDiA’s music forecasts email stephen@midiaresearch.com

Did independents really do three times worse than the majors in 2021?

Today, the IFPI released its estimates for the global recorded music market, with reported revenues of $25.9 billion. Last year, the IFPI estimated global revenues to be $21.6 billion (note that the IFPI retrospectively changes its historical figures every year, but you can see its actual 2020 figure here), which implies a growth rate of 20% (18.5% against the IFPI’s rebased 2020 figure of $16.9 billion). The IFPI estimate is significantly below MIDiA’s figure of $28.8 billion – but before getting into the reasons for the differences*, it is worth diving into just what the IFPI’s $25.9 billion figure implies for the size and performance of independent sector.

The major labels’ combined revenue in 2020 was $15.2 billion, and in 2021 it was $18.7bn, representing 25% annual growth. If you simply deduct those figures from the IFPI figures you end up with an implied independent figure of $6.5bn for 2020 and $7.0 billion for 2021. Here is where things start to get interesting. The implied indie growth rate is therefore just 9%, i.e., indies (according to the IFPI) grew three times more slowly than the majors, with implied market share dropping from 30% to 27%. Everything that MIDiA has been hearing from the market suggests that 2021 was actually a strong year for the non-majors. Indeed, Believe just reported a 31% growth, while the ‘label’ portions of HYBE’s revenues increased by 29% (though, not all of that growth was organic). If we remove the revenues of those two labels from the IFPI’s implied indies figure, the remainder of independents would have grown by just 4% in 2021.

To take this line of thought a step further, if we additionally remove the artists direct (i.e., self-releasing artists, which grew by 30%) revenue from the IFPI’s implied indie segment, the growth drops to minus three percent. Even accounting for bigger, older independent labels that did not fare so well in 2021, a -3% growth does not feel like a reflection of an otherwise vibrant sector.

One key reason for the growth and values looking smaller in the IFPI’s figures is that they may not include non-DSP revenue (TikTok, Meta etc), which MIDiA pegged at $1.5 billion in 2021. The IFPI reported all streaming revenues as $16.9 billion which is in line with MIDiA’s $17.0 billion for DSP-only streaming. It is worth noting that majors have around 65% market share on DSP streaming. If the IFPI’s streaming figures do include non-DSP, the implied market share for majors would be 74% (total major label streaming revenue was $12.6 billion in 2021).

Numbers are important, as they are what enable people to understand how markets are performing and what decisions to make. MIDiA’s overriding objective is always to provide the most comprehensive and authoritative data as possible, in an entirely agenda-free way. We have no intention nor objective to make the market look any bigger than we think it actually is. In fact, MIDiA has a well-earned reputation for being on the bearish side of market sizing and forecasts. Nonetheless, this year, our work has led us to the viewpoint that 2021 was a great year right across the recorded music market, with majors and indies alike finding success in a rejuvenated marketplace. And long may that continue.

*The main distinctions between MIDiA’s revenue figures and the IFPI’s are the following:

  • MIDiA includes all reported major label revenue
  • MIDiA includes the masters side of music production music libraries (including royalty free)
  • MIDiA includes a portion of D2C independent artist and label revenue that does not get tracked via traditional tracking methods
  • MIDiA includes some independent label revenue that does not get tracked via traditional tracking methods

NOTE: a previous version of this post had incorrectly stated non-majors have around 65% share on DSP streaming. It now reads ‘majors’

Music subscriber market shares Q2 2021

MIDiA’s annual music subscriber market shares report is now available here (see below for more details of the report). Here are some of the key findings.

The global base of music subscribers continues to grow strongly with 523.9 million music subscribers at the end of Q2 2021, which was up by 109.5 million (26.4%) from one year earlier. Crucially, this was faster growth than the prior year. There is a difference between revenue and subscribers – with ARPU deflators, such as the rise of multi-user plans and the growth of lower-spending emerging markets – but growth in monetised users represents the foundation stone of the digital service provider (DSP) streaming market. So, accelerating growth at this relatively late stage of the streaming market’s evolution is clearly positive.

Spotify remains the DSP with the highest market share (31%), but this was down from 33% in Q2 2020 and 34% in Q2 2019. With Apple Music being a distant second with 15% market share, and Spotify adding more subscribers in the 12 months leading up to Q2 2021 than any other single DSP, there is no risk of Spotify losing its leading position anytime soon – but the erosion of its share is steady and persistent. Amazon Music once again out-performed Spotify in terms of growth (25% compared to 20%), but the standout success story among Western DSPs was YouTube Music, for the second successive year. Google was once the laggard of the space, but the launch of YouTube Music has transformed its fortunes, growing by more than 50% in the 12 months leading up to Q2 2021. YouTube Music was the only Western DSP to increase global market share during this the period. YouTube Music particularly resonates among Gen Z and younger Millennials, which should have alarm bells ringing for Spotify, as their core base of Millennial subscribers from the 2010s in the West are now beginning to age.

But the biggest subscriber growth came from emerging markets. Between them, Tencent Music Entertainment (TME) and NetEase Cloud Music added 35.7 million subscribers in the 12 months leading up to Q2 2021. Together, they accounted for 18% of global market shares, despite being available only in China. Yandex, in Russia, was the other big gainer, doubling its subscriber base to reach 2% of global market share.

Combined, Yandex, TME and NetEase account for 20% of subscriber market share, but they drive 37% of all subscriber growth in the 12 months leading up to Q2 2021.

The strong growth in subscribers holds an extra meaning going into 2022. The surge in non-DSP streaming in 2021 means that the streaming market is no longer dependent on the revenue contribution of maturing Western subscriber markets (nor indeed ARPU-diluting emerging markets). With non-DSP streaming revenue looking set to have contributed between a quarter and a third of streaming revenue increase in 2021, streaming revenues look set for strong growth, even if subscriber growth lessens. That is what you call a diversified market.

A little more detail on the subscriber market shares report:

The report has 23 pages and 13 figures featuring country level subscriber numbers, revenues and demographics by DSP. The accompanying data set has quarterly subscriber numbers and annual revenue figures from Q4 2015 to Q2 2016 by DSP by country, with 33 markets and 27 DSPs. The report and dataset is available to MIDiA subscribers hereand also available for individual purchase via the same link.

Email stephen@midiaresearch.com for more details.

2022 MIDiA predictions: the year of the creator

With 2021 nearly behind us, and 2022 fast approaching, it is that of year for the MIDiA predictions report. We have been publishing our predictions reports since 2016, and apart from being good fun to do, we have also established a pretty good track record of success. We had an 84% success rate for our 2021 report, and Facebook’s transformation into Meta certainly played to the report’s title: The year of the immersive web. The full 29-page report is available exclusively to MIDiA clients here. But, as with every year, here are a few of the top-level highlights to help you get your head around what 2022 might bring with it.

In addition to sets of predictions for music, video, games and sport, the report lays out the ten meta and cultural trends that will shape 2022.

  1. The year of the creator: all eyes are now on the creator economy
  2. Hybrid futures: the growth of AR and blended IRL / URL experiences
  3. Reasons, not ways, to spend attention: competition for time intensifies
  4. Metaverse edges towards primetime: the push beyond games
  5. NFT’s grow, but meet inflated expectations: boom and backlash 
  6. Asymmetry of competition: big tech will dig protective moats
  7. Lean-out: fans are leaning out, making their own fan content
  8. The remuneration revolution: creators need remuneration, not monetisation
  9. The whole world is a game: everything we do is becoming gamified, even if we do not realise it
  10. The internationalisation of culture: Money Heist, BTS and Squid Game are the start, not the end, of the trend 

I am going to dive into two of those here.

The year of the creator

2021 was a big year for content creators, fuelled by the growing accessibility of high-quality production tools and the fragmentation of consumption. 2022 will be bigger still. From social video, through to game streamers and independent artists, 2022 will be the year of the creator. But there will also be a growing need for a duty of care from platforms to their creators. Platform business models function by accumulating income from a large number of smaller contributing parts, which, in turn, contribute little individually, but form a majority as a whole. Creator platforms (from Splice, to YouTube and TikTok) are no different. The consequence is that creator platforms can prosper even when the majority of their contributors do not. Of course, the majority of creators will never be big, but the essence of the new creator economy is that success no longer has a fixed definition. The onus on creator platforms is to set realistic creator expectations – not to oversell a dream, but instead to enable each creator to fulfil their potential, whatever that might be. Creator platforms need to think of their creators not as wheat to be harvested, but as flowers to be nurtured.

Lean-out

Prior to the digital era, content could only be consumed passively in a one-way stream from distributor, through a designated channel, to a listener, viewer or player consuming on their own in a limited number of contexts. This one-way style is ‘lean-back’. Digital has prompted ‘lean-in’ behaviour, where consumers can engage with content by multitasking – socialising with friends online, researching the franchise, or following on other forms of the same IP. Now, creator tools are prompting a third method: ‘lean-out’. Consumers are now empowered to take that content of which they are fans and own it in new ways outside of immediate consumption, be that writing a fan musical on TikTok (e.g., Bridgerton), joining Discord servers, sampling for their own tracks, participating in a debate online (e.g., ‘did Karol Baskin kill her husband?’), playing chess (e.g., The Queen’s Gambit), or simply making and sharing memes. In 2022, this lean-out form of consumption will become a distinguisher between content that is simply good, and that which becomes culturally important.

As a reminder, the full report is available here.

IFPI confirms global recorded music revenue growth

Last week MIDiA reported that recorded music revenues grew by 7% in 2020. Today the IFPI confirmed that figure, reporting 7.4% growth. (Similarly, the IFPI reported 19.9% growth for streaming, MIDiA had 19.6%). Given that the majors’ total revenues collectively grew by just 5.5% in 2020, this means that even by the IFPI’s reporting the majors lost market share, driven largely by the continued rapid growth of the ‘artists direct’ segment and also the similarly stellar growth of smaller, newer independent labels. Whichever measure you use, the recorded music market is transforming at pace.

There was one big difference between the IFPI and MIDiA figures. MIDiA’s figure for 2020 is $23.1 billion while the IFPI’s estimate is $21.6 billion. The gap between the IFPI’s and MIDiA’s figures is steadily widening each year, in large part because of the way in which the market is changing. The traditional market, which is of course the easiest to measure, is being out accelerated by an increasingly diverse mix of non-traditional revenue streams. MIDiA has spent the last few years putting considerable resources into measuring these emerging sectors. These include the music production library sector, of which the revenues do not flow through any of the channels that traditional music industry trade associations track. You have to go direct to company financials, ad agencies and sync companies to collect this data, which MIDiA spent a lot of months doing. The recordings side of that sector alone was worth the best part of half a billion in 2020. 

The long tail of independents is the other key area of variance, which is why MIDiA fielded a survey of independent labels to capture the revenue of independents of all ages, regions and revenue sources. This gave us an unrivalled view of just how much the independent sector was growing and its contribution to global revenues. 

Direct to consumer has also been a growth sector and one which access to the data is limited for traditional trade associations. During the pandemic impacted 2020, direct to consumer became a lifeline for many smaller labels and independent artists. MIDiA was able to size this sector through the independent label survey, an independent artist survey and data collected directly from platforms.

The key takeaway from all of this is: change. The industry is changing and in turn it is becoming more difficult to measure. There is also a host of additional challenges to how anyone measures the market in the future. For example, Bandcamp did $100 million of merch and live streaming revenue in 2020 and even though total Bandcamp revenues went up, recorded music income growth ground to a near halt. It turns out that aficionado indie kids only have so much disposable ‘fandom’ spending. As more platforms aim to monetise fandom, whether that be subscriptions on Twitch or NFTs, more music consumer spending will shift from traditional recorded music to derivative formats. The old distinction between merch and recorded may become counter-productive when trying to size the music business.

But these are all quality problems to have. The recorded music business grew in a year when the live music business was decimated. It was a rare beacon of hope when the world was falling apart. And as MIDiA’s recorded music market figures revealed, global Q4 revenues were up 15% year-on-year. The recorded music business weathered its fiercest storm in 2020 and entered 2021 in fighting shape. 

The MIDiA Research Podcast: Episode 1 – What Next for Tencent?

midia research podcastWe are excited to announce the first episode of the MIDiA Research podcast: What Next for Tencent?

President Trump’s executive orders concerning Bytedance and Tencent set the cat among the pigeons. In this podcast we explore what the potential ramifications are for Tencent’s bold and disruptive entertainment business strategy in the West.

MIDiA Research · MIDiA Research Podcast Episode 1: What Next for Tencent

Music Subscriber Market Shares Q1 2020

WWDC would have been a perfect opportunity for Apple to announce another streaming milestone for Apple Music. It didn’t but the good news is that MIDiA already have a figure for Apple Music, as part of our latest music subscriber market shares. Whether Apple’s lack of announcement was because it didn’t have a good news story to tell or because it is waiting for a bigger number to pull out of the hat at a later date, well, we’ll have to wait and see.

Music Subscriber Market Shares 2020 MIDiA Research June 20

Overall there were 400 million music subscribers in Q1 2020, up 30% from Q1 2019, with 93 million net new subscribers added. This compares to the 77 million added one year earlier. The eagle eyed of you may be struggling to rationalise why streaming revenue growth slowed in 2019 while subscriber growth accelerated. The simple answer is ARPU. The combination of family plans, promotional trials and progressively more global growth coming from lower ARPU, emerging markets means that the long-term outlook for streaming is that subscriber growth will increasingly outpace revenue growth.

Spotify remains the standout leader in terms of subscribers with 32% market share. Spotify’s market share has remained between 32% and 34% every quarter since 2015. This is some achievement given how much more competitive the market has become in that time, and the stellar growth of Amazon. Spotify’s growth is both an extension of the wider market and a driver of it.

Despite Apple Music’s strong showing in second with 18%, this market share is down from 21% in Q1 2019 and contrasts with Amazon Music which finished Q1 2020 with 14% share, up from 13% one year earlier. Apple Music is making ground in absolute terms, Amazon is making ground in both absolute and relative terms.

Tencent Music Entertainment takes fourth spot with 11%, all the more impressive given that this number almost entirely refers to China and that it is accelerating growth, adding 14 million subscribers by Q2 2020 compared to 6 million on the year earlier.

Google is fifth with a more modest 6% but this represents a turnaround, with YouTube Music finally making Google a genuine contender in the subscription space. In Q1 2018, Google’s market share was just 3%. Google is outperforming the overall market.

What is particularly interesting about the state of the global market now compared to a couple of years ago is that we are starting to see some genuine segmentation taking place, which is a real achievement given that most of the services have to operate with the same catalogue and pricing:

  • YouTube Music is resonating with Gen Z and younger Millennials
  • Amazon Music is bringing older audiences to subscriptions
  • Spotify and Apple Music are the mainstream options
  • Deezer is enjoying success in emerging markets – Brazil especially – with pre-pay mobile bundles

The global subscriber market is in rude health in Q1 2020, significantly more so than the revenue and ARPU side of the equation.

These figures are the very top level findings from MIDiA’s Subscriber Market Shares model which includes quarterly data for 25 music services across 36 markets. This year we have added splits for MENA, Russia and Ireland. As well as a whole new dataset: Ad supported market shares, with splits for Sub-Saharan Africa. This data will be available for MIDiA clients in the coming weeks. If you are not yet a MIDiA client and would like to learn more about this dataset, email stephen@midiaresearch.com

New Webinar on What Comes After Lockdown

0Want to know what happens in the post-Lockdown era? Join us for our free-to-attend Recovery Economics webinar tomorrow (Wednesday 10th June) at 4pm BST / 11am EST / 8am PT for insight on music, radio, games, TV, sports and media.

We will be presenting an overview of MIDiA’s latest research thesis: Recovery Economics. This is our framework for identifying which changed need states that emerged during lockdown will form the basis for new behaviours post-lockdown and what you need to do in order to adapt to this new normal.

What is clear is that simply doing more of the same is not a strategy. The Covid-19 lockdown created severe dislocation across many entertainment sectors but also a host of new growth opportunities. As we emerge from lockdown and enter the early stages of a global economic recession, some of these ‘new-normal’ business models will grow further, presenting increased competition for the ‘old normal’. New and established players alike will have to play by different rules in this coming period, dealing with challenges such as permanent changes to lifestyles, weakening consumer spending and ever growing competition for attention.

In the webinar we will explain how this will look across the music, TV, film, games, radio, sports and media industries.

Register now!

Recovery Economics | Bounce Forward not Back

COVID-19 social distancing measures caused unprecedented dislocation to the entertainment economy. With a recession now a question of ‘how bad’ rather than ‘if’, entertainment companies have to adapt their businesses and identify new partners to maximise opportunities in the post-lockdown era. This requires a detailed understanding of how the underlying user need states of their customers changed during lockdown, how these changes will in turn evolve, and how they can meet this new demand.

To help entertainment businesses and creators understand these dynamics and navigate the choppy waters ahead, MIDiA Research has created a new research stream entitled Recovery Economics. Recovery Economics explains what the post-lockdown era will look like, which market and audience fundamentals will remain changed and the risks and opportunities these will result in.

MIDiA clients can already access the first two Recovery Economics reports here in our exclusive COVID-19 research practice, with more reports to follow. And following on from the runaway success of MIDiA’s first COVID-19 webinar, we are showcasing some of the research highlights in another free-to-attend webinar: Recovery Economics: Bounce Forward not Back. Spaces are strictly limited so sign up soon! In the meantime, here is an introduction to Recovery Economics.

Recovery Economics - MIDiA June 2020

Recessions are no new thing to the global economy, but the scale and impact of the coming recession looks set to be unlike any that has been experienced in the living memory of today’s business world. Although it is COVID-19 effects that are the fire’s spark, these factors will still underpin the recession’s impact on entertainment businesses.

The crucial difference is the recession prologue that was lockdown. We can hope that COVID-19 dissipates far more quickly, but at this stage it would be imprudent of any business not to at least plan for things being markedly different for some time so that it can identify how to adapt and even thrive during such a scenario. It is time to prepare for the new normal.

recovery economics midia research

Politicians talk of a lockdown ‘bounce-back’, with business returning to normal after its enforced hiatus. In practice, recessions do not work this way. Instead, the dislocation that caused the economy creates permanent scarring, with the effect persisting into the future even once the causal factors are gone. This dynamic is known as hysteresis, as economist Michael Roberts puts it:

“Hysteresis is the argument that short-term effects can manifest themselves into long-term problems which inhibit growth and make it difficult to ‘return to normal’.”

For the purposes of understanding how the coming recession will impact entertainment businesses, the crucial consideration is what ways lockdown impacted consumer demand and supply chains will have long term effects. The length and severity of the recession will be crucial in determining this as will the degree to which social distancing measures remain a feature of the economy.

Perhaps the single most important factor to consider is changed need states. User need states underpin all businesses. For consumer entertainment businesses this is particularly true. Lockdown’s reframing of consumption paradigms showed us that some businesses did not have a plan B when need states became void states (e.g. live) while others were dependent on specific use cases (e.g. radio and music streaming on the commute).

In the post-lockdown era, some void states will return to need states – but slowly, while some of the new need states that emerged in lockdown (e.g. more video conferencing, YouTube fitness trainers, wellness / mindfulness apps) will continue to prosper in the post-lockdown era.

The boredom dependency

For music streaming, podcasts and radio, the biggest need-state change will be the commute. For so long a source of captive audiences, the commute is entering terminal decline. Post lockdown fewer employees will be fully office based. Some will be entirely home-based. Nearly a third of consumers said that during lockdown they have been using their commute time to do something else rather than listen to audio. This dynamic will lessen post lockdown, but it is not going to go away.

Lockdown revealed the vulnerability of entertainment’s boredom dependency. The obvious weakness of relying on people to consume because they have nothing better to do is that as soon as they can do something better, they will. Entertainment companies will have to plan for a steady erosion of boredom-driven consumption.

For more on Recovery Economics, insight into what forms of entertainment will do best post lockdown and how to map how it will affect you, join us on June 10th for: Recovery Economics | Bounce Forward not Back

If you have any questions regarding registration contact dara@midiaresearch.com.