Recorded music market 2022 | Reality bites

Following a spectacular year of growth in 2021, global recorded music revenue growth slowed significantly in 2022 due to the combined impact of global economic headwinds and growth slowdown in mature streaming markets. Context, though, is everything – not many industries can deliver solid growth while the global economy is in turmoil, ad markets are falling and many emerging tech sectors are in crisis.

Global recorded music growth has oscillated in recent years, slowing in the pandemic, booming in 2021, and then returning to more modest growth in 2022.

2022 was a year of realignment for much of the global economy, and the music business had to contend not only with the wider trend of the cost-of-living-crisis, but also rising interest rates softening music catalogue M+A demand and the long expected streaming slowdown kicking in. It is testament to the solidity of the recorded music market that, despite these multiple headwinds, global revenues grew by 6.7% to reach $31.2 billion in 2022. While this was significantly down on the 24.8% registered in 2021, it illustrates the strong role music plays in consumers’ lives, especially in uncertain times when escapism and identity are more important than ever. The persistent value of music was even more strongly illustrated by music publishing, which grew by 16.6% in 2022.

Streaming was again the main driver of industry growth, with revenues up by $1.5 billion in 2022 (8.3% growth), though this was less than half the $4.2 billion added in 2021.  The slowdown was underpinned by a) slowing subscriptions growth in mature markets; b) a slowdown in ad-supported revenues, reflecting wider advertising market dynamics. Music subscriber growth was markedly stronger, up by 13.7% to 652 million, however, the more mature North America and Europe regions accounted for just a third of the growth. Emerging markets will become a progressively larger part of global streaming growth, but due to lower ARPU and low shares of Anglo repertoire, the divergence between growth revenue and subscriber growth rates seen in 2022 will become a long-term market characteristic.

Independent labels and artists direct both strongly out-performed the wider streaming market, growing streaming revenues by 13.9% and 17.9% respectively. In terms of total recorded music revenues, 

UMG added more recorded music revenue in 2022 than the other two majors, adding $0.5 billion to reach $9.2 billion, giving it a 29.5% share of the global recorded music market. UMG’s percentage growth (6.2%), though, was slower than SMG’s (8.7%), with SMG gaining 0.4 points of market share.

Artists direct (i.e., artists who release without labels, directly via a distributor) were the big success story once again, growing by 16.6% in 2022 to generate $1.7 billion of recorded music revenue, giving it a 5.7% market share, up from 5.2% in 2021. 

Independent labels also outgrew the wider market (up by 7.1%), and the combined market share of artists direct and independent labels reached 34.6% in 2022, up from 34.0% in 2021. Though it is worth noting that this does not include the additional revenue from independent labels distributed by major labels.

Combined, independent labels and artists direct, were the largest single market segment with $10.8 billion.

Though overall market growth was down in 2022 compared to 2021, 2021 was in many respects a year of artificially accentuated, post-Covid growth, while 2022 was at the opposite end of the scale, with a host of economic headwinds. In this context, 6.7% growth for 2022 could be considered even more of an achievement than the 24.8% achieved in 2021.

The full report and dataset (with quarterly revenue by segment and format going back to Q1 2015) will be shortly available to MIDiA clients. If you are not a MIDiA client and would like to learn how to get access to our research, data and analysis, email stephen@midiaresearch.com

Music creators and independent labels – have your voice heard!

MIDiA is currently fielding two separate surveys that will help us create the definitive view of the contribution from music creators and independent labels to the global music market. We are exploring what it means to be a label and a creator in today’s fast-changing and challenge-strewn music business. We are listening to what challenges they face and how they feel about the coming year.

We have already got some great responses, but we want more! Not only will these surveys give you the chance to have your voice heard, we will share a summary of the results with all respondents. This means you will be able to benchmark yourself against your peers to get a better sense of how you are doing and assess whether your concerns and aspirations are shared by others.

Crucially, we do not share ANY respondent-level data. What this means is that your responses only ever go into the total average responses. Nothing is ever attributable to you and we have a comprehensive privacy and data protection policy that you can read when you take the survey.

The two surveys are:

• Music creator survey: if you are an artist, songwriter, producer / engineer, performer, sound designer, and / or composer then this survey is the one for you. Click here to take the survey
  
• Independent label survey: if you are a record label or distributor of any size that is not a division of a major record label, then this is the survey for you. Click here to take the survey. (Note – the extra reason for independent labels and distributors to take this survey is that we use the data to help create the global market shares data, to create the most accurate reflection of the contribution of independents possible)

If you have any questions then please email info@midiaresearch.com

Independent labels and distributors: take our survey!

Measuring the actual contribution of the independent sector to the global recorded music market is an important but difficult task. The traditional way of thinking about independent market share is to take the total market and remove the majors’ revenues from that. But this ‘distribution’ basis of market share under-represents independents because the majors also distribute independent labels and artists. The truest measure of the independents’ contribution is on a copyright ownership basis. This is a task MIDiA has conducted for many years now and a crucial input into this is our global independent label and distributor survey.

This survey is now live and we encourage independent labels and distributors of all sizes and geographies to complete it. The more completes submitted, the more accurate the final dataset will be. 

We use this survey to take the pulse of what the independent sector is thinking, what challenges and opportunities it is facing, and as a measure of its commercial performance. Thus, confidentiality is absolutely crucial. All responses to this survey are treated as strictly confidential, and no company-level data, nor company-level market share is shared with any party or presented anywhere. This commitment has earnt the trust of independent labels and distributors to collect their data and build market-level datasets that they can benefit from.

All survey respondents will receive a summary of the themes component of the survey (e.g., market sentiment, market opportunities, marketing challenges, etc.) and a complete summary of the global market shares dataset. In short, MIDiA Research wants to ensure that all participants benefit from this market intel and can benchmark themselves against the market.

Take the survey here: https://www.surveymonkey.co.uk/r/TYVBLJL

Please feel free to share this link with anyone you think would be interested in taking the survey.

MIDiA 2023 predictions webinar

So, 2023 is upon us. The last couple of years were notable for being dramatic, unlike those of the previous couple of decades. 2023 is likely to be even more stirring, with a looming recession, racing inflation, and geo-political upheaval. What this means for entertainment companies is that the coming year will be anything other than business as usual. While the uncertainty might be unnerving, disruption and change can also mean opportunity. What is more, there is a strong case to be made that home entertainment as a whole may be far better placed to weather the coming storm than other sectors of the economy.

To help plot a path through the coming year and beyond, MIDiA recently published the 2023 edition of its annual predictions report: ‘2023 MIDiA predictions: Pivot point’, which clients can read here. On Wednesday the 11^th of January, we will be hosting a free to webinar in which analysts from the MIDiA team will walk through some of the key themes and predictions from this report, across music, games, video, audio, creator economy, social, culture and more. 

Join us to get the inside track on the dynamics and market trends that will shape digital entertainment in 2023. And if you need any extra incentive to join, we have got a pretty good track record with our predictions: we had an 88% success rate for our 2022 predictions.

You can register for free here. Hurry as places are limited and we have already had a sizeable number of signups!

We look forward to speaking to you next week.

Artists – take our survey and get a free MIDiA report

With 2022 coming to a close, and Spotify’s Wrapped just around the corner, artists are beginning to look back across the year at how they performed and what they have achieved, and whether it lines up with their hopes for the coming year. If you are one of these artists, we would love to hear from you. MIDiA has launched a new artist survey, designed to take the pulse of artists and their careers. You can complete the survey by following this link.

In the survey, you will be asked about topics such as:

• How streaming is working out for you
• What sort of career you are pursuing
• What tools you use, such as distributor platforms
• How you feel about navigating today’s streaming-centred music business

All respondents to the survey will get a free copy of our report, Music creator survey, Redefining success, which presents the findings of our most recent major global survey of artists. This will give you a benchmark to monitor how your career is shaping up against other artists, and allow you to compare your aspirations and approaches with theirs.

The creator economy’s post-lockdown growth

The Covid pandemic created a unique catalyst for the music creator economy. More time on hands and more cash in pockets gave novices and veterans alike the opportunity to spend both more time and money making music. Though the pandemic was a peak, it also marked the start of a new era for the music creator economy across every one of its aspects, from revenue to creation to remuneration. In MIDiA’s new landmark report ‘State of the music creator economy’ we provide the definitive assessment of this exciting marketplace, covering everything from creator behaviours, creator personas, all the way through to workflows, market sizes, and growth forecasts. The full report and datasets are available to MIDiA clients here. Here is an overview of some of the key themes explored in the report.

A new generation of music makers

The music creator tools space is being transformed by the increasing availability of simple, affordable music-making tools, plus a new generation of consumers that is steeped in creator culture. We are entering a new era for the music creator economy. Yet, despite all the dramatic changes, underpinning this new era of creator behaviour are suites of complex software that arose over two decades ago and, at their core, have seen little substantial change. The digital audio workstation (DAW) is the foundation of modern music making, but was not designed for the modern music maker. This presents fertile soils for seeds of disruption as more casual music making, centred around mobile devices and sharing music online, becomes the new top of funnel for the music creation space, and the music industry as a whole. 

Having grown up as social media mainstreamed creativity, the new generation of music makers expects to achieve professional results quickly. However, as their aspirations clash with the harsh reality of streaming economics, more creators are seeking out a diversity of income streams — from selling beats to mixing and engineering — underscoring the need for creator tools companies to help drive creator remuneration. Combined with the growth of casual creators, catalysed by embedded tools on social platforms, like TikTok and BandLab, the result is a newfound fluidity in defining what it means to be a music creator. 

Though much of that generational shift will take time to permeate through to the current market, seismic change is already manifesting. Nowhere is this better seen than in the that hardware music creators use. As recently as five years ago, music creators would have invested in hardware mixing desks, synthesisers, and outboard effects. But today, the most widely owned hardware is devices that plug into computers, such as controller keyboards and audio interfaces. These affordable devices free up creators to spend on the software and sounds on their computers, relying on the hardware to control sound making, rather than actually making the sound.

And it is the spending on software, sounds and services that is currently propelling the market. With an average creator spending more than $600 a year on music creation, promotion, distribution, and commercial tools. For beginners this can mean spending three and half times more than they earn from music, while for advanced creators it is a little over one tenth. In total, the music creator tools market was worth $4.1 billion in 2022, across learning, collaboration, production software, sounds, funding, commerce, distribution, marketing and commercial, with distribution and production software being the two largest segments.

In 2021, the cumulative number of creators paying for software, sounds, skills sharing, and learning was under 30 million – by 2030 there will be nearly 100 million with learning and skills sharing becoming the largest single group of buyers. Learning and skill sharing were among the fastest growing components of the music creator economy in 2021, with strong rise in both formal and informal learning as well as in skills sharing. Just under half of the learning revenue was from companies that were largely or entirely focused on music production learning. With 83% of creators feeling that they still have much to learn and improve upon, the opportunity for learning is pronounced and will become even more so because of the fast-changing nature of the sector.

However, much of all this may seem like a separate and parallel industry to those in the traditional music business (labels, publishers, streaming services, etc.), the creator tools market that commands much of the attention, time and spend of artists and songwriters. Streaming is only around a fifth of the income of the average creator, with many aspects of the creator tools marketplace representing new ways that they can earn meaningful income, whether that is selling singing sessions on skills marketplaces, writing soundpacks for sounds platforms or producing tracks for other creators. Furthermore, clear connections are being made across the two industries, such as Avid and LANDR both offering distribution, Sony Music Publishing striking a partnership with BeatStars and Spotify launching a bundle subscription for its Cloud DAW Soundtrap. The most impactful synergies, however, will come from audience platforms, like TikTok and Shorts, that are already home to music creators and already provide their own creator tools. But what they have that rightsholders and most creator tools companies do not, is audience. As the culture of creation spreads towards audiences themselves, it is these sorts of companies that have the ability to play the most transformative role in the future of music creation.

If you are interested in learning more about MIDiA’s state of the music creator economy report, email stephen@midiaresearch.com

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.