Music sales growing at fastest rate since 1998

   Robert Cookson FT.com 4/12/16

Record companies have reported their fastest revenue growth in nearly two decades, as the rise of subscription streaming services such as Spotify and Apple Music offset declines in CD and download sales.

Total industry revenues grew 3.2 per cent to $15bn in 2015, according to the International Federation of the Phonographic Industry, an organisation that represents recording companies. This is the highest rate of sales growth in the sector since 1998.

Frances Moore, IFPI chief executive, said: “After two decades of almost uninterrupted decline, 2015 witnessed key milestones for recorded music: measurable revenue growth globally; consumption of music exploding everywhere; and digital revenues overtaking income from physical formats for the first time.”

British singers Adele and Ed Sheeran were the top selling recording artists of the year, followed by Taylor Swift, Justin Bieber and One Direction.

However, Ms Moore argued that the industry’s revenues should be much higher, claiming that certain streaming services such as Google’s YouTube were paying too little to record labels for the use of their songs.

Overall, recording companies’ streaming revenues increased by 45 per cent to $2.9bn last year, IFPI reported. Of that total, $2bn came from about 68m people who pay for subscription streaming services such as Spotify and Apple Music.

By contrast, only $634m was from YouTube and other “user upload” streaming services in 2015, even though these services streamed songs to almost 1bn listeners, IFPI noted.

“We’re operating in a market that’s skewed,” Ms Moore said.

IFPI argues that YouTube has been able to avoid paying a “fair” rate to copyright holders by taking advantage of legislation that protects internet hosting companies from being liable for copyright infringement by their users. This has allowed users to upload unlicensed content on YouTube — and left it to the recording companies to request its removal. IFPI is now lobbying European and US regulators to amend the legislation.

Chart: Recorded music industry sales

YouTube, however, says it has paid out more than $3bn to the music industry to date and points out that it provides a tool, called Content ID, that gives record labels strong control over their copyrights. It makes the bulk of its revenues from advertising but recently launched a subscription offering.

While music streaming was surging, revenues from physical formats continued to decline in 2015 — albeit at about half the rate of decline in the previous two years. Sales from physical recordings, mainly CDs, were worth $5.9bn, a drop of 4.5 per cent.

These sales were boosted, in part, by the success of Adele’s latest album, which was withheld from streaming services, as well as a rebound in Japan, the world’s second biggest music market, where CDs are still the main medium for music consumption.

Revenues from performance rights — the use of recorded music by broadcasters and public venues — increased 4.4 per cent to $2.1bn.

However, download revenues fell 10.5 per cent to $3bn — a bigger decline than in 2014.

Will Page, director of economics at Spotify, said the growth of the Swedish streaming service alone more than offset the global decline in downloads in 2015, “which makes this streaming-based recovery feel increasingly sustainable”.

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