Digital music in figures

The music business continues to expand into new markets and create new business models, attracting more users to digital music services and bringing artists to a wider global audience.

Overall, recorded music revenues grew in Europe and Latin America and continued to stabilise in the US, growing 0.8 per cent in trade terms. Music sales on a global scale, however, were sharply influenced by a steep 16.7 per cent fall in Japan, the world's second largest market. Outside Japan, global music revenues fell (0.1 per cent decrease); including Japan, they fell 3.9 per cent to an estimated US$15 billion.

The recording industry’s global revenues for 2013 came from a number of revenue streams:

51% physical format sales
39% Digital revenues
7% Performance rights
2% Synchronisation revenues

Digital channels

The industry’s digital revenues grew by 4.3 per cent in 2013 to US$5.9 billion. There was steep growth in both revenues and user numbers for subscription services, continued revenue growth from ad-supported services and stable income from download sales in most markets. Globally, digital now accounts for 39 per cent of total industry global revenues and in three of the world's top 10 markets, digital channels account for the majority of revenues.

Subscription services, part of an increasingly diverse mix of industry revenue streams, are going from strength to strength. Revenues from music subscription services — including free-to-consumer and paid-for tiers — grew by 51.3 per cent in 2013, exceeding US$1 billion for the first time and growing consistently across all major markets.

Global brands such as Deezer and Spotify are reaping the benefits of geographical expansion, while regional services such as Rdio, KKBOX and WiMP continue to attract new users. New entrants including Beats Music and YouTube launched, or announced plans to launch, subscription services in early 2014.

The subscription model is leading to more payment for music by consumers, many of whom appear to be shifting from pirate services to a licensed music environment that pays artists and rights holders. The number of paying subscribers to subscription services rose to 28 million in 2013, up 40 per cent on 2012 and up from only eight million in 2010.

Revenues from advertising-supported streaming services, such as YouTube and Vevo, are also growing — up 17.6 per cent in 2013. Music video revenues in particular increased as the industry extended the monetisation of YouTube to more than 50 countries, adding 13 territories in 2013. Vevo has performed strongly, hitting 5.5 billion monthly views in December 2013, a 46 per cent year-on-year increase, and attracting 243 million unique viewers worldwide.

Record companies have adapted their business to a model increasingly based on access to music, and not only ownership of music. This reflects in the growing share of subscription and streaming revenues as a percentage of digital revenues globally. The industry now derives 27 per cent of its digital revenues from subscription and ad-supported streaming services, up from 14 per cent in 2011.

The digital download model remains a key revenue stream, however. Downloads still account for a substantial two-thirds of digital revenues (67 per cent) and are helping to propel digital growth in certain developing markets such as South Africa, Hong Kong, Philippines and Slovakia. Downloads have seen a slight decline in overall value globally, although digital album sales remain on an upward curve as consumers still show strong demand for owning the album format. Revenues from downloads globally fell slightly by 2.1 per cent in value, the decline being offset by increases in streaming and subscription revenue to generate overall digital revenue growth in the majority of markets.

Physical format sales

Although the industry is less reliant on income from physical format sales, with their share declining from 60 per cent in 2011 to 51 per cent in 2012, they still account for the majority of industry revenues.

Over 28 million people paid for music subscription services in 2013, up 40% on 2012

Despite the overall transition to digital, physical music sales still account for a major proportion of industry revenues in many major markets. Gifting and deluxe box sets remain popular while vinyl continues to grow as a niche product. Physical formats account for more than half (51.5 per cent) of all global revenues, compared to 56.1 per cent in 2012. Although global physical sales value declined by 11.8 per cent in 2013, major markets including Germany, Italy, the UK and the US saw a slow-down in the rate of physical decline. France's physical sales grew by an estimated 0.8 per cent, helped by a local repertoire boom which saw French repertoire accounting for 17 of the French top 20 albums of 2013.

While vinyl sales account for only a small fraction of the overall industry revenues, they have seen an increase in recent years in some key markets. In the US, vinyl sales increased by 32 per cent in 2013 (Nielsen Soundscan), and in the UK, they increased by 101 per cent in 2013 (BPI).

Performance rights income

Revenue from performance rights - generated from broadcast, internet radio stations and venues - saw strong growth. Performance rights income topped US$1.1 billion globally for the first time in 2013, increasing by an estimated 19 per cent in 2013, more than double the growth rate in 2012, and accounting for 7.3 per cent of total record industry revenue.

Synchronisation income

Revenues from synchronisation deals — the use of music in TV adverts, films and brand partnerships declined by 3.4 per cent in 2013 and new accounts for 2.1 per cent of total industry revenue. Tough economic conditions, lower fees and the decline of the music games sector impacted synchronisation revenues in some markets.

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