Germany: Streams grow, CDs resilient
Germany is the third largest recorded music market in the world. It combines an enduring and robust physical sector with a fast-growing and intensely competitive streaming market. Overall, the market increased in value by 1.9 per cent in 2014 to US$1.40 billion.
Physical format sales account for 70 per cent of the market and their value dropped by just 1.5 per cent in 2014, significantly below the 8.1 per cent global fall in physical sales. Holger Christoph, vice president, digital sales, Universal Music Germany, believes that physical sales and streaming can co-exist in Germany. “The physical market, including an increasing vinyl share, remains important not only for collectors, for fans who want to have something to put on their shelves, it is also a popular format for domestic repertoire and with older consumers who enjoy buying and listening to full albums. At the same time, we’re seeing streaming growing strongly with younger consumers, who tend to listen to more international track driven repertoire, while s la carte downloads remain popular across the board.”
The physical retail infrastructure in Germany is robust, with Media Markt, Saturn and Muller operating around 700 outlets between them. The typical average age of a music buyer is 46, higher than in most other countries, which is reflected in the popularity of traditional repertoire such as Schlager, Alpine Volksmusic and Classical, which account for 16 per cent of the market and are predominantly sold in physical formats. German singer Helene Fischer topped the 2014 singles chart with her track Atemlos Durch Die Nacht and held on to the top spot in the 2014 German albums chart with her release Farbenspiel, which was also the top seller in 2013.
Germany has seen a comparatively slow transition to digital. Digital revenues accounted for 22 per cent of the market in 2014, growing strongly by 12.2 per cent, which is markedly above the global digital increase of 6.9 per cent. This was largely achieved thanks to an 86.8 per cent increase in subscription income and a 43.0 per cent increase in revenue from ad-supported streams helping offset a 3.7 per cent decline in download sales.
The surging subscription market is driven by intense competition with 14 players currently operating in the streaming space. The biggest players include Spotify, which has a partnership with Deutsche Telekom; Napster, which runs through O2 and E-Plus; and Deezer, which has a partnership with Vodafone.
Partnerships with telcos are a key driver of the growth of streaming. They also mean telcos do not have to build a music service from scratch. Prior to linking with Spotify in 2012, Deutsche Telekom ran its own download store Musicload. Peter Kerckhoff, vice president, content, Deutsche Telekom, says the telco partner benefits from the subscription partnership with Spotify because a streaming service package can “give greater consumer value, increase loyalty, improve customer satisfaction, help the brand’s image and make us stand out from our competition.”
Stefan Goebel, SVP International, Sony Music Entertainment, says: “Partnerships with telcos are helping the streaming services reach sizable audiences without spending lots of money themselves on marketing. We think it’s important to have a healthy market with lots of players and are supporting them all in their efforts to gain customers.”