Sweden: A market transformed

The Swedish music industry has a seen an encouraging revival in just three years, from a low of US$144.8 million in 2008, revenues grew to US$194.2 million in 2013. During the same period, digital's share of total revenues increased from 8 per cent to 70 per cent, with subscription services accounting for 94 per cent of the digital market.

The turnaround dates back to 2009 when the combined effect of The Pirate Bay trial and a new anti-piracy law persuaded many consumers to try the new Spotify service. Many preferred streaming to illegally downloading music. Streaming and subscription has helped migrate music consumption from piracy to the licensed environment. Consumer research published by GfK in September 2013 showed that nine out of 10 paying subscribers to Spotify say they download illegally "less often"; seven of 10 of the service's free users say the same. Spotify's success was also boosted by a partnership with telcoms firm Telia, whose bundled deal offered customers three months' free access to the service. The majority continued to pay afterwards. Having benefited from reduced churn, Telia later rolled out the deal across Scandinavia.

The subscription revolution has changed the way rights holders are paid, with artists whose music is continuously listened to on Spotify benefiting from a constant revenue stream. Jacob Key, vice president, digital strategy and business development, Europe, Warner Music, says: "Repertoire can now make more money over a longer period of time.

The consumption model enables a much longer product life cycle, and generates more revenues over time for most artists." Per Sundin cites Lars WinnerbŠck, one of the top-selling Swedish artists over many years. "He has remained in the Spotify top ten for years without releasing a new album. His management thinks that Spotify is fantastic."

“If you look at business models over 20 years, you have the potential to get much more revenue with streaming”

Jacob Key, Warner Music

Another Swedish artist, DJ John de Sohn, has had four hit singles, the latest being Taking It Back, and is considered a 'Spotify phenomenon'. He says: "Streaming services have been a key part of reaching a new audience with my music. My last three singles have accumulated over 30 million streams in Sweden, and Spotify has been an instrumental part of building my artist brand and live business. For recorded music, streaming is by far the biggest revenue source for me."

"For recorded music, streaming is by far the biggest revenue source for me.”

DJ John de Sohn

Subscription services have also removed a barrier to music discovery. Jacob Herbst, head of digital sales and business development (Sweden), Sony Music Entertainment, says: "The barrier to listen to a new artist is lower than it was when you had to buy their album. We now pay out royalties to more artists now than ever before. Ten years ago, the vast majority of our revenue came from a smaller number of artists."

"Ten years ago, the vast majority of our revenue came from a smaller number of artists.”

Jacob Herbst, Sony Music Entertainment

New artists have benefited from the younger audience that streaming attracts. Label executive say streaming users are younger and that is having an effect on A&R. Urban music and electronic dance music consistently 'over index' on streaming services, which means that record companies are striving to sign more artists performing in these genres. Per Sundin says: "Streaming is the most democratic tool we have ever been part of. The range of artists being listened to is wider. Swedish hip-hop artists are making money again. We've been able to invest in them because of Spotify."

Dance music, too, leans towards digital. Jonas Sjšstršm is CEO of Playground Music Scandinavia AB, an independent record company which owns the digital-only dance label Uniform Beat, home to artists such as Adam Rickfors. He says: "The entire dance market is 98 per cent digital. It means we can sell music globally without licensing deals and no manufacturing costs, but we still have to promote it everywhere and pay for the local expertise to do that."

"Streaming is the most democratic tool we have ever been part of.”

Per Sundin, Universal

Subscription services have paved the way for the rise of the playlist. Jacob Herbst of Sony says: "We built a strategy around playlists that evolved into the Filtr brand. It's all about building up the label as a trustworthy source of music. Labels now run large above-the-line advertising campaigns promoting playlist brands."

IFPI Sweden has changed its charts to include streaming, also bringing it into its Gold and Platinum award certifications, which traditionally went to artists who crossed a certain sales threshold. Jacob Herbst says: "As an industry, we're now increasing the number of units required for Gold and Platinum awards after more than 10 years of bringing them down. And even with that, we are giving away more Gold and Platinum awards than for many years."

Few in the industry think the evolution of the Swedish market is over. The focus now is on how streaming is benefiting A&R and marketing. Per Sundin of Universal says: "We have seen the consumption revolution, but now we're seeing radical changes in A&R and marketing as record companies adapt to a changed environment." Jacob Key cites singer Robyn, who launched three mini-albums with several singles, promoting them over 18 months before releasing her album. "Marketing strategies are changing. You need to keep investing for two, three or four years to get people to keep listening to an album."

Digital services themselves continue to evolve. WiMP has become the first streaming service to launch a super premium service with higher audio quality and others are talking about new deals such as family packages. Meanwhile, a landmark was reached in October 2013 when YouTube became monetised for the first time in Sweden.

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