IFPI 2015 Year End Report Analysis
Today the IFPI had the good idea to publish their yearly music industry report. It refers to 2015 year from January to December.
When I first started this blog several months ago I dropped a run of three Music Industry, An Infinite Journey articles, the last one focusing on The Future. On this latter article, I mentioned an upcoming boom of the industry thanks to streaming mass arrival. Is this way being opened properly? Let’s see how it goes!
Raw data analysis
The major indicator for 2015 is an increase of the overall music industry revenue of 3,2% from $14,5 billion to $15,0 billion. The increase is the best yearly increase in 20 years after continuous drops, while the overall revenue represents the best year of the decade.
- Physical sales: -4,5% at $5,8 billion
- Digital sales: -10,5% at $3 billion
- Streaming: +45,2% at $2,89 billion
- Other digital revenues: +9% at $0,8 billion
- Performance rights: +4,4% at $2,09 billion
- Synchronization revenue: +6,6% at $0,4 billion
The main news is that all digital segments add for $6,7 billion, for the first time ever more than the $6,1 billion brought by physical sales. Inside this digital segment, streaming represents 43% and download sales 45%, meaning as we speak streaming already crushed such sales.
Physical drop of 4,5% is quite small if we consider it was over 10% per year for many years now. The main reason is the notable increases vinyl have been registering. While their market share was too small to get noticed, the combined effect of their constant increases as well as CD sales drops creates a situation where they get more and more crucial.
A last very positive point is how widespread increases are. Historically markets had delays in penetration of each formats and individual economic context concluding on increases of some markets and decreases of others, which is why an overall 3% increase is so rare. In 2015, every single continent saw increases:
- North America: +1,4%
- Europe: +2,3%
- Asia: 5,7%
- Latin America: 11,8%
Upcoming years forecasts
If you check revenues of each section of the industry, what’s impressive is the way streaming increase of $0,9 billion compensates the $0,4 billion loss of all other areas combined and still bring a sizable overall increase despite it represented a mere 14% of revenues last year. Yes, a 14% segment boosted the entire industry pie. This streaming segment now represents 19% of the music industry, what does it mean for following years?
Let’s do a bit of fantasy and apply each sector evolution to year 2016 too.
2016 Possible Forecast
- Physical sales: -4,5% at $5,54 billion
- Digital sales: -10,5% at $2,685 billion
- Streaming: +45,2% at $4,2 billion
- Other digital revenues: +9% at $0,87 billion
- Performance rights: +4,4% at $2,18 billion
- Synchronization revenue: +6,6% at $0,43 billion
A total of $15,9 billion, representing a massive increase of 6%. In fact, as booming sectors get larger and decreasing ones get weaker, the evolution can only be great. Reproducing the same evolutions in 2017 would conclude on $17,5 billion, a 9,9% increase, 2018 would bring $20,0 billion revenues, the highest point since 2005.
Won’t streaming start to reach its limits yet? From 2012 to 2014, increases of this segment remained strong but slowed down from +56% to +40,9% to +37,5%. In 2015 the increase was 45,2%, the best in three years, definitely not the sign of an upcoming roof. What’s more, paid streaming subscribers increased since 2012 from 20 million to 28 million to 41 million to 68 million in 2015, a gigantic +27 million users in a single year.
Aside from the digital market, the CD to Vinyl replacement happening lately will also solidify the physical market while performance rights keep going up for very long on a highly consistent way.
Room for improvement
While current situation already let us expect truly positive forecasts, there is still various limitations today. The main dark point today is the failure of proper monetization of ad-supported streaming:
- 68 million paid subscribers generated $2 billion, $29 per user
- 900 million ad-supported users generated $634 million, $0,7 per user
If the need of better monetization is obvious, especially from music video streaming giant Youtube, the dark point of today can be regarded as a green light for the future. A setting of more favorable legislations to the music industry that are being negotiated, would be an immensely large room for improvement.
The continuous increase of smartphones and 4G penetration will also push higher the potential number of users. Those two elements are especially true in Asia and Latin America. Thus, the strong increases on those two areas are one more element to be confident in the future as it is only getting started there. During the long story of physical sales those markets have never been exploited at the level of their populations, with streaming they will be able to turn into a major force in upcoming years.
2015 Top selling Albums – Singles – Artists
TITLE – ARTIST – UNITS (M)
1 25 – ADELE – 17.4
2 X – ED SHEERAN – 3.5
3 1989 – TAYLOR SWIFT – 3.5
4 PURPOSE – JUSTIN BIEBER – 3.1
5 IN THE LONELY HOUR – SAM SMITH – 2.6
6 MADE IN THE A.M. – ONE DIRECTION – 2.4
7 FIFTY SHADES OF GREY – VARIOUS ARTISTS – 2.2
8 A HEAD FULL OF DREAMS – COLDPLAY – 1.9
9 TITLE – MEGHAN TRAINOR – 1.8
10 BEAUTY BEHIND THE MADNESS – THE WEEKND – 1.5
Physical and digital sales of albums only, no track equivalent nor streaming involved.
TITLE – ARTIST – UNITS (M)
1 SEE YOU AGAIN – WIZ KHALIFA (FT CHARLIE PUTH) – 20.9
2 UPTOWN FUNK – MARK RONSON (FT BRUNO MARS) – 20.0
3 THINKING OUT LOUD – ED SHEERAN – 19.5
4 SUGAR – MAROON 5 – 13.5
5 LEAN ON – MAJOR LAZER (FT MØ & DJ SNAKE) – 13.1
6 LOVE ME LIKE YOU DO – ELLIE GOULDING – 12.6
7 HELLO – ADELE – 12.3
8 BLANK SPACE – TAYLOR SWIFT – 9.2
9 CHEERLEADER – OMI – 8.3
10 WANT TO WANT ME – JASON DERULO – 8.1
Download sales plus streaming equivalent.
2 ED SHEERAN
3 TAYLOR SWIFT
4 JUSTIN BIEBER
5 ONE DIRECTION
7 MAROON 5
8 SAM SMITH
10 THE WEEKND