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How streaming has boosted the music industry

After years of crisis, the music market has reversed its trend thanks to the industry's capacity to endorse digital innovation. The web is not scary anymore.

11/27/2018 - 04:55 PM

The music industry crisis seems a distant memory now. Revenues have risen steadily over the last four years, including in 2017. Last year, total global revenues hit 17.3 billion dollars (IFPI data Global Music Report 2018), another major step forward from the 16 billion of 2016 and, most importantly, a figure that had not been topped for precisely ten years. But there is still a long way to go: in 1999, at the dawn of the spread of Internet, revenues in the music industry amounted to 25.2 billion; this figure was doomed to nosedive over the years to follow – mainly as a result of piracy, of which Napster was the epitome – hitting an all-time low of 14.2 billion dollars in 2014.

Since then, however, the trend has finally reversed: especially thanks to a market that has been able to innovate and has stopped concentrating its efforts on selling physical products, instead enhancing and making the most of the more innovative digital services.

The data speaks for itself: in 2017, for the first time, streaming services generated greater income than the sale of physical albums (6.6 billion against 5.2 billion), while the sale of digital records on platforms such as iTunes remains a significant - albeit steadily decreasing - entry (currently worth 2.8 billion). Overall, streaming accounts for 38% of total revenue and is showing its potential to keep on growing further at a very rapid pace. Around the world, as many as 176 million people now use paid streaming services through Spotify, Apple Music and the other platforms, with year-on-year growth of 45%. According to some analysts, we are still far from the peak: by 2025, the number of subscribers to streaming platforms could reach a total of 336 million.

However, clouds are still looming: it is common knowledge that artists are unhappy about the remuneration generated by streaming services, which is nowhere near the figure earned during the golden age of the compact disc. And that is not all: growing competition between platforms – fought out with exclusive tracks – is partially reanimating the phenomenon of piracy after many years of constant decline. The reason is known: since most users do not have the money (or in any case the desire) to sign up to more than one streaming service, they turn to piracy to get the albums of artists who are not on their platform. This situation threatens to constrain growth and needs to be tackled systematically. With all this attention to digital, it should be pointed out that physical media still boast a significant market.

Despite dropping again this year by 5.4%, the sale of traditional formats still amounts to around 30% of the global market; with particular peaks in countries like Japan (72%) and Germany (43%). This year also saw further continuous growth of vinyl sales, which rocketed by a massive 22.3%. This segment alone now generates 3.7% of total revenues. In short, the digitisation of music has even had the “romantic”, we could say, effect of relaunching the very symbol of the analogue past. But what does the future have in store? On the one hand, reduced music production and distribution costs are giving new impetus to independent labels (that have been growing constantly for years), thus providing the necessary market diversification. On the other, streaming platforms are becoming increasingly complex services, abounding in offers tailored to users’ specific needs. This is, for example, the all-Italian case of TIMmusic,

TIM’s streaming platform which, in addition to a 25 million-strong song list, offers weekly charts, exclusive interviews with the artists, album commentaries by the authors themselves and constantly updated playlists. Moreover, examining the most recent developments, we can see these platforms increasingly becoming, over the upcoming years, places where artists can promote their concerts – including by selling tickets directly – and distribute their merchandise. This will enable increasingly diversified takings and a direct relationship with listeners. In short, the future of the music industry is once again bright. And it is all down to what was long considered its number one enemy: the digital industry.

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