The International Federation of the Phonographic Industry (IFPI) publishes a report on the state of the global market with AN ABSOLUTE MOUNTAIN OF INTERESTING INFO (!!!) every single year and after reading an article on the 2014 report I can safely conclude it should have info of note for everyone ^_^ There's everything from the health of the physical market to confirmation of the digital saturation to the expected surge in streaming worldwide, plus some rather positive news in terms of the future of the industry! Here are the most interesting points I found:

• Trade revenue generated by the global recorded music industry in 2013 fell by 3.9% to $15.0 billion, which sounds bad, BUT this was largely caused by a massive 16.7% drop in the Japanese market, which when taken out of the equation leaves revenue down only by a tiny 0.1% worldwide. So not a vintage year but the market being flat is hardly a bad thing.
• Japan's horrendous drop is being blamed on a decline in the physical market which is not being buffeted by an uptake in streaming or downloads - Japanese labels are trying to protect the physical market rather than risk switching to more modern formats which is somewhat comparable to early 2000s UK/US I suppose.
• Most of the world's other leading markets actually posted positive growth, including Europe's six biggest markets (Britain, Germany, France, Italy, Netherlands and Sweden) and North America as a whole. Revenue in North America rose by 0.5%, while revenue in Europe rose by 0.6%. Latin America posted even stronger growth of 1.4%.
• Unsurprisingly, revenue growth is STRONGLY being driven by streaming, which rose in revenue by an incredible 51% in 2013. Streaming now accounts for 27% of global digital revenue (also including digital downloads and ad-supported services such as YouTube), which recorded growth of 4.3%.
• Bad digital news is here however: revenue from digital downloads dropped 2.1% thanks to saturation in western markets, though growth in emerging markets continues and should into the future (particularly in Japan).
• Physical sales dropped by 11.7% but continue to account for 51.4% of global revenues, down from 56% in 2012. However, a 0.8% growth in the market was recorded in France.
• Performance rights revenue strongly climbed by 19%, more than double the growth rate of 2012.

The IFPI Chief Executive's Opinion Looking Forward:

“Last year, in the 2013 report, the theme was road to recovery and we are continuing down that road. Why do I say that? Well, most of the major markets have stabilized. Digital continues to grow and revenues streams have diversified. In addition we have the potential of the emerging markets”.

 

Hole called 2013 “a year of good news and bad news.” On the positive side, he identified the global growth in streaming and subscription services, resilience of physical format sales, which he noted were “holding up much better than anyone could have predicted 5 years ago,” and emergence of new business partners like Beats, iTunes radio and Google’s streaming service creating a strong “portfolio business for the recorded music industry.”

 

“The bad news is largely all Japan,” Hole went on to say, citing “protectionism of the physical business and struggle to get consensus on digital” as contributing factors behind the country's sharp decline in music sales.

 

“The good news about a very bad year [for Japan]is that it is going to kick-start change. The major companies are playing a part in trying to lead the industry into taking more chances,” he continued, adding that he expects the adoption of streaming and subscription services in Japan to drive it back to growth within the next 18 months.

 

“Our outlook remains optimistic,” added Edgar Berger. “Music has always been at the forefront of the digital revolution, leading the way for other creative industries. Music is defining the future of digital entertainment and today the digital revolution in music is moving to the next phase.”

 

Berger continued: “Today we have 28 million paying subscribers on a monthly basis paying for music subscriptions, up from 8 million just three years ago. I don’t see any reason why this won’t be more than 100 million in the near future.”

 

Source: Billboard

Personally I think it's a really fantastic report and one that really gives me some optimism for the future of the market. Digital sales may be beginning their decline and physical sales are of course still falling quite hard but the rise in revenue from streaming is incredible and to see all six of the main European markets rise is really encouraging. Selling music as a concept is definitely going to become outdated and that in itself is sad but the industry has diversified a huge amount, and this diversification means it may just survive the decline of sales.

 

I'm not sure this gives the full picture.

 

If you exclude Japan and revenue is the same, that doesn't mean sales haven't decreased.

 

What does trade revenue actually mean?

 

 

 

And the slight increase, or should I say the reason the physical market held up in France is probably due to Stromae :lol:

 

 

I'm not sure this gives the full picture.

 

If you exclude Japan and revenue is the same, that doesn't mean sales haven't decreased.

 

What does trade revenue actually mean?

I would imagine the "excluding Japan" means taking the revenue from 2012 (without Japan) and comparing it to the revenue of 2013, also without it. So revenue in everywhere minus Japan went down by 0.1% (or at least that is how I understand it).

 

Trade revenue should just mean the money taken in by music-related adventures - sales, streaming, advertising (e.g YouTube) and tour revenue.

 

And the slight increase, or should I say the reason the physical market held up in France is probably due to Stromae :lol:

Stromae and Daft Punk and Maitre Gims and Zaz probably. The IFPI actually attributed the pickup in France to a boom in local music and it's true - the first 3 artists I listed all had Diamond certified albums in 2013, Zaz going 4x Platinum with her own album (100k off Diamond, she'll make up that this year). So it was really an exceptional year for the French music industry.

There is no way the physical sales in Japan weren't going to decrease drastically as the past year has seen low #1 figures both in the album and singles chart. Artists there who generally sell 500k+ physically in singles wise even suffered a drastic decrease in their usual sales and there's only so much a music market can take before it starts collapsing. Hopefully it won't go down the same route as the US/UK where physical singles are now non-existent (although I heavily doubt it as even though physicals have dropped in Japan, the figures easily beat the entire global physical sales combined without a doubt).

 

Edit: Oops, the report mentioned trade revenue instead of physical sales. :lol: Either way, the drop could be explained by the decreasing sales in both formats I suppose.

I remain massively pessimistic sadly, the gap in revenue left behind from physical sales will struggle to close in the coming decade with digital sales now starting to decline. Difficult to predict what is going to happen really, particularly with the world economy so fragile at the moment... I mean, it is widely predicted that in the 2020s Russia will collapse (due to its over reliance on oil etc.) but that doesn't necessarily mean it will happen.

There is no way the physical sales in Japan weren't going to decrease drastically as the past year has seen low #1 figures both in the album and singles chart. Artists there who generally sell 500k+ physically in singles wise even suffered a drastic decrease in their usual sales and there's only so much a music market can take before it starts collapsing. Hopefully it won't go down the same route as the US/UK where physical singles are now non-existent (although I heavily doubt it as even though physicals have dropped in Japan, the figures easily beat the entire global physical sales combined without a doubt).

When did this massive decrease start? I don't understand how it came about, it seems a lot more sudden than the decline of the physical market in western markets and the market has held up for so long that collapsing now just seems weird.

I remain massively pessimistic sadly, the gap in revenue left behind from physical sales will struggle to close in the coming decade with digital sales now starting to decline. Difficult to predict what is going to happen really, particularly with the world economy so fragile at the moment... I mean, it is widely predicted that in the 2020s Russia will collapse (due to its over reliance on oil etc.) but that doesn't necessarily mean it will happen.

The decline of digital sales is really awfully timed :drama: If it weren't for that I'm certain the market would have grown [sans Japan] this year, and it just feels so premature for that format to already go the way of the physical. The digital era is going to be extremely short from a historic point of view I think, which is a huge pity because there was such promise in it.

 

I think the distant future of the industry is distinctly uncertain (as you say the distant future of the world is uncertain) but I am pretty confident the short term will be pretty positive - digital sales have peaked in many countries but are rising elsewhere, so that market isn't going to go into global collapse just yet, while streaming and tour revenue are seemingly doing pretty well to make up the losses at the mo. I just wonder just how much they can grow going into the future, streaming can surely never bring in the same amount of money sales do at the moment and touring should have a pretty low ceiling...

 

So basically I think the market will do pretty well for a few years but I'm just not sure about how it'll do going into the mid to long-term future.

When did this massive decrease start? I don't understand how it came about, it seems a lot more sudden than the decline of the physical market in western markets and the market has held up for so long that collapsing now just seems weird.

 

It started probably towards the end of 2012/start of 2013 when an individual like myself who monitors the charts, saw how drastic the drops were for established artists in Japan both domestically and non-domestically. Album sales have yet to top 1 million mark now for 2 years (or 3 I cannot remember) and apart from AKB48 and the sister drops dominating the single chart, everything has dropped (and even AKB48 aren't getting the same success as before even if they do pull off 800k+ first week physical single sales).

 

Probably an explanation for this is over-saturation, a bit like the Asian economic crisis a couple of years ago. Prior to idol groups dominating the scene, there were already indications that single and album sales were dropping but due to multiple version releases as a tactic by record labels have spewed a sudden increase in the chart. It's an unsustainable method really.

Probably an explanation for this is over-saturation, a bit like the Asian economic crisis a couple of years ago. Prior to idol groups dominating the scene, there were already indications that single and album sales were dropping but due to multiple version releases as a tactic by record labels have spewed a sudden increase in the chart. It's an unsustainable method really.

Well in that case it's no wonder it's dropping off :P Artificially inflating sales is stupid. If they don't figure out a way to fix the market quickly they may not be the 2nd largest for much longer.

I think the current biggest world's markets will be flat, with streaming replacing digital sales - but the whole global market could rise due to its growth in young markets. For instance, in Russia, when the physical format collapsed the legal revenue or the industry became almost non-existent in 2010. But last year iTunes Store was opened and it's already somewhere near #20 globally by its amount of sales (not the actual revenue though, as the singles/albums are really cheap here - you can buy a single for about £0,33 which is an analogue of your 99p). Here we also have a couple of large legal streaming sites, Spotify is about to open shortly too. Our market is far from being full. All of that is being supported by quite strict anti-piracy laws.

 

But I can't recall any more markets where the growth can be that big. Ukraine and other former USSR countries don't have enough money to pay even £0,33 for a track, maybe China could turn the things over - but a HUGE job should be done to get to their market. Stranger things have happened though, such as the fact that China is now the biggest importer in the world of French wine - who could have thought?

I think the current biggest world's markets will be flat, with streaming replacing digital sales - but the whole global market could rise due to its growth in young markets. For instance, in Russia, when the physical format collapsed the legal revenue or the industry became almost non-existent in 2010. But last year iTunes Store was opened and it's already somewhere near #20 globally by its amount of sales (not the actual revenue though, as the singles/albums are really cheap here - you can buy a single for about £0,33 which is an analogue of your 99p). Here we also have a couple of large legal streaming sites, Spotify is about to open shortly too. Our market is far from being full. All of that is being supported by quite strict anti-piracy laws.

 

But I can't recall any more markets where the growth can be that big. Ukraine and other former USSR countries don't have enough money to pay even £0,33 for a track, maybe China could turn the things over - but a HUGE job should be done to get to their market. Stranger things have happened though, such as the fact that China is now the biggest importer in the world of French wine - who could have thought?

That's good news for Russia, but Europe as a whole is still so poorly developed as a market I think. Lots of room for growth everywhere east of Italy/Germany I think, though the wealth gap really does have to be made up. I'm interested to see how the Russian market develops though! Pity there was nothing in the report about it (to my knowledge at least). Keep me posted :P

 

China seems obvious, yeah. Honestly I'm still kinda confused as to why China isn't a big market yet, but I suppose the culture isn't really there yet.

China seems obvious, yeah. Honestly I'm still kinda confused as to why China isn't a big market yet, but I suppose the culture isn't really there yet.

Not sure it ever will.

 

 

China doesn't have a big music market because pirate shops are actually LEGAL there. Who would pay £10 for a CD when you can get 2 for £2. That's the biggest problem out there and gradually, the pirated shops are disappearing but it's not up to the level where we can see a significant growth within the music industry there yet

 

China doesn't have a big music market because pirate shops are actually LEGAL there. Who would pay £10 for a CD when you can get 2 for £2. That's the biggest problem out there and gradually, the pirated shops are disappearing but it's not up to the level where we can see a significant growth within the music industry there yet

2 for £2 - that's crazy :lol:

 

 

Surely making places like that legal is bad for the Chinese economy? :unsure:

It's so widespread that it WAS uncontrollable. That situation is slowly becoming manageable but only gradually. £10 for a CD seems rather high in China so perhaps some adjustment will be needed there (e.g. selling legal CDs for say £5-6 instead), just like how CDs in the UK cost an average £10 for brand new releases and yet around £25 in Japan.

 

Also, who cares if it's bad for the economy of China? The profit of illegal shops technically go back to the Chinese economy as none of it go back to record labels. Selling a CD for £10 being a legal purchase, the majority of it I'm guessing would go back to its area of origin (i.e. Western countries). Plus, it's not like China is struggling in the economical aspect. :lol:

It's so widespread that it WAS uncontrollable. That situation is slowly becoming manageable but only gradually. £10 for a CD seems rather high in China so perhaps some adjustment will be needed there (e.g. selling legal CDs for say £5-6 instead), just like how CDs in the UK cost an average £10 for brand new releases and yet around £25 in Japan.

 

Also, who cares if it's bad for the economy of China? The profit of illegal shops technically go back to the Chinese economy as none of it go back to record labels. Selling a CD for £10 being a legal purchase, the majority of it I'm guessing would go back to its area of origin (i.e. Western countries). Plus, it's not like China is struggling in the economical aspect. :lol:

What about the Chinese music industry? I know it isn't the biggest thing but it can't do Chinese labels any good. And stuff like VAT would be a lot bigger on albums with reasonable prices, so I don't see any huge reason to allow stuff like this to continue.

What about the Chinese music industry? I know it isn't the biggest thing but it can't do Chinese labels any good. And stuff like VAT would be a lot bigger on albums with reasonable prices, so I don't see any huge reason to allow stuff like this to continue.

 

The Chinese music industry is actually huge in Asia, but not in terms of digital/physical sales. Musicians earn most of their money via endorsements, tours and other ventures rather than selling legit CDs and digital singles. Asian music industry operate differently from the west in that a lot of singers/musicians are termed as "idols", thus the money from endorsements, acting, and other ventures gained from the celebrity benefit Chinese labels in that they take the majority of the profit.