In 2019, recorded-music-industry revenue increased 8.2% — a figure that sounds substantial, but that nonetheless left some analysts and executives fretting that the business' streaming-fueled growth rocket might now be coming down to earth.

After four years of booming expansion, last year's gains were down 1.5 percentage points from the 9.7% growth that IFPI reported for 2018. And that was before the coronavirus pandemic halted touring, shuttered record stores and convinced some of the world's biggest artists to postpone releasing music.

But a closer analysis of IFPI's 2019 Global Music Report, which was released earlier in May, suggests the industry's future is actually brighter than it appears — and reveals some surprising trends that could shape the way artists and labels will market their music in the years ahead.

CHINA'S BIG DEBUT

One reason 2019's growth looks slower than 2018's: China. IFPI counted total music revenue from the country for the first time in its 2018 report, using transactional data from digital services, just as it does for other countries. (Before 2018, it couldn't get that information.) That change in methodology led to a misleading 80% growth figure for 2018. The 2019 report presents a more accurate picture: China's market grew 16%. The effects can be seen worldwide. Without the 80% growth in China, 2018 revenue would have increased by 8.5% rather than 9.7% — and this year's growth wouldn't seem paltry by comparison.

MY, MY THIS AMERICAN PIE

As streaming services expand across the world, the global music market is oddly becoming more American. When Spotify launched in the United States in 2011, IFPI reported that America made up slightly over a quarter (26%) of the recorded-music business' global revenue. In the years since, revenue has ballooned by more than one-fifth — putting the U.S. share of that increased pie at just over one-third (36%).

This might seem unlikely: Streaming is opening up new markets, and there are more smartphones in the world today than there ever were CD players. But there are a number of reasons why the United States accounts for a growing share of global revenue, beyond the fact that the U.S. market has posted its own near-double-digit growth for four consecutive years. One factor: The dollar has been strong, with the trade-weighted exchange rate (measured against a range of currencies) rising 30% from 2011 to 2019. Also, the world's second-biggest music market, Japan, hasn't grown in size over the same four years, fueling America's dominance. Nearly 70% of Japan's recorded-music revenue still comes from CDs, but as the CD business struggles with the store closures and distribution issues posed by COVID-19, the United States could increase its share of the global pie even more.

GOOD NEWS FROM THE NORDICS

Sweden and Norway, the birthplaces of Spotify and TIDAL predecessor WiMP, respectively, were the first countries to embrace streaming, which became mainstream there in 2008. Subscription revenue now accounts for about 95% of total recorded-music revenue in Sweden and Norway. Every year, analysts predict these two countries will soon reach a dreaded state — Peak Streaming — at which point subscriber numbers will plateau. But revenue in Norway grew 5.5% in 2019, despite a 10% subscription price hike in 2018 — while Swedish revenue grew 4.3%. Such continued growth bodes well for later adopters like the United States, and success in raising prices in Norway could encourage services to do so in other markets. Meanwhile, there are still plenty of Scandinavians left: Both countries still have only half as many music subscribers than they do members of Facebook, and the market of consumers age 60 and older is big — and largely untapped. After marketing to students and children, perhaps a "retirement plan" could extend the runway for future growth.

LATIN LESSONS

For the fifth consecutive year, recorded-music revenue grew fastest in Latin America, yet the region still only accounts for 4% of the global business. The potential is still huge: Latin America (measured from Mexico south) now has only 45 million music subscribers out of a population of 650 million, according to research firm MIDiA. Another consultancy, Omdia, estimates that 300 million of these residents have smartphones and credit cards, and that another 100 million might pay for music bundled into their wireless plans if telcos did the billing. But high inflation, taxation and political instability have music streaming companies struggling to get more local traction. In countries like Argentina, where inflation hit 50% in 2019, streamers also face pricing challenges, like whether to offer subscriptions in volatile local currencies (to reduce risk for consumers) or in U.S. dollars (to reduce their own). One edge for the streamers: Latin American consumers may be less sensitive to small price increases, since inflation has habituated them to it.

SHOW ME THE RUPEES

Revenue from China and India fell just short of $0.75 billion, meaning the two markets together account for just 4% of global recorded revenue. By comparison, they make up a quarter of global GDP, raising questions about when, or if, those two numbers will start to converge. In 2019, YouTube announced that it had 265 million users in India, more than Spotify had amassed globally in over a decade. But the revenue hasn't been as impressive, with video streaming payouts lagging behind both ad-supported audio and subscriptions.

NOW, THE FINE PRINT

The Global Music Report includes only 63 markets, compared to the 193 countries recognized by the United Nations, and not all of the revenue goes to labels, since the figures include mechanical royalties that will be paid to music publishers.

Also, while IFPI trumpeted 341 million users of paid music services at the end of 2019 — a third more than the previous year — its definition of "user" is inconsistent. When it comes to family plans, each family member is considered a subscriber, which could mean that as much as one-third of "subscribers" are not paying anything at all. Meanwhile, consumers who subscribe to two different service platforms may be counted twice.

VIRAL IMMUNITY?The biggest cloud over the future of every business is the coronavirus, of course. As of now, U.S. streaming volumes are still broadly stable. The split between current releases and catalog is unchanged, and hits are still hitting like they used to. Take two of the biggest year to date: BTS' Map of the Soul: 7, released three weeks before sheltering in place was announced in the United States on March 13, saw a similar pattern of streaming activity to The Weeknd's After Hours, which arrived a week after the lockdown began. The Weeknd's prior release, Starboy, was broadly in line with this curve, too. The stability of the paid subscription model increasingly gives recorded music more security than other media businesses.The challenge ahead will be the decline in disposable income, which will make it harder to attract new subscribers. In the short term, the battle for attention might be a more pressing threat. SuperData Research, a Nielsen Company, reported that revenue from gaming, including consoles, reached $10.8 billion in March — which is more revenue than labels collected from streaming during all of 2019. Online video game Fortnite's 350 million users alone outnumber all the paying music subscribers across the globe. Whenever these gamers resume commuting to work on public transportation, music will have to fight even harder for their attention.

Will Page is a visiting fellow at the London School of Economics, who previously was the chief economist at both Spotify and PRS for Music. His book, Tarzan Economics, will be published by Little, Brown and Company in the United States in 2021.

Additional reporting by David Bakula and Ally Glerum of Nielsen Music/MRC Data and David Safir of Music of Economics Consultancy. 

This article originally appeared in the May 23, 2020 issue of Billboard.