PwC Music Report Stresses Strength of Live Biz, Fate of Downloads Still Hazy

The U.S. live music market is universally expected to grow in the coming years. There's more uncertainty, and disagreement, on the future course of country's music download market.
The big picture offers good news. The total U.S. music market is expected to grow from $15.1 billion in 2013 to $16.5 billion in 2018, according to a PricewaterhouseCoopers report to be released Wednesday. Total revenues had actually declined 0.2% since 2011.
Already the largest segment in the music business, live music will command an even greater share of total music revenues. Live music revenues are expected to grow to $8.9 billion, or 63.7% of the entire music busines s, from $10.5 billion in revenue and a 58.7% share in 2013.  
The highest growth rate in the music business comes from streaming music. PwC forecasts streaming revenue will grow at 14.5% per year for five years, pushing last year's $848 million of revenue to $1.67 billion in 2018. In that event, streaming would account for 36.9% of digital revenues, 27.8% of recorded music revenues and 11.1% of total music revenues.
The report's music download forecast may surprise some people. PwC believes U.S. download revenues, without taking inflation into account, will remain flat over the next five years. Greg Boyer, a partner in PwC’s entertainment, media and communications practice, believes 2014 will be the U.S. download market's "most painful year" in terms of growth rate.
"The mass appeal of streaming and weak release schedule have led to a sharper-than-normal downturn," Boyer explains. Year-to-date numbers show streaming and downloads have indeed headed in opposite directions in 2014. Through May 18, total streams were up 37.6% and digital downloads were down 12.3%, according to Nielsen SoundScan.
PwC believes a number of factors will contribute to download growth in the coming years. Stronger release schedules, new fans coming into the digital marketplace and a growth in niche markets driven by a healthy live market will prevent download revenues from falling, says Boyer.

Other experts are less optimistic about the future of downloads. Citing existing trends and consumer shifts to streaming services, Nielsen Entertainment's David Bakula doesn't believe downloads will reverse course in the coming years. He tells Billboard the rolling trend in download sales, as measured by rolling 52-week sales, has been "pretty dramatic and pretty sharply down" since the beginning of 2013.
NPD Group's Russ Crupnick shares Bakula's concerns about the U.S. download market. Crupnick doesn't believe the gloomiest predictions for the download, but he does believe the format has hit a peak. Without something to shift aggregate demand, NPD's music expert doesn't think PwC's forecasts will materialize. "I'm just not sure without some big modification in the model there is that level of growth in the future.
Even if the download drops in the coming years, the decline could be relatively mild. "I don't think it will come crashing down the way CDs did," Crupnick adds.
PwC did not include music publishing revenues in the forecast, although some revenues attributable to publishers, such as mechanicals paid by labels and performance revenues paid by music venues, are included in the other categories. "We continue to see good stability and good exploit of catalog" in music publishing.