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Germany's Music Market Flips for Digital as Streaming Overtakes CDs During Flat Year for Sales

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The world's No. 3 music market continues its transition into streaming, which now makes up 46.4 percent of the market -- compared to 36.4 percent for CDs. Vinyl has hit a wall, falling 5.2 percent.

Streaming finally overtook CDs as the market leader in Germany last year, though explosive growth in digital wasn't enough to push the world's No. 3 music consumer into the black overall, according to new figures released today by the Federal Music Industry Association (BVMI).

The trade organization announced in Berlin that revenue from the sale of CDs, vinyl, DVDs and downloads, as well as from streaming services, totaled €1.582 billion ($1.78 billion) in 2018, down a slight 0.4 percent from 2017, when the industry raked in €1.588 billion ($1.94 billion), itself a 0.3 percent drop from the year prior.

"This is not unhappy news," cautioned BVMI chairman Dr. Florian Drücke. "In fact, the German music industry continues to hold the course as it moves through a major transformation phase."

That metamorphosis of sorts is driven by continued growth in audio streaming, which soared 33.5 percent in 2018 and now accounts for a market share of 46.4 percent. CD sales declined roughly 20 percent, bringing that format's share of the market down to 36.4 percent. That's a total flip from just a year before, when CDs held 45.4 percent share and streaming 34.6 percent.

These two leaders are followed at a considerable distance by downloads, which contributed just 7.8 percent of sales, down from 9.9 percent, and vinyl, which after rising steadily for many years, fell 5.2 percent over the previous year to a market share of 4.4 percent at the end of 2018. In last year's wrap-up, vinyl reported growth 5.1 percent and accounted for 4.6 percent of market share.

In other words, the German music business in 2018 continued its large-scale shift towards the digital realm, with 56.7 percent of sales generated by audio and video streams and downloads, and physical market sales accounting for the remaining 43.3 percent.

"We owe the stable market to the ongoing substantial growth in audio streaming... thereby demonstrating its widespread acceptance among fans," said Drücke. "This is a very good sign for the coming years, as it indicates users’ increasing willingness to pay. The lion’s share of audio streaming revenue is indeed generated by premium subscriptions."

Leader at two of the major labels have chimed in on the results as well, with both declaring optimism thanks to the growth in paid streaming services in a country that was, until very recently, dominated by the CD format.

"In 2018 the trend towards the consumption model continued at a rapid speed," said Frank Briegmann, president & CEO Universal Music Central Europe and Deutsche Grammophon. "Audio streaming is the biggest source of revenue for the total market. Nonetheless, [CD market share is still high], especially compared to other markets. So we are going to continue to supply all formats without exception as long as there is a demand for them and it makes economic sense. Another one of our priorities at the moment is equal opportunity in the digital space. The EU Copyright Directive can make a significant contribution in this area."

Added Bernd Dopp, chairman and CEO of Warner Music Central Europe: "Against the background of more than 5 percentage points gain in market shares in the past five years and an outstanding performance in 2017, we are quite satisfied with this result. The saturation rates known from other markets, such as Scandinavia, are far from being reached in Germany, so that we continue to see considerable potential for growth here."

Marc Schneider contributed to this report.