Strong growth in streaming throughout the world helped lift global music sales by almost 6 percent in 2016, the biggest year-on-year rise in revenues since the International Federation of the Phonographic Industry (IFPI) began tracking the market in 1997.
The IFPI’s Global Music Report (previously known as the Digital Music Report) states that trade revenue generated by the global recorded music industry climbed by 5.9 percent to $15.7 billion, with digital sales up 17.7 percent across the board. After digital revenue surpassed physical for the first time in 2015, digital hits another milestone in 2016, accounting for 50 percent ($7.8 billion) of all music sales for the first time.
More importantly, 2016 marked the second successive year that the recorded music market grew after nearly two decades of continually falling sales during which revenues dropped by almost 40 percent at their lowest point.
Speaking at the report’s launch, IFPI chief executive Frances Moore said that the industry’s upturn "hadn’t happened by chance."
“As an industry we’ve had years of investment and innovation to make it happen and we’re starting to see the shift now: from adapting to the digital age to actually driving the digital age," Moore said, cautioning against complacency or excessive back slapping.
“It's important to remember the context in which this announcement is being made,” she told an invited audience of journalists and music executives. “The story of recorded music over the last couple of decades has really been one of transformation: from physical to digital; from downloads to streaming; from ownership to access. We want to achieve one more transformation and that is from decline to growth,” she stated.
Joining Moore at the report launch were Michael Nash, executive vp digital strategy, Universal Music Group; Dennis Kooker, president, global digital business and U.S sales, Sony Music; and Stu Bergen, CEO international and global commercial services, Warner Music Group, who struck a similarly optimistic but cautious tone.
“We have a long way to go before we’ve established a truly robust and healthy environment for our artists," said Bergen, noting that the industry was only two years into its recovery after a long period of decline.
"We must remain alert, resourceful and ambitious. We’re no longer running up a down escalator, but that doesn't mean we can relax," Bergen continued. "Whatever growth we see in the future, we will always need to stay vigilant about every new opportunity. We’re not sitting back and waiting for streaming to do the heavy lifting."
Bergen's words were echoed by Sony Music’s Kooker, who identified a highly competitive market place as helping “drive growth for everyone across the industry."
“I think we will look back on 2016 as a tipping point for the industry, a point where we moved from the early-adopter stage to moving towards mass market," Kooker said, citing the arrival of new services coming to market with different product offerings as a source of optimism for the future.
Breaking down the Global Music Report findings, the mass adoption of streaming services such as Spotify, Amazon and Apple Music in both established and emerging markets is -- as expected -- the main driver behind the industry’s sustained upturn.
At the end of 2016, there were 112 million paid music subscribers worldwide, according to the IFPI. When users of ad-supported streaming services are factored in, that number rises to 212 million, with total streaming revenues climbing 60 percent year-on-year to just over $3.9 billion. Streaming now makes up the majority (59 percent) of digital revenues, while digital (downloads and streaming) accounts for more than half of all record sales in 25 markets.
That was enough to offset a 20.5 percent fall in download sales (sales figures were not provided) and a 7.5 percent drop in physical revenues.
Performance rights revenue grew by seven percent to $2.2 billion and accounts for 14 percent of the market, with the U.S., U.K. and France the three biggest territories for performance rights revenues. The global sync market also grew, climbing 2.8 percent and maintaining its two percent share of all recorded-music revenues.
Regionally, the U.S. grew by 7.6 percent -- a significant increase on last year’s rise of one percent -- with streaming income rising by 80.5 percent year-on-year. The North American market as a whole grew by 7.9 percent (compared to 1.5 percent in 2015), while Europe grew by four percent and Latin America was the region with the highest level of growth for the seventh consecutive year, seeing a 12 percent rise.
As previously announced, Drake was named by IFPI as the world's best-selling recording artist of 2016, topping its fourth-annual Global chart, recognizing the biggest selling artists across physical and digital formats, including downloads and streams. Beyoncé's Lemonade topped the IFPI's 2016 Global Albums list (based on physical and digital sales, but excluding streams), beating Adele's 25 into second and Drake's Views into third place. Metallica's Hardwired... To Self-Destruct and David Bowie's Blackstar rounded out the top five highest-selling albums worlwide.
Tempering the optimism and general mood of positivity that the report's findings brought was the ever contentious issue of tackling the value gap, with YouTube's low royalty rates the unspoken white elephant in the room. According to IFPI data, user-uploaded video streaming services that operate under safe harbor legislation returned $553 million to rights holders in 2016 from a global audience of over 900 million users. The disparity between that return and the $3.9 billion that rights holders received from streaming services in the same 12 month period -- despite streaming having a far lower user base of around 200 million people -- was a major problem that needs to be addressed if the music industry is to achieve its true potential, all four speakers agreed.
"To declare mission accomplished is to fundamentally misunderstand the mission itself," said Universal Music's Nash. "The overriding strategic objective to ensure that, as our business continues to evolve, artists are given the broadest range of opportunities in a market place where their music is fully and fairly valued. Not just for 2016, but for 2017 and the future. To breathe a sigh of relief and rest on our laurels as if we've arrived at our destination is to completely misread the landscape.
"Our success relies on more than just our own transformational initiatives," he continued. "Achieving a vibrant and sustainable future will require a resolution of the market distortion known as the value gap. The disparity between the mass scale of music consumption on services that rely on user-uploaded content and de minimus revenue returned by these platforms to those who create and invest in music is growing. The scope of this inequality casts a shadow across the entire landscape that cannot be ignored. The longer this value destruction is permitted to continue, the greater the threat to the music ecosystem with real costs to creatives, fans and digital services themselves. The value gap must not be permitted to derail our mission."