Norway is one of those countries often held up as example of streaming potential. It’s no wonder why: streaming revenues carried the country’s recorded music market to a 7% gain in 2012 and are the driving force behind a 17% gain in the first half of 2013.
The country is certainly an example of how new business models can lead to growth when the right factors are in play. But the example doesn’t translate perfectly to countries like the United States.
One thing that really stands out here is the continued strong growth in streaming revenues. Norway’s streaming revenue grew by roughly $24 million in 2012 — a 226% increase. Although streaming revenue will not have the same percentage growth this year, the country could see a growth in value. Streaming revenue grew nearly $13 million in the first half of this year, or just over half of the entire value gain in 2012.
Put another way, streaming appears to have room for growth even though it currently accounts for 66% of Norways’ recorded music revenues.
Countries like the United States should view Norway’s current growth with optimism. It shows that given the right conditions — such as partnerships (see below) and broadband and mobile penetration — streaming services can make up for losses in download and physical revenues. (On a side note, it is unknown if Norway’s 22% decline in download revenue was caused by cannibalization from streaming services or is a natural decline of a mature format.)
Partnerships have been important to Norway’s streaming gains. Spotify has partnered with Norwegian telcos NetCom and Chess to bundle Spotify Premium with broadband and mobile services. WiMP has a partnership with Canal Digital. These initiatives have certainly helped adoption of subscription services in the country.
Unfortunately, the kinds of mobile and broadband partnerships common in Europe are less common in the United States. Some exist — Rhapsody and MetroPCS, for example — and more are undoubtedly on the way. Beats Music is pursuing mobile partnerships ahead of the U.S. launch for its “Daisy” subscription service. But the major carriers and broadband providers have not yet jumped feet-first into music subscriptions. (For whatever reason, although lack of interest by mainstream consumers would be enough. Which is a shame. As Muve Music’s success shows us, consumers will respond to a good mobile-and-music bundle.)
Norway also shows that physical losses can be overcome if CDs play a minor role. Norway’s physical sales dropped 29% and went from a 33% share to a 20% share. CD sales didn’t play a major role in recorded music revenues in 2012. They play a smaller role today.
CD revenue is another difference between Norway and the United States. Physical revenue (CDs plus vinyl and music video) accounted for 45.4% of U.S. recorded music revenue in 2012 (I’m following Norway’s example by including only physical, downloads and subscription and excluding digital performance royalties and mobile), well above Norway’s 33%.
The United States couldn’t handle physical losses like the ones Norway is experiencing — nor does it have to. U.S. revenues would take a hit if CD sales fell 29%. But U.S. CD sales (in units) were down just 14% in the first half of 2013, according to Nielsen SoundScan. That’s a typical year-over-year decline for the CD. Thus, the U.S. doesn’t have to count on streaming gains as much as Norway does. In the event the CD turns south, streaming would have to pick up a lot of slack. If CD sales fell 29% (instead of 14%) in 2013, subscription services would need to gain additional $162 million to make up the difference.
Every market is different. Norway has taken well to streaming services. Other countries, such as Spain, have the same services but generate less revenue per capita. The United States has a good chance to experience streaming gains similar to those of Norway — if the pieces are in place.