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Merlin Survey Reveals Members’ Digital Growth Driven by Subscriptions and Streaming

A major finding in the report is that digital accounts for 54.7 percent of revenue for over half of Merlin survey respondents -- the first time the 50 percent threshold has been crossed.

Indie labels and distributors from dozens of countries say their digital revenues are growing and streaming services are driving the improvements.  A survey of Merlin members revealed 65 percent of members reported overall business growth last year, up from 62 percent the year before. The percent of respondents reporting a decrease in overall revenue improved to 16 percent from 18 percent in 2013.

A major finding is that digital accounts for 54.7 percent of revenue for over half of Merlin survey respondents — the first time the 50 percent threshold has been crossed. For a third of respondents, digital accounts for 25 to 50 percent of their revenue.

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The survey, Merlin’s third, was conducted in May and June and reached members spanning 26 countries. The glimpse inside the books of record labels and distributors with 10 percent global digital market share comes two days after Merlin inked a deal for Apple Music. 

Another notable is the finding that growth from subscription and streaming services appears to be compensating for the decline in download revenue for many members. This helps explain why 81.7 percent of respondents reported being either very or somewhat optimistic about the future of their businesses.

Nearly three in four Merlin members said their digital revenues increased last year. Roughly 17 percent reported an increase over 50 percent. Streaming revenue increased for almost all — 98.3 percent — members and doubled for 17.9 percent of them.

Supporters of the embattled freemium business model could find at least a little solace in this takeaway. As the largest subscription service, Spotify is undoubtedly a large factor in growth of streaming revenue for Merlin members. On the other hand, critics could counter that free, on-demand streaming isn’t doing enough to drive subscriptions. After all, it’s possible that Merlin members could have experienced even more digital growth.

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Falling download sales left an impression on members. Over half (55.3 percent) of members said their download revenue had remained the same or decreased. This decline was mitigated by downloads’ minority share of digital revenue. Only 9.7 percent of members said download sales account for over 75 percent of digital revenues. About one in three (31.7 percent) said downloads were between 50 and 75 percent of their 2014 digital revenues.

Global digital revenue mirrors the trends seen in Merlin’s survey results. According to the IFPI, worldwide digital revenues grew 6.9 percent to $6.9 billion last year from $6.4 billion in 2013. The growth was fueled by subscription services and ad-supported streaming services.

The survey results arrive amidst heavy debate about how rights holders and creators are paid by digital services. Merlin announced late Tuesday it had a licensing deal for Apple Music, the tech giant’s subscription service that will launch in over 100 countries on June 30. Apple’s original contract for independent labels included a controversial waiver of royalties during the 90-day free trial. Following industry-wide outcry — including an open letter by Taylor Swift — Apple quickly backed down. It also reached deals with Beggars Group and PIAS and has been endorsed by WIN.

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The results provide a valuable look at the state of independent labels. However, the survey isn’t an accounting of independent label revenues. Merlin has not tallied member revenues in the way the RIAA tracks its members’ revenues and the IFPI reports recorded music revenues for entire countries. The survey treats each respondent equally. In other words, the high-percentage growth of a small label would be treated the same as low growth by a much larger label.