Global music copyright grew $800 million to a record $32.5 billion in 2020, according to an Omdia report released Tuesday (Nov. 16) by Music & Copyright. Authored by Will Page, a former chief economist at Spotify, and Omdia analyst Simon Dyson, The Global Value of Music Copyright aggregates revenues for record labels and publishers for streaming, purchases and public performances.
For record labels, the pandemic limited annual revenue growth to $1.5 billion, bringing it to $21.1 billion. Streaming was a “stay-at-home stock,” as the report described termed it, that benefitted from consumers’ need for entertainment when public interaction was limited. Not that 2020 was without challenges. Ad-supported streaming was hit by a global pull-back in ad spending. Brick-and-mortar sales slowed, however, despite some retailers’ efforts to ease losses with curbside pick-up and mail orders. But labels fared better than their counterparts, music publishers. Music publishers were especially exposed to the pandemic’s ill effects on public performances from live venues, retail shops, fitness studios and other businesses shut down — some permanently — because of extended restrictions imposed by local governments. As a result, music publishers’ global income in 2020 fell by $700 million to $10.4 billion.
The pandemic increased an already-contentious income gap between record labels and publishers. Record labels commanded two-thirds of global music copyright income in 2020, a significant gain from 55% when the report was first conducted in 2014. As if anticipating changes in the future, Page and Dyson ask if the scales will tip back in publishers’ favor. That’s a possibility — not because of changes in music formats or listening habits, but from government intervention. U.K. regulators responded to publishers’ calls for a more equitable split of income by initiating an inquiry. “These cries may grow louder and more contagious,” they wrote.
Streaming accounted for more than half of global music copyright income, reaching 54% after a steady march from 22% in 2016 to 46% in 2019. The music business underwent a radical transformation in reaching that tipping point. Just fifteen years ago, streaming was not even a category in the IFPI’s annual global report, Page and Dyson noted. When CD sales peaked in 2001 and recorded music revenues reached a record $23.6 billion, music publishers got the lion’s share of their income from mechanical royalties from CD purchases. Looking forward to 2022, labels and publishers can clearly see opportunities but might not consider some of the challenges.
Music companies expect big contributions from four growing segments: social media, games and fitness. In Warner Music Group’s Nov. 15 earnings calls, CEO Stephen Cooper said the company’s record labels are receiving $235 million on an annualized basis from companies such as TikTok, Facebook and Roblox. The report adds a fourth category, livestreaming, due to Twitch’s emergence as a viable platform for online performances (Page had previously found that artists can earn 3 to 15 times on Twitch what they normally would from Spotify and similar streaming services). But the authors see trouble brewing as platforms vie for consumers’ attention. In some cases, music streaming on TikTok, for example, could crowd out streaming on another ad-supported platform (revenue from TikTok streaming would be additive to fixed monthly subscription fees that do not vary with listening time). In other cases, podcast listening can replace music streaming. After all, a person can listen to only so much audio each day.
The report sounds another alarm bell regarding saturation of subscription services in leading markets. The authors estimated subscription services will reach two-thirds of the U.S. market and average 1.4 subscriptions per household; the U.K. will have slightly smaller numbers. The authors pose an important question: with the US and UK — collectively half of all global streaming revenues –- nearing their peak subscription potential, will late adopters and emerging markets be able to build on labels and publishers’ growth aspirations? Spotify and major labels have said mature markets have room to grow and emerging markets, while needing time to develop, are important and potentially lucrative next targets. That puts added pressure on growing segments – and long-term projects such as the metaverse –- to pick up the slack.