In 2020, we saw streaming sustain the music industry through the incredible upheaval of COVID-19. Last year, and continuing into the present, we have seen both new sources of uncertainty and optimistic signs of a meaningful return toward normalcy within a music industry where the importance of streaming is even more clear.
As streaming has become the preferred way for fans to listen to music, the music industry has experienced year after year of healthy financial growth. Over half a billion streaming subscribers worldwide now form the heart of a resurgent industry. Fans are engaging with music in ways never before possible and paying for it month after month via subscription fees and robust growth of once-nascent digital audio advertising.
Just look at the incredibly successful years announced by the largest label-publishing companies in the world, Universal Music Group, Sony Music Group, and Warner Music Group. All three companies reported another year of double-digit revenue growth in both recorded music and publishing. Streaming remains at the core of their success, with recorded music streaming revenues among the three growing nearly 28% and Sony reporting an increase in publishing streaming revenue of 37% (Universal and Warner don’t break down annual publishing revenue specific to streaming). Over the past decade, as streaming has grown in popularity, Universal has seen its revenues more than double.
This success, which is not limited to the largest music companies, is a product of many factors. There are, for example, fundamental changes to the long-term earning potential of older songs and recordings that generate revenue every time a stream occurs. This upending of traditional industry economics has led record labels, publishers, and other well-capitalized entities to invest billions in catalogs that, prior to streaming, were wildly popular but had seen their earning potential diminish as their sales receded. Streaming has turned those catalogs into a highly sought-after asset class, a credit to both their incredible artistic contributions and the economic realities of streaming.
For newer music, streaming has reduced artificial barriers that once limited both the creation of music to certain people and access to music to certain geographic boundaries. The significant, ongoing investments made by streaming services to drive music discovery and develop fan engagement tools that were previously unimaginable can be seen in the streaming-driven growth of Latin music, hip-hop, K-pop, and Afro-pop. Untold numbers of artists and writers have achieved success through streaming that would never have been possible before.
At the heart of all this success lies a simple truth — streaming’s ability to combine incredible music and unprecedented technological innovation has been the most fan-friendly evolution in the history of recorded music. Those fans, and their subscription fees or related advertising dollars, make up the ever-growing foundation of today’s industry. We have every reason to believe that that trajectory will continue in the coming years.
Despite this overall positive trajectory over the past few years, we have also seen an increasing level of frustration from songwriters and artists about how streaming is impacting them on an individual level. As the overall revenues and royalties have increased massively, the frustrations have grown louder. The unavoidable conclusion is that the writers’ and artists’ concerns cannot be solved simply through more streaming royalties paid to the largest rightsholders.
This reality suggests that we are at a critical inflection point for the streaming-centric music industry. We must decide if we are willing to collectively take a long, hard look at structural and other issues, some of which are as old as the industry itself.
Ultimately, while streaming is driving industry growth it is neither the cause of nor the solution to all the music industry’s challenges. In the conversation about how to properly value songwriters and artists, it isn’t wrong to ask that streaming services come to the table; we stand ready to be a part of those conversations with all interested parties.
Together we should further explore alternative payment models such as user-centric; tackle ongoing data challenges that stymie effective and accurate royalty payments; and reconsider contracts premised on a pre-streaming industry. Finally, we should look at how we value the creation of music separate from its consumption, while recognizing that success in this industry has never been guaranteed.
But everything must be on the table, and everybody must be at the table.
Failure to approach these issues collectively and comprehensively will perpetuate the industry we see today — one with sky-high revenues for the largest rightsholders and boiling frustrations from songwriters and artists, where streaming services are credited for the former and blamed for the latter.
Garrett Levin is president and chief executive officer, Digital Media Association (DiMA).