Global recorded-music and music publishing market share results for 2018

Music & Copyright‘s annual survey of the recorded-music and music-publishing sectors has revealed the changes in global market share for the three major music groups and the independent sector. Recorded-music leader UMG maintained the top spot, with an increased share of digital sales fully offsetting a decline in the company’s share of physical sales. UMG also increased the gap on second-placed SME, with the latter suffering a fall in both its digital and physical shares. WMG’s share of digital sales edged down last year, but a higher share of physical sales boosted the company’s overall recorded-music market share. A repeat of last year saw independent record companies collectively account for the biggest share. Sony was unable to repeat the record year of 2017 for music publishing, with the company suffering a dip in share. UMPG registered the highest share gain of all the major music publishers, but the collective share of the independent sector accounted for the biggest share of the music publishing pie.

Share gains for UMG and WMG at SME’s expense
UMG had a 29.8% share of combined physical and digital recorded-music trade revenue last year, up from 29.7% in 2017. For digital revenue only, UMG’s share increased, to 32.4%, from 32%, while its physical share was down, to 23.4%, from 25.4%.

Record companies, physical- and digital-revenue market shares, 2017 and 2018
Source: Music & Copyright

SME was the second-largest record company, although its combined physical/digital market share was down last year, to 19.9%, from 21.9% in 2017. For the second consecutive year, SME registered a year-on-year fall in both physical and digital market shares. Furthermore, the company’s share of all recorded-music trade revenue, which includes licensing and other revenue as well as income from physical and digital music sales, was down to 20.5%, from 22.3%.

Record companies, total recorded-music-revenue market shares, 2017 and 2018
Source: Music & Copyright

The smallest of the three majors, WMG, experienced a reversal of its 2017 results, when the company’s digital share was up and its physical share down. Last year. WMG’s digital share slipped slightly, to 17.7%, from 18.1%, while its physical share grew to 13.4%, from 12.8%. Overall, WMG’s combined physical/digital share increased, to 16.5%, from 16.2%, and its total revenue share was also up, to 16%, from 15.8%.

Aside from the changes in the majors’ shares, independent record companies’ combined physical/digital revenue share was higher than the leader last year, at 33.8%. The independent company sector increased its share of both physical and digital revenue, but there remained a sizable difference between its physical and digital shares.

Another positive year for music publishing
In line with the way in which Music & Copyright determines global recorded-music market shares, music publishing market shares are also based on revenue received by each company. Music & Copyright has calculated that global music publishing revenue grew 11.4% last year, to $5.47bn, from $4.92bn in 2017. Sony was unable to repeat its record performance of 2017 and suffered a decline in global publishing share last year, to 26%, from 27.3%. Sony took the top spot in 2013, following the purchase of EMI Music Publishing (EMI MP) by a Sony-led consortium in 2012. Sony acquired an approximate 60% of the interest in EMI MP in November 2018. In addition to revenue from EMI MP, the company’s publishing share includes Sony/ATV earnings as well as income from Sony Music Publishing Japan.

Music-publishing companies, revenue market shares, 2017 and 2018
Source: Music & Copyright

UMPG was the second-largest music publisher last year. Music & Copyright estimates the company’s share increased, to 20.2%, from 19.5% in 2017. Furthermore, UMG registered the biggest share growth of the three major publishers. Third-placed Warner/Chappell’s share was up last year, to 12.3%, from 12%. The collective share of independent music publishers was also up, rising to 41.4%, from 41.2%.

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New issue of Music & Copyright with Canada country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Difficult year for SME as UMG, WMG, and the indies make recorded-music and publishing share gains
Music & Copyright’s annual survey of the recorded-music and music-publishing sectors has revealed the changes in global market share for the three major music groups and the independent sector. Recorded-music leader UMG maintained the top spot, with an increased share of digital sales fully offsetting a decline in the company’s share of physical sales. UMG also increased the gap on second-placed SME, with the latter suffering a fall in both its digital and physical shares. WMG’s share of digital sales edged down last year, but a higher share of physical sales boosted the company’s overall recorded-music market share. A repeat of last year saw independent record companies collectively account for the biggest share. Sony was unable to repeat the record year of 2017 for music publishing, with the company suffering a dip in share. UMPG registered the highest share gain of all the major music publishers, but the collective share of the independent sector accounted for the biggest share of the music publishing pie.

GEMA sees third consecutive year of collections over €1bn
German authors’ society GEMA has reported its financial details for 2018. Although collections and distributions were unable to match the previous year’s record levels, the underlying performance was positive. Collections in 2017 were inflated by one-time payments, and the exclusion of those extras meant total income last year registered healthy growth. Public performance and broadcasting, the two biggest collection sources, recorded another year of modest growth, while digital revenue grew sharply. The private copying total more than halved, but the 2017 collection figure was inflated by extra payments, so a year-on-year comparison is not strictly accurate. Overseas income edged down, while mechanicals continued to suffer from lower sales of physical formats. Total expenses were slightly reduced, but the decrease in income meant the cost rate increased.

TikTok gets serious with music as it clocks up the hits
Short-video sharing platform TikTok has seemingly come from nowhere to garner a seriously large following among young demographics around the world. While the service does lean heavily on record companies’ existing catalogs, it has also proved adept at enabling its video “creators” to unearth offbeat atypical tracks that then get serious traction. And TikTok has recently demonstrated that it can not only break emerging artists but also serve as a platform that delivers hits in the mainstream charts. Now it is up to TikTok to take advantage of those capabilities to become a leading music discovery channel in its own right, while record companies need to put resource into the video network as part of their A&R efforts.

Canada country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed Canada music industry report. Canada is one of the world’s bigger music markets. Although ever present in the top 10, the country lost a couple of places last year, slipping from seventh to ninth. Canada was overtaken by China and Australia, with those two countries registering higher year-on-year growth rates in trade sales. Recorded-music consumption levels were up last year, but the increase in trade revenue was more modest. Although streaming income continued to rise, a big slump in sales of CD albums dented the overall market performance. UMG maintained its market share lead over second-placed SME with the former gaining share and the latter suffering a decline. Canada’s live sector is thought to have registered a positive year with attendance at music events up year on year. Preliminary results from SOCAN show royalty collections were up for the sixth year in a row with the level of royalties collected and distributed breaking previous records.

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New issue of Music & Copyright with Indonesia country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Pressing vinyl problems need tech solutions
There’s no sign yet of a collapse of the vinyl revival, and audience demand for the format is in sharp contrast to that of its onetime nemesis, the CD. The segment does face challenges, however, as supply problems continue to dog record companies – while there are no hard numbers available, there are plenty of reports to suggest that long wait times for orders tend to be the norm. The answer would normally be increased capex to build big plants and boost capacity, but that is not likely to happen. Rather, the pressing sector is increasingly characterized by small operations owned and run by audiophiles. The solution, then, is to increase productivity, and that means investing in technologically innovative production facilities that finally do away with antiquated machinery.

Apple issues its response to Spotify’s claims of discrimination
In March Spotify filed a complaint against Apple with the European Commission (EC), complaining that the US tech giant has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience. Spotify accused Apple of acting as both player and referee to deliberately disadvantage other app developers. The company also said that after trying unsuccessfully to resolve the issues directly with Apple, it had made the request to the EC for action to be taken to ensure fair competition. The following day, Apple published a statement refuting the Swedish streaming service’s claims. Apple also accused Spotify of suing music creators following a decision by the US Copyright Royalty Board to increase royalty payments to authors and publishers over the next five years.

Tencent Music Entertainment publishes the first financial results since its December IPO
Chinese music giant Tencent Music Entertainment (TME) has published its first financial results since the company’s IPO in December 2018. Although TME’s move to go public involved the publication of documents detailing historic financial and operating details, the latest results provide a good indication of how the company is currently performing. Moreover, the dominance of TME in the music subscription space also illustrates how China as a country is shaping up in the face of considerable expectation from both local and international record companies. Revenue for TME last year was up along with net profits. The number of monthly active users of the company’s music and entertainment services also increased, as did the number of paying users. The popularity of music was confirmed by the publication of the latest China Internet Network Information Center (CNNIC) report on the use of different services by online and mobile users in the country.

Indonesia country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed Indonesia music industry report. Indonesia is one of a number of countries in Asia that is considered by music companies to offer real prospects for future growth. Although the success of music subscription services in developed markets has turned around the fortunes of recorded-music sales, in most cases sales are slowing, and the likelihood is that there won’t be a return to the record years of the late 1990s. So, continued expansion at a global level beyond the next five years or so must come from the so-called emerging markets, and Indonesia has the potential to be front and center in this future growth.

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Family plans and bundling are a big hit for music service subscribers

Ovum’s Digital Consumer Insights 2018 survey has provided some interesting answers to the question of how consumers subscribe to music streaming services. Certainly, the availability of multi-user plans as well as bundled offerings with mobile access have been a big success but, until recently, the precise popularity of the likes of family and student plans was largely unknown. The results of this Ovum survey clearly show that family plans are a hit with subscribers, so much so that they are keeping a lid on music streamers’ average revenue per user (ARPU). Also, despite bundle deals for music services through mobile operators becoming less generous, a sizable share of subscribers still gain access to music through their mobile operator.

Driving sales of recorded music in the last few years has largely been the responsibility of a small number of streaming services such as Apple Music, Deezer, and Spotify. These services have successfully convinced consumers that they do not need to own music but, for a fixed monthly fee, can access pretty much every track that has ever been released, or will be released, so long as they keep up the payments.
How users pay to stream music

Direct or as part of a bundle
Payment for a music subscription service takes a number of different forms. Consumers can either go direct to the service and pay monthly or make one single payment covering a year. That subscription can cover one person or a whole family (usually up to six people, including the account holder). Services also offer reduced-rate access for students. For a few years, users have also been able to take advantage of bundle deals with mobile operators that either roll in access to a music service for free with a mobile tariff or give a discount on the direct subscription price. The benefit for consumers is clear – lower-priced access to music. Mobile operators also benefit from increased “stickiness” of certain mobile tariffs, which boosts customer retention. However, as noted in the last couple of financial results presentations by Spotify, the rising popularity of discounted access plans has impacted on ARPU. No service has published precise details on how the total subscriber share is split by the different plans, but Ovum’s Digital Consumer Insights 2018 survey, conducted at the end of 2018, has shed considerable light on the uptake of the different plans.

Multi-user access accounts for a growing number of users
According to the survey, which took in the views of around 6,211 consumers spread across Australia, Brazil, China, Germany, the UK, and the US in December 2018, 60.7% of respondents said they took out a music subscription through a single package, while 34.7% said they accessed it via a family package, with the remaining 4.6% being students (see Figure 1). By country, the split offers some notable differences. For example, in the US, currently the biggest streaming market in the world, the family share was 43.4%, while in Brazil the student share was 9.9%. Given that a family subscription costs 1.5 times a direct subscription but provides access for the account holder and five other users, the survey findings suggest that the impact on ARPU could be significant, particularly if uptake of family packages rises faster than single-user subscriptions.

Figure 1: Share of music streaming subscription users by package, December 2018

Source: Ovum

Ovum’s Digital Consumer Insights 2018 survey also revealed details of access via bundled plans. Overall, 66.7% of subscribers held a direct subscription, with 22.2% of subscribers accessing a service via some form of mobile bundle, and 11.1% through a fixed-line service deal (see Figure 2). As with package access, there were differences by country. The UK had the highest share of direct subscriptions (76.3%), with China being the lowest (57%).

Figure 2: Share of music streaming subscribers by access, December 2018

Source: Ovum

Although bundled offerings with mobile and fixed operators have shifted over the last few years from being included for free with an access plan to simple billing arrangements, there are still plenty of bundled offers that give discounts on music subscriptions or extended free trial periods. Moreover, when respondents were asked about the addition or removal of a service bundle in the past 12 months, 24% said they added online music streaming compared to just 6% saying they removed music service access. So, at the moment at least, music bundling is still important for a significant number of consumers.

Despite music streaming’s advances, it is worth noting that music access is still a relatively new way of listening to music, so slight reductions in ARPU through discounted plans and bundled access are not a problem at the moment. However, the issue of costs to services is something worth keeping an eye on. Eventually, services may be forced into looking at raising prices, and the obvious first target is the underpriced family plan. As Ovum’s Digital Consumer Insights 2018 survey has shown, the multi-user plans have proved popular, and a modest price rise is unlikely to result in mass subscription cancellations.

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New issue of Music & Copyright with South Africa country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

US Supreme Court rules that copyright registration is required to begin an infringement claim
To make a copyright infringement claim in the US, rights holders must first have registered their work with the US Copyright Office. However, courts engaged in infringement claims have disagreed on the nature of registration, with some happy that a registration with the Copyright Office be made when an application has been submitted and others requiring that an application be granted. Authors have complained that the problem with waiting for a Copyright Office grant can lead to a lengthy delay in making a copyright infringement claim. However, proponents of the procedure suggest that the requirement to have a work registered before infringement claims can be made acts as encouragement to register works prior to their release. Now, the Supreme Court has provided clarity on the issue by ruling that rights holders must wait for a copyright registration to have been completed before an infringement claim can be made.

Recorded-music industry makes slow progress in efforts to tackle gender imbalance
Despite a rise in the number of initiatives to increase female participation in the performance, management, and technical sides of the music business, women remain severely underrepresented across the board. New research from the USC Annenberg’s Inclusion Initiative has highlighted the low numbers of women featuring in the performance of top-selling tracks, authorship of those tracks, and their production. This year’s Grammy Awards was a successful night for some of the world’s leading female artists, but their success masks a very real problem of gender exclusion. Although the USC Annenberg report spells out relatively simple solutions to overcome the lack of female opportunities, putting those solutions into practice and changing the mindset that songwriting and music production are jobs for men will be a long process.

SoundCloud must keep artists happy to thrive
Music streamer SoundCloud looked as though it might be on its way out a little over a year ago, but a spot of belt-tightening, an injection of finance, and a new CEO have improved performance. Now the company is upping its game and looking to make more of its large and dedicated artist community by providing a gateway to many of the world’s digital music providers. That pits it against the streaming sectors’ big boys, however, and SoundCloud will need to work hard to ensure that it gives its artists the tools they need both to create music and to distribute it easily and efficiently.

South Africa country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed South Africa music industry report. Despite its geographic location, South Africa more closely resembles a Western music market and has far more in common with many countries in Europe and North America than it does with its neighbors. Although this means per capita spending on music is high compared with other African countries, South Africa has experienced the same problems encountered in the developed world in the shift from physical formats to digital and from downloads to access. But although the rise in high-speed internet access has exacerbated problems associated with the unauthorized distribution of music, higher digital sales, rising smartphone penetration, and the rollout of several international streaming services suggests the market has a bright future.

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New issue of Music & Copyright with China country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

As endgame nears for the Copyright Directive, opponents plan their final hand
The European Union (EU)’s key institutions – the Commission, Council, and Parliament – have finally agreed on new copyright rules, in the face of intense opposition and lobbying from internet giants. The agreed deal between the institutions – the outcome of the so-called trilogue process that underpins EU rule-making that had already been subject to delay in December – includes the controversial Article 13, which will put the onus on the likes of YouTube to remove copyright-infringing material without being asked, something that online platforms have long resisted. For the measure’s supporters, Article 13 reinforces the position of content rights holders and enables them to be properly remunerated. But for some of its opponents, who have tended to rail against it in near-apocalyptic terms, it means the effective end of the internet as we know it.

Class action lawsuits against SME and UMG are set to clarify entitlement to US termination rights
Major labels SME and UMG are facing class action lawsuits filed at the New York District Court in an attempt by a number of authors to reclaim the copyrights to their music under the so-called 35-year law. David Johansen, John Lyon, and Paul Collins were named in the legal action against SME, while John Waite and Joe Ely are part of the action against UMG. According to the lawsuits, both record companies have refuted the artists’ termination rights claims on the grounds that the sound recordings are “works made for hire” and so not available for termination under US copyright law. In addition to copyright infringement claims, the artists have asked the court for declaratory relief that sound recordings cannot be considered “works made for hire,” and that the release of sound recordings created by a particular recording artist in album form does not constitute a contribution of a collective work. Although these two challenges to the record companies’ refusal to recognize the termination rights requests are not the first, they could prove to be the first to go all the way to trial and finally provide resolution to a problem in the making for more than 40 years.

It’s now “game on” for the music industry
Music and gaming are clearly natural bedfellows but the music industry has yet to fully exploit the potential of games and gaming audiences. The reach of some gaming platforms is vast, offering great marketing prospects for the recorded-music business, while esports events can attract sizable audiences that are also looking for content beyond the core tournament battles. Plus, as games developers have shown recently, there is real appetite for virtual concerts inside the titles themselves – and that really should be a cue for physical festival promoters to deploy gaming at events to further develop those live music experiences.

China country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed China music industry report. China’s relatively buoyant economy is reflected in several sectors of the country’s music industry. Recent trade results published by the IFPI show the country, often described as an emerging market, is starting to live up to its long-held potential with previous glimmers of optimism now turning into real sales. China’s digital infrastructure is highly developed, and with smartphone penetration on the rise, all the requirements for further digital growth are firmly in place. However, some creative sectors continue to suffer against a backdrop of unlicensed services and restrictive practices. Royalty collections have grown consistently for the last eight or so years, but given the size of the population and level of music use, rights holders’ earnings measured at a per capita rate are very small.

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New issue of Music & Copyright with India country report

The latest issue of Music & Copyright is now available for subscribers to download. Here are some of the highlights.

Music streaming faces longer-term questions over falling ARPU and rising prices
Recorded music is a growth sector, with record company financials and trade sales results all indicating a very bright future ahead. Forecasts for longer-term growth are all based on the continued uptake of music access services, and despite the inevitable slowdown in the developed world, music streaming in emerging markets is becoming popular, and so it is fair to say that the recovery in recorded music is firmly on track after so many years of decline. There are, though, some issues that require a little consideration, particularly regarding the price of a music subscription. Although the direct single user price is now firmly established and unlikely to change for the foreseeable future, the uptake of the family plan, whereby a single account allows access for six users, and its impact on streaming service revenue and user numbers, is starting to raise a few eyebrows.

Spotify turns a profit on rising subscription numbers and looks to podcasts for future growth
Spotify has published its fourth quarter and full year results, detailing both the company’s financial position and its operating details. Revenue continued to rise at a healthy rate and for the first time, operating income, net income and free cash flow were all positive. Totals for premium subscribers and monthly active users (MAUs) all hit the company’s guidance. Average revenue per user (ARPU) edged up in the quarter compared with the previous three months but was down on the prior-year period because of the popularity of the Family Plan and Student Plan. Spotify confirmed that it extended its footprint in the quarter by 13 markets in Middle East and North Africa, taking the total number of countries where the service is available to 78. The company also said it was in the process of acquiring podcast producers Gimlet Media and Anchor to aid the acceleration in podcast listening.

SiriusXM set to open Pandora’s streaming box with completion of service acquisition
While music streamer Pandora has long been popular with audiences, the company has failed to live up to its early promise on the financial side. The company’s decision to develop a model based on advertising rather than streaming looks to be the wrong one, given the growing appetite among consumers for rental rather than purchased music. However, the recent acquisition of Pandora by satellite radio provider SiriusXM brings new resources in-house, including an experienced executive team that isn’t short on ideas on how to bolster the streamer, as well as how to make it a useful addition to the SiriusXM fold. The satellite radio company has a proven track record in subscription, and the takeover could prove a turning point for Pandora.

India country report
In addition to the usual set of music industry statistics and news briefs, the latest issue of Music & Copyright includes a detailed India music industry report. India’s biggest obstacle to recorded-music growth is piracy. Retailers have always struggled to compete in a market flooded with illegal copies. Moreover, rising internet penetration has brought with it increased access to unauthorized music distribution sites and services. However, developments in the last couple of years have suggested that streaming may be the way out of the piracy problem, but the road to prolonged higher sales and meaningful returns is likely to be a long one.

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