The IFPI (International Federation of the Phonographic Industry) released its 2016 Report today, and while mostly positive, there is a mixed bag of news for the music industry in general, and recording artists in particular. The IFPI is a non-profit organization that represents 1300 record companies in 57 countries, and the report released today is a result of data collected in 2015.

Report Highlights 

  • • Overall global music revenues rose 3.2%
  • • Digital sales contribute 45% of industry revenues while physical sales contribute 39%
  • • Streaming revenues rose 45.2%
  • • Global streaming revenue is now worth $2.9 billion
  • • Over the previous 5 years streaming revenue has increased four-fold
  • • Streaming accounts for 43% of revenue (downloads = 45%) and is projected to overtake downloads this year
  • • 68 million people now subscribe to a premium streaming service (41 million in 2014, 8 million in 2010)
  • • Income from downloads fell 10.5% in 2015 and 8.2% in 2014, but still accounts for 20% of total industry income
  • • Income from physical sales declined 10.5% in 2013, 8.5% in 2014 and 10.6% in 2015
  • • Physical sales still account for 39% of total industry revenue
  • • Japan leads the world in physical sales per capita with 75%

 

While the numbers look good, and in fact more music was consumed in 2015 than at any comparable period in history, a “value gap” has arisen.

In the report, IFPI Chief Executive Frances Moore states, "After two decades of almost uninterrupted decline, 2015 witnessed key milestones for recorded music: measurable revenue growth globally; consumption of music exploding everywhere; and digital revenues overtaking income from physical formats for the first time. They reflect an industry that has adapted to the digital age and emerged stronger and smarter. This should be great news for music creators, investors and consumers. But there is good reason why the celebrations are muted: it is simply that the revenues, vital in funding future investment, are not being fairly returned to rights holders. The message is clear and it comes from a united music community: the value gap is the biggest constraint to revenue growth for artists, record labels and all music rights holders. Change is needed - and it is to policy makers that the music sector looks to effect change."

To illustrate this issue, the reports states that Spotify’s average royalty paid per user (ARPU) was $18 in 2014, Pandora's ARPU was $1.76 and YouTube’s ARPU was “less than $1.00.” Pandora and YouTube are primarily free services while Spotify is primarily a paid service, so correcting the value gap won’t be easy, but it’s important for consumers of music to understand how their favorite artists are supported via the various streaming channels available to them. In spite of the mostly good news released in the report the IFPI does conclude that "The market distorting value gap must be resolved if music is to thrive in the long term."

Jack Sharkey for KEF