The music industry has seen resurgence over the last few years, displaying relatively strong growth after a decade of decline. Online music streaming is the major factor for this trend, with nearly 40% of the revenue being generated from streaming services. Live concerts are also providing an important boost, with millennials driving the demand for an authentic experience away from the unlimited entertainment options at the click of a button. Vinyl sales have reached the $1bn mark for the first time this century, as consumers increasingly value the tangible nature of physical copies away from the ‘renting’ approach that is dominating the market currently. However, whilst all these features display a prosperous market, the musicians themselves are seeing their revenues decline.
During the past 20 years, the music industry has declined drastically due to obsolete forms of distribution, such as CDs, alongside the prominence of illegally downloaded music. However, online music streaming has helped to revitalize the industry, proving to be imperative in terms of helping to eliminate the illegal downloading of music, creating demand for vinyl and encouraging consumers to attend live concerts.
Music streaming was created to help combat illegal downloading, by providing a database of music at an affordable price, with discovery features to help customers find artists they would enjoy listening to. Particularly within the last five years, it has skyrocketed to account for the majority (38.4%) of the revenue in the music industry. Nevertheless, artists have only seen a tiny fraction of the enormous profits generated by streaming services.
In 2018, vinyl sales broke the $1bn mark for the first time this century. Even under the current trend of ‘renting’ music in a digital format, there has been a revival in the physical format whereby consumers can enjoy the artwork and tangible nature of vinyl. As a result, Sony Music has begun to produce vinyl in-house as the distribution format continues to take up a sizeable chunk of the industry’s market. Importantly, it provides a much needed financial boost to artists and helps to reduce the power of streaming services.
Live music has continued its impressive growth over the last decade, with a CAGR (Compound Annual Growth Rate) of 3.3% and expected to reach $30.55bn in 2022. The growth is largely attributable to millennials driving the demand by valuing authentic experiences over possessions, leading to a higher preference to attend live concerts. However, whilst touring is the primary source of revenue for artists, they currently only receive around 10% of the proceeds due to the fragmented nature of the industry, leaving managers, promoters and booking companies all taking large chunks.
A major concern for the industry is the continuing demise of profits for the artists themselves, with a mere 12% of revenue being collected from the creation of their music. The overriding issue amongst each aspect of the industry is the fragmented nature of each platform, leading to intermediaries becoming involved in the process and themselves taking excessive chunks of the earnings.
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