The global recorded music market grew by 5.9% in 2016 to $15.7 billion, according to the IFPI’s new Global Music Report, achieving its highest growth rate since the organisation began tracking the market 20 years ago.
The new report revealed that there were 112 million users of paid music streaming subscriptions by the end of 2016, driving a year-on-year streaming revenue increase of 60.4%. Over the course of the year, digital income accounted for half the global recorded music industry’s annual revenue for the first time.
The streaming boom more than made up for a 20.5% slump in downloads and a 7.6% decline in physical revenue – a higher rate than the previous year which saw a decline of 3.9%. Streaming has also helped drive growth in emerging markets, with China (+20.3%), India (+26.2%) and Mexico (+23.6%) each experiencing significant revenue growth.
Spotify's director of economics, Will Page, commented on 2016's global streaming growth: "What Spotify set out to make happen 10 years ago is finally happening. The music industry is growing, thanks to the growth in streaming, and Spotify - as the biggest player in the music subscription space - is driving that growth.
“Spotify’s success story has expanded beyond established markets, with Brazil and Mexico now making up two of our top four countries worldwide by reach. Back when the industry peaked in 2000, Brazil and Mexico were 7th and 8th biggest markets in the world respectively. A combination of increasing smartphone adoption [reaching far more users than CDs ever did] and Spotify’s success makes the potential for these emerging markets to ‘re-emerge’ and to exceed previous peaks.”
Overall, digital revenue saw an uptick of 17.7% to $7.8bn. In 25 markets, digital revenues now account for more than half the recorded music market, with five further countries crossing the 50% threshold last year.
The European recorded music market grew by 4.0% in 2016, up slightly on a growth rate of 3.7% in 2015. One of the most notable features of the European market is the varying degrees of streaming adoption. In Sweden, streaming revenue accounts for 69% of the market, growing up 9.9% on 2015. Meanwhile, in Germany, the world’s fourth largest music market, physical sales still make up the majority (52%) of the market. However, streaming revenue increased by a whopping 73% in 2016, suggesting adoption of streaming platforms is on the up. Europe as a whole saw an increase in streaming revenue of 45.5%.
In the US, revenues grew 7.9%, a major increase on 2015’s growth of 1.5%. Digital revenue was key, rising 16.5% and more than offsetting declining physical sales of 17.1%. Streaming revenue was up 84.1%. The US, which is the world’s largest recorded music market – continued its evolution, seeing an 80.5% rise in streaming income and growing by 7.6% overall, a significant increase on last year’s 1.0% growth.
The report’s findings point towards a return to sustainable growth for the industry after a 15-year period, which saw revenues plummet almost 40%. However, it also highlights the ‘value gap’ created by streaming sites such as YouTube and their insufficient payments to rights holders, as a major obstacle on the path to sustained market growth over the long-term.
Frances Moore, chief executive, IFPI, commented: “The story of the recorded music industry over the last two decades is one of transformation: from physical to digital; downloads to streaming; ownership to access. The industry is now working with its partners on another, ongoing transformation: from years of decline to sustainable growth.
"While physical sales remain significant in certain territories and for certain artists, there is no doubt that streaming is the key driver of growth, with the number of users of paid subscriptions having broken the 100 million mark and continuing to rise. Fans are engaged with music in an amazing variety of formats, from the vinyl revival to the phenomenon of musical.ly, but the growth story is centred on services which are widening streaming’s demographic appeal. Record companies and their distribution partners have been instrumental in this, licensing more than 40 million tracks to hundreds of digital services worldwide and developing the high performance systems that allow music to be accessed around the world. Their approach has been global in scope and yet local in execution, adapting their practices to open up legal digital markets for music."
Elsewhere in the report, the IFPI stated that the global industry is continuing to work to tackle the illegal distribution of music. IFPI and its national groups identified 19.2 million URLs as hosting infringing content in 2016 and issued 339 million requests to Google requiring it to ‘delist’ infringing sites.