- Digital revenues contribute 45 per cent of industry revenues, overtaking physical’s 39 per cent share
- Streaming revenues up 45.2 per cent, helping to drive 3.2 per cent global growth
- Music consumption is exploding globally, but the “value gap” is the biggest brake on sustainable revenue growth for artists and record labels
Downloads remain a significant offering, accounting for just 20 per cent of industry revenues. Income was down 10.5 per cent to US$ 3.0 billion – a higher rate of decline than in 2014 (- 8.2 per cent). Full album downloads are still a major part of the music fans’ experience and were worth US$1.4 billion. This is higher than the level of sales in 2010 (US$983 million) and 2011 (US$1.3 billion).
Performance rights revenue grew. Revenue generated through the use of recorded music by broadcasters and public venues increased 4.4 per cent to US$2.1 billion and remains one of the most consistent growing revenue sources. This revenue stream now accounts for 14 per cent of the industry’s overall global revenue, up from 10 per cent in 2011.
Revenues from physical formats declined, albeit at a slower rate than in previous years, falling by 4.5 per cent compared to 8.5 per cent in 2014 and 10.6 per cent in 2013. The sector still accounts for 39 per cent of overall global income and remains the format of choice for consumers in a number of major markets worldwide including Japan (75 per cent), Germany (60 per cent), and France (42 per cent).
IFPI’s Global Music Report 2016 also reported a 10.2 per cent rise in digital revenues to US$ 6.7 billion, with a 45.2 per cent increase in streaming revenue more than offsetting the decline in downloads and physical formats.
Total industry revenues grew 3.2 per cent to US$ 15.0 billion, leading to the industry’s first significant year-on-year growth in nearly two decades. Digital revenues now account for more than half the recorded music market in 19 markets.
However, the IFPI say that there is a fundamental weakness underlying this recovery. "Music is being consumed at record levels, but this explosion in consumption is not returning a fair remuneration to artists and record labels. This is because of a market distortion resulting in a “value gap” which is depriving artists and labels of a fair return for their work."
IFPI Chief Executive Frances Moore said: “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.”
The IFPI say that the “value gap” arises because some major digital services are able to circumvent the normal rules that apply to music licensing. User upload services claim they do not need to negotiate licences for the music available on their platforms, or conclude licences at artificially low rates, claiming protection from so-called “safe harbour” rules that were introduced in the early days of the internet and established in both US and European legislation. Its clearly a dig at YouTube who many feel hide behind the DMCA 'safe harbor' provisions - and have an unfair advantage over competitors.
Recently some 400 recording artists, songwriters and groups including the Recording Industry Association of America (RIAA) are calling on Congress to reform existing US copyright law saying that the Digital Millenium Copyright Act (DMCA) is obsolete, dysfunctional and harmful, and calling for stronger measures against the ongoing piracy troubles they face. The DCMA was signed into law by President Bill Clinton in 1998 and aimed to ready copyright law for the digital age. Christina Aguilera, Katy Perry, Steve Tyler, Lionel Richie and Garth Brooks are just some of music’s biggest names who want to make it harder to pirate music online. The musicians are asking lawmakers to make “drastic reforms” to the Act.
In September 2015 Cary Sherman, the chairman and CEO of the Recording Industry Association of America, has some choice words about the current state of US copyright law. He said that the provisions of the Act were 'largely useless' to combat music piracy and that under the Digital Millennium Copyright Act, rightsholders had to play a game of whack-a-mole with Internet companies to get them to remove infringing content. But that "never-ending game" has allowed piracy to run amok and has cheapened the legal demand for music. Sure, many Internet companies remove links under the DMCA's "notice-and-takedown" regime. But the DMCA grants these companies, such as Google, a so-called "safe harbor"—meaning companies only have to remove infringing content upon notice from rightsholders.
The IFPI say that the safe harbour rules are being misapplied: "They were intended to protect truly passive online intermediaries from copyright liability. They were not designed to exempt companies that actively engage in the distribution of music online from playing by the same rules as other online music services. The effect is a distorted market, unfair competition and artists and labels deprived of a fair return for their work."
"Rights holders from across the music community and wider creative sector are committed to changing this legislative anomaly. They say there is no case for digital platforms that have built major businesses on the back of music and other creative content, to be allowed to seek “safe harbour” refuge while they profit from making music available on the internet."
YouTube’s deals with Universal Music Group, Sony Music and Warner Music have either expired or will this year, the Financial Times reported on Sunday.