Digital streaming subscription services the driving force for the growth of music industry

THE world’s biggest recording artists might not be happy with the digital streaming royalties, but these services are helping salvage a dying industry.

THE world’s biggest recording artists might not be happy with the royalties offered from digital streaming, but these services are helping salvage a dying industry.

Locally, the Australian music industry’s revenue has grown for the first time in three years and it’s all thanks to digital streaming services.

Figures released from the Australian Recording Industry Association (ARIA) found the revenue of Australian music sales had seen a five per cent increase to $333.8 million, which was the first increase in wholesale figures since 2012.

Streaming services like Apple Music, Spotify and Tidal were responsible for the turnaround, with the value of the services doubling from $23 million to $46 million.

The statistics also showed digital streaming services have a steady hold on the overall market, now accounting for 62 per cent.

Coinciding with this was a decrease in digital downloads and CD sales by 13 per cent and 4 per cent, respectively.

Interestingly, the decline in CD sales was much more steady than the 18 per cent decline seen in 2013.

Vinyl records also showed an increase of an astounding 38 per cent to $8.9 million.

ARIA chief executive Dan Rosen said these figures were a welcomed finding.

“It is a testament to the ongoing innovation and resilience of our local music industry to see a return to growth in 2015,” he said.

“Australian music fans are consuming more music than ever before and did so across an (unprecedented) number of formats from streaming and downloading on mobile devices, to buying CDs and vinyl at local record stores.”

HOW HEALTHY IS THE GLOBAL INDUSTRY?

The Australian findings were a reflection of the global industry, which has seen its first major growth since the dawn of the internet age.

According to the International Federation of the Phonographic Industry, 2015 saw the revenue from recorded music expand 3.2 per cent to a whopping $AU19.5 billion.

The increase was the first time sales had grown at a more than marginal level since 1998, when they upturned 4.8 per cent year-on-year.

Despite the growth, the revenue is still down one-third from the 1990s before internet became mainstream.

The IFPI estimated 68 million people globally used digital subscriptions, which is a huge increase from the eight million people just six years earlier.

In 2015 alone, streaming revenue grew by 45.2 per cent — bringing it close to par with digital downloads on iTunes and other sites.

Chief executive for international and global commercial services at Warner Music Group Stu Bergen said an increase in revenue was a long time coming, but more improvements needed to be made to the industry.

“The value of music is still not being fully recognised. Today, there is a real spirit of optimism across our industry, but we are a long way from declaring ‘mission accomplished’,” he said.

Part of the problem holding the industry back is “user-upload platforms” such as YouTube.

The IFPI said some 900 million people are exploiting the system by listening to music for free through advertising-supported sites.

Despite being notorious for piracy, China was responsible for a massive spike in sales of licensed music with revenue showing a 64 per cent increase.

Chief executive of international for Sony Music Edgar Berger said China was the key to a healthy industry.

“The biggest potential in the world for music growth is in China,” he said.

PIRACY IS STILL A HUGE ISSUE

Spotify and Apple music sharing a combined 40 million paid users worldwide has obviously been a huge win for the entertainment industry, but the war is far from won.

Despite these millions of people paying to stream music on-demand, piracy is still a huge issue plaguing the industry.

The IFPI report claims one fifth of the world are still obtaining their music illegally.

A large contributing factor to this is the heavy competition in the world of online streaming.

In an attempt to secure new customers, digital streaming services are following the ‘Netflix model’ by releasing highly-anticipated albums exclusively on its product.

Hip hop artist Drake is the most recent example with his upcoming album Views from the 6 scheduled for release exclusively on Apple Music.

This follows Tidal’s exclusive release of Kanye West’s newest album The Life of Pablo and Apple Music’s exclusive rights to Dr Dre’s Compton.

The problem with this model is it makes it increasingly hard for the average music consumer to get all of their music from one source.

Say a subscriber wants to legally obtain their music and joins Apple Music and Spotify, their annual streaming budget will double from $120 to $240.

Add Tidal into the mix and they are looking at roughly $360 annually, which is likely more than they are willing to pay.

The adverse effect of this is people turn to piracy instead of joining multiple services.

This was seen with Kanye West’s The Life of Pablo, which appeared on The Pirate Bay’s list of most shared music torrent and illegally downloaded more than half a million times just two days after its release.

Another contributing factor to piracy are the artist themselves, who are opting-out of streaming services, which adds to user frustration of not being able to get all music in one place.

Taylor Swift has been instrumental in taking on streaming services over artist revenue, with the pop star pulling her music from Spotify and also writing an open letter to Apple Music.

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