The music recording industry globally is back on its growth track again. According to studies, the recorded music business revenue returned back to growth in 2015 after almost two decades of piracy-related declines. The global music industry’s revenue in 2014 resulted in only 14 billion dollars which saw some rise in 2019 to 20 billion dollars.
If you want to explore music business degree or want to know if studying music is worth it in today’s time, then this article is for you, as we discuss the revenue sources and performance of the music industry.
Music streaming is the main source of revenue in the music industry. The personalisation of music streaming, its great convenience combined with the ready availability of smart devices and phones has driven the sales of music to record heights. The IFPI study finds that revenues from global streaming services grew at a 42 per cent compound annual growth rate . These numbers have been applicable since the year 2015 as compared to the entire industry’s growth rate of 9%. The industry has evolved in terms of its revenue composition especially after the onset of music streaming.
Another important thing to learn about the music industry are its three dominant players. As per Music and Copyright, the 3 largest record labels are Sony Music Entertainment (holding about 20% of shares), Universal Music group with a whopping 32% share in the market and Warner Music Group amounting to 68% shares of the music recording industry. The three largest music publishers in the field are also Sony (25% shares), Warner Chappell Music with 12% shares and Universal Music publishing amount to 21% and therefore they maintain a solid 58% of the total share of the music publishing industry. Warner, Universal, and Sony are collectively referred to as the Big Three or the Majors, and it is very important to understand these industry concentrations because the deals signed by these Majors with streaming services benefit greatly from their market shares. As the streaming services keep generating more revenue, the Majors’ income automatically rises. Moreover, digital downloads and online streaming lead up to about 50 to 60% compared to the physical margins which are lower and result in about 40-50% revenue due to manufacturing as well as distribution costs. As streaming services still continue to hold a greater share of sales, the operating margins of the Majors are likely to benefit in the future as well.
These Major record labels as well as music publishers in the industry have witnessed industry trends play out in their recent earnings report. However, Universal music group was the only label that witnessed a revenue increase every year up to June of 2020, seeing a 6% rise, while Warner Music group and Sony were at a -5% and -12% revenue. And all of this resulted from the lockdowns which ensued after the outbreak of the coronavirus. And even then, inside results showed positive growth when it comes to streaming while revenues earned through non-digital means and platforms like artist services, purchase of physicals etc.