The global recorded-music industry’s growth slowed by half in 2022 after a pandemic surge, as it settles into a decade in which streaming services have become normalized – with some major labels suggesting that subscription services should raise prices.
“It would help if music subscription pricing would reflect the realities of inflation,” said Simon Robson, Warner Music Group’s international division president, on a conference call with record labels Tuesday discussing the record industry’s performance last year. Video-streaming services such as Netflix, he pointed out, “have been putting up their prices quite significantly.”
The International Federation of the Phonographic Industry – the record industry’s central lobbying group, representing major labels Universal, Sony, Warner and a variety of independents – published its annual Global Music Report Tuesday. Though the lobby group itself declined to take a stance on price increases, citing competition law, it acknowledged that a slowdown in mature music markets is prompting the industry to do some soul searching.
The federation reported that the industry grew 9 per cent last year over 2021, to US$26.2-billion. Its growth rate in 2021, however, was 18.5 per cent.
Subscription and ad-supported services combined accounted for two thirds of the industry’s global revenue in 2022, bringing in US$17.5-billion last year at a growth rate of 11.5 per cent. But that rate, too, was less than half of 2021′s.
In Canada, recorded music revenues grew 8.1 per cent, which itself was a slowdown from a rate of 12.6 per cent in 2021.
About three-quarters of streaming revenue comes from subscription services such as Spotify and Apple Music, but the federation said that the average revenue from each user had actually been declining in some mature markets. Dennis Kooker, Sony Music Entertainment’s president of global digital business and U.S. sales, suggested that paid streamers’ prices should rise: “It is an amazing value proposition and one that should continue to appreciate.”
Kooker also said that ad-supported streaming services such as YouTube – which account for the vast majority of music streaming but much less of the revenue – faced headwinds, as inflation and rising interest rates have pinched the tech sector and its lucrative ad business.
“Even though ad-supported [revenue] grew, later in the year, we’ve seen that’s been challenged a lot more than the paid subscription side,” Kooker said.
The rise of streaming was hailed for much of last decade as a kind of saviour for recorded music – a chance to ward off the pirates who’d plundered nearly US$10-billion from the industry’s revenues in the 15 or so years since the founding of Napster.
But while record labels, streaming services themselves and other industry players reaped many of the benefits of music’s newly rising revenues, streaming services have spent much of the past decade facing constant criticism from the musicians who made the music in the first place.
Artists have routinely argued that the fraction-of-a-penny they got from each song stream rarely matched the returns they deserved, or at least what they got from selling physical albums. Though many have also argued that streaming services should raise their prices to reflect their music’s value, it has often been in the context of getting a greater cut of revenues in general.
The slowdown in 2022 may not be sustained – 2020′s growth rate was just 7.2 per cent, so growth has been uneven – but it comes at a moment when touring as a musician has become remarkably difficult. Inflation has hit many of the costs of putting on concerts, leaving promoters to seek out sure-thing acts. Even the cost of a work visa to play in the United States may soon soar. More and more touring costs are being passed onto already cash-strapped consumers, who may also be deterred from attending due to COVID-19 risks.
Decades ago, conventional wisdom dictated that tours were a way to advertise artists’ latest vinyl records, cassettes or CDs, whose sales were highly lucrative. When sales collapsed in the post-Napster era, that flipped, and touring became many artists’ main income line. Now both are hard to wring a living out of.
Physical music sales grew 4 per cent in 2022, buoyed by vinyl collectors who rushed to releases such as Taylor Swift’s Midnights, as well as interest from Asian countries, which continue to embrace CDs. China became one of the world’s five biggest music markets for the first time, with overall music-revenue growth of 20 per cent.
On Canada’s Bill C-11, which could require streaming services to promote a certain amount of Canadian content, Sony executive Kooker said that the free market already directs consumers to local music they want to hear.
“Charts are more local than they’ve ever been,” Kooker said. “I’m not sure why quotas are even necessary, because we’re seeing fans that are finding the music that they want, the artists that they want – local charts are reflecting that. So quotas to protect domestic artists, we’re actually seeing the opposite need in the market.”