The latest IFPI Global Music Report has come around again - and it’s positive news once more.
Despite an unflattering comparison with industry growth in 2021, which was skewed by the post-Covid bounce, it’s another strong set of results, including a headline growth rate of 9%.
Perhaps the most striking statistic was that IFPI recorded growth in every single market for a second consecutive year - the first time that has happened. Furthermore, China is now a top five market.
However, there are challenges for the industry, whether it’s maturing streaming markets, streaming manipulation or the relationship with TikTok. The video app was not mentioned during the session, which perhaps reflects the current uncertainty over the long-term use of music on the platform and organisations including the BBC banning it from work phones.
Music Week attended the Global Music Report presentation in London, featuring several major label executives. Here’s their take on some of the key issues…
Paid streaming subscription is still the driver of growth
While paid subscription generates most of the revenue from streaming, ad-funded platforms are still a key part of the ecosystem. However, the industry wants the focus to be on the value of music, especially when prices are often still unchanged in a decade.
“When you look at eight years of consecutive growth, obviously it's a fantastic story,” said Dennis Kooker, president, global digital business at Sony Music Entertainment. “The consumer demand for music, and the ability to be able to access music, continues to grow, and that's absolutely great to see - and revenues [growing] in line with it.
“But I think it's really important for us to continue to remember when you look at this business model, that ultimately convincing consumers about the value of music, and ultimately getting them to pay for music, is the real winner. If you look at the balance between ad-supported and paid subscription, about 75% of the revenue is from paid subscription, even though the vast majority of users are actually on the ad-supported model.”
“The ad-supported model tends to be more sensitive to cyclical impacts,” he added. “And so as good as the numbers have been, later in the year [2022] we've seen that that's actually been challenged a lot more than the paid subscription side. So the development of paid subscription, and having that ecosystem that works and moves consumers from ad-supported experiences and into paid experiences, remains critically important if we're going to continue to grow the business.”
Africa powers ahead as 2022’s star performer
With an increase of 34.7%, Sub-Saharan Africa was the only region to see more than 30% growth in 2022.
“Over the past few years, we've seen the light really shone on different African genres, specifically Afrobeats,” said Temi Adeniji, president, Warner Music Africa, speaking via video connection. “When it comes to opportunities, in my opinion it's the diversity of the genres on the continent and the opportunities that exist beyond Afrobeats.
Afrobeats has had opportunity to really shine as a significant crossover genre
Temi Adeniji
“I've been fortunate enough to see the arc when it's come to Afrobeats, from really being a genre that people were interested in sort of tangentially, to really coming into the fore and having the opportunity to really shine as a really significant crossover genre.
“What I've been able to apply from that story arc is really seeing what's possible for all the different genres, from amapiano to Bongo Flava in East Africa, to all the other different parts of the continent. So the significant opportunity is looking at the continent as an export market, and just seeing what the potential is there.”
Streaming subscription price rises can boost market growth
It’s been pointed out that maturing markets means slower growth in subscriber numbers, which then has a similar effect on revenue. But not if you increase ARPU (average revenue per user), which is part of Deezer CEO Jeronimo Folgueira’s plan for the DSP (as revealed in his Music Week interview).
“I'd like to think certainly everyone on this panel, and most people in the room, will agree that we all want the value of music to be fully appreciated and recognised,” said Simon Robson, president, international, Recorded Music at Warner Music Group. “So it would help if music subscription pricing could reflect the realities of inflation, which, as we've seen with video streaming services - they have been putting up their prices quite significantly.”
AI is already transforming the industry
AI has been the buzz topic of 2023. It even came up in the first earnings call for Warner Music CEO Robert Kyncl.
Adam Granite, chief executive officer, Africa, Middle East and Asia, Universal Music Group, is a veteran of the IFPI gatherings who had plenty to say on the subject of AI.
“Music has long managed change, especially technological change,” he said. “AI is a particularly powerful technology that will change many things in our world in the years to come. To be clear, we're already using AI in so many ways around audience identification, new artist discovery, helping remix old masters to Dolby Atmos.
“We actually have three patents on AI technology already. And in some instances, our artists are using it to help them creatively. Giles Martin just deployed AI technology to help remix the Beatles album Revolver, which sounds great by the way.”
Granite acknowledged the launch during SXSW of the Human Artistry Campaign to confront the challenges for creators from AI. He underlined the fact that use of copyrighted works requires authorisation, and that policymakers should not enable the exploitation of creators.
“As an industry we plan to lean into this new and exciting technology and use it to help further the creativity of our artists,” said Granite. “We very much view it as additive to our industry. That said, we will continue to work day and night to protect the rights of our artists and ensure fair remuneration for real artists.”
NFTs lose their shine… but still have huge potential, along with the metaverse and gaming
Market growth is also about monetising new areas for music. Unfortunately, the NFT gold rush has not helped that nascent digital industry.
“The reputation in that area has taken quite a big hit, but that was because the market was driven by speculators,” said Warner Music’s Simon Robson. “The dust is still settling, but we feel at Warner that NFTs is a massive opportunity to have relationships with core fans through, effectively, digital fan clubs. Snoop Dogg showed an example of that and how it could work. So I actually feel the potential to grow in these areas is really exciting. It’s something we're really leaning into at Warner Music.”
It would help if music subscription pricing could reflect the realities of inflation
Simon Robson
“The likelihood is established markets will be the ones to be the first territories to benefit from this new development,” he said, noting the potential boost for market growth.
It could even lead to new kinds of formats.
“Gen Z is the first generation where gaming is the first choice in entertainment, not video,” noted Sony Music’s Dennis Kooker. Fortunately, music is No.2 and bringing those together - such as Lil Nas X in Roblox - is key for that audience.
“This energy that we feel around gaming and music is being driven by young consumers, and the innovation around that from a creative standpoint is happening through young artists who are in that arena,” added Kooker.
“When you look at transformation and disruption, often it has a negative connotation to it, and I think we look at it just the opposite. It creates opportunities for us, it creates opportunities for our artists, it brings new creative formats like NFTs. When you think really far out, the metaverse and where it could go, again, unlocking new creative formats for artists is exactly where we want to be, with them being innovative and ultimately delivering what music fans are looking for all around the world.”
Speed is of the essence… and A&R is still all about artists
The execs acknowledged that it’s becoming harder to break acts in a global streaming market, especially when there’s so much content competing for people’s attention.
“Speed has become key in discovering and signing artists,” suggested Marie-Anne Robert, MD, Sony Music Entertainment France. “So we’ve put tremendous effort into building new tools that can adapt very effectively to artists’ needs, and that put an emphasis on developing the right story that will help the artists to foster their creativity.”
Alongside technology, data and analytics, Robert spoke about the importance of developing the “pipeline of the next generation of A&Rs in a diverse way”.
"For me, personally as an executive in music, but also being a published musician and a performing one for a long time, I can tell you the concept of A&R hasn't changed,” said Devraj Sanyal, MD & CEO, Universal Music Group India & South Asia.
“I think the only difference is that modern A&R has tools and analysis at their disposal, which the old guys didn't have. A&R has suddenly changed because everyone now has access to vast amounts of data and tools, which is undoubtedly an important part of the process. But there is no shortcut to A&R. The greatest people in music in the world will tell you, you need good ears, you need great people with great relationships, and you truly need to believe in the market opportunity and the artists.”
Latin American repertoire is already global… other markets have export potential
Revenues in Latin America grew by 25.9% in 2022, with the region’s hot spots of Brazil and Mexico up 15.4% and 24.3% respectively. Brazil has now reached a new peak of No.9 in the global rankings.
Warner Music’s Simon Robson noted that the Latin American domestic market is then complemented by the power of its repertoire in huge markets such as the US. The company’s Brazilian superstar Anitta made No.1 on the Spotify Global Chart.
“LATAM is becoming increasingly influential in the US market, and it is the fastest growing segment of the US market,” said Robson. “So when you add in the US segment, it nearly doubles the size of the LATAM market… We're seeing the impact on the US charts.”
And other markets are building up their export potential, including India and the MENA (Middle East and North Africa) region.
“I’m confident that we’ll start to see artists from MENA influencing the global charts,” added Robson.
Subscribers can read our interview with Deezer CEO Jeronimo Folgueira for more on the future of streaming.
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