Goldman Sachs has published the 2024 edition of its highly influential Music In The Air report.
Last year’s edition of the report helped to create the industry buzz around superfans, as it explored the potential revenue growth around premium options for artists’ most loyal followers.
Music In The Air’s research is by Lisa Yang, MD, Media & Internet, Global Investment Research, along with fellow Goldman Sachs analysts.
The report describes 2023 as a “turning point” for the industry, including the streaming price increases, modernised royalty payment structures and the deployment of generative AI.
Goldman Sachs has raised its growth forecast for the global music industry, although it’s live and music publishing that’s doing the heavy lifting rather than recorded music.
Music In The Air’s authors expect the global music industry to grow revenues by 7.9% year-on-year in 2024 (upgrading its forecast by 0.1 of a percentage point) and then sustain that growth rate throughout the decade. The sector grew by more than expected last year – up 14.8% in terms of gross revenues versus a forecast of 7.2%.
That was partly down to the live sector vastly outperforming expectations with net revenue growth of 25% in 2023, compared with a forecast of just 6%. It means the live market is now 20% above the pre-Covid 2019 level.
“This is driven in our view by a strong schedule that featured many artists who had not toured since pre-Covid, in particular Taylor Swift and Beyonce, driving both attendance (owing to larger venues) and pricing power (due to perceived scarcity of these artists in the short term),” stated the report. “This also once again demonstrates the resilience of concert spending amidst elevated inflation and pressure on consumer spending, and the growing structural demand for experiences, particularly amongst Gen Z and Millennials.”
This demonstrates the resilience of concert spending amidst elevated inflation and pressure on consumer spending
Music In The Air
There was also better than expected growth in recorded music net revenues in 2023 (up 10.2% rather than the 7.5% forecast) and music publishing (up 10.9% versus the 8.2% forecast).
The global investment firm is now forecasting the 2024-30 CAGR (compound annual growth rate) for the global music industry will increase from 7.4% to 7.6%. That small shift will deliver a 12% increase in global music market net revenues (label/publisher share and live ticket sales and sponsorship revenue) to $116.5 billion by 2030 compared to the old forecast.
The revised forecast reflects a stronger outlook by 2030 for live music (estimates raised by 31%) and music publishing (estimates raised by 4%).
Live music is forecast to be worth $35.1 billion (net revenues) this year and $51.7 billion by 2030. That would represent a revenue increase of 47.3% over that period. Live music’s CAGR forecast up to 2030 has been increased by around 1.6 points to 6.6%.
Music publishing is forecast to be worth $9.9 billion this year and $15.3 billion (net revenues) by 2030. Music publishing’s CAGR forecast up to 2030 has edged up from 7.6% to 7.8%.
However, Goldman Sachs’ recorded music forecasts have been reduced modestly. Global recorded music net revenues are now forecast to be $49.5 billion by 2030 (down from the expected $50.1 billion). The sector’s growth forecast this year has been reduced slightly (8.9% instead of 9.3%) to $31.2 billion. Up to 2030, recorded music's CAGR has been reduced from 8.6% to 8.1%.
What’s perhaps significant is that Goldman Sachs is now forecasting much higher growth in physical sales but reduced growth in streaming. Physical music is now forecast to be worth $5.2 billion in 2024 (up from the old forecast of $4.4 billion) and $6.4 billion by 2030 (previously forecast at $3.9 billion).
Higher physical sales assumptions are offset by reduced streaming growth forecasts across ad-funded (although the report was prepared just before UMG agreed a new TikTok deal) and paid (reflecting an increased revenue mix shift towards lower ARPU emerging markets). The overall streaming market is forecast to be $42 billion this year (previous forecast: $43.7 billion) and $73 billion by 2030 (previous forecast: $80.3 billion).
While global streaming services have implemented their first round of price increases in the past 18 months, Goldman Sachs expects that trend to continue either as headline increases or more nuanced added costs for extra features. In fact, Spotify has just announced further UK price increases.
“As the monetisation of paid subscription improves, we believe that there is also an opportunity to better monetise the vast pool of freemium users and evolve the ad-supported offering to improve paid conversion rates,” stated the report.
SUPERFANS
As Music In The Air set the agenda on superfans last year, it’s worth checking out what the 2024 report has to say on the buzz topic.
Physical sales have become one of the most direct routes to monetise the superfans. Luminate’s 2023 mid-year Music Report highlights that physical music buyers in the US are more than twice as likely to be music superfans and spend 80% more money on music than the average listener.
But while superfans have been seen as the drivers of physical sales, Goldman Sachs sees strong opportunities in the streaming space. Major labels have already spoken about this key audience, with Warner Music developing an app for its artists’ superfans and UMG partnering with HYBE and global platform Weverse. Spotify is reportedly working on a “supremium” tier.
In fairness, organisations like ERA in the UK have long called for labels to facilitate innovation in terms of how platforms serve audiences.
“The current streaming model does not distinguish between its users, charging each the same flat monthly fee, independent of the level of engagement with the platform and its artists, despite the wide availability of data,” said the Goldman Sachs report.
Goldman Sachs has increased the addressable superfan market opportunity for superfans to $4.5 billion (from $4.2 billon), based on an assumption that 20% of paying streaming subscribers could be in that fan category of at least one artist. Such superfans would be spending double on music than an average individual, according to the analysis.
The report acknowledges that, while there would likely be a “strong appetite from superfans for the opportunity to gain further access to their favourite artists through their streaming platform”, it would take time for new products to be fully optimised and would vary depending on the DSP.
Overall, the Music In The Air report suggests that the improved monetisation of superfans could represent $3.3bn of incremental revenue by 2030, which would amount to a 13% uplift to paid streaming revenues.
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