Stream­ing boom is mu­sic to ears of big three de­spite po­ten­tial pit­falls

Ris­ing subscriber num­bers are wel­come but job losses may cre­ate need for plan B, writes Chris John­ston

The Daily Telegraph - Business - - Business -

Mu­sic fans ap­pear un­will­ing to give up their stream­ing habits de­spite much of the world be­ing in lock­down for months. The big three recorded mu­sic groups all posted a rise in rev­enues from stream­ing in their sec­ondquar­ter re­sults this week, with Warner Mu­sic up 11pc to $589m (£449m), fol­lowed by an 8.5pc rise for Uni­ver­sal Mu­sic to just over €900m and a 5.9pc in­crease for Sony Mu­sic to $640m.

Stream­ing was about the only bright spot for the trio. Vivendi-owned Uni­ver­sal posted a big drop in sales of phys­i­cal prod­ucts such as CDs, as to­tal recorded mu­sic rev­enues dipped 4.5pc to €1.33bn com­pared with the three months to June 30 last year.

Sony – sec­ond in terms of mar­ket share af­ter Uni­ver­sal – took an even big­ger hit, with to­tal rev­enues from recorded mu­sic down a tenth to just over $900m, while Warner was 4.2pc lower at $861m.

Tim Ing­ham, founder of Mu­sic Busi­ness World­wide, says the preva­lence of sub­scrip­tion stream­ing in the ma­jor la­bels’ rev­enue mix has proved to be their sav­ing grace.

“In March, se­nior fig­ures in the in­dus­try told me they were ner­vous that masses of peo­ple world­wide might end their mu­sic stream­ing sub­scrip­tions as part of house­hold eco­nomic cut­backs – in fact, Spo­tify’s subscriber count has con­tin­ued to grow at a de­cent clip,” he says.

“The re­ally pos­i­tive note for record la­bels is this trend ap­pears to demon­strate how much value peo­ple at­tach to ad-free mu­sic stream­ing.”

Spo­tify ended the June quar­ter with 138m pay­ing cus­tomers – 27pc higher than at the same point last year and at the top end of its pro­jec­tions. Al­beit the Swedish com­pany ad­mits its “fam­ily plan” – which al­lows mem­bers of a house­hold to use the same, slightly more ex­pen­sive, sub­scrip­tion – “con­tin­ues to be a sig­nif­i­cant driver of our out­per­for­mance”.

Mark Mul­li­gan, of MIDiA Re­search, says that de­spite the over­all 6.3pc in­crease in stream­ing rev­enues for the big three mu­sic groups in the quar­ter, there was al­ready a clear slowdown in growth be­fore Covid-19 struck. Nev­er­the­less, he ex­pects a suf­fi­cient re­turn to growth in many sec­tors and re­gions by the end of the year, “mean­ing global recorded mu­sic rev­enues will be higher in 2020 than 2019 – not by much, but up none the less. How­ever, the stream­ing slowdown em­pha­sises just how im­por­tant it is for the in­dus­try to es­tab­lish a se­ries of po­ten­tial plan Bs to stream­ing’s plan A – and fast”.

Of­com’s Me­dia Na­tions 2020 re­port re­leased yes­ter­day found that a quar­ter of adults aged 16 and over sur­veyed said they had lis­tened to mu­sic stream­ing ser­vices in the week end­ing June 3.

It also found that about one in five house­holds with a Spo­tify or Ap­ple Mu­sic sub­scrip­tion had can­celled, with some ap­pear­ing to switch to YouTube. “The rise in mu­sic lis­ten­ing on YouTube may have been driven by the re­duced use of ra­dio and on­line mu­sic stream­ing ser­vices such as Spo­tify dur­ing lock­down, as these ser­vices are gen­er­ally lis­tened to ‘on the go’,” Of­com says.

Ing­ham warns that trend could gather mo­men­tum later in the year: “If the econ­omy doesn’t fire back up quickly, es­pe­cially in the US, there will in­evitably be wide­spread job losses to come – and un­em­ployed peo­ple may view their mu­sic sub­scrip­tions as a lux­ury too far.”

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