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
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.”