US market Analysis
US market heads upstream 2
After several years of decline or stagnation, the United States finally enjoyed growth in music consumption in 2015 - thanks to a huge surge in the use of streaming services...
ANALYSIS ■ BY EMMANUEL LEGRAND
015 will be remembered as a good year for music consumption in the United States, and the year streaming became the main way to consume music. History will also remember that this feat was achieved while access to the year’s biggest album was restricted on streaming platforms. “Total music consumption was up significantly in 2015, and the supporting data illustrates promising trends that bode well for the industry as we begin 2016,” commented James Donio, president of the Music Business Association, which represents bricks-and-mortar as well as digital retailers.
The total number of songs streamed in the United States reached 317.2 billion audio and video streams in 2015, almost double 2014’s 164.5bn. Similar growth rates are reflected with on-demand audio streaming (up 83%) and on-demand video streaming (up 109%). “Streaming is now mainstream and is the dominant format in the US,” said David Bakula, SVP of industry insights at research and data company Nielsen, which supplied music consumption data for 2015 (see table). With the addition of album sales, track equivalent albums and streaming equivalent albums (1,500 streams equal an album), overall album consumption in the US rose to 549.4m in 2015 from 476.9m in 2014, a significant 15% growth.
Total album sales reached 241.4m units in 2015, down from 257m in 2014. CD sales continued their downward spiral with 125.6m sales against 140.8m in 2014 (-10.8%). Digital album sales fell to 103.3m in 2015, from 106.5m in 2014 (-2.9%). Meanwhile, vinyl sales were up 29.8% from 9.2m in 2014 to 11.9m in 2015.
“The album is not obsolete,” said Bakula. “Adele helped push album sales with an unprecedented number [see sidebar] but we had a lot of great stories: Taylor Swift sold well, but also Drake or The Weeknd who sold a lot of digital albums. You still have consumers who buy a hit single or an album. The album is still viable. And vinyl, while it may not be the majority of the business, it’s still a good chunk of the business.”
On the other hand, Bakula noted that digital track sales fell 12.5% year-on-year with 964.8m sales in 2015 against 1.102bn in 2014. “Digital tracks seem the format with the most pressure,” said Bakula. “Consumers seem to be no longer into that. I see a continuing decline there.” Bakula’s analysis is shared by Josh Friedlander, SVP strategic data analysis at the Recording Industry Association of America (RIAA), who noted that, while streaming developed “into one of the biggest forms of music consumption”, more traditional formats “continue to be under pressure, with physical sales and digital tracks continuing to decline”.
On the plus side, Friedlander is impressed by the strong growth of all types of streaming - from on-demand
january 18 Tom Silverman Jim Donio Josh Friedlander David Bakula
ad-supported like YouTube/Vevo and Spotify’s free tier, to paid subscription services like Spotify Premium and Apple Music, as well as from internet radio services like iHeartRadio and Pandora. “Subscription services expanded significantly with the launch of new services like Apple Music and Tidal,” said Friedlander.
“Everyone says streaming will kill downloads, but digital albums were down less in 2015 than the year before” TOM SILVERMAN, TOMMY BOY
The rise and rise of streaming is welcomed by executives surveyed by Music Week, but their main concern is the level of revenues that will flow back to rights holders. Nielsen’s data only focuses on consumption trends and do not encompass sales figures in dollars. A better picture of the volumes of revenues for the industry will be available in March when the Recording Industry Association of America (RIAA) will release the overall market figures.
KEY US MARKET FIGURES FOR 2015
Source: Nielsen *includes physical sales, digital sales, track equivalent album, streaming equivalent albums
Units
Total Album Consumption*
Total Album Sales
Album Sales – CD
Album Sales – Digital
Album Sales – Vinyl
Track Sales Total Streams
Track Streams – Audio
Track Streams – Video
2015 549.4m 241.4m 125.6m 103.3m 11.9m
964.8m 317.2bn 144.9bn
172.4bn 2014 476.2m 257m 140.8m 106.5m 9.2m
Change from 2014 +15.20%
-6.1%% -10.80% -2.90% +29.80%
1102.5m -12.50% 164.5bn +92.80% 79.1bn
+83.10% 85.4bn +101.90%
“It’s worth noting that huge - and growing - numbers for music streaming is good and encouraging,” said Jonathan Lamy, EVP, communications at the RIAA. “It shows that music remains incredibly popular. You see it on the massive social media traffic that artists generate. “Ultimately, what matters most for a sustainable creative industry is revenue. Do the various streaming models generate the revenue needed for artists to earn a living and for labels to invest in the next generation of musicians? There are some encouraging trends there, especially for subscription services, but the jury is still out.” Lamy said that the numbers RIAA will report in March “will help illuminate this question”. He added: “Healthy volumes of consumption is good and essential – more important is what all those streams add up to.” Bakula admitted that “streams are not at the same level as album sales but the amount of monetised volume is up 15%”. “There’s a big growth offsetting a slight decline in other formats. From a business standpoint that is what you have to look at,” he added. “You trade a few million downloads for billions of streams, that is not a bad ratio.” For Tom Silverman, founder of Tommy Boy and a board member of indie labels’ body A2IM, the picture is positive overall and he expects the recorded music market figures to show positive growth in 2016 as it did in 2015. For Silverman, two consecutive years growing revenues could mark a significant change for the industry after close to 15 years of decline.
“Yes, there are some declining formats but the decline seems to be slowing down and you had no acceleration of the decline, even with download tracks, which I take as a positive,” said Silverman. “I am excited by what I am seeing. Everyone says streaming will kill downloads and actually digital albums are down less in 2015 than the year before. Streaming is helping people decide what they want to download. This is a very surprising thing for me. Basically what I see in these numbers is exonerating streaming.”
With such an increase in streaming volumes, Silverman anticipates a growth in revenues in 2016. “Last year, we had a 2.1% growth in revenues,” he said. “I believe the number will increase with the explosion of streaming that will generate significant amounts of revenues. This would be the second year of an up cycle. We can become bullish again after a 15-year down cycle. That’s very exciting and that will bring investors back. All these things are going to change the mentality of people in the business and outside.”
In market share by label ownership, indie labels took the biggest slice of the US pie with 34.4%, slightly down from 35.1% in 2014, according to Billboard estimates. Universal comes second, with 26.7%, down from 27.5% in 2014, followed by Sony with 23.1% (up from 22% in 2014) and Warner with 15% (14.6% in 2014). From the distribution perspective, Universal leads with 38.5% (38.7% in 2014), followed by Sony (29.5% vs 18.5% in 2014),
18 MUSIC Week
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