Last week, we released our revenue and shipment data on the U.S. music business. We’re pleased to see this data so widely cited in news reports, analyst commentary, and other research on the industry. As we said at the time, we believe that our data is the most authoritative metric reflecting the state of the music business. After taking a moment to digest and sift through the extensive commentary, a few additional takeaways occur to us:
- Much attention has been paid to the 29% growth in streaming music revenues. What does 29% growth mean? That’s $418 million dollars more in 2014 than the prior year from those services – the equivalent of 6% of the total U.S. annual industry revenues.
- Diversification is good. The split between revenues from digital, streaming, and physical formats have never been more balanced. This reflects healthy adaptation of the industry to the multiple ways fans want to engage with music.
- This is not yesterday’s music industry. While it’s true revenues from music are not as high as they once were, overall the industry is now in a more healthy and stable place than it was a few years ago. Positive steps have reduced (but not eliminated) the harm from piracy, and recurring revenue streams are building a healthy base from which to grow. There’s a vibrant, competitive marketplace with numerous different options for fans.
Sr. VP Strategic Data Analysis, RIAA
Today we released our report on recorded music revenues and shipment information for 2014. More than ever, the data we provide – including the aggregate valuation of various streaming services -- is the most meaningful barometer about the state of the U.S. music business.
Our VP of Strategic Data Analysis, Josh Friedlander, provides a more detailed snapshot here. It’s worth noting a few observations. First, the wholesale value of the American music business continues to grow – a 2% uptick this year. Modest, but the fourth straight year of such growth. The overall retail value of the business is basically flat – a small decline of .5%. This is the fifth straight year we’ve been essentially flat.
The music business continues to undergo a staggering transformation, one embraced by the music labels we represent. Record companies are now digital music firms, earning more than 2/3rd s of their revenues from a variety of digital formats. Streaming services collectively are generating meaningful revenue: nearly $2 billion in 2014, a 29% percent increase over 2013. You may notice that we continue to break out the revenues generated from the three major streaming categories. We believe the music community and the American public deserve to fully understand the revenues produced from each category, including the number of users of each particular type of service and the revenues generated by them.
Another observation: streaming music has been the subject of a healthy debate, which is appropriate. These are new models – how their value to the artist and label accrues is different than buying a CD or a download. But the reality is that the consumer has spoken and this is what fans want. The entire music community must come together to help make these services work for fans, artists and the music industry.
Especially as the business pivots to a streaming world, gaps in the law or decisions by some companies to deny compensation to certain categories of creators and labels is even more indefensible. That means, for example, that it’s long overdue for AM and FM radio stations to pay artists and labels for the use of their work. Yes, you read that right – broadcast radio stations pay nothing to recording artists and labels for the music they use to attract listeners and sell advertising for their own commercial benefit. It’s time for this special interest exemption to end.
Similarly, it is inexcusable that digital radio companies like Pandora and Sirius XM refuse to pay musical icons of our past for recordings made before 1972. Yes, you read that right, too – two of the biggest digital music companies choose not to share any of their revenues with the artists and labels behind the musical treasures of the 50’s, 60’s and early 70’s, just because they’ve decided not to. And it’s time for Sirius XM to start paying royalties at fair market rates, rather than below-market rates. Recording artists and labels shouldn’t be forced to subsidize a multi-billion dollar behemoth like Sirius XM.
Our mantra is ‘fair market value for all creators, regardless of platform.’ That goes for the record labels too, who are the economic engines of the music business, investing billions of dollars to discover new artists, nurturing them as they refine their craft and helping them find an audience, all while paying a bigger share of their revenues to artists than ever.
The music business is not without its challenges, but the foundations of a continued comeback are strong. Just look at the Internet and social media, for example, where artists and music drive the conversation like nothing else. Music is more relevant to commerce and culture than ever before. It is fundamentals like these that continue to give us great hope. Here’s to a bright future for music and everyone who creates it.
Cary Sherman, Chairman & CEO, RIAA