Analysys Mason: Digital transforming music landscape

The rise of online and digital has fundamentally changed the publishing landscape in the music industry, with revenues from CDs dropping rapidly since 2005 while streaming and downloading music took hold. While this has negatively affected traditional publishers, overall spending on music hasn’t greatly changed, with more money spent on live events, finds recent research from Analysys Mason.

Long gone are the days in which to make a copy one needed to be a priest, living daily with the manuscript and the calligraphy that was then still an art in itself. With printing came the mass production of editions, however, still at a cost. Fast forward some centuries and digitalisation makes the act of reproduction – in terms of resources and effort expended – almost free. While with the internet, the distribution of works became merely a click away.

In a recent research article from Analysys Mason, the consultancy explores some of the effects the recent changes to the production and distribution of music has had on the market landscape – revenue, costs and market power – as well as on the role and positioning of new distributors and intermediaries.

Changing music
With the loss of the characteristically physical medium of the CD or music record, the music industry went through considerable changes between 2006 and 2011. The ease of copying digital content, and the increasing internet accessibility, allowed for the large-scale downloading of digital music (legally or illegally) which opened up a new avenue that predominantly affected the revenues of “traditional” players in the publishing industry. As a result, music publishers’ wholesale revenue fell around £400 million between 2003 and 2014 as CD sales collapsed and download and streaming services took hold. 

While revenues for publishers suffered, the overall spending on music has remained relatively stable with particularly live events benefiting artists – live music now represent approximately 50% of artists’ income, and royalties appear to have doubled between 2006 and 2013 – up from £375 million to £750 million.

With the changes in the way the media is distributed – from labels, publishers, and physical music shops to streaming platforms, digital music stores, concert organisers and promoters – new competitive tensions have been created. Yet the added rivalry from the new medium seems to have predominantly affected middle man publishers, while the actual content creators perform well, with the economic output in the UK’s music industry growing at 5% – 10% per year.

Listening to stories
The digital revolution has enabled a whole new branch of content, with the creation and distribution of audiobooks radically transformed by the internet and innovative companies using the new medium to maximal effect. The number of audio books produced per year – on the back of increased ease in creation and distribution – jumped from about 3,000 (mainly tapes and CDs) in 2007 to 40,000 in 2014 – representing year on year growth of 44%.

Market revenue has too jumped massively, from $1 billion in 2007 to $2.5 billion in 2014, which equates to an annual growth rate of 15%.

The authors note that the transformation of the market through the digital channels is likely to unlock further talent, saying: “The digital transition of the past 15 years has led to incredible innovation and a sharp increase in creative ambition. For this to continue, it is clear that all market participants must remain vigilant and innovative in how they deal with their partners. In particular, new intermediaries that have both driven and benefited from the digital transition must tread carefully and ensure that the market power they may have does not become harmful to creators.”