Music Business Outlook for 2021: Industry Takes a Hit, but It Is Bouncing Back
It has been a very tough year for the music industry. The ongoing coronavirus pandemic creates challenges in every aspect of the music business. And while the damaging effects are widespread, the live performance sector has taken the biggest hit.
The global music industry is worth more than $50 billion. And of the two primary income streams-live performances and recorded music-concerts account for more than 50% of the total revenue, mostly in the form of ticket sales. It is therefore no surprise that limitations on large gatherings of people have taken a massive bite out of the industry since the pandemic began.
On the positive front, the RIAA reports that streaming music revenue increased by 12% to $4.8 billion in the first half of this year. At the same time, the industry news is not all good. Physical music sales are down by approximately one-third, while digital sales have dropped by about 11%. The former is largely due to the closure of retail stores, while the latter is a result of the general decrease in discretionary spending by consumers.
However, while these hits are difficult to swallow, the music industry is implementing creative strategies that will not only help it to survive these difficult times but will also bring about cool innovations that enhance music creation and consumption in lasting ways.
A Closer Look at the Numbers
Although 2020 has been a challenging year, the numbers provide reassurance. The RIAA’s mid-year revenue statistics show that the positive growth trends of recent years are continuing. Recorded music revenue in the US increased by 5.6% in the first half of this year, reaching $5.7 billion at retail value. Streaming is on the rise, now accounting for 85% of the market, from 80% last year. As I mentioned above, streaming music revenue increased by 12% in the first half of 2020. Furthermore, paid subscriptions to streaming services rose by 14% to reach $3.8 billion in revenue.
The pandemic lockdown appears to be part of the reason for the rise in music streaming, as is the case with video streaming as well. This comes as very welcome news for the music industry and further illustrates the resilience of our business, even in the face of unprecedented challenges and restrictions.
So, what can we expect in 2021?
The future is bright! Investment giant Goldman Sachs stated its expectations for a strong rebound in the live music sector next year. Additionally, the investment firm predicts an annual average of 6% growth in the overall music industry over the next decade to reach a value of $142 billion by 2030.
Goldman Sachs believes that record labels will be the primary beneficiaries of the continued growth in streaming revenue, considering their royalty payouts of 52–58% from these platforms. It is interesting to note the investment firm’s prediction that Apple Music will fall to fourth place in the streaming wars by 2030, while Spotify will remain on top, followed by Tencent Music and Amazon.
When it comes to the precarious world of live concerts, Goldman Sachs projects “a return to 4–5% annual growth rates to reach $39 billion by 2030,” offering an optimistic perspective in this uncertain sphere.
Live Streaming Takes Center Stage
For fans, artists, and the entire music industry, the lack of live concerts has been one of the most difficult aspects of the coronavirus pandemic. And although massive numbers of canceled shows have been rescheduled for 2021, it is impossible to know whether or not these concerts will actually be able to occur on their revised dates.
While the timeline for returning to traditional concerts remains unknown, live streaming events are taking center stage. Performing live is an essential part of being a musician. Concerts help artists develop their craft. And live shows are one of the primary keys to building an audience.
Virtual concerts are rapidly growing in popularity, bringing technology to the forefront of the live music sector. In addition to the established video streaming companies, such as YouTube, Facebook, and Instagram, a new wave of start-up platforms is popping up to fill the significant void left by the cancellation of traditional live events. Although gaining traction in this competitive landscape is a challenging undertaking, several of the newer platforms are steadily expanding their reach, including Twitch, Livestream (owned by Vimeo), and TikTok.
“Given the tremendous popularity of these shows, we are seeing the potential for live-streaming to become an additional long-term component of our concert business, allowing fans in other cities, or those who can’t attend, to enjoy the concert as well.” — Michael Rapino, CEO and President of Live Nation Entertainment.
The music industry, including artists and the companies that support their work, is embracing new ways to use technology to express creativity and connect with fans. Many industry experts believe that the upheaval resulting from the pandemic is sparking a second digital wave, similar to what occurred when streaming music started to gain traction. But this time, the shift is in live events.
There is a new world of performance to explore, and the industry is alive with innovations and forward momentum. Newer technologies, such as VR and 5G, serve as catalysts for new business models, providing the tools to schedule live concerts within the limitations of social distancing protocols. Many industry players believe that virtual events will continue once the pandemic is over, while others point to the connections between the music and gaming industries becoming stronger and more vital as a result of the dramatic changes in the entertainment world.
Although the coronavirus pandemic continues to disrupt the music industry and virtually every aspect of our daily lives, I’m confident that we will not only weather the storm but will also come out of it with a superior industry for the future.
I want to conclude this article with an inspiring quote from Christian Henson, co-founder of Spitfire Audio, who sums up the vitality of music and the resilience of the industry in a simple yet beautiful way:
“Music is a fundamental human need, and no matter what hardship befalls us, what adversity we face, the need to make and listen to music will never ever cease.”
By Sergey Bludov
SVP, Media & Entertainment, DataArt
Originally published at https://blog.dataart.com.