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ERA publishes positive stats galore about streaming, but says industry needs to be “bold” in responding to economics of streaming debate

By | Published on Wednesday 2 March 2022

The average Brit streamed 2342 tracks in 2021, which equates to nearly five days worth of listening. That’s one of a flurry of stats that were published by the UK’s Entertainment Retailer’s Association yesterday via its annual yearbook. From a recorded music perspective, last year was a good year, with subscription streaming not all affected by the pandemic meaning overall revenues continued to grow.

Though, as ERA’s stats pack was published, the trade group’s boss Kim Bailey did acknowledge the ongoing debate around the economics of music streaming, saying that the wider industry should be “bold” in addressing concerns that have been expressed about how the digital pie is sliced up within the music community, and in tackling ongoing issues around data and transparency.

We already knew the top line figures for the wider UK home entertainment market in 2021, because ERA published them at the start of the year. Music, video and gaming combined reached record revenues of over £9.7 billion. Music services and retailers brought in £1.67 billion in total, an 8.7% increase on 2020.

Of the monies coming in via the music services and retailers in 2021, 80% was from the streaming services, with 9% from CD sales, 8% from vinyl sales, and 3% from downloads. When it comes to streaming, 79% of revenues came from selling subscriptions, with 21% from the ad funded services. If you take the video platforms like YouTube out of the mix, its 86% subscriptions and 14% ad money.

As well as the financial data, the new yearbook also has stats from ERA’s consumer research. Asked what the top feature of music streaming was, 55% of those surveyed identified having unlimited access to such a vast catalogue of music. When asked about the playlists on the platforms, 40% said they were an important or very important part of the experience.

Honing in on the economics of music streaming debate as the yearbook was published, Bayley was keen to stress how the premium streaming model pioneered by the likes of Spotify took a recorded music business that had been in decline for fifteen years back into growth.

Spotify critics in the music community often note the massive valuation of the Spotify company – which is still significant, despite a steady decline in its share price in recent months. But Bayley focuses on the massive valuations achieved by the big music companies on the back of the industry’s revival, as well as the mega-bucks catalogue deals involving heritage artists, enabled by the streaming led boom in music rights.

Yes, Spotify’s founders and early investors cashed in big time, but some in the music business have been big winners too. And while major record company profits have been surging in recent years, most streaming services currently make modest profits, if any.

“Streaming has delivered billions in IPOs for shareholders of music companies and it has delivered hundreds of millions of pounds to artists like Bruce Springsteen and Bob Dylan and others who have seen the value of their music explode”, she wrote yesterday. “It has also ensured that more artists can earn money from their recordings than ever before and it has delivered incredible benefits to music fans”.

But that doesn’t mean there aren’t issues to be addressed regarding the streaming business. Though, Bayley said, most of those are issues within the music industry itself. Which means, in the main, labels, publishers and collecting societies need to provide the solutions.

First, there’s the debate over how streaming monies are shared out between the recording rights and the song rights. The services have long argued they have no opinion on this, providing their margins are unaffected.

“There is nothing God-given about the division of income between the recording and the song or how that money flows through the value chain”, Bayley wrote. “However comforting it may be to stick with the status quo, it is not beyond improvement”.

Data and transparency issues need be tackled by the industry too, she added: “There are still significant flaws in the data supplied to streaming services. We need to address them. We need more transparency so we can go beyond asserting streaming is fair to demonstrate it”.

Though, there is one area of possible reform where the streaming services would need to be more proactively involved – and that relates to how monies are allocated to tracks each month. “We need to move on from saying we are ‘open-minded’ about user-centric licensing”, Bayley said, “to actually doing the homework on what its impact would be”.

Bayley then concluded: “Streaming services have done and continue to do a magnificent job in growing the music market. Let’s now ensure that the fruits of their innovation and investment are applied in a way which best ensures the long-term success of the entire music ecosystem”.