Market Insight

US and UK see growth in streaming, decline in digital purchases

January 09, 2015


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British Phonographic Industry (BPI), the trade body for British record labels, and Nielsen SoundScan released year-end 2014 statistical data UK and US music markets respectively.

BPI reported a £1.03 billion (approximately $1.6 billion) year for UK recorded music, 1.6% lower in value than in 2013. The retail value of music subscription services increased 65% from 2013 to £175 million as just over 15 billion songs were streamed from digital music services, compared with 7.5 million streams in 2013. Music streaming from services like Spotify, Deezer, and Google Play comprised 12.6% of all music consumed and 17% of retail spend in 2014.

Digital downloads declined 8.7% from 32.6 million in 2013 to just under 30 million in 2014; however, they still represent 34% of all album sales in the UK.

Physical sales of CDs continued to decline in the UK, dropping 7.9% to 55.7 million unit sales. Physical sales of vinyl continued to rise as it reached 1.3 million unit sales in 2014. However, vinyl remains a niche market and represents less than 2% of the total recorded music market.

Similarly, Nielsen SoundScan in the US reported an 11% decline in album sales to 257 million units. Paid downloads of albums and songs declined 9% and 12% respectively, with album downloads generating $106.5 million. Digital single sales fell 160 million units to 1.1 billion in 2014. Digital streams, including both audio and video, were up 54% to 164 billion songs and videos, although Nielsen does not include Pandora's data.

Physical sale of vinyl increased 52% from 2013 to 9.2 million units in 2014. Nielsen has not released any information on CD sales at this time.

Our analysis

With increased availability of subscription music services, digital purchase has seen a decline similar to physical sale declines with the introduction of digital purchase. The landscape for music is evolving as music has become more widely accessible through music subscription services like Spotify and Deezer.

Per capita streaming in the UK is about 232 streams per person compared to 246 streams per person in the US. Per capita digital downloads in the UK is 0.46 downloads per person compared to 3.75 downloads per person in the US. While streaming has a similar adoption in both the US and UK, digital downloads is more popular in the US than in the UK. Digital download has seen a sharp decline as streaming has become a preferred method for music consumption.

The UK and US are both mature music markets with many streaming services to choose from. In absolute terms the US has had a range of streaming offers for far longer than the UK. However, the veterans of the US market, like Rhapsody, have seen solid international growth but weak increases domestically. By contrast the UK has seen the most popular services like Spotify and Deezer around for longer than the US. Spotify and Deezer both launched in 2009 in the UK whereas Spotify launched in 2011 in the US and Deezer launched limitedly in 2014. Consequently, it’s tempting to see the differences in streaming adoption as being tied into the maturity of the leading streaming services.

As digital and physical sales have decreased, the question has been whether or not revenue from subscription services would make up the loss from declining digital and physical sales. In the UK recorded music market, overall revenues decreased only slightly, 1.6% while physical and digital sales had a more substantial 8% decline. The value of streaming has more than doubled, fueled by advertising revenues, but still comprises less than sales (both physical and digital) of all consumed music. 

Geography
UK USA
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