The Shape of Music

“As the world contends with the COVID-19 pandemic, we are reminded of the enduring power of music to console, heal and lift our spirits."

IFPI Chief Executive Frances Moore

Despite the obvious impact of the Pandemic on live performances, 2020 actually saw the global record music market grow over 7%, its sixth consecutive year of growth with 2030 revenue forecasts upgraded. This is due in large part to the rise of streaming music on smartphones and tablets with Millennials and Generation Z being the biggest annual spenders on music of any age group. The growth in smartphone music streaming over the next decade is set to be biggest in emerging markets where internet connectivity is bringing music to new audiences.

3.3x vs. 2.1x

growth in developed markets (2018-2030)

Listeners meanwhile are locking into music streaming platforms via subscription models which help secure long-term revenues for artists and businesses through the likes of Spotify or Apple Music (see our article Subscribe and Stay on the power of subscription models). The recent rise of streaming music over physical or downloaded channels is clearly visible in Chart 1.

20 years of online music

2019 was a seismic year for streaming (see Timeline), as it became the dominant channel for global music revenues. Today over 4 in 5 listeners subscribe via five key streaming platforms: Spotify, Apple Music, Amazon, Tencent or You Tube (see Chart 2).

These streaming platforms have partnered with record labels so as to secure licensing agreements for the distribution of music content such as the multi-decade agreement which exists between Tencent Music Entertainment Group and Warner Music. Through this strategic partnership, Tencent makes Warner Music's repertoire available across all its online music platforms in mainland China, including QQ Music, Kugou Music and Kuwo Music, as well as its live streaming platforms and WeSing, its online karaoke platform. The shift to streaming has also empowered artists to reach audiences directly, skipping record labels entirely. In 2020 TikTok entered into a music distribution partnership with indie music distributor UnitedMasters. The deal gives artists the chance to see their music go viral amongst TikTok's 680m monthly active users and then distributed to other music streaming services such as Spotify, Apply Music / iTunes, SoundCloud or YouTube.

Did you know?

Artists on music streaming platforms are generally paid via a system called a pro-rata payment model. That means that rather than receiving a fixed fee when you stream a song or album, they are paid a % of the overall subscription revenue from that platform based on how many listens that artist has received vis-à-vis all other listed artists. Both Apple and Spotify use the pro-rata model to pay artists based on their relative share of total streams.

It's important to remember that streaming services, do not pay musicians directly. Instead, streaming services pay royalties to rights holders—a group that includes record labels, publishers and other distributors. It is these rights holders who in turn pay musicians based on their recording, publishing and distribution agreements.