jeudi 9 février 2017

An analysis of the worldwide music streaming market

More and more consumers of streaming music subscribe to paid services like Deezer or Spotify. The number of subscribers to streaming services worldwide even tends to grow faster than their overall number of users, as evidenced by Spotify data for the period from September 2011 to June 2015.

It should be checked that the trend has not reversed since then, but everything suggests the opposite. The increase in the subscriber conversion rate posted by Spotify reflects this : from 20% in September 2011, it increased to 26.6% in June 2015. With 40 million subscribers in June 2016, and 100 million active users, ie a conversion rate of around 40%, this trend seems to be confirmed.

The increase in subscriber revenues (+ 45% in 2015 according to the IFPI) is lower than that of the number of subscribers globally (+ 66% in 2015). This is related to differences in subscription price from one territory to another, to family or promotional and bundle offers, and seems to be placing its evolution on an asymptotic curve. The conquest of emerging markets, in particular, will draw the ARPU (Average Revenue Per User) for paid streaming down for a certain time.

But according to the projections published by Statista on the evolution of the digital music market in its Digital Music Outlook 2016, the total revenues of streaming, free and paid together, are expected to get an average annual growth rate (CAGR, for Compound Annual Growth Rate, or average growth rate per year) higher than the number of users over the period 2016 - 2021.

The average annual growth rate in streaming revenues is expected to be 17.2% in the United States by 2021, against a CAGR of 5.2% for the number of users. The gap is expected to be smaller in Europe, according to Statista, with a CAGR of 11.4% for streaming revenues from 2016 to 2021, against a CAGR of 6.6% for the number of users. It promises to be significantly more significant in China, which is expected to have twice as many streaming users in 2021 (613 million) as the United States and Europe combined (287 million).

The CAGR of the number of streaming users in China will be 3.7% over the period 2016 - 2021, says Statista, against a CAGR of 21.2% for its revenues. Given that streaming accounts for 92% of China's recorded music revenues (three-quarters of these streaming revenues coming from adverising, while three-quarters comes from subscription in Europe and in the United States), it should be the average annual growth rate of the Chinese music market over the next five years.

China's wholesale streaming market will still be less than $ 1 billion in 2021, five times lower than the US market and three times lower than the European one, but it will triple in value in five years.

Free and paid, Statista anticipates without surprise a markedly upward evolution of the average income per user of streaming (or ARPU, for Average Revenue Per User). This ARPU is expected to increase from US $ 25.4 to US $ 43.6 per year over the period 2016-2021 in the United States, and from US $ 15.7 to US $ 19.4 per year in Europe. Despite the enormous potential of this new market, it will only reach $ 1.5 a year in China in 2021, but will double from 2016.

Free streaming, still largely under-monetized, should also contribute to the growth of the global streaming ARPU: in emerging markets such as China, where advertising is its main source of revenue but also in developed markets, where it globally weighs twice less in value than subscription.

The rise in wholesale revenues from free streaming financed by advertising (+ 30% in 2015 in the United States, according to the RIAA) is generally lower than that of subscription (+ 52.5% the same year ). But the market for audio advertising on the Internet is barely emerging and promised at a bright future. It could weigh $ 4 billion in the United States in 2017, according to XAPPmedia, coming from webradios, interactive radio and on demand streaming, against 2 billion in 2014.

SoundExchange collects about 15% of this revenue in the US, and free on-demand streaming accounts for 15% more : this come to 700 million dollars in 2015, against 1, 2 billion for subscription.

With the widening audience of streaming and the increase in hours of listening, the advertising inventory grows. In 2016, Deezer broadcast 290 million audio spots in France, revealed the platform during a workshop at Radio 2.0. An increase of 58% over one year, when this increase was only 20 to 25% in previous years. Between 2013 and 2016, the number of advertisers at Deezer France rose from 41 to 102, and the number of campaigns from 108 to 429.

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