In 2018, the BPI reported that 4.2 million records were sold in the UK. This a rise of just 1.6%.
In the same year sales of CDs plummeted by 23% last year, as consumers flocked to streaming services for their music. Just 32 million CDs were sold in 2018 – almost 100 million fewer than in 2008; and a drop of 9.6 million year-on-year.
Who is making money from music sales?
This graph does not take into account revenue. For example, a vinyl album typically might retail at £15 to £20, a CD £5 to £12. An album on Google Play or Spotify can cost between £5 and £10. The recent growth in UK record shops over the last couple of years is partly underpinned by the higher prices vinyl buyers are willing to pay for records.
While the consumer may be shifting to this type of model, it’s not clear whether it can actually sustain the music industry financially.
Spotify has never made a profit (Spotify has never been profitable and that could cause it trouble in their IPO). According to filings it submitted in February 2017, Spotify had a net loss of $1.5 billion in 2017, even with almost $5 billion in revenue and 160 million active users.
The picture may have improved in 2018, with a predicted loss of $6.8 million for the year. However set this against a backdrop of 87 million premium subscribers, and €10 billion paid to licence holders (Spotify is just $6.8 million away from profitability).
One of the major barriers to Spotify’s profitability is the licensing dues it has to pay to music publishers, which eats up a majority of the revenue that it gets primarily from advertising and subscription fees. The company pays for licensing every time a user streams a song, which contributes to the incredibly thin margins.
If they were pitching this in BBC’s Dragon’s Den I doubt they’d get very far.
Artists starting to claim more money
Artists and licence holders themselves are starting to mutiny over the amount of money they are receiving for millions of streams. This also has the potential to harm album sales.
A class action, a combination of the two lawsuits, originally came from David Lowery, a musicians’ rights advocate from the band Camper Van Beethoven, and Melissa Ferrick, a songwriter and owner of a music publishing company.
They each asserted that Spotify had failed to obtain proper licences to songwriters’ work; Ferrick accused them of “wholesale copyright infringement”.
The victory means Spotify will pay $43.5m in cash, with the rest of the $112 million committed to ongoing payment of artist royalties. Judge Alison Nathan, at New York’s southern district court, described the amount as a “significant recovery” for the artists involved (Spotify to pay out $112m in royalties to songwriters)
On a much smaller scale I was at a concert by folk duo Josienne Clarke and Ben Walker and they recounted how their lovely song ‘Something Familiar’ had found its way onto a playlist.
They were delighted to hear it had received millions of plays, however disappointed to receive less than £100 for the privilege.
Portishead’s Geoff Barrow similarly reported that 34 million streams earned him just $2500 – Portishead’s Geoff Barrow earned just $2500 from 34 million streams
The cost of maintaining the platform may eventually sink Spotify and other first generation streaming services but the future is likely to be a combination of physical and streaming.
Musician Jack White recently told Rolling Stone he thought the CD was on the way out.
“I definitely believe the next decade is going to be streaming plus vinyl – streaming in the car and kitchen, vinyl in the living room and the den. Those will be the two formats. And I feel really good about that.”
Vinyl not just for the older music fan
The recent growth in vinyl may not just be confined to 50 somethings indulging in nostalgia, as the top 10 vinyl albums is an interesting mix of all-time classics such as Dark Side of the Moon and Rumours mixed with the latest Arctic Monkeys album and The Greatest Showman movie soundtrack. Unscientifically, 3 out this top 10 are likely to only be bought by the younger music fan.
|1) Arctic Monkeys||Tranquility Base Hotel and Casino|
|2) Various Artists||The Greatest Showman|
|3) Fleetwood Mac||Rumours|
|4) Queen||Greatest Hits|
|5) Pink Floyd||Dark Side Of The Moon|
|6) George Ezra||Staying At Tamara’s|
|8) Oasis||(What’s The Story) Morning Glory|
|9) David Bowie||Legacy|
|10) Amy Winehouse||Back To Black|
The modern music fans are being much more selective about the music they own, and use streaming services such as Spotify to discover music through streaming. Owning a physical product may be a luxury purchase in the future.
See these comments on the BBC article:
I have two young boys (3 and 5) who like to listen to music from my phone/Wi-Fi set up. But they weren’t interested in it until I invested in a vinyl set up a few months ago. The tangible aspect of thumbing through vinyl/CDs means so much more to them. Exciting artwork and observing the vinyl spin etc adds a dimension that streaming can’t offer. And my boys new found love confirms this for me.
One has to move with the times I suppose, but for me nothing beats vinyl for quality of sound. Streaming is convenient and instant, sitting at a laptop for a couple of hours in the evening at weekends listening to Spotify is very gratifying, but the look and feel of a physical record cannot be beaten.
CD’s have their place though in places such as the car.
Never understood this streaming nonsense, and I’m not an old fart either as I’m 28 so technically should be of “streaming age”. Give me a CD, Vinyl or Cassette any day. It’s a shame the lack of sales is driving up live gig prices to extortionate levels, pricing out the working class fans as usual.