Digital-Music-Report-2014

Kingson Jin photo by Zheming ZhangGLOBAL SMARTPHONEPENETRatiON13%“Each market is different . . . The transitionis always going one way — it is just aquestion of how fast it’s going to happen.”— Rob Wells, Universal Music Groupmajor services. Rob Wells, president of global digital businessat Universal Music Group, says: “There’s a blurring of the linesbetween the models. iTunes Radio is a stream. iTunes Match isa subscription, and on the back of it is a download service.“Service definitions are getting more and more complicated,but this is to the benefit of the consumer, who is getting moreand more choice. The greater the variety of consumer offeringsthere are in the marketplace, the more they will spend on musicand the more engaging their experience will be.”In the last three years record companies have licensedservices to operate in more than 150 countries. Thoseservices are now growing in markedly different waysinternationally. Rob Wells says: “Each market is differentaccording to socio-economic factors, infrastructure, creditcard penetration, the willingness of carriers to implementcarrier billing, anti-piracy legislation. These are all in the mix.The transition is always going one way — it is just a questionof how fast it’s going to happen.”While the biggest growth area is music subscription(revenues up 51.3 per cent globally in 2013), downloadsremain substantially the largest revenue segment of thedigital music business (67 per cent). They are seeing stronggrowth, especially in certain developing markets where iTuneshas relatively recently arrived — notably, South Africa, Taiwanand countries in South East Asia. The arrival of iTunes morethan doubled the value of the South African digital musicmarket within the space of one year.2011 (770M)The rise and rise of streaming andsubscriptionSource: Portio36%2016 (3067M)Record companies’ revenue streams continue to diversify,with streaming and subscription accounting for a growingproportion of income. The industry has licensed theexpansion of global services, such as Deezer and Spotify,and backed regional services such as Muve, Napster, Rdio &WiMP. Asian subscription service KKBOX is expanding to newmarkets while streaming is growing in Africa with THE KLEEKand Deezer.The impact of streaming, alongside an improvedenforcement environment, in helping revive markets inScandinavia is well-documented (see Sweden case study,page 34). Research also shows that streaming services aresuccessfully helping to reduce piracy. GfK research in Swedenin 2013 showed nine in 10 paying users of Spotify downloadillegally less often. For consumers, streaming services’unlimited access and specialist playlists encourage discovery.17