Music

Executive summary

The Australian music industry is starting to recover after a period of significant disruption, with growth projected in the next five years, in part due to the use of streaming music platforms. Revenue is gained through subscriptions, and/or advertising revenue. The global streaming platforms available in Australia are growing users and loyalty by  differentiating their offering through exclusive content, bundled services and superior technology.1

For artists though, the streaming royalties model presents challenges for receiving fair compensation.2 Artists and record labels continue to experiment with new ways of monetising content to make up for profit losses from physical sales declines. Strategies include building direct distribution networks with fans, maintaining social channels and offering exclusive experiences when touring.

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Growth Drivers

1. Live contemporary music, especially mass appeal international artists at large stadium venues
2. Subscription streaming services
3. Exclusive products, content, or events
 

Forecasts at a glance

Continued growth in live music and streaming services propels the total market

The disparity between digital and physical music sales continues to widen

Digital transition to streaming has been fully embraced

The Australian music streaming market has been an exceptional performer in the digital music sector, growing exponentially, albeit off a small base (CAGR of 63.3 percent, 2013 to 2017).4 Fuelling this has been high-speed internet, connected device, and cloud technology. For advertising revenue, Spotify is the dominant player in the domestic market, with both Pandora and SoundCloud discontinuing their Australian operations5,6, though the dominant business model is for monthly subscribers. Over the next five years, modest growth is forecasted, as streaming reaches a critical mass. Growth will be achieved through an increase in the average revenue per user, not necessarily by attracting new users to the category.

Smart speakers increase the accessibility of music

Hardware product offerings from technology heavyweights Amazon, Google and Apple have changed the way consumers interact with music, with an estimated 16 percent of Australian households using a smart speaker at the end of 2018.7 Listening to music on smart speakers is the most popular application ahead of search.8 As consumers become more comfortable engaging with new technology through voice commands, marketers and brands have a new channel to reach consumers, increasing advertising revenue opportunities. This is expected to continue as smart speakers evolve to include screen displays, such as the launch of Facebook Portal and Google Home Hub in the USA, both featuring smart display with video and chat capability, which could also carry advertising inventory.9  

‘After navigating through a period of considerable disruption, the industry has reached a period of sustainable growth.’³

Dan Rosen, Chief Executive Officer, ARIA

Live music remains an essential revenue stream

Live music, which is somewhat immune to piracy, continues to be an essential revenue driver for the industry. Over 8 million Australians attended contemporary music performances in 2017 (versus 5.6 million in 2016).10 For stadium shows, 2018 Ed Sheeran’s Divide and Taylor Swift’s Reputation both enjoyed record breaking tours.11 Music festivals are also experiencing strong attendance and revenue growth,12 though this may be effected in one of the largest markets, New South Wales in the forecast period as the state government's music festival licensing scheme impacting profitability.13

‘We are now in a global market, with artists competing every day against every piece of music ever made - from Beethoven, to Beyonce to The Beatles.’¹⁴

Dan Rosen, Chief Executive Officer, ARIA

 Australia’s total spend by 2023 (A$ millions)

Music continues to embrace technology through artificial intelligence (AI)

The growing prevalence of data is supporting the rising utility of artificial intelligence (AI) in the creative process, with data being used to enhance and support the composure and production of music.15 AI is a powerful tool that will increasingly support artists in developing content, and get feedback from listeners at scale.16 IBM WatsonⓇ BEAT (an AI tool with machine learning capability) was used in collaboration with Alex da Kid’s song ‘Not Easy’, which reached number four in the iTunes Hot Tracks chart within 48 hours of its release.17

Differentiated experiences key to maintaining subscriber loyalty

Differentiated, premium experiences are important for audio streaming service businesses to win new, and maintain current subscriber numbers. Collaboration with artists to build exclusive content, interviews and merchandise is likely to become more common.18 Kanye West, Rhianna, Jay-Z and Beyonce all offered access first, or exclusively, to content on Tidal,19 and Taylor Swift has collaborated with Spotify on the exclusive distribution of a music video.20 More sophisticated hardware accessories are facilitating an increasingly immersive audio experience. From headphones that adapt to personal preference, to the potential role of augmented and virtual reality to take the listener backstage or on stage at live events.

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