Sony Music Quarterly Profit Surges 71% On Big Streaming, Physical Gains

Sony’s music operations came roaring back in the company’s fiscal third quarter ended Dec. 31, as recorded music and music publishing operations grew 13% on a yen basis and 17.6% on a dollar basis to 187.11 billion yen ($1.79 billion) from 165.66 billion yen ($1.52 billion) in the year-earlier period.

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Consumers Now Favor Streaming Services for Music Discovery Over All Other Sources

Billboard Magazine reports, “Don’t take it personally, but your friends and family members just don’t trust you that much when it comes to what they should listen to.”

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Don’t take it personally, but your friends and family members just don’t trust you that much when it comes to what they should listen to. In 2020, music consumers are putting their faith instead in algorithms: 62% of people surveyed said streaming services are among their top music discovery sources while just 54% named friends and family, according to the new Music 360 2020 report by MRC Data/Nielsen Music.

In the two weeks leading up to the survey period (June 8 to July 6), 65% of people said they had avoided crowded public areas and 45% had listened to more music than the prior two weeks, according to MRC Data’s COVID-19: Tracking the Impact on the Entertainment Landscape -- Release 5. Isolation may have robbed people of companionship, but it gave them more time to explore the deep catalogs on leading services. 

Other research has shown when people choose a single source of music discovery, nearly half of them say either YouTube and Spotify, according to Edison Research and Triton Digital’s Infinite Dial 2020. Drilling down deeper, YouTube is the top source to discover music for 26% of “new music seekers” who keep-up-to-date on music. Spotify is the preferred music discovery source for 19% of people surveyed, and AM/FM radio followed at 11%. Only 10% of new music seekers count the most on friends and families to discover music.

YouTube and Spotify didn’t rise to the top of the heap by accident. YouTube videos are easy to embed in social media posts and websites, and the YouTube app is nearly omnipresent on smartphones. Plus, a Google search for an artist or song brings up YouTube videos at the top of the page. As for Spotify, a larger royalty source than YouTube, it’s arguably the easiest audio streaming service to use, has a free version that adds to its subscription service’s market share, and has focused intensely on discovery with regularly updated personalized algorithmic-based playlists, like the nostalgic “Time Capsule.”

As for long-lasting effects, the pandemic actually helped streaming services’ customer acquisition. For the two weeks ended June 8, MRC Data/Nielsen Music (COVID-19: Release 5) found that 45% of people surveyed added a music subscription in the prior two weeks, up from 38% in the week of March 23. Whatever their ages, new arrivals will be warmly met by human curators and programmed algorithms -- further proving the depth of streaming’s influence. 

U.S. Recorded Music Business Still Growing (A Bit) Amid Pandemic: RIAA 2020 Mid-Year Report

Billboard US reports, “Streaming accounted for 85% of total recorded music revenue in the first half of the year, while vinyl ended a 30-year run of physical format dominance by the compact disc.”

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The good news: The U.S. recorded-music business was still in an upswing in the first half of 2020, growing 5.6% at retail to $5.7 billion, up from $5.4 billion, continuing a trend of growth that extends back to the industry’s nadir in 2015.

The less-good news: That growth, like most everything else in the music business and beyond so far this year, took a pandemic-related hit, ending a short streak of double-digit gains after a 17% boost at mid-year 2017, 10% at mid-year 2018 and 18% at mid-year 2019.

Of course, percentage-based growth, by its nature, is always increasingly-difficult to improve upon, and once-in-a-generation pandemics were never going to help keep that streak alive. And within that context there’s still plenty of good news for the industry in its continued recovery amid the streaming era.

As part of the total $5.7 billion in revenue, streaming accounted for $4.8 billion, or 85%, increasing its share from the 80% it held at the same point in 2019 when it totaled $4.3 billion. And within that, paid subscription revenue accounted for $3.8 billion, an increase of 14% over last year and 67% of the total revenue share overall, and 79% of streaming revenue.

That was buoyed by a 24% growth in the average number of paid subscriptions in the U.S. for the first half of the year, to 72.1 million, up from 58.2 million in the same period of 2019. That’s a boost of nearly 14 millions subscriptions, or just over 1 million more per month for full-tier subscriptions. Ad-supported on-demand revenues grew 3% over the same period in 2019, from $410 million last year to $421 million this year, making up just 7% of total revenues overall and ending a run of double-digit growth for that specific sector. Digital and customized radio revenues grew 6%, to $583 million, a category that includes SoundExchange distributions from internet radio.

Meanwhile, both digital download and physical sales revenue fell below ad-supported on-demand streaming revenues for the first time, with both dropping more than 20%. Digital downloads fell 22% overall to $351 million -- track sales down 27%, digital album sales down 18% -- and accounted for just 6% of overall revenue, down from 8% in the first half of 2019. Physical revenues fell more on a percentage basis -- down 23% -- to $376 million, or 7% of overall revenues. Significantly, vinyl sales accounted for $232 million of that figure, or 62% of physical sales (4% overall), marking the first time in more than 30 years that the vinyl format outsold CDs in revenue for a half-year period.

That's quite a swing, percentage-wise, from mid-year 2019, when vinyl accounted for 46% of total physical sales (4% overall), with $224 million.

But those numbers tell a broader story, and the RIAA’s report in some places delves deeper into the effects of the pandemic, which began to shutdown much of the United States in mid-March and thus splits almost neatly into the first quarter of 2020 vs. the second quarter.

For example, ad-supported on-demand streaming didn’t grow nearly as fast in the first half of 2020 as it had in previous years, but the report says that in Q1 of 2020 it was on track to match that pace, only for the pandemic’s massive effect on advertising revenues to nearly wipe out those gains during Q2, with a double-digit percentage decline, despite streaming numbers in the hundreds of billions. On the flip side, paid subscription revenues grew faster in Q2 than they did in Q1, suggesting a bigger boost in numbers of paid subscribers in the second quarter as opposed to the first, once the pandemic began to keep people in their homes.

And the impact on physical retail was understandably demonstrative as well, as stores closed down and touring ground to a halt. While vinyl sales grew 4% overall in the first half of 2020 compared to the first half of 2019, for example, vinyl revenue actually fell during Q2, with the resulting net gain significantly less than at the rate it was on pace for in Q1.

"These are historically difficult times: the live music sector is shut down; studio recording is limited; and millions of Americans are out of work across the broader economy," RIAA chairman/CEO Mitch Glazier said in a statement accompanying the report. "While we’re pleased that the years of hard work and resources we’ve invested in streaming are driving growth in paid subscriptions, today’s report demonstrates just how much work remains to achieve a sustainably healthy music ecosystem for both music creators and fans. We must continue working to help sustain live music and venues, support gig workers and session musicians, and ensure fair pay for music on all digital platforms. Despite all the challenges from the pandemic, one thing clearly hasn’t changed -- fans still love music."

PRS for Music Posts Record Results, Calls for Unity as Pandemic Rattles Industry: 'It's Crazy How Much Infighting There Is'

"If we do not think of the songwriters, composers and the artists, we as a music industry will not survive," says Andrea C. Martin. "We need to rally around that purpose."

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LONDON – The chief executive of PRS for Music, one of the world's leading rights collection societies, has warned that unless the different factions of the U.K. music business put aside their differences and work together, the industry will not survive the coronavirus crisis.

Royalty revenues at London-based PRS for Music grew 8.7% in 2019 to total £811 million ($985 million), an increase of £65 million ($79 million) on a constant currency basis, year-end figures published Thursday reveal.

Of that total, a record £686 million ($833 million) was processed and paid out to songwriters, composers and music publishers, an almost 14% increase on the previous year.

Of course, 2019's record-breaking financial results were achieved pre-COVID 19 and it is almost certain that PRS' royalty collections will significantly fall in 2020 and, most likely, early 2021 on the back of the current global shutdown.

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International receipts, for instance, were PRS' biggest single source of revenue last year with world tours by PRS members Ed Sheeran, Elton John, Florence + the Machine and The Rolling Stones helping drive £279 million ($339 million) in collections.

U.K. festivals and concerts by Ariana Grande, Spice Girls and Drake, along with music played in British shops, bars, restaurants and offices (collectively known as public performance), contributed a further £222 million ($270 million) to PRS' year-end total, a 16% rise on 2018.

With those revenue streams now cut off for an unknown time, PRS for Music CEO Andrea C. Martin says the impact will be felt by virtually every one of its 145,500 members, but it is too soon to estimate the financial cost of COVID-19.

"These are unprecedented and unpredictable times," she tells Billboard. "We're strong in live and international, so in the third and fourth quarters we will see a decrease, but by how much I really have no idea. We're doing everything we can to mitigate the risk and we're doing everything we can to protect the rights of songwriters and our members."

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To that end, PRS for Music launched its emergency relief fund in March to help members severely financially impacted by the coronavirus pandemic. To date, the fund has paid out £1.2 million ($1.5 million) to more than 3,000 songwriters and composers.

The organization also held a 24-hour virtual fundraising gig (PRS Presents LCKDWN) April 24, featuring Tom Walker, Katie Melua and Linda Perry, among others, and has worked hard to speed up royalty processing and distribution times for members. Some international collections from societies in other markets are also paid in arrears, so a percentage of next year's international revenues will derive from concerts and tours in 2019.

Other glimmers of hope for the future can also be found in 2019's receipts from online platforms, including downloads, online video games and streaming services like Spotify and Amazon, which generated £179 million ($217 million) in 2019 (up 24% y/y) and will be relatively unaffected by the pandemic.

Included among that year-end total were PRS' first royalty collections from licensing deals brokered with Mixcloud, Facebook and Instagram in 2018, as well as revenues from video-on-demand services like Netflix and Amazon Prime, although Martin points out that in terms of absolute dollars, growth in online does not compensate the projected loss in live revenues.

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Income from broadcasters, including the BBC and commercial network ITV, was £131 million ($159 million), up 2.4% on 2018, despite a decline in linear TV viewing.

In total, PRS processed 18.8 trillion music performances in 2019, a 68% rise on the previous year, with further transaction growth predicted in the future. Net costs reduced just under 7% y/y to £87 million ($105 million).

"We're leaders in our field," says Martin, pointing to a lean cost-to-income ratio and sustained growth of PRS for Music's international business.

Looking ahead, she says changes to ways that people are consuming and engaging with music, accelerated by the lockdown, will continue to transform the business. In March, PRS saw a 250% increase in licenses purchased for businesses broadcasting music from home, compared to March 2019. As more and more gigs are livestreamed, Martin anticipates further growth in online revenues.

"We will go into a much more digital world," she says. "What's really important, [as we] go through some very, very tough times, is that the music industry has to work much better together. We have to put our personal and company agendas aside. It's crazy how much infighting there is in our industry and we will not get through this if we continue in this way."

"We all have to put the purpose and the essence of this industry in the centre," she says. "If we do not think of the songwriters, composers and the artists, we as a music industry will not survive. We need to rally around that purpose."