Sizing the American music industry

It’s not always clear where to draw the line when sizing the music industry. The broad definition will include not only the actual customer’s expenses (on concert tickets, streaming subscriptions and so on) and B2B licensing cash flows, but also ad-revenues of radio and other music-related media. That definition will put total revenue of the U.S. music market at whopping 43$ billion.

Under a more conservative approach, however, only a fraction of radio revenue will be included in the music industry in the form of royalty payments. In the U.S., however, even that won’t be exactly the case, as American radio stations don’t pay out performance royalties to recording artists, stating that they provide “free publicity and promotion to the artist”. Accordingly, the US radio is only compensating the owners on the composition — songwriters and their publishers. So, adopting a more precise definition, the industry’s revenue can be estimated by summarizing the cash flows of the following core businesses:

Recording industry:

• The recording industry is growing, and revenue is up 16,5% in 2017, adding up to $8,8 billion in retail value.
• That growth is primarily powered by the rise of streaming services. Over the same period, streaming revenue went up by 43%.
• In 2018, streaming accounted for 75% of the total recording revenues.

Live industry:

While the recording industry is precisely measured, there is no consensus when it comes to the live sector’s revenue. The estimation becomes problematic due to various reasons, from the complexity of revenue attribution to the volume of the secondary ticket market. As a result, revenue estimations vary between the different sources.

• Drawing primarily on Citi and PwC estimations, the total revenue of the live industry can be put at around $9,5 billion.
• Around 80% of live revenue comes directly from ticket sales, while brand sponsorships and merchandise generate another 20%.

Publishing industry:

• According to the MIDiA Research, publishing generated $1,8 billion in the U.S. in 2017
• Overall publishing revenue increased 8% over the course of 2017.
• According to Citigroup, this growth is primarily driven by the surge of performance royalties, connected to the rise of streaming.
  
  Summarizing the cash flows of recording, live and publishing segments, total revenue of the U.S. industry can be put at around $20 billion.

Streaming is King

The U.S. music market seems to be utterly reliant on streaming as the music consumption medium. The latest BuzzAngle report states that it accounts for as much as 85% of all recording revenues, while the global average is at around 38%. The U.S. has completed its transition to the new music distribution paradigm: Drake’s Scorpion takes the top spot on the BuzzAngle’s end-year chart with 500 thousand CD sales vs. 6 billion on-demand streams, and A Boogie Wit Da Hoodie’s SZN reaches the #1 on Billboard with just 823 album sales. However, don’t rush to the conclusion. The structure of music consumption is not that simple.

Radio in the digital age

There is a big chunk of consumption that is not reflected in the industry revenues. As previously mentioned, terrestrial radio doesn’t contribute directly to the industry’s revenues, as the U.S. law rules that the promotional effect of airplay is enough to compensate right holders. At the same time, radio remains the most powerful medium in the U.S, reaching 92% of Americans every week. This reach is not only high but also stable – those ~90% figures are persistent over the last decade. To put it in perspective, according to Nielsen’s research, throughout 2017 the average weekly consumption via radio was about 14 times bigger than the aggregated consumption through audio streaming services (including all sites and internet applications designed to provide audio content, e.g., Pandora, Spotify, iHeartRadio). 

Radio broadcasts, of course, are not exclusively limited to the music programming: news, talk shows and other non-music content were always the vital components of airplay. Still, though, the role of radio as a consumption channel can’t be underestimated. Essentially, it remains the primary music medium in the U.S. up to this day. But what are the reasons for such strength of radio, the media that seems to be outdated in the country with the highest streaming penetration rate?

The power of the Airplay

The radio industry is powered by both cultural specificity and the localized nature of the market. First of all, the U.S. is one of the most geographically fragmented music industries. The fourth largest country in the world, stretching across more than 9 million km2, the U.S. is built on the principles of decentralization. Both political and legislative landscapes of every state are different, and this is a reflection of the deeper-level cultural versatility.  

To a certain extent, every distinct part of the United States has its own cultural and media setting, and music is a big part of it. That decentralization doesn’t necessarily stop at a state level: Nielsen, for example, highlights no less than 210 DMAs (Designated Market Areas) as singular territories where “population can receive the same television, radio and broadcast channels”. Such fragmentation affects the music industry in a significant way – numerous studies have highlighted the variation of music preferences across the U.S, from overall genre tastes distribution to the popularity of selected artists.

In other words, the U.S. is more like a group of local conjoint markets than a homogeneous industry. Of course, there are broadcast networks that connect the country’s media-space, which are a crucial tool of artist promotion on a national level. Coast-to-coast broadcasts can offer nationwide reach, and shows like Saturday Night Live are notorious for propelling music careers into the next league. Still, though, there is a good reason why no country musician has ever come out of New York – and here is where radio shows its strong suit.

The localized nature of airplay allows radio stations to engage with the regional cultural context, and that is something that global, unified streaming cannot offer (at least not yet). Radio broadcasts are curated, localized and increasingly interactive, and this is precisely why radio can compete on par with streaming services of all scopes. That localized nature also makes radio airplay data a massive source of insights for music professionals — which is why Soundcharts currently tracks over 1,700 radio stations in 69 countries across the globe.

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While these stats can be helpful to you as an artist to some degree, they can also do a lot of harm.

It’s natural to think that streams and views can fully represent a song’s value, but that’s not at all true.

The truth is that streaming stats can’t begin to define you or your music. Putting too much stock in them will hurt your creativity and make it harder to reach your goals.

What streaming stats can and can’t say about you and your music

Tracks that rack up millions of plays aren’t necessarily “better” than ones that don’t.

As long as they’re accurate—and sometimes they’re not—public streaming numbers tell us how many times a specific song was listened to, and that’s about it.

The numbers can’t define your creativity as a music-maker, the potential for success of your songs, or your worth as an artist.

Music is arguably the most powerful and limitless art form in the world, and it can’t be summed up by streaming statistics.

There are countless great songs that never get heard and plenty of popular songs that are quickly forgotten. Both you and your listeners will lose if you let the numbers behind your songs shape your creativity and identity as an artist.

It’s easy to forget that your authenticity and creative curiosity are your most important assets as an artist. Obsessing over the numbers threatens these assets in a huge way.

4 ways streaming stats can’t reflect music’s value

So if public streaming stats can’t define the true value of a song, what can?

It’s a good question to ask, and the answer will be different for each of us.

One helpful way to look at it is by asking what streaming stats can’t tell us about music. This isn’t a complete list, but here are some of the major points of value in music that streaming statistics can’t reveal:

1. Creative value

The creative value of a song is far too complex to be defined by public streaming stats. This is because what’s creatively engaging changes for each of us not only as musicians but also as listeners.

A song’s popularity can’t tell you whether it’s actually creative and innovative or not.

2. Connection with listeners

Streaming stats show us how many times your songs are listened to, but they can’t tell us how listeners are engaging with your music.

For example, there’s a massive difference between hundreds of listeners streaming your tracks once and a couple of listeners streaming them hundreds of times.

The special connections your work makes with listeners are the most important relationships you’ll have as a music-maker.

You may not have a lot of streams, but if you’re making these connections you’re building a dedicated following that will be with you for the long haul.

3. Potential for success

While streaming stats can tell us a lot about a song’s momentum, it’s not a definitive indication of commercial potential.

You could have an incredible song that millions of people would love to hear, but it doesn’t mean it will get the attention it deserves.

The way you distribute and promote your music has a massive influence on whether your music gets heard or not.

4. Staying power

Lots of streams don’t tell us anything about whether a song will be remembered a year from now let alone decades into the future.

What determines whether your music will be remembered are the connections it forms with listeners, not the numbers it generates.

Streaming analytics can help or hurt you as an artist

It’s important to note that the analytic information platforms like LANDR Distribution and Spotify give artists can be more helpful and insightful than public streaming stats.

This information breaks down who is listening to your music by age, gender, and location.

Used correctly, analytics can help you plan your next tour and identify which of your songs is getting the most momentum.

But, just like with public streaming stats, obsessing over analytics and letting them shape your music is a bad idea.

Over a short period of time, analytics could show you that listeners are flocking to one of your songs.

That’s obviously a good sign, but it doesn’t mean you need to create an album filled with tracks that sound just like it. And the lack of momentum you see in your other songs doesn’t mean they don’t have value.

With technology that allows you to see when and where listeners are streaming your music in real-time, it’s hard not to get wrapped up in the numbers associated with your songs.

But when you choose to look past them and create authentically and on your own terms, you’ll make your best music.

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