Gautam Baid | Updated on: Saturday, March 26, 2022, 04:49 PM IST
Music entertains, inspires and thrills. It is one of the universal cultural aspects of all human societies.
Today, great things are happening in music. There are new artists and musical trends as well as new ways of discovering older music. There is increased penetration by digital music services, expansion of music services to new markets and new music-based products. Around the globe, fans are connecting with music in new and engaging ways and, as a result, enjoying more music than ever before.
The music entertainment industry, which now includes not only recorded music and music publishing businesses but also other business lines such as merchandising and music-based audio-visual content is dynamic, growing, and global.
The industry has grown significantly in recent years, predominantly due to a growth in the digital consumption of music-based entertainment driven by technological innovation and consumer consumption trends and made possible by the industry’s adoption of new technologies, formats and monetization models.
The following graph shows global recorded music industry revenue from 2001 to 2020.
Global recorded music industry revenue from 2001 to 2020 | EY FICCI 2020 and IFPI 2020
The music industry has been on an upswing globally on the back of increased digital revenues. The transformation of the music business has included the following trends:
• Reduced upfront investment and associated risk;
• Distribution and customer-acquisition costs now funded by major tech companies;
• Predictable recurring revenue streams;
• Less hit driven than in the past;
• Limited, if any, seasonality;
• Minimal recession risk; and
• Increasing value of the music catalogue.
Even with its strong growth in recent years, music streaming is still in the early stages of penetration and there remains a substantial opportunity for further expansion driven by growth in the number of paid subscribers of digital streaming services.
The continuing migration of consumers online provides potential for significant growth of ad-supported streaming. This trend is also driven by continued technological innovation across devices and formats, such as voice-controlled speakers, connected cars, intersections with social media and gaming, audio-visual product evolution, which is deepening fans’ engagement and consumption of music. These are also early days of the expansion of streaming music licensing into new lifestyle categories such as digital health and fitness, which have considerable potential for growth.
The Indian music industry stood at Rs 15.3 billion in 2020 and is expected to grow at a CAGR of 15 percent to cross Rs 23.2 billion by 2023. (EY FICCI report, Mar’21 release). The average user in India spends 21.5 hours listening to music each week, higher than the global average of 17.8 hours per week. The growth in India has come on the back of digital consumption led by smartphone popularity. The success of audio streaming services is fueled by the ease of accessibility, cheaper data and efficient distribution models.
While India-based Audio OTT streaming services may have gathered over 150-200 million monthly active users, the overall paid subscribers are estimated to be 1 percent, thus offering a huge headroom for growth. Audio OTT streaming companies have 450 million paid subscribers globally. Ancillary benefit of streaming services is the rising popularity of regional music namely, Tamil, Bhojpuri, Punjabi, Gujarati, Telugu, Bengali, etc.
The music streaming segment has grown by 40 percent year on year in FY21 according to Saregama’s annual report. Saregama said that its musical intellectual property (IP) was used 85 billion times in the financial year 2021 alone. It licenses its IP to streaming platforms like gaana.com, Spotify, Amazon Music, Hungama, Wynk, Saavn and other popular apps including several video streaming platforms to use music owned by Saregama. In addition, in only five years, its views on YouTube have grown from 0.5 million to 940 million. The company has also signed deals with social media platforms like Facebook and short-format video sharing apps like Instagram, Josh, Triller etc.
Similarly, Tips has signed two global deals in the year 2020-21 - a distribution deal with Warner Music and with Facebook. The two listed players in this space in India, Saregama and Tips, operate in the most lucrative part of the music industry value chain, i.e. music licensing..
(Gautam Baid is Founder, Stellar Wealth Partners & smallcase manager. Views are personal)
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