Goldman Sachs - Music Streaming Services On the Cusp of Major Structural Change

Goldman Sachs

According to Goldman Sachs Research, while the industry is yet to fully monetize its content, music streaming services are seeing less revenue for every song streamed. Their analysts expect the sector to grow and capture new business opportunities, therefore ensuing a potential major music industry structural change.

Key Takeaways:

  • Global revenue for recorded music - forecast to grow 7.5% in 2023, with compound annual growth rate of 8.6% for 2023 to 2030 - Lisa Yang, head of the European Media and Internet Research Goldman Sachs team
  • Music revenue as a percentage of what people spend on entertainment is today well below the level in 1998.
  • The average revenue per user (ARPU) on paid streaming music services has fallen by 40% since 2016.
    • The decline in ARPU has occurred as streaming services such as Apple Music and Spotify have introduced family plans, lowering prices for bundled users.
  • Recently, several major music streaming platforms have increased prices on their standard services, first time in a decade.
    • “We believe that such price increases are not just a one-off, and we would expect the industry to work towards implementing price increases on a recurring basis, especially in an environment of higher inflation,” Yang writes in the team’s report.

  • A "superfan segmentation" may also boost revenue as current streaming model charges all users a flat monthly fee.
    • Customers have different levels of engagement with streaming platforms and artists.
      • A strong appetite from superfans for the opportunity to lean closer to their favorite artists through their streaming platform may be utilized.
    • Goldman Sachs team projects monetization of superfans could add $2 billion of incremental revenue for streaming platforms by 2027 and $4 billion by 2030.
  • The inability to distinguish premium content is one of the reasons that the structure of payments between streaming services and music labels may be in need of change.
  • An alternative is a more flexible artist-centric model that seeks to distribute payouts based on the value an artist creates and provides for the platform.

Read Goldman Sach' Original Article and Report

(2023, July 31). Music streaming services are on the cusp of major structural change. Goldman Sachs.

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