Major Record Labels Turn Corner As Revenues Grow
With recent news of the rapid decline in physical album sales, the rise of online music streaming services such as Spotify, and the new, controversial online music store from Google, it seems that major labels are currently in a dire situation.
A recent report however, suggest that the labels may be about to reach a crucial tipping point where digital sales will replace the lost revenue from the decline of physical sales, as digital econmics website Paid Content points out.
Although CDs sales have pretty much reached rock-bottom, with little if any chance of recovery, digital sales are beginning to replace it as a viable source of revenue, marking an important step for the music industry and especially the record label majors.
Universal Music Group, the world’s biggest major label, seems to be beginning a recovery of sorts, with financial details released earlier this week revealing that sales from CDs dropped by 14.2% to US$1.29 billion, but digital sales grew another 8.6% to reach $US1.16 billion, and this small gap is predicted to close in the very near future.
Warner Music Group, Sony, and the label titans, are also reportedly close to reaching this important tipping point in music sales, signaling a new direction of sorts for the music industry.
This new direction will see more music being sold digitally via downloads rather than physically on CDs, a point that seems inevitable after many years of market shifts.
On of the first major signs came earlier in the year in England where, for the first time ever, sales from downloads were greater than those from CDs and vinyl combined n the first quarter of the year, and in the US, digital album sales are set to break last year’s record of $US1.3 billion in revenue.
Although profits from recorded music continues to shrink as digital downloads become cheaper in price, this growth is subsequently picked up by new ventures, such as licensing to other service like streaming services and royalty rates.
In further good news for Universal Music Group, who recently acquired EMIT Recorded Music, the label claims it is attracting “robust interest” from potential bidders for several EMI imprints, which the European Commission is forcing it to sell in order to satisfy antitrust concerns around the take-over of EMIT.
A move reminiscent of the recent movers and shakers of the industry, including a deal that saw Sony/ATV Music Publishing auctioning off its Virgin Music and Famous publishing catalogues – including those of Iggy Pop, Culture Club and Lenny Kravitz in order to satisfy the EU Commissions concerns about the merger.
While Australia’s Independent body, AIR, criticised the ACCC for letting the recent Universal/EMI merger go through unimpeded, a controversial forging of major labels that happened (or perhaps triggered by) Warner’s and EMI’s CEOs abruptly stepping down.