With the arrival of Apple Music on the streaming market, competition is fiercer than ever in the world of music distribution. The industry is changing at a rapid speed and so is distribution. What is the global portrait?

DIAGNOSIS : IS THE INDUSTRY SICK ?

How many times have we heard that artists no longer gross revenues by selling albums? Is this a sign that the industry is on a downhill?

Well, according to the International Federation of the Phonographic Industry (representing the global recording industry), sales of physical copies still represent 51% of the overall album incomes. On the other hand, digital (including streaming and selling on online platforms) represents a share of 39%. It is an increase of 4.3% during last year.

In fact, album revenues are growing in Europe and South America and are stabilizing on North American territories. Overall, the industry undergoes a loss of 0.10%. This can be explained by the fall of 16.7% in revenues last year on the world's second largest market for music : Japan.

The markets are far from being as profitable as they used to be. That being said, the industry is certainly not in deficit. Revenues from album sales are declining but experts predict a stabilization of the market in the coming years as the streaming will take a prominent place among consumers.

WHAT FUTURE FOR PHYSICAL DISTRIBUTION ?

The statistics are clear: physical sales migrate slowly but surely towards a digital distribution scheme. One thing is for sure: the physical distribution is not dead yet (far from that!)

Two years ago, the threat of digital distribution forced HMV to face a deficit of about £ 170M in the UK. The chain was forced to permanently close 223 stores. Three months later, an investment and restructuring firm took HMV as a protégé. In less than one year time, the firm managed to save some 140 stores in addition of generating a profit of £ 17M.

This incredible turn-over proved that the physical market still has an appeal for the consumer. Despite the growing interest for the digital distribution, retailers such as HMV have not said their last word. Consumers are still looking for a complete consumer's experience that can only be fulfilled by a physical store.

THE INCREDIBLE RISE OF DIGITAL DISTRIBUTION

We now know that some physical distributors such as HMV had to restructure their business model to survive. What about the digital distributors?

The digital distribution is on a promising rise! The model seems to suit the new cohort of consumers: the C Generation. In the study of marketing, the C Generation is described as a group of individuals born between 1985 and 1996. They are consumers who grew up with the rise of technology and the Internet. In this case, the C is used to designate: Communication; Collaboration; Creation. It is therefore logical for this generation to turn to the web for their various purchases including music.

According to the International Federation of the Phonographic Industry, in 2013, the digital model generated almost £ 3.8 billion in gross revenue. The following year, those revenues grew of 4.3%. That growth can be explained among other, by the number of paying users registered to streaming services. Companies such as Spotify, Apple music and Deezer gained those additional consumers following their expansion into new markets.

Streaming companies claim that their business model leads to more consumers paying for music. It is simple: Instead of illegally downloading albums, consumers can stream a wide library for free on their computers via Spotify or pay a monthly fee to have access to the library on their mobile phones.

Unfortunately, the model does not please everyone. The composers and performers deplore the shortfall created by Spotify. The incomes generated by advertising is not enough to ensure a guaranteed return to artists when the consumer uses the basic version (free) offered by the streaming service. Some artists protested by withdrawing their music catalogue from the platform. The most publicized case is certainly that of Taylor Swift and her 1989 album.

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