[Editoriale] Are really physical media on the rise, as the 2023 year-end report by RIAA seems to claim?

The banner headline for the RIAA end of year report is that “9/10 social media users do music related social media activity”. It is a good question whether this is a desperate cry of optimism in the face of the challenges monetising recorded music, or a rallying cry for the future.

They say that in the U.S. in 2023 continued strong growth for the eighth consecutive year. Total revenues grew 8% to a record high $17.1 billion at estimated retail value. Streaming continued to be the biggest driver of growth with record levels of engagement in paid subscriptions, continued growth in ad-supported revenues, and growing contributions from new platforms and services. Wholesale value revenues grew 7% to a record high of $11 billion. Physical media represented 11% of the total. The average number of subscriptions for the year grew 5.7% to 96.8 million, compared with an average of 91.6 million for 2022. Revenues from physical music formats grew. Total physical revenues of $1.9 billion were up 11% versus the prior year. Revenues from vinyl records grew 10% to $1.4 billion, the seventeenth consecutive year of growth. Vinyl accounted for 71% of physical format revenues. For the second time since 1987, vinyl albums outsold CDs in units (43 million vs 37 million), even as revenues from CDs also show growth, up 11% to $537 million in 2023.

The RIAA remain surprised that vinyl has been in “remarkable resurgence” since 2021. Total units sold in all media are down 11.7% but turnover is increased by 7.7%. It is often good business practice to make more turnover from fewer sales (that is what CD was all about and it saved the industry) and lower costs, except when this is achieved by cost cutting through under investing. Whether the RIAA has learned this lesson will be obvious in the next decade.

Trends?

In his article on the RIAA 2023 mid year report, our editor Lucio Cadeddu notes the Recording Industry of America market reports are a useful indicator of global trends in music consumption. With more numerous methods of monetising an etherial product like music, there is the potential for wide deviation in the expression of sales by format. The old system of units sold, be they shellac discs, LP's, CD's, minidiscs and prerecorded tapes (R2R, 8-track, musicassette, DAT) was OK for measuring sales volumes but not for identifying turnover or profitability. Each format had a completely different cost base and completely different retail price range.

Briefly the market had a virtual version of the above, track by track, in virtual sales through outlets like the Apple store (now less than 3% of market share) or as a bonus digital download bought with legacy physical media. Then came subscriptions and licences and streaming. So, as Lucio stated, the RIAA report now only refers to the market share in terms of money spent by consumers on a given music consumption system, since it is difficult to track the number of units sold. Streaming gains ever larger market shares. The obvious paid for services include the direct subscriptions to services such as Spotify, Tidal, Qobuz and Apple Music but there are under the radar consumption of music as on demand radio (including BBC Sounds and globally streamed local radio), backgrounds to videos, games and apps designed for workouts, meditation or relaxation.

In the previous article, Lucio noted that while turnover of physical media seems higher, actual sales volumes were falling fast for CD and remaining steady for LP, in the 2023 interim report. The second half of the RIAA year seems to indicate a resurgence in vinyl sales. As Lucio observes, this is similar to the audio hardware market. Fewer of us are involved but we spend more on premium products.

A trend I have observed in the last quarter century (yes, we are that far into this millennium) is that the consumer trends that the Western Northern Hemisphere enjoyed in the second half of the 20^th century, tend to be replicated in developing markets in the first quarter of the 21^st century. Thus new markets for Hi-Fi equipment are opening up across the globe, often being met with new manufacturers in those areas. It will be really exciting to observe whether the global balance of available recorded music content changes to mirror the changing markets.

What Might This Mean?

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RIAA 2023 full year results

What does this mean?

Trends?

What Might This Mean?