In late March, the International Federation of the Phonographic Industry (IFPI) released its annual estimates on recorded music industry trends. It detailed that global revenues fell 3% to $16.6 billion. For most industries, negative growth would be seen as extremely disappointing, but the demise of recorded music from stores through the sale of compact discs (CDs) has been on a decline that has lasted the better part of a decade. Overall, the annual declines continue to be less severe and indicate that piracy is no longer crippling the industry as a whole.

See: Why Rock and Roll is Slumping in the U.S.

Online Music Continues to Grow
The saving grace in recent years has been the growth in online music revenue from legitimate sources. Pirated music from the Internet has steadily declined as appealing offerings from reputable (and legal) companies have become available. IFPI estimated that global digital revenues grew 8% to $5.23 billion, or nearly a third of total industry revenues. Apple's iTunes has been a huge driver to online music, but new sources including streaming sites such as Pandora and subscription models including Spotify continue to burst onto the scene.

See: How The SEC Regulates Social Media

Many industries are benefiting from rising income levels in emerging markets, and the recorded music industry is one of them. With higher incomes, consumers are less likely to rely on pirated music and other multimedia. The IFPI study specifically cited strong growth in Brazil, which leapfrogged the Netherlands and Italy to the number eight market in the world. Brazil reported 8.6% growth to total industry revenue of $262 million. The study found that 17 markets across the world reported positive growth and mentioned South Korea, Mexico, India and Australia for robust trends.

Concert Revenue Increased
Though not officially a part of the recorded music industry pie, bands have learned that hitting the road can be quite lucrative and goes a long way in replacing lost CD sales. Industry trade firm Pollstar estimated that the 100 largest tours in North America reported $2.3 billion in ticket revenues during 2011, up 6.3% from the previous year. The concert space had a tumultuous couple of years following the credit crisis, but has been a relatively steady and growing source of income for leading bands. The statistics detailed 3.7% international growth of the top 50 acts to just over $3 billion.

See: 16 Tips for Scoring Cheap Tickets

Greed Isn't Good
The growth of revenue-based online music sources could end up leveling the playing field for the industry, which could help boost total competitiveness. Last year, U2 reported nearly $232 million in revenue from touring across the world. Clearly, no one single band really needs to make that much, and the top bands garner a larger proportion of touring and recorded music sales.

Online music makes it possible for smaller bands to reach a wider audience, and also puts into play more obscure or older music that retail stores and concert promoters used to ignore. The concept also applies to movies, books and other media.

The Bottom Line
Several years ago, the music industry aggressively pursued consumers that downloaded pirated and other illegal music to their computers. It has finally discovered that creating legitimate, more competitive and appealing services, may have incentivized consumers to again start paying for their music. However, it will never be possible to replicate seeing a band live and in person. Finally, growing emerging markets are creating a new class of consumer that should continue to help the recorded industry climb out of its multi-year funk.

Related Articles
  1. Economics

    The Oscars and Golden Globes: Worth Their Weight In Gold!

    The Oscars and Golden Globes set off a wave of spending that creates new flows of funds in the economy and has major financial impact.
  2. Stock Analysis

    The Top 4 Companies Owned By Sony (SNE, ERIC)

    Learn how Sony Corporation became a leader entertainment. Music acts such as Beyoncé and movies such as "Spider-Man" are part of Sony's success story.
  3. Stock Analysis

    Analyzing Dish Network's Return on Equity (ROE) (DISH, TWC)

    Analyze Dish Network's return on equity (ROE), understand why it has vacillated so greatly in recent years and learn what factors are influencing it.
  4. Stock Analysis

    Tribune Media: An Activist Investment Analysis (TRCO)

    Learn more about the breakup of Tribune Company, once a powerful newspaper and broadcasting giant, and the role of activist investor Cliff Robbins.
  5. Fundamental Analysis

    The World's Top 10 Entertainment Companies (CMCSA, CBS)

    Take a look at the world's top 10 entertainment companies, spanning the movie, television, cable television, gaming and streaming video sectors.
  6. Retirement

    Ipsy Review: Is It Worth It?

    Discover the history of ipsy, how much packages cost, options available for membership, major competition and what the future looks like for the company.
  7. Stock Analysis

    The Biggest Risks of Investing in Dish Network Stock (DISH)

    Get insight about the potential risks of investing in Dish Network stock, such as its lack of cross-selling ability as an independent pay-TV provider.
  8. Stock Analysis

    The Top 5 Entertainment Penny Stocks for 2016 (SIRI, ZNGA)

    Learn more about what types of businesses comprise the entertainment industry, and discover five entertainment penny stocks for investors to consider in 2016.
  9. Stock Analysis

    Comcast Stock: A Dividend Analysis (CMCSA)

    Discover a detailed analysis of Comcast's dividend policy, and learn about its dividend coverage and payout ratios, which indicate future dividend growth.
  10. Investing News

    The 8 Highest Grossing Movies of 2015

    Count down the most popular films at the American box office in 2015, and learn how much they earned in the domestic and worldwide markets.
RELATED FAQS
  1. What causes politicians or governments to begin "pork barrel" spending?

    Pork barrel spending occurs when the government taxes the general population to hand out concentrated benefits to special ... Read Full Answer >>
  2. What are examples of businesses that exhibit social responsibility?

    In the 21st century, companies that exhibit corporate social responsibility are winning high marks from consumers and investors ... Read Full Answer >>
  3. How are Rupert Murdoch's holdings distributed?

    Rupert Murdoch owns a controlling share of News Corporation and over 750 different businesses. Some of the major brands he ... Read Full Answer >>
  4. Why is social responsibility important to a business?

    Social responsibility is important to a business because it demonstrates to both consumers and the media that the company ... Read Full Answer >>
  5. Why are business ethics important?

    Several factors play a role in the success of a company that are beyond the scope of financial statements alone. Organizational ... Read Full Answer >>
  6. How important are business ethics in running a profitable business?

    A number of factors play a part in making a business profitable, including expert management teams, dedicated and productive ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center