The Beat Goes On: Growth Estimates Raised for Global Music Industry

September 24, 2024 EDT

Goldman sees a "new era" of improved music monetization, led by better pricing, the creation of super-premium plans, and a focus on the most profitable music listeners.

Goldman Sachs raised its long-term growth estimates for the global music industry in its latest update to its influential ‘Music in the Air’ report.[1]  What prompted this upward revision?  What does it say about the industry’s future potential?

Long-Term Growth Estimates Raised

Goldman raised its long-term compound annual growth rate (CAGR) estimate for 2023-2030 to 7.6% from 7.4%.  Goldman estimates that the global music revenues will reach $163.7 billion in 2030, versus its previous $151.4 billion estimate.  The increase was primarily due to:

  • Higher expectations for live music – The 2030 estimate for live music was raised by 31% to $51.7 billion from $39.5 billion.  The CAGR for live music was increased to 6.6% from 5.0%.
  • Stronger expected results from music publishing – The 2030 estimate for music publishing was raised 4% to $15.3 billion.  The CAGR was raised to 7.8% from 7.6%.

Results for 2023 Were Stronger Than Expected

Results for 2023 were stronger than expected, attributable in part to:

  • Live music revenues in 2023 increased 25% over 2022 and were 20% above 2019’s level.
  • Recorded music and music publishing revenues grew by a better-than-expected 10% and 11%, respectively.

Major 2023 Music Milestones

Goldman describes 2023 as a turning point for the music industry based on three events:

  • Spotify raised the price of its subscription streaming service in 2023, the first major price increase by a global streaming platform.
  • Changes in the royalty payment structure for music publishing.
  • The deployment of generative artificial intelligence (AI) during the year.

Greater Monetization of Music Fan Base

There may be opportunities to better monetize the music fan base.  Music streaming is relatively cheap compared to video and gaming pricing.  Goldman estimates that average revenue per stream decreased by 10% in 2023 versus 2022 as the number of streams increased much more than prices.  Therefore, major streaming companies are expected to pass through additional rounds of price increases.  Goldman is estimating 3% annual price increases through 2030.

Price increases can take several forms.  The most straightforward is an across-the-board increase, e.g., prices for the platform are raised.

Super-premium plans catering to superfans are also expected to be instituted.  Goldman estimates this could drive an additional 13% in annual revenue increases.

Also, more product-centric or artist-specific plans may be instituted.

Growth in Emerging Markets

Growth in emerging markets may power the industry.  Emerging markets contributed 60% of net music subscriber increases in 2023 and is expected to rise to 70% by 2030.

Leading to a Potential Investment Opportunity

Companies in the global music industry may be poised to benefit from expected future growth.

How May Individuals Gain Exposure to Companies in the Global Music Industry?

The MUSQ Global Music Industry ETF (MUSQ)

The MUSQ Global Music Industry ETF (MUSQ) seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the MUSQ Global Music Industry Index (MUSQIX).  The MUSQIX Index is designed to provide exposure to global, publicly traded companies and royalty funds with a core business interest in the global music industry.

MUSQ may provide individuals with an attractive vehicle to gain exposure to the global music industry.

 

[1] Music in the AirFocus on Monetisation, Emerging Markets and AI; Updating Global Music Industry Forecasts. Goldman Sachs, 5/1/24

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