The Five Numbers That Say Everything About the Music Industry in 2018

The music business is finishing 2018 with a spring in its step. Thanks to the growth of streaming services such as Spotify, Amazon Music and Apple Music, the record industry has witnessed another 12 months of prosperity — suggesting that its post-Napster-era recovery is sustainable (for the time being, at least).

Meanwhile, the live-music industry has soared to record revenues once again, proving that, even in an era awash with people glued to Fortnite, Instagram and Netflix, the power of songs and artistry remains something Joe Public will shell out for.

Not everything, however, has gone the music industry’s way; its continuing battle with YouTube over per-stream payouts, for example, now appears set to disappoint labels, artists and publishers everywhere.

So, as music-business leaders prepare to rest up over the holidays, it’s worth taking the temperature of one of the most exciting, changeable industries in existence — via five crucial statistics that all tell their own story….

$910 million (well, minus $910 million) and streaming’s financial frailty

Streaming is now the biggest contributor to the global recorded-music business. Estimates suggest that the format will pay out $9.6 billion into artist and industry coffers in 2018, making up more than 50 percent of the global trade’s total revenues. Meanwhile, worldwide users of paid-for subscription music-streaming accounts should top 225 million at year-end (up from 176 million last year) — easily bigger, to cite one example, than Netflix’s worldwide paying subs base (which hit 130 million at the end of September).

However, this promising progress is being built on vulnerable foundations. Largely thanks to finance-related costs, Spotify posted a €520 million ($623 million) net loss in the first nine months of 2018; Pandora, the largest streaming platform in the U.S. with just under 70 million users, posted a $287 million net loss in the same period. Combined, that’s $910 million down the pan. Across the 12 months of 2018, these two businesses alone will lose more than a billion dollars, despite actually improving their bottom line in 2017.

Music streaming is booming, but it still hasn’t figured out a profitable business model. This plays into the hands of some of the largest companies on Earth, who can easily withstand a loss-making music division in order to drive other areas of income. Take Apple, for instance, whose CEO, Tim Cook, said of Apple Music earlier this year: “We’re not in it for the money.” Words to make Spotify founder Daniel Ek shudder….

$10.4 billion and a live industry on the up and up

Thanks to her controversial “slow ticketing” strategy, Taylor Swift was less 2018’s queen of pop and more its queen of yield management.

According to new Pollstar statistics (published after Rolling Stone’s piece last week), the star’s Reputation stadium tour saw her fans pay an average ticket price of $119.46 globally and — yup — $218.57 in the United States this year. Pollstar says that Swift’s global run of 53 dates generated $345 million, some $277 million of which came in her home market.

Swift wasn’t behind the biggest tour of this year, though; that honor went to Ed Sheeran, who racked up a massive $432 million in gross ticket sales worldwide — an all-time record within a calendar year. (Lovers of Sheeran’s everyman persona may wish to know that his average U.S. ticket prices were less than half the price of Swift’s, weighing in at $92.39.)

Overall, the live-music industry had a very buoyant year. Pollstar says that the worldwide concert industry saw a record-setting $10.4 billion spent across 152.1 million tickets; $2 billion of this money was spent on the top-10-grossing artists alone.

1.14 billion and the streaming era’s G.O.A.T.

Spotify’s biggest song of 2018 is in no doubt: Drake’s “God’s Plan,” which was released in January, has now surged to 1.14 billion plays on the service within 12 months. That makes it the ninth biggest track of all time on the platform, behind Justin Bieber’s “Love Yourself” at Number Eight (1.15 billion); Luis Fonsi and Daddy Yankee’s “Despacito (Remix)” (feat. Bieber) at Number Seven (1.17 billion); Major Lazer’s “Lean On” at Number Six (1.19 billion); Ed Sheeran’s “Thinking Out Loud” at Number Five (1.23 billion); Post Malone’s “Rockstar” at Number Four (1.36 billion); the Chainsmokers’ “Closer” at Number Three (1.43 billion); Drake’s “One Dance” at Number Two (1.61 billion); and Ed Sheeran’s “Shape of You” at Number One (2.01 billion).

No real surprise, then, that Drake was Spotify’s most-streamed artist of 2018, with more than 8.2 billion plays this year — amounting to an estimated annual Spotify payout to the artist (and fellow industry rights-holders of his songs and recordings) of approximately $57 million.

Over on YouTube, though, things looked rather different. The biggest new tracks of 2018 were led by “Te Boté (Remix)” by Nio Garcia, Darell and Casper Magico (feat. Bad Bunny, Nicky Jam and Ozuna), which has racked up 1.49 billion plays since being uploaded in April. (Drake’s “God’s Plan,” in comparison, is on 901.7 million.) The second-most-watched new YouTube music video of 2018 is Maroon 5’s “Girls Like You” (feat. Cardi B) with 1.47 billion views, while the third is “X,” by Nicky Jam and J Balvin (1.42 billion).

One trend to watch: Just as the likes of Daddy Yankee and Bad Bunny have ushered in a YouTube-led era of global Latin hits, 2019 may see the mainstream rise of Bollywood pop. The channel of Indian label T-Series is currently vying to become the world’s most popular YouTube destination, ahead of gaming phenomenon PewDiePie.

Combined with the mooted arrival of Spotify in India next year, plus an onslaught of industry attention, some are predicting that local music-makers in the region will have their best ever shot at a global chart takeover.

$2.3 billion and the deal which has consolidated power in the music business

In November, Sony Corporation completed the $2.3 billion acquisition of a 60 percent stake in EMI Music Publishing. Sony already owned 30 percent in the company, which controls more than 2 million songs, including megahits performed by the likes of Kanye West, Queen and Pharrell Williams. The remaining 10 percent stake in EMP was purchased by Sony from the Michael Jackson estate in July for $287.5 million.

Thanks to this piecemeal buyout, Sony Corp now owns the world’s second-biggest record company — Sony Music Entertainment — in addition to EMI Music Publishing and fellow major publisher Sony/ATV. As a result, according to MBW analysis, Sony owns the biggest combined music-publishing entity on the planet, with an annual turnover in excess of $1.3 billion, while its record company generated revenues of more than $4 billion per year.

The biggest overall music rights company (publishing plus records) in the world, though, remains Universal Music Group, whose publishing company (Universal Music Publishing Group) will turn over around $1 billion this year, while its record company is on course to post around $6 billion in annual revenues.

Together, Universal and Sony’s recorded-music operations should generate more than half of the annual revenue of the global music business in 2018. That’s a daunting power base, yet one which is due for some serious disruption if UMG owner Vivendi comes good on its plan to sell up to 50 percent of the music company to a strategic outside buyer by the end of 2019.

$0.00074 and record labels’ failing battle against the ‘value gap’

The music business is preparing itself for disappointment. According to a recent open letter signed by Universal Music Group parent Vivendi, as well leading global trade organizations, a new piece of legislation in Europe — the European Copyright Directive — will fail to ensure that user-upload services like YouTube are legally obliged to fix the “value gap.”

What’s the value gap? In short, the vast difference in the amount of money paid per-stream by YouTube when compared to the likes of Spotify and Apple Music.

According to the anonymized numbers of one mid-sized independent record label (presented by Cracker frontman and music biz brain David Lowery), YouTube paid it an average of $0.00074 per stream in 2017. That compared to $0.004 from Spotify (blended across the service’s free and paid-for tiers) and $0.008 from Apple Music (i.e., more than 10 times as much as YouTube).

The music business had its fingers crossed that European lawmakers would, via the soon-to-be-sanctioned European Copyright Directive (and its controversial “Article 13”), force YouTube to pay more through strict legislation. As we stand today, however, it is the Google/Alphabet-owned platform which looks likely to come out on top.

Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis and jobs since 2015. He writes a weekly column for “Rolling Stone.”