Wealth in Places: As the music business approaches peak streaming, where will the growth come from?

It's all about the artist, say (and say and say) music executives. But if you really look at the industry over time, it's really all about formats — the health of the business may have more to do with how people listen to music from what they actually listen to. For the past decade, that's been on-demand streaming, and the music industry has soared — from total revenue of $6.7 billion in 2014 to $17.1 billion last year, according to an RIAA report in late March. In inflation-adjusted dollars, the industry is worth almost double what was at the beginning of the streaming boom. Internationally, the story is broadly similar – the business was worth $13 billion in 2014 and $28.6 billion last year, according to IFPI statistics.

In the U.S., at least, growth is slowing — revenue rose from $15.9 billion to $17.1 billion last year, and hasn't grown much in the past two years, due to inflation. The reason is simple: There are only so many streaming subscriptions for sale, and the US now has a 12-month average of 96.8 million on-demand subscriptions in a country of 127 million households. It is difficult to know when we will reach the maximum subscription — 105 million in one year? 110 million in two? — but slower subscriber growth seems inevitable. This is one reason why record companies are cutting back. It's the end of overdevelopment for creators and rights holders — at least in some places.

These places also include most of Europe, where recorded music grew by 8.9%, according to IFPI's World Music Report 2024, compared to 7.4% in the US and Canada. In the developing world, where the music industry is much smaller, the figures tell a very different story: Asia grew by 14.9%, with much of that growth coming from China, which grew by 25.9%. Latin America grew for the 14th consecutive year, by 19.4%. and revenue from sub-Saharan Africa increased by 24.7%. These increases are taking place at smaller businesses, but they mean there's plenty of room for growth — it's just moving south and east.

We've all heard the simple and optimistic version of what's next: Just wait until everyone in China, India, and Brazil signs up for a streaming service! (I hope that sign up for Billboard Pro while they're at it.) But that assumes a world where the global middle class continues to grow, trade and prosperity continue to expand, and developing economies remain relatively stable. Alas, as the fine print says, past performance is not indicative of future results. Over the past two years, Russia has gone from a growth market to a geopolitical rival, and tensions between the US and China are heating up. (Whatever you think about globalization, it will be much worse the other way around.) If the US forces the sale of TikTok, could China retaliate by imposing limits on American music? Could inflation in Latin America hurt consumer spending power in a way that stifles a streaming business still heavily dependent on advertising? Whatever happens is beyond the control of the music business. The potential is incredible — it's just not reliable.

The truth is that there is still plenty of opportunity in developed markets, including plenty of room to increase streaming subscription prices, but creators and rights holders don't have to just sit back and wait for that to happen. Other opportunities are emerging, and growth could be fueled by licensing music for AI training, as well as social media, video games, and the next iteration of the technology formerly known as Metaverse.

Some of the most exciting opportunities can come from a traditional business model: Selling items. Yes, I know, it's all so unbearably sad compared to the “free” future we were told to wait. But consider that, adjusted for inflation, the US recorded music market is still only two-thirds the size of its peak in 1999. Then – how old that sound? — much of that revenue came from serious fans buying a few albums a month instead of a few albums a year, mostly for more than the cost of a monthly streaming subscription today. That dedication explains the fantastic growth in the vinyl market, which grew from $243.8 million in 2014 to $1.4 billion last year — nearly one-sixth the size of the music business a decade ago in 2023 dollars. (I'm proud that I say I have done my duty.)

Sure, the growth of vinyl is also slowing — the format isn't for everyone and I don't have the shelf space myself, but consumers have shown a willingness to spend more for their favorite artists, so music executives are so excited with superfans, that it could be the most exciting opportunity available. The last decade of the music business was earning a hundred dollars a year from millions of people. The next 10 years will be about making millions — OK, probably thousands, but you get the idea — from hundreds of people. It won't be easy though. The music industry has always been, pardon the pun, a volume business. Making money from superfans requires them finding it, understanding what they want to buy, and promoting it, possibly online, better than live promoters or dedicated startups.

This could also solve one of the biggest problems with the recorded music business: it doesn't make stars fast enough, and the news it does have doesn't shine for as many people. But what's a big problem in the hit-based streaming business doesn't matter as much when it comes to monetizing superfans – older acts are still doing big business and there are riches to be had. Financially, K-pop is essentially a high-margin merchandise business that focuses on an audience that is dedicated, but not quite mainstream. And if the labels are to continue to grow in the US and Europe, at least some of their operations may look a lot like this.