Same Old, Same Old: PwC's Forecast Shows a Shrinking Music Industry through 2019

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Apple turned the music industry on its side more than a decade ago with the advent of iTunes. By the time artists and labels learned how to effectively monetize this digital model, they faced a new problem: free music streaming services, such as Pandora and Spotify, had cannibalized the industry once again. Will the music business bounce back from these hits, forming a lucrative partnership with these services and positively shifting its course?

PricewaterhouseCoopers doesn’t think so.

In its annual Entertainment & Media Outlook report, which Billboard reported on extensively, the professional service network predicts that live music will continue to grow and recorded music will continue to decline at almost uniform rates, resulting in a flat trajectory through 2019. PwC expects live music to grow at a 4.4 percent compound annual growth rate (CAGR), and live music sponsorships at a 2.8 percent CAGR. Meanwhile, they expect recorded music sales to decrease 4.5 percent over the next five years. And just in case anybody forgot about the compact disc’s downward spiral into oblivion, the company expects physical music sales to continue plummeting at 9.1 percent a year.

Those last numbers should come as no surprise: vinyl and CD preservationists lost the battle years ago. It’s interesting to note, however, that PwC also forecasts a negative 10.3 percent CAGR for downloads, further solidifying that Apple has surrendered its crown over the digital marketplace. Streaming revenues, on the other hand, are expected to grow at an 11.2% CAGR. But even that prediction masks another potential negative: although streaming services are expected to grow 20.3% this year, their projected annual growth rates are on a steady decline, all the way down to 4% in 2019.

Pandora  and Spotify are still relatively young services that are continually figuring out new ways to monetize their users, so it makes sense that their exponential growth will slow and eventually cap out. But PwC predicts this will happen in just a few years, and their report fails to account for other potential disruptions or revolutions within the streaming industry, such as Apple’s new subscription-based service. “Basically, they’ll steal market share from others,” PwC’s Greg Boyer told Billboard. On the other hand, he says current services haven’t reached their full potential yet. “The services are there. Demand for music exists. But the monetization piece just isn’t there yet.”

Yes, recent entries in the streaming war have failed to make a splash (here’s looking at you, Tidal), but it would be a mistake to dismiss Apple before they even leave the gate. After all, this is a company that’s written, broken and rewritten the rules of modern technology countless times, and they’ve got the skill and the resources to do it again. “If Apple wants to make a dent, it can by its sheer heft,” said Peter Csathy, CEO of Manatt Digital Media, to USA Today. “It can simply throw gazillions of dollars at the problem/opportunity. There is nothing else like it.”

PwC’s report includes other problematic assumptions, one being that Apple’s streaming service won’t cut into download revenues; considering Apple dominates about 75% of the U.S. download market, that’s certainly possible. It also assumes that Spotify’s momentum will almost completely halt by 2019, and with its current explosion in popularity, there’s simply no guarantee of that. The forecast also writes off the possibility of Congress forcing terrestrial radio programs to pay performance royalties to record labels, but with the introduction of the “Fair Play, Fair Pay Act of 2015” in April, this could soon change as well.

Then, of course, there’s always the threat of another recession, the likes of which shook the country and knocked down live music revenues in 2009 and 2010. Boyer insists such an event is improbable. But if there’s one thing less predictable than the music industry, it’s the economy.

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