Music Revenue to Drop 25% in 2020, but Long-Term Outlook Is Good: Goldman-Sachs

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Cheyne Gateley/Variety Intelligence Platform

Investment giant Goldman-Sachs has been one of the great cheerleaders for the revival of the music industry, and its projections played no small role in some of the industry’s recent successes — not least Universal Music Group being valued at $33.6 billion as part of its sale of 10% to Tencent.

However, the coronavirus pandemic has knocked the wind out of many formerly rosy projections for the music industry, largely due to the virtual shutdown of the live-entertainment business. And although Goldman’s latest “Music in the Air” report projects a 25% drop in global music revenue in 2020 — and a 75% revenue plunge for the live industry this year, to $7 billion — it also expects a “strong rebound” in the live sector in 2021 and an average 6% growth in the music business over the next decade, nearly doubling in value to $142 billion by 2030.

The pandemic led the company to lower its projections significantly, with music pulling in $57.5 billion in 2020 — a nearly 30% drop from its original forecast, and depressingly lower than 2019’s $75 billion. It also scaled down its publishing forecast by 5% (to $6 billion) and recorded music by 8% (to nearly $21 billion).

However, there’s a lot of optimism — or at least less long-term pessimism than might be expected — in the 80-page report.

Although it projects streaming to maintain its 18% annual growth, recorded-music is expected to grow just 3% due to the accelerated, pandemic-driven drop in physical and licensing revenue. It expects record labels to be the primary beneficiaries of streaming’s continued growth, based on their significant royalties (52-58%) from streaming platforms. The report projects that Spotify will retain its leading position, but by 2030 Apple Music will have dropped to fourth place behind Tencent Music and Amazon.

“Overall we forecast the streaming market to grow at a 12%” compounded annual growth rate from 2019 to 2030 to reach $75 billion by 2030, the report reads.

Music publishing, with its diversified revenue streams, is projected to grow 3.5% in 2020 and next year, and continue growing over the decade.

The report identifies several key beneficiaries of this growth — main Universal Music owner Vivendi, Tencent Music, YouTube/Google parent Alphabet — and points to one major company receiving a negative impact: Sirius, which not only is a major radio network owner but its parent company, Liberty Media, also owns 34% of Live Nation, the world’s largest live-entertainment company, which has lost significant value since the pandemic lockdown began.

It also projects, with significantly guarded optimism, the return of growth to the live-music industry. “While we believe fans will be eager to get back to live events, concerts and festivals once the situation normalizes,” it reads, skimming over a very big if, “the timing and speed of the recovery will largely depend on the regulations around social distancing and large public gatherings around the world.”

Mid to long term, it projects “a return to 4-5% annual growth rates to reach $39 billion by 2030 (comparied with $28 billion in 2019) as live events benefit from a number of demand and supply side tailwinds such as the ‘millennial experience economy’ driving greater demand for live events, new monetization opportunities through live streaming, ticket sales, merchandise and sponsorship, and artists’ greater dependence on touring income.”

The degree to which that comes to pass is a very open question when one considers how many companies may not survive this downturn, and how much the industry, which just returned to growth in 2015 after more than a decade of doldrums that saw the music industry emerge at half of the size it was in 2000.

However, the report concludes, “Overall we believe the industry’s long-term growth outlook is intact, driven by the secular growth of paid streaming, growing demand for music content and live events, new licensing opportunities (e.g. TikTok) and positive regulatory developments.”