Guest Post By BY TIM INGHAM
The last time Goldman Sachs issued a report on the recorded music industry, it caused a wave of fiscal confidence in and around the global business.
The investment bank’s ‘Music In The Air’ dossier, from August 2017, forecast a booming future for record labels, and set in motion a series of escalating valuations for Universal Music Group which have since hit $50bn (in the case of JP Morgan).
In that report, Goldman forecast that trade revenues from paid streaming would reach $28bn by the year 2030, with the overall recorded music industry pulling in a whopping $41bn in the same 12 months.
To put Goldman’s optimism in context: according to IFPI data, in 2018, the recorded music industry generated $19.1bn globally – of which 37% (circa $7bn) was derived from paid streaming services.
Today (June 5), Goldman has issued an update to ‘Music In The Air’ – obtained by MBW – in which it raises its forecasts for the years ahead.
Goldman now predicts that, by 2030, the global recorded music industry will be pulling in $45bn annually (up on a restated prior forecast of $44bn).
It also believes that paid streaming will generate $27.5bn for labels and artists in that year (up on a restated prior forecast of $27.1bn), and that the overall annual global trade streaming revenues (including ad-funded) will reach $37.2bn.
Perhaps the most exciting prediction within Goldman’s figures, however, is its forecast for the number of paying music streaming subscribers around the world.
The financial firm now believes that, in 2023, this stat will rise to 690m (up on a previous forecast of 528m) – more than double the number of users of paid music streaming accounts (255m) confirmed by the IFPI for 2018.
Goldman further predicts that, in 2030, there will be 1.15bn paying streaming subscribers globally (up on a previous forecast of 901m).
Within this 1.15bn number, Goldman believes that over two thirds of subscribers (68%) will come from ’emerging markets’, rather than ‘established markets’.
Partly as a result of that growth in emerging markets, Goldman predicts that global annual ARPU (Average Revenue Per paying User) from music streaming services will continue to fall significantly, down from $32.70 in 2018 to $27.30 in 2023 and $24.60in 2030.
It notes a current valuation for Universal Music Group of €25.1bn – €35.2bn (approx $28bn – $40bn).
Goldman’s ‘Music In The Air’ update also predicts that, in 2030, Spotify will remain the global market leader in audio subscription streaming, with 32% market share of global streaming subscribers, down from the 38% it registered in 2018.
The timing of Goldman’s new report is certainly good news for Universal Music Group owner Vivendi – which is looking to sell up to 50% of UMG this year.
A recent report from Bloomberg suggested that UMG had held talks with Tencent over a potential deal, but that some in the investment community were growing impatient.
It quoted one source as saying that “some private equity investors balk at the high price [of UMG] and slow pace of the deal”.
Potential buyers for Universal Music Group mooted to date have included Tencent, Alibaba, KKR, Apple, Verizon, Amazon and Liberty Media.