Music Production, Publishing & Distribution

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 3,500 companies in the sound recording industry in the US produce and distribute musical recordings, publish music, and provide sound recording and related services. Recorded music companies, also known as record “labels,” generate revenue through the sale of physical products (CDs, vinyl albums) and digital products (downloads, streaming). Distributors generate revenue through wholesale sales of music to online and brick-and-mortar stores. Music publishers generate revenue from royalties received through the exploitation of musical compositions, which include licenses to reproduce and perform music.

Music Piracy

Piracy is one the music industry’s most serious issues and significant source of lost revenue.

Industry Concentration

The musical production, publishing, and distribution industry is highly concentrated and dominated by large multi-national firms.

Industry size & Structure

The average company operates out of a single location, employs about 6-7 workers, and generates almost $4 million annually. Employment averages within the industry range from 3 to 17 workers, and average revenue ranges from $640,000 to $15 million annually.

    • The music publishing and distribution industry consists of about 3,500 firms that employ about 23,600 workers and generate almost $16 billion annually.
    • Record production/distribution companies account for 53% of revenue and 16% of firms; music publishers account for 35% of revenue and 20% of firms; sound recording studios account for 8% of revenue and 53% of firms; other sound recording firms account for 4% of revenue and 11% of firms.
    • The music publishing and record production/distribution sectors of the industry are concentrated; the top 50 companies account for 93-96% of sector revenue. The sound recording sector of the industry is more fragmented; the top 50 companies account for 38% of sector revenue.
    • The largest music publishers and integrated production/distribution firms include Kobalt, Warner Music Group, BMG (Bertelsmann), Universal Music Group (Viviendi), and Sony Music Entertainment (Sony). Major digital music distributors include CD Baby, Ditto, and Octiive. Major recording studios include Capitol Studios, Conway Recording Studios, and Sterling Sound.
    • The US accounts for the biggest percentage of music sales globally and is the largest exporter of music, according to IFPI.
                                    Industry Forecast
                                    Music Production, Publishing & Distribution Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Coronavirus Update

                                    Apr 29, 2022 - New COVID-19 Cases Increase After Music Festival
                                    • Daily COVID-19 cases in Riverside County, CA, rose 76% in two weeks as tens of thousands of people gathered there for the Coachella Valley Music and Arts Festival over two April weekends. Organizers of the outdoor festival did not require visitors to wear masks or present proof of vaccination or a recent negative Covid test. Riverside County’s average daily Covid cases jumped from 102 on April 14, the day before the festival started, to 180 cases on April 28, four days after it ended. But that figure is likely an undercount, disease experts said, because of the common use of at-home tests.
                                    • New York City ended in March the proof-of-vaccination requirement for those dining indoors, using gyms, and going to entertainment venues. Chicago's proof-of-vaccination mandate ended with the month of March. California state rules still required vaccination proof or negative test results to enter large indoor events as of late March. Other major cities are also moving to end some mandates.
                                    • Pollstar estimated that the top 100 tours of 2022 would gross $5.63 billion in revenue, which would be 1% over the record revenue levels of 2019.
                                    • The COVID-19 outbreak endangered many live music venues as attendance of live shows almost completely disappeared during the pandemic. The industry received a lifeline on December 27, 2020, with the passage of the Save Our Stages Act (SOS Act) which was part of the $900 billion stimulus package – the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. The SOS act provides $12 billion in grants to financially distressed venue operators, talent representatives, and event promoters and producers. Grant funds can be used for operational expenses, including payroll, rent or mortgage payments, utilities, and loan payments. In March 2021, President Biden signed the American Rescue Plan Act, which included an additional $7.25 billion for the Paycheck Protection Program (PPP), a lending program aimed at helping small businesses and nonprofits retain their workers. The PPP was set to wind down on May 31, but the program ran out of money on May 11, 2021, and stopped accepting most new applications, according to The New York Times.
                                    • The pandemic has hastened consumers’ movement toward on-demand streaming. US music streaming revenues increased 13.4% year over year in 2020, to $10.1 billion, according to the Recording Industry Association of America (RIAA). Growth continued in the first half of 2021 as total recorded music revenues increased 27% to $7.1 billion compared to the first half of 2020. Streaming accounted for 84% of total recorded music industry revenue in the first half of 2021, posting sales of $5.9 billion and rising 26% over levels in the first half of 2020. The number of paid music streaming subscriptions increased 13% to 82 million in the first half of 2021 compared to 73 million during the same period in 2020. Physical music sales – vinyl albums and CDs – increased 75% in the first half of 2021 to $690 million.
                                    • Industry experts suggest that artists sidelined from in-person live shows seek to monetize their music with sync deals. Sync (synchronization) is the term for licensing music in movies, TV, video games, and advertisements. Sync deals are usually arranged between music publishers and supervisors that oversee the musical aspects of advertisement, TV, movie, and video game productions. Synching opportunities may increase as TV and movie productions have resumed. Other creative pandemic-era revenue boosters include pay-per-view live streaming concerts via companies like LiveXLive. Live-streamed events generate ticket revenue and create opportunities to upsell VIP access to the artist, merchandise, and content subscriptions. Some artists are also getting cash advances on their future royalty earnings through companies like Royalty Exchange.
                                    • Selling songwriting rights ramped up during the pandemic among legacy artists. Big names including Bob Dylan, Shakira, Neil Young, Stevie Nicks, David Crosby, Paul Simon, and Bruce Springsteen have cashed out their catalogs. Industry watchers suggest aging artists may wish to sell their rights to leave liquid assets to their heirs instead of songwriting estates.
                                    • Despite the challenges presented by the pandemic, performance rights organization BMI posted record domestic licensing revenue and distributions to writers and publishers for its fiscal year ended June 30, 2021. BMI distributed over $1.3 billion to its songwriters, publishers, and composers, up 8% over fiscal 2020. The firm’s domestic licensing revenue topped $1 billion for the first time at more than $1.4 billion and grew 7% over the prior fiscal year. The pandemic has hurt the performance of BMI’s media licensing (revenue from cable, satellite, and broadcast radio and TV) and general licensing (revenue from live concert venues, bars, restaurants, and fitness centers) divisions. But those losses have been more than offset by BMI’s digital segment, which grew 47%. Digital growth was mainly due to the boom in audiovisual streaming.
                                    • Surging demand and pandemic-related supply chain disruptions have contributed to delays in the production of vinyl LPs, according to The New York Times. While vinyl records represent only a small fraction of recorded music sales, they have enjoyed a renaissance during the pandemic. According to RIAA, vinyl sales during the first half of 2021 reached 17 million copies and generated $467 million in revenue, nearly double the levels during the same period in 2020. However, record-pressing plants have not been able to keep up with the booming demand. Plant closures earlier in the pandemic slowed production, and widespread supply chain snarls have disrupted the distribution of key inputs, including cardboard and polyvinyl chloride (PVC). Most of the machinery used to make records is aging and expensive to maintain, and supply chain bottlenecks have also slowed deliveries of costly new machinery.
                                    • Some in the live music industry have seen an uptick in “no-shows” – ticket-buyers who do not attend an event, according to The New York Times. According to estimates by Billboard, for some big-name acts, no-show rates have been as high as 20%. No-show rates have been as high as 30% for smaller, indoor events. No-shows hurt promoters, venues, and artists due to reduced food, beverage, and merchandise sales. No-shows have been a significant issue for some veteran performers whose audiences tend to skew older and may have lower risk tolerance. Older fans also tend to have deeper pockets and are an important source of revenue for the industry.
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