Constellation Change: Audio Streaming Overtakes CDs In Germany’s Half-Year Recorded Music Sales

Germany, one of the world’s most physical recorded music markets, has crossed a milestone six months into this year: for the first time in history, audio streams have superseded CD sales as the main recorded music revenue generator.
German recorded music stats
– German recorded music stats
Digital has overtaken physical products as the music industry

The German recorded music industry had a turnover of €727 million ($846 million) in the first half of 2018, which marks a two percent drop in revenue compared to the same period in the previous year ($864 million).
47.8 percent of that revenue was generated through audio streams, which went up by 35.2 percent compared to the first six months of 2017.
The CD on the other hand continued its decline of recent years, losing 24.5 percent in sales YOY and ending up at 34.4 percent market share, ending its almost 30-year reign as Germany’s most important recorded music revenue generator.
Music downloads continued to decline as well, by 23.4 percent, and now have a market share of just 8.5 percent. For the first time since 2006, vinyl sales also suffered a loss, dropping by 13.3 percent and making up 4.4 percent of total music industry revenues.
The only segment to show growth besides audio streaming, is video streaming, which increased by 27.2 percent and now accounts for 2.2 percent of total revenues. 
At the end of last year, overall physical revenues were still in front of overall digital revenues. That has changed as well. After the first six months of 2018, physical sound recordings, including CDs, DVDs and vinyl LPs, come in at 41.1 percent, whereas digital sales are now at 58.9 percent of the overall sum of €727 million.
Sales are measured at retail prices and include VAT, which is 19 percent in Germany.
Dr. Florian Drücke
BVMI/Markus Nass
– Dr. Florian Drücke
CEO of Germany’s Federal Music Industry Association BVMI

Florian Drücke, CEO of Germany’s Federal Music Industry Association BVMI, said: “Audio streaming now represents almost half of revenues and has replaced CDs as the largest sales segment. This development marks a clear change in the constellation of the music market to the benefit of online sales.

“This situation further reveals the necessity of establishing legal clarity with regards to digital licensing. As we all know, licenses are the lifeblood of the creative industries, and this is particularly true in the digital era. Especially, it finally has to be made clear that user uploaded content services making music available must negotiate licenses on the market.
“On 12 September, the European Parliament will have the tremendous opportunity to pursue a better path and to update the rules of the ‘platform
economy’ that have developed over the past 20 years.”
Drücke was speaking about what the worldwide recorded music industry, represented by the IFPI, calls the value gap. The value gap describes the discrepancy between the royalties paid by licensed streaming services and ad-supported video streaming sites, of which YouTube is the most popular.
According to IFPI’s most recent figures, 176 million users paid for a streaming subscription in 2017, while some 96 million used an ad-supported service. Both factions generated $5.6 billion in revenues.
1.3 billion users of video streaming generated significantly smaller revenues of $856 million. 
In other words: while video streaming accounts for more than half of on-demand streaming time, it only generates a fraction of revenues.
Backed by current online legislation, YouTube claims to only host content, without having any control over the content itself. It’s how it was able to end up with a vast library of content, for which other services such as Spotify or Apple Music had to pay license fees.
This led to “a mismatch between the value that online user upload services, such as YouTube, extract from music and the revenue returned to the music community,” IFPI writes, calling this situation “the biggest policy challenge facing the music industry.”
YouTube launched its new subscription offer YouTube Music in May, copying the pricing model of other big players such as Apple Music or Spotify. It remains to be seen how the amount of royalties the Google company pays out at the end of this year are going to compare to last year’s, when they were close to $1 billion – or not even a dollar per user, per year.