World online music market current situation
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1 J son & Partners Consulting presents the research of online music market, results of 2012 During the report preparation we used the interviews prepared by our consultants with experts in the music industry, such as Yandex.Music representatives and others (for example: JSON.TV interview with a teacher and business trainee of RMA business school who has a pull of implemented projects for music business companies Alexey Nikolaev ). World online music market current situation In 2012 the worldwide music market was 16.5 bln.usd, that include digital and physical sales. As a result of 2012 Digital format was 5.8 bln.usd (8% higher in comparison with 2011). Fig. 1. Volume and dynamics of world online music market, , bln USD Resource: J'son & Partners Consulting 1
2 US music market is still keeping the leading position in the world rating in 2012, it presents 4.48 bln.usd by all segments the ratio decreased for 0.5% in comparison with the previous year. Japan is the second market with 4.42 bln.usd, UK is the third one with 1.33 bln.usd and South Korea occupies the 11th place with 188 mln.usd. Mobile apps for music download is gaining popularity all around the world due to the convenience and portability of audio content digital purchases, and also the apps functions are increasing each year. Number of pay music services subscribers increased by 44% in 2012 and present 20 million of people. Fig. 2. Number of subscribers of the world digital music distribution services, mln. people Resource: J'son & Partners Consulting 2
3 Current state and forecasts of the Russian online music market According to J son & Partners Consulting the volume of Russian digital sales of music content market in 2012 was 3.1 mln.usd vs 2.55 mln.usd in This amount includes direct sales (over 65% of Russian music digital content market) plus advertising revenues and subscription model. Fig. 3. Volume of Russian online music market, F, mln USD Source: J'son & Partners Consulting Until the end of 2012 the situation on the Russian market was very complicated, due to the leave of the local market players, such as Yota Music, Fidel, Stream, etc. They refused to develop this business branch. It happened because of the very high level of piracy, secondly it is very difficult for the legal platform to clean copyrights and the policy of the largest copyright holders played its role. At the end of 2012 among the strong Russian market players who saved position was streaming-service Yandex.Music, that is not monetized directly in web-version (advertising model is being used). However in 2012 happened what everyone (users, experts, market players) have been waiting for so long: Apple launched its shop itunes in Russia. The appearance of such strong market player changed the situation drastically. In particular, copyright holders, become more enthusiastic in promoting music products via digital shop itunes rather than via small platforms with unclear future. According to J son & Partners Consulting, the year 2013 must be crucial for the Russian online digital music content distribution market. The total market volume will reach 8 mln.usd with growth rate of 158%. Such rates will lead Russian market to the unconditional and absolute leader among fast growing world markets of music industry. According to Yandex data (use of Yandex.Music service) the following market trends could be emphasized: Users prefer Russian music (more than 50% of listening): despite the fact that the local content has only 1% in catalogue. 3
4 The main platform for music listening remains - the web: proportion of listening in web and mobile versions is 95% and 5 % accordingly. Monthly number of unique visitors of Yandex.Music is around 13 million of people. After 1.5 months of Android mobile apps launch, number of listening increased more than twice The main barriers for service development are legislation in the copyright and associated property rights sphere and wide expansion of piracy content. Factors about Yandex.Music service: In the beginning the service planned as part of search service. Around 4% of user s searches were about music. The decision was made: reply to every search request with opportunity to listen the target content. Yandex.Music is a streaming service and tending to be more comfortable and to become intuitive online player for users Independent expert in music market, teacher in business school RMA ( Management in music business and entertainment industry department) Alexey Nikolaev, described the market development, its drivers and barriers: Copyright holders start to revaluate the digital market and to structure their catalogues first (about launch of itunes) Before itunes artists and lables provide the rights without thinking For any music services such moments as discovering, recommendations and artist search are crucial. Our market biggest problem is that we don t have community that will collect fees for mechanicals rights from internet platforms for downloads and streaming. Google Music will be esier as itunes standard tought lables how to work Full version of the interview can be watched on J son TV Channel on YouTube. 4
5 Illustration.4. Russian online music market: classification by models for content distribution, F, млн USD Source: J son & Partners Consulting Subscription will be the most fast growing method of monetization. This very model J son&partners Consulting considers as the most prospective for Russian and world digital music markets. According to J son & Partners Consulting tracks and albums sales share in 2016 will reach 80.3%, and the total share of subscription and advertising model will increase up to 19.7%. The main market growth drivers will lay on itunes services (J son & Partners Consulting evaluates itunes market share as 50%) and Google Music (launch is expecting soon on the Russian market). J son & Partners Consulting expects in growth of Russian digital music content market. itunes revenues will present over half of the market in
6 Full results of the research of online music market in Russia and in the world, results of 2012 are presented in the report: Online music market, (79 pages) Content Resume 1. Introduction 2. Sources and Methodology 3. Definition and classification of online-music market 4. Online music makret overview, Online music services market general overview 4.2. History of online music market development 4.3. Online music market in particular countries 4.4. Volume and dynamics of the Russian online-music market, Online music market development forecasts for Online music market drivers and barriers in Russia 4.7. Market structure, players 4.8. Main business models and ways to monetize Streaming-services Online radio Download services Music apps and services for mobile devices 4.9. Level of piracy in the segment of online music in Russia, General assessment of the level of piracy in the segment of online music Torrent-trackers Web sites with direct download Pirate content in social networks Key market players profile 5. Adjacent markets 5.1. Broadband access wireless network in Russia and in the world 5.2. Mobile Internet market 5.3. Electronic payment systems 5.4. Smartphones market in Russia and in the world 5.5. Tablet PC market in Russia and in the world 6
7 List of Illustrations Fig. 1. Volume and dynamics of the global market of online music, , mln. USD Fig. 2. The number of subscribers of worldwide digital music distribution services, mln. people Fig. 3. Shares of digital music content distribution in the world, % Fig. 4. Market of digital sales in USA, $, E Fig. 5. Structure of music market revenues in USA, 2010, 2012 Fig. 6. Market of digital sales in UK, $, E Fig. 7. Structure of music market revenues in UK, 2010, 2012 Fig. 8. Market of digital sales in Japan, $, E Fig. 9. Structure of music market revenues in Japan, 2010, 2012 Fig. 10. Structure of music market revenues in South Korea, 2010, 2012 Fig. 11. The volume and dynamics of the Russian online music market, , mln. USD Fig. 12. The volume and dynamics of the Russian online music market: the distribution of content distribution models , mln USD Fig. 13. The volume and dynamics of growth of online music in Russia, , mln. USD Fig. 14. Russian online music market: diversification by content spread models, , mln. USD Fig. 15. Russian online music market: diversification by platforms, , mln. USD Fig. 16. Model of the interaction of players in the Russian online music market Fig. 17. Audiocontent structure on rutracker.org, 2012 Fig. 18. The total mobile data traffic in the world, Eb, Fig. 19. The total active mobile subscriber base of cellular network in Russia, mln subscribers, 1Q2010 2Q2012 Fig. 20. The total mobile data traffic, bln. MB, 1Q2010 2Q2012 Fig. 21. The frequency of use of the mobile internet from a smartphone Fig. 22. The use of different access technologies to the Internet, Russia, October 2012 Fig. 23. The total active subscriber base of mobile data transfer in Russia, mln subscribers, 1Q2010 2Q2012 Fig. 24. Total revenues from mobile data transfer services in Russia, bln.rub, 1Q2010 2Q 2012 Fig. 25. The total mobile data traffic, bln. MB, 1Q2010 2Q2012 Fig. 26. Average cost of 1 MB of mobile data traffic by mobile operators, RUB for MB, 1Q2010 2Q2012 Fig. 27. Market turnover of remote financial services, bln.rub, 2008А-2017F Fig. 28. Total existent Park of smartphones in the world, bln.pcs, Fig. 29. Total existent Park of smartphones in the world by operational systems, mln.pcs, Fig. 30. Volume sales of smartphones in mln pcs., in Russia, 1Q2010 2Q2012 Fig. 31. Dynamics of average retail price of a smartphone in Russia, USD, Fig. 32. Market structure: smartphones telephones, %, natural value, Russia, Fig. 33. Total existent Park of Tablet PC in the world, mln.pcs, Fig. 34. Total existent Park of Tablet PC in the world by operational systems, %, Fig. 35. Total existent Park of Tablet PC in Russia, mln. pcs, List of tables Table 1. The main stages of digital content development in the world, Table 2. The system of penalties for the distribution of illegal content Table 3. Pirate portals traffic Table 4. Overview of the electronic payments market in Russia 2008A-2012E-2017F., bln.rub Table 5. Number of internet users and broadband access subscribers Table 6. Population, mln.people The newsletter was prepared by the J'son & Partners Consulting Company. We exert every effort to provide actual and forecasting data representing the situation in full and available at the time of the publication of the material. J'son & Partners Consulting reserves the right of revising the data after publication of some new official information by individual players. CONTACT FOR MORE INFORMATION: Pavel Ermolich Commercial Director Pavel@json.ru 7
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