Can Streaming Really be Worth $28 Billion?

Can Streaming Really be Worth $28 Billion?

In 1980 critics referred to Bruce Springsteen’s The River as “a trip through the rock ‘n’ roll heartland.” But an album-length discourse on the human condition is a relic of music’s bygone era. The album is dead, and the single-song purchase is giving up the ghost. Smartphones have ushered in the age of music streaming services. Experts predict worldwide streaming markets to rise exponentially over the next decade. Hyper-connectivity in an era of instant gratification drives the new billion dollar industry.

Goldman Sachs forecasts streaming music sales to reach $28 billion by the year 2030. It’s a bold statement. The music industry’s highest revenue year ever (1996) only brought in $27.4 billion total. Goldman revised these numbers upwards 16 percent over previous estimates. France’s Vivendi SA and Sony Corporation appear primed to be the winners of this windfall. The former owns Universal Music Group, the latter, Sony Music Entertainment. Industry experts predict royalties around 55 – 60 percent for their respective catalogs. Both companies recently saw a rise in valuation from Goldman, with Vivendi pegged at $23.5 billion. Sony’s price target skyrocketed to $51.60.

Streaming services raked in around $3 billion in 2016. The industry increase predictions should eclipse the full music market as a whole. Analysts foresee 14 percent of all smartphone users adopting streaming services by 2030. That number accounts for roughly 847 million people. The largest of those markets are in Scandinavia, where 30 percent of all music sales are streaming.

Goldman is basing much of its prediction on the success of Netflix here in America. The video streaming service has penetrated 50 percent of all homes with cable. The industry has its skeptics. Most streaming services cost about $9.99 per month. Some believe that for Goldman’s predictions to become a reality the price point may need to be halved. History shows that major record labels are averse to cutting prices. Still, others suggest more nefarious forces at work. Spotify, the world’s most extensive streaming service, is seeking a listing on the New York Stock Exchange. A prediction like this would be pretty beneficial to the company that has never turned a profit.

And guess who represents Spotify – Goldman Sachs.

For its part, Goldman says streaming music is the next digital music revolution. In fact, they claim their estimates may be on the conservative side. Other digital technologies like smart speakers and connected cars could add as much as $8 billion to their prediction. The music industry spent a decade trying to tackle music piracy. Now Goldman says they finally have a way back to the profitability they enjoyed at the turn of the century.

Leave a Reply

Your email address will not be published. Required fields are marked *