Goldman Sachs updates its music industry revenue forecasts

Goldman Sachs’ series of ‘Music in the Air‘ reports have been widely read and quoted within the music industry in recent years, not least because their bullish forecasts for future growth have been just the thing to encourage investors to get their wallets out.

In its last report, published in June 2022, Goldman Sachs raised its estimates for music industry revenues, predicting $94.9bn in 2023 rising to $153bn in 2030. Those are combined revenues for recordings, publishings and the live music industry.

This week the latest Music in the Air report is out, a copy of which Music Ally has seen. How have those predictions changed? Well, they’ve been lowered – but only slightly.

Goldman Sachs is now predicting that the global music market will be worth $92bn in 2023 rising to $151.4bn by 2030.

Those are gross revenues, but the report also provides estimates for net revenues, which for recordings and publishing includes only the share taken by rightsholders. The net figures are $65.1bn in 2023 and $104.4bn in 2030.

The 2023 prediction includes $28.2bn of recorded music revenues, which is down from last year’s forecast of $30bn. However, the report predicts $8.8bn of publishing revenues this year, up from the $7.8bn it expected a year ago.

As for the live market, Goldman Sachs thinks that will be worth $28.1bn in 2023, compared to its previous prediction of $29.1bn.

Looking forward, the company’s $104.4bn of predicted net revenues in 2030 includes $50.1bn from recorded music, $14.7bn from publishing and $39.5bn from the live industry.

There are a number of other talking points in the report, including Goldman Sachs’ summary view of the music business.

“The music industry is on the cusp of another major structural change given the persistent under-monetisation of music content, outdated streaming royalty payout structures and the deployment of Generative AI,” it explains.

“In the wake of these developments, we believe a more coordinated and collaborative response from the main stakeholders will be key to ensure that the industry not only continues on its path of sustainable growth but also captures new business opportunities.”

Taking those in turn, Goldman Sachs thinks that the under-monetisation of music can be solved in several ways, including regular recurring price rises for streaming subscriptions, and more efforts to make money from superfans of artists.

“We would expect the industry to work towards implementing price increases on a recurring basis, especially in an environment of higher inflation, and similar to the price increases adopted in other industries such as SVOD,” it claims, referring to subscription video-on-demand services like Netflix.

There’s an interesting prediction on the superfans side too. “We believe that the increased monetisation of superfans could represent nearly US$2bn of incremental revenue by 2027, and US$4bn by 2030,” claims the report.

It also puts the boot into the traditional ‘pro rata’ model of streaming payouts, saying that it “needs to evolve… to cope with the dilution of market share” from three trends: the explosion in the amount of music being released; the rise of streaming manipulation fraud; and “the propensity of algorithms to push lower royalty content”.

As for generative AI, Goldman Sachs notes that “while it is too early to fully access the impact” of this technology, it sees it as “further lowering the barriers to entry for content creation, boosting music creation capabilities and improving productivity”.

It also delivers a warning to music rightsholders. “The industry will need to be aligned in controlling its deployment to ensure that the IP [intellectual property] remains protected and the user experience is preserved.”

That means rightsholders and DSPs working together, with the report suggesting that streaming services will want to “limit the potential flood of new music being uploaded to their platforms” – it suggests that Spotify could face “millions of songs” being uploaded every day compared to the current 120,000.

Goldman Sachs expects self-regulation of generative AI in the short term, but that in the longer term “regulations across different jurisdictions will be introduced and implemented to add another layer of protection to existing copyright laws”.

However, the report makes a very clear attempt to reassure investors that generative AI isn’t a big threat to the music industry, with an argument that the market’s consolidation is what will help it fend off the dangers.

“Unlike at the end of the 1999s when the music industry faced significant challenges with digital piracy, the industry today is a lot more structured, with a handful of streaming companies controlling most of the music streams and 3 music companies owning the vast majority of catalogues, making it easier for the industry to remain in control, in our view.”

(This could be a problem in another way, however. Will music that sits outside those catalogues get the same level of protection? If the industry’s response to the challenges posed by generative AI were to leave independent artists, songwriters and rightsholders to fend for themselves, that would be a bad path to go down.)

As ever, this is one analyst company’s view, and as has been noted before, it’s a company that has a web of past and present business relationships with some of the biggest firms in the music industry (UMG and Spotify included). This certainly doesn’t invalidate its research and predictions, but it’s necessary context.

Update: we’ve spotted another very interesting part of the report: its estimates for ’emerging platforms revenue’. That’s money from short-video apps, gaming, fitness and podcasts among other sectors.

Goldman Sachs estimates that this emerging platforms category accounted for 6% of global recorded music revenues in 2022, which based on its figure of $26.2bn for the latter means around $1.57bn.

It estimates that Facebook accounted for 23% of that revenue (so around $361m) followed by gaming generally (19% – $298m); Peloton (17% – $267m); TikTok (14% – $220m); YouTube Shorts (8% – $126m); Snapchat Spotlight (7% – $110m); and Instagram Reels (5% – $78.5m).

Again, just one company’s analysis, but it’s one of the first times we’ve had these kinds of estimates to work with when assessing the value of these particular platforms.