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“Listen”: music, radio and podcasts ride out the pandemic – but rights remain key and structural change will continue

When UK consumers “listen”, they often do it alongside other activities – whether commuting, exercising or working. As the COVID-19 pandemic took hold, this tendency brought significant yet contrasting impacts for consuming music, radio and podcasts. And it will continue to influence revenue trends in these segments throughout the PwC Media & Entertainment Outlook forecast period up to 2025.

The revenues for music, radio and podcasts is shown in Figure 1. Overall spending plunged by almost one-third in 2020 before rebounding almost as sharply in 2021. From there, the segments’ revenues are projected to rise at a compound annual growth rate (CAGR) of 6.16% through to 2025 – slightly ahead of the forecast CAGR for UK E&M overall, at 5.37%.

Figure 1: Growth in UK music, radio and podcast revenues, 2016-2025

  2016 2019 2020 2021 2025
Music, radio and podcasts in UK (GBP mn) 3,989 4,399 3,005 3,796 4,820
Music (GBP mn) 2,855 3,201 1,909 2,609 3,544
Podcast advertising (GBP mn) 4 27 28 37 64
Radio (GBP mn) 3,588 4,717, 5,399 5,860 7,060

  

Music: divergent impacts…

However, these headline figures mask dramatic differences at sub-sector level. Live music revenues collapsed by 85% in 2020 as concert venues closed and events were pushed back. By contrast, recorded music – a sub-segment now dominated by digital streaming – registered only a small increase in revenues in 2020 as seen in figure 2. Additionally, we have seen strong growth in recorded music in recent years, the big 4 labels (Sony Music, Warner Music, Universal Music Group and BMG) recorded music businesses growing by up to 15% per annum.

Figure 2: Music sub-sector revenues 2016-2025

  2016 2019 2020 2021 2025
Music (GBP mn) 2,855 3,201 1,909 2,609 3,544
Live music (GBP mn) 1,546 1,576 225 846 1,558
Recorded music (GBP mn) 1,309 1,625 1,684 1,763 1,985

But this was not straight-line growth. Initially, streaming revenues fell back as the activities that people usually undertake when listening to streamed music were halted and consumers switched to news to keep up-to-date with the pandemic.

The pandemic is continuing to have divergent impacts in 2021, as pent-up demand sees live music rocket by 275% while recorded music sees a single-digit rise. A concern that’s proved unfounded was that a post-pandemic economic downturn might make people less likely to pay for music streaming if disposable incomes were impacted. But with one major subscription provider giving access to virtually all music, it’s still regarded as good value-for-money – especially when compared to TV subscriptions.

…as podcasts and radio marked time

Podcast advertising was another sub-segment that managed a modest rise in revenues amid the pandemic. Streaming providers such as Spotify have been investing heavily in building up their podcast portfolios – and during lockdowns people had time on their hands and wanted to be stimulated. While a clear monetisation model for podcasts has yet to emerge, one of their big benefits is that, in terms of data, they provide much deeper insight into a consumer than their music listening habits.

UK radio advertising saw double-digit decline in 2020, before almost recovering the lost ground in 2021 and then returning to gradual but steady growth. The pandemic initially boosted consumption of radio news until fatigue set in. However, this effect was offset by consumers’ personal connection with radio, which provided many people with a familiar voice in the household through lockdowns.

A drill-down into music: global trends, UK impacts

“The UK is a powerhouse of musical creativity – a nation where live music is deeply embedded in the culture and the music industry is a major exporter. While this is clearly a positive for the UK, it also makes the country exposed to the type of downturn seen in live music, especially given performers’ difficulties in getting travel visas post-Brexit.”

Simon Harris - Technology, Media & Telecommunications Valuations Partner at PwC

A major trade-off is underway in music globally – one with special relevance to the UK. On the one hand, streaming generates significant income only for artists in the top tier, and with live music hit hard it’s debatable whether any musician without substantial capital backing can achieve mass-breakthrough. On the other, DIY music production tools and digital delivery channels are democratising music creation and fuelling an explosion in content. The jury’s out on how much these two trends will counteract each other.

Music continues to be a strong and growing industry, with music rights becoming their own asset class, in addition to further public listings of music players. Music publishing and recording rights valuations remain at an all time high, and we have seen the likes of Bob Dylan and Stevie Nicks, be some of the latest artists to sell their back catalogues. Furthermore, Universal Music Group launched an IPO on the Euronext exchange in Amsterdam in September 2021, achieving a valuation of more than €45 billion and continued to trade strongly during the first few weeks following its listing.

Looking forward: new routes to revenues

In music, the UK currently ranks only fifth globally in terms of per-capita spending, underlining the opportunity on offer. Key developments going forward include the trend for video games to offer performance spaces for musicians, for instance, American rapper Travis Scott’s appearance on Fortnite. Rather than cannibalising existing music audiences, such innovations – along with rising use of virtual and augmented reality (VR/AR) for music experiences – may well be additive by attracting new consumers.

Figure 3: Per capita spending on music, 2021 – top ten countries

Meanwhile, radio has ridden out frequent predictions of its demise and will continue generating modest revenue increases. Podcast listening will continue to rise, as providers wrestle with how to monetise them more effectively – perhaps through subscriptions for premium content.

The message for market participants? In music, we are likely to see new creators emerge through getting onto streaming playlists and engaging fans through smart use of social media. For businesses in the segment, rights ownership remains key, as mirrored by music rights becoming an asset class and the emergence of music funds. As music consumption keeps rising, success will be about controlling and benefiting from opportunities to exploit content rights – perhaps helped by more equitable sharing of revenues with artists. Because without the creators, the industry has nothing to sell.

Contact us

Jonathan Ford

Jonathan Ford

Director, Audit, PwC United Kingdom

Tel: +44 (0)7801 624829

Jordan Holdsworth

Jordan Holdsworth

Technology, Media & Telecommunications Senior Manager, PwC United Kingdom

Tel: +44 (0)7710 035 480

Simon Harris

Simon Harris

Technology, Media & Telecommunications Valuations Partner, PwC United Kingdom

Tel: +44 (0)7841 490474

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