Music

Playing field

Global trends in the music industry state the past few years have seen digital streaming revenues race ahead of physical formats and downloads. One catalyst for growth in accessing digital services in the Netherlands was a major push by telecom operators, led by a 2013 partnership in which telco KPN introduced a special mobile add-on that gave subscribers access to Spotify. By tapping into the Dutch consumer’s preference for bundles, this initiative helped to propel Spotify to a leading position in the Dutch market for digital music, offering both paid and unpaid subscriptions.

Trailing behind Spotify in the paid-subscriber format is Apple Music, which is thought to be the second-most-popular service ahead of number three on the list, Napster. Although Apple Music is not available as part of any telecom bundle, Napster is available to Vodafone subscribers. Besides Spotify and Napster, Deezer is the third digital streaming service available as part of a telecom bundle, combined with T-Mobile. Other streaming services are bidding for a local market share as well by marketing their unique selling points. JUKE allows subscribers to add radio music directly to playlists, while Tidal focuses on quality and exclusivity. Giants such as Amazon and Google are also looking for a way to penetrate this scalable market.

Even though the vinyl market and continued loyalty to other physical formats from a minority of consumers, physical sales continue to drop.

Although we live in an increasingly digital world, Dutch live music revenues continue to grow, with a steady CAGR of 1.6% forecast over the course of the next five years. The live music market is flourishing despite a worldwide decline in physical sales, and artists have therefore become more dependent on live music. Overall, the continued popularity of live music, led by the Netherlands’ thriving festival and electronic dance music (EDM) scenes, will account for the greater share of total music revenue in 2022.

What’s new

Although Spotify has a strong position in paid streaming, it must remain alert to its competitors and ensure that its offering remains compelling in an increasingly diverse market. Local competitors like JUKE and major global players like Google are also entering the market. Every party has its own strategy to win music-loving souls. For example, spotify focuses on its ability to offer tailored recommendations with its new modules Discover Weekly and Release Radar. Google Play announced in April 2017 that the default music player on the Samsung Galaxy S8 would be Google Play Music, introducing a new marketing strategy as compared to the music streaming-and-telco collaborations seen at Spotify, Deezer and Napster.

Google Trends analysis based on searches shows that YouTube is generally far more popular than Spotify. YouTube Music, its new subscription streaming service, launched in several markets in May 2018 and the Netherlands likely to follow.

Furthermore, the watchword for music labels is consolidation. Warner Music Group bought Dutch dance label Spinnin’ Records for more than US$100mn in September 2017, fending off other major companies in the process. The proportion of music sold by the Big Three music labels – Warner, Universal and Sony – was already thought to exceed 70% in the Netherlands in 2016. With the purchase of Spinnin’ Records, this trio’s grip on the market has tightened.

Music market (€ millions)
Netherlands  Historical data Forecast data   CAGR %
  2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 18-22
Physical 113 103 97 91 84 75 64 54 44 34 -16.7%
y-o-y growth   -8.7% -6.0% -5.4% -8.1% -10.8% -13.9% -16.1% -18.5% -23.6%
 
Digital 80 86 107 144 186 230 272 309 339 368 14.7%
y-o-y growth   8.7% 23.9% 34.8% 28.5% 24.0% 18.2% 13.7% 9.7% 8.5%  
Performance rights 57 56 62 67 72 76 77 77 75 72 -0.1%
y-o-y growth   -0.8% 9.7% 8.8% 6.6% 5.2% 2.2% -0.3% -3.0% -4.1%
 
Synchronisation 1 1 2 2 2 2 2 2 2 2 3.0%
y-o-y growth   51.5% 20.8% 9.8% 7.5% 5.9% 2.7% 0.1% 2.8% 3.4%  
Total recorded 250 247 267

305

343 383 416 443 460 476 -16.7%
y-o-y growth   -1.1% 8.2% 14.1% 12.6% 11.5% 8.7% 6.4% 4.0% 3.4%  
Live music 535 541 551 560 569 578 587 596 606 615 1.6%
y-o-y growth   1.2% 1.8% 1.6% 1.7% 1.5% 1.6% 1.6% 1.6% 1.6%  
Total 785 788 818 865 912 960 1,003 1,039 1,066 1,091 3.6%
y-o-y growth   0.4% 3.8% 5.7% 5.5% 5.3% 4.4% 3.6% 2.6% 2.4%  

Outlook

The outlook for fans trying to pick up resold tickets seems much improved due to the success of Amsterdam-based TicketSwap, which caps the price of resold tickets at 20% above face value and features robust anti-fraud measures. Having already secured the backing of many of the Netherlands’ leading EDM promoters, TicketSwap has set its sights on further expansion. With ticket touting and fraud being two of the major issues affecting the live music industry, solutions such as these could have a positive effect on uptake for gigs and festivals Europe-wide.

The current playing field is still led by Spotify. However, competitors are now entering the market, trying to get a piece of the pie by competing on quality, exclusivity or user-experience-enhancing modules. Differentiation is the key, and what the playing field will be like in the near future is uncertain. For now, offering the Dutch a telco-music streaming bundle seems to be paying off, making competitors’ alternative strategies even more interesting.

Contact us

Joram Prinsen

Senior Associate, PwC Netherlands

Tel: +31 (0)88 792 35 33

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