Billion Dollar Tours And The Economics of Modern Music

Five big questions re: how musicians make money:
1) How large is the music industry?
2) How do we purchase music today?
3) How many people subscribe to a music service?
4) What share of revenue for musicians comes from touring?
5) How do people discover new music in 2023?

Big question #1: How large is the music industry?

U.S. music industry retail revenue (YoY growth) according to the RIAA:
1) 2013 – $7.0B (↑ 0%)
2) 2014 – $6.7B (↓ 4%)
3) 2015 – $6.7B (↑ 0%)
4) 2016 – $7.6B (↑ 13%)
5) 2017 – $8.8B (↑ 16%)
6) 2018 – $9.7B (↑ 10%)
7) 2019 – $11.1B (↑ 14%)
8) 2020 – $12.2B (↑ 9%)
9) 2021 – $15.0B (↑ 23%)
10) 2022 – $15.9B (↑ 6%)

Big question #2: How do we purchase music today?

Source of music industry retail revenue (YoY growth):
1) Streaming – 84%
2) Physical – 11%
3) Digital downloads – 3%
4) Synch – 2%

Interesting: Purchasing physical copies of music grew share by 2% YoY, driven by continued growth in vinyl records.

Wow: Vinyl records outsold CDs for the first time since 1987.

Key details for the history of the compact disc (CD):
1) 4.7–inch disc made of plastic and aluminum
2) U.S. arrival in 1983
3) 75 U.S. stores carried at launch
4) $900 ($2,700 in 2023 $) purchase price for a CD player
5) $16-$20 ($48-$60 in 2023 $) purchase price for CDs

Big question #3: How many people subscribe to a music service?

Streaming subscribers for the music industry (YoY growth):
1) 2015 – 11M
2) 2016 – 23M (↑ 110%)
3) 2017 – 35M (↑ 56%)
4) 2018 – 47M (↑ 33%)
5) 2019 – 60M (↑ 29%)
6) 2020 – 76M (↑ 25%)
7) 2021 – 84M (↑ 11%)
8) 2022 – 92M (↑ 10%)

Big question #4: What share of revenue for musicians comes from touring?

Quick answer: A major act such as U2 makes 95% of its revenue from touring.

Wow #1: Both Taylor Swift and Beyonce are on track to generate $1B from a single tour.  Elton John has the current record at $800M for the Yellow Brick Road tour.

Wow #2: Each Taylor Swift show generates ≈$10M in ticket revenue and $2M in merchandise sales.

Big question #5: How do people discover new music in 2023?

Quick answer: Spotify’s algorithmic recommendations account for 1/3 of new music discovery.

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