Streaming Is Finally Beginning to Turn the German Market

Still the fourth-largest market by revenue after the US, UK and Japan, Germany has been comparatively slow to make the digital transition while remaining a key territory for record labels due to its scale, spending power and robust physical market. Similar to Japan, Germany has been viewed as taking a leisurely adoption curve towards having a recorded market dominated by streaming. Unlike the more technologically amenable Nordic markets of Sweden, Denmark and Norway, Germany’s digital music transition has arguably been slowed by a population that is often less open to newer technologies. While this delayed transition means that physical revenues in Germany experienced a slower decline than the other larger markets, this process has expedited over the past year, resulting in slower growth than other major streaming markets:

• Despite subscription growth, German revenues are flat as a result of a belated physical slump: Germany’s recorded music market grew 3% in 2018, significantly below the global market growth of 12%. This slowed growth is due to a delayed decline in its physical market, which stood firm longer than other developed music markets. As recently as 2015, physical was only declining by 1% year-on-year; whereas last year physical revenue fell by 18%.

• After a slower start, streaming revenues and subscriber growth have hit their stride in Germany over the past two years: Germany is the world’s third-largest streaming market by revenue, with retail value revenues of $1 billion in 2018. It also has the fifth-highest number of unique subscription accounts with 14 million subscribers as of 2018. This was 29% higher than the previous year and outpaced the overall growth rate of subscription accounts for the year (27%).

• Despite a mature digital ad-market, ad-supported music streaming revenues continue to lag: This is partly due the slower adoption of streaming in the country but also a consideration of demographics: Germany’s most valuable consumers (typically older) are still yet to meaningfully join the streaming ecosystem and thus large-scale advertisers are yet to invest in the same meaningful way as other markets.

While Germany will continue to deliver meaningful revenue, that the German language is spoken by fewer people globally than Spanish or Portuguese means it has less reach in its global diaspora than other languages on streaming platforms. This was fine when the recorded music industry monetised purchasing rather than consumption, as the wealth of the country meant it could deliver significant revenues. That does not entirely disappear in the streaming economy, but there are now other factors at play which mean purchasing power is not the only economic variable impacting revenue.