2016 in Review

New developments marked the US music business in 2016,

There was welcome growth in recorded music sales driven by more streams and streaming services. Still, payments continued to be lost to Google’s YouTube, much to the chagrin of artists and the labels. In a first, there were more incentives than ever for top artists to reconsider their existing recording contracts as well known online services vied to sign them up for exclusive releases at their sites.  Here was another instance of a conflict between the old business guard and the tech companies.

Then there was live music. There was much more of it, and especially festivals. Places like Indio, California, host of Desert Trip, Coachella, and Stagecoach, even measured the total economic return of music to the local economy. At a remarkable two billion dollars, it approached this year’s gross concert ticket sales.

Finally, the State seemed to encroach on civil society, when the Department of Justice seemingly redefined the practice of songwriting. It provoked a backlash by talent, music publishers, and PROs’ ASCAP and BMI that is ongoing.

Below, we turn to these and events, and more.

Recorded Music and Streaming

The global industry has seen its second calendar year of growth, with an increase of 3%1  in the first half of 2016 – mostly due to a significant increase in streaming. After nearly 2 decades of struggles with digitization, piracy, and slumping physical sales, digital revenue has continued its upward ascent , overtaking physical revenue for the first time ever and off-setting its losses. Of that digital revenue, 43% came from streaming. This, plus the fact that both physical and download revenues decreased, indicates that streaming is quickly solidifying its position as the preferred format of music consumption.2,3

The streaming model has become more strongly established over the past year as the number of paid subscriptions has grown to now encompass 37% of all Internet users.4 However, many questions still remain in regards to obstacles like copyright infringement. In the quest for profitability and a set of standard business practices, new competition continues to arise and industry players experiment heavily with how to better position themselves against one another. 2016 saw continued dominance of the market by Spotify and Apple Music, which together have created more than 20 million new subscribers in the last year.5

Spotify, which has continued to negotiate successfully with the major labels, is the pre-eminent streaming service. They maintain a strong brand, and with the news of streaming’s dominance over physical and digital sales, they enter 2017 with newfound clout. Spotify boasts an interface that offers social media functionalities and usability, and is laser-focused on converting their free-tier, ad-based revenue users into paying subscribers. The company’s future will rest on their planned IPO, possibly at some point this year.6

Apple Music on the other hand has the benefit of a large parent company with deep pockets, which can absorb marketing and development costs while the service creates its own foothold in the marketplace. With Apple’s pre-constructed brand image, Apple Music poses a threat in that it has potential to be easily and deeply integrated, given more time.

Both of these services have a new competitor.  Amazon has entered the fold with its Amazon Music Unlimited Service. Much like Apple, Amazon’s aim is to mobilize and incentivize their already established customer base. They have announced multiple cheaper price points for their streaming service, reserved for subscribing Prime users and customers who purchased their new line of portable IoT speaker, Alexa.

One of the most visited sources for music streaming is of course YouTube. Though not explicitly a music streaming service, IFPI found that as of 2016, 82% of YouTube’s 1 billion users are in fact using the service for music consumption,7 dwarfing their competition’s user rate. Traditionally considered to be a free video streaming service, YouTube’s ability to contribute and/or detract value to and from the music industry is up for debate. Key to YouTube’s open access, ad-based model is their protection within the “safe harbor” provisions of the Digital Millennium Copyright Act. In this way, YouTube is legally able to generate revenue without being required to compensate artists in the same way as other services. By June, more than 180 artists, together with the PRO’s and major labels, had endorsed a petition to revise the DMCA, and blamed YouTube for lack of compensation.8 At the moment, the U.S. Copyright Office and the EU Commission are conducting research into the effectiveness of current Fair Use provisions.

Other streaming services, such as SoundCloud and Pandora, find themselves fighting for every inch they can get in the effort to acquire more funding. SoundCloud, which like many streaming services has never turned a profit, was in talks over a potential buyout from Spotify. However, Spotify dropped out of the discussion in December, fearing that such a venture may jeopardize their planned IPO.9 Pandora is in a similar position, where their operating losses have outpaced their increase in revenue. The size of Pandora’s user rates and song libraries pale in comparison to those of Spotify and Apple, and it is increasingly difficult to see how the company will maintain its ground without a buyout in its future, with Sirius XM suggested as a potential buyer.10 Pandora’s hope lies in their plans to release an on-demand paid subscription service, Pandora Premium within the first half of 2017. Their projections say the service will increase their paid subscribers from 4.39 million, to 6 or even 9 million, within its first year.11 To bolster the new service, Pandora will be looking to further integrate its acquisition of Ticketfly promoting live shows directly to its user-base, based on their listening patterns.12

Piracy and copyright infringement continue to be problems for the streaming industry, but their prevalence has diminished if only slightly. MUSO, a company that specializes in anti-piracy market analytics, claims that music piracy has decreased by 5% over the last year.13 Notably, the nature in which consumers pirate their music is changing: music pirates are opting to use YouTube ripping websites over P2P services, with audio ripping sites enjoying 25% more usage.14 Through the decrease in piracy and the overall increase in paid subscribers, streaming seems to be moving towards the right direction, and is proving not only that music has not been permanently devalued in the eyes of consumers, but that it may be profitable once again.

By year’s end, one of the hottest topics was that of exclusivity deals within the streaming realm. As competition has heated up, streaming services have resorted to signing artists exclusively, for varying periods of time, in order to rope in their fan bases. Even the newcomer Amazon managed to sign an exclusive deal with Garth Brooks. For streaming services, this practice is effective: In the first week after Beyoncé’s Lemonade was exclusively released on Tidal, more than one million accounts were created.15 However, others within the industry criticize the use of exclusivity deals on the basis that it has potential to alienate customers, encourage piracy, and that it diminishes overall consumption of the artist’s songs. In August, Lucian Grainge, CEO of Universal Music Group, released a memo asking that the practice be “outlawed”. The reason given for this decision is that Universal, which does the majority of its business outside the U.S., gets hurt when its artists are exclusive to streaming services comprised of mostly U.S. users, such as Apple Music.16

Though apparently not a factor in Universal’s decision, Frank Ocean undeniably created frustration for the label with his bait-and-switch release tactics. First, in order to fulfill his final contractual option to Def Jam (a UMG label), Ocean released the visual album Endless. However, shortly after being let go he issued the “real” album independently exclusively through Apple Music — the critically acclaimed and top selling Blonde.17 In future, much to the chagrin of the labels, some artists may begin to opt, like Frank Ocean did,  for direct deals and upfront payments from streaming services.

Songwriting and Publishing

The Department of Justice shockingly reinterpreted its consent decrees with BMI and ASCAP, a decision that will have far-reaching effects on how business as usual is carried out. DOJ ruled that BMI and ASCAP must adhere to a 100% licensing requirement, thereby doing away with the previous norm of “fractional” licensing.  The result is that a copyrighted work can no longer be collected by multiple PRO’s at once, and instead must be assigned to only one. This makes collaboration on a song unnecessarily complicated for artists by creating an environment where songwriters would be forced into working exclusively with other songwriters within their own PRO.

ASCAP and BMI, who originally wanted to do away with the consent decrees completely, both insist that fractional licensing is the most efficient and desirable practice. The two PRO’s have promised to fight the DOJ, claiming that this decision will result in more administrative costs, less bargaining power to negotiate royalty rates, and a stifling of songwriters’ ability to collaborate and create with each other.18,19

Live Music

Throughout 2016, as with the past 15 years, live music has remained a reliable revenue stream for the industry in the presence of declining sales. Pollstar year-end numbers calculated worldwide concert grosses to reach about $9 billion in 2016.20 Goldenvoice, a subsidiary of promoter AEG, contributed a large part of that sum: their annual festival Coachella is reported to have created  $704 million in total economic activity.21 Then Desert Trip, also put up by Goldenvoice, became the marquis  live music event of the year, and improved Coachella, generating a total activity value for the local economy of of $805 million. Indio, California, did well. The festival grossed an estimated $160 million in ticket sales, making it the highest-grossing concert in history.22 Dubbed by the Internet as “Oldchella”, the selective line-up consisted of only the most commercially successful legacy acts of the rock n’ roll generation, featuring artists Paul McCartney, Bob Dylan, Roger Waters, Neil Young, the Who, and the Rolling Stones. Expectedly, the main demographic of the show were baby-boomers, and with the overwhelming success of the festival it’s possible that the industry may find ways of further targeting that demo in the future.

Last but not least, the three highest grossing tours of the year were by Bruce Springsteen and the E Street Band ($268 million), Beyoncé ($256 million), and Coldplay ($241 million).23


Artists themselves made headlines in a variety of ways over the course of 2016.

Newcomers The Chainsmokers’ hit single “Closer” spent 12 weeks atop the Billboard Hot 100 chart.24 Beyoncé, Drake, Chance the Rapper, Frank Ocean, and David Bowie, and Adele all released albums that garnered widespread recognition and critical praise, through high chart rankings, award wins and nominations, and an nual “Best of” lists.25,26,27

At the Grammy’s Adele came away the biggest winner, with five awards, including Best Song, Best Record, and Best Album of the year. David Bowie also won five Grammys posthumously for his album Blackstar, and Beyoncé’s Lemonade won Best Urban Contemporary Album. Chance the Rapper won two for Best Rap Album, and Best New Artist, and in doing so made history as the first independent, “streaming-only” artist to win a Grammy.28

Bob Dylan was the first musician in history to be awarded The Nobel Prize for Literature, sparking a hot debate between both supporters and detractors from the global music and literature communities. In the end, he respectfully accepted the award, but lamented that he would not be able to attend the ceremony, due to prior obligations.29

And whether by accident or not, controversy was not far from the surface in a politicized environment where the November election loomed large in everyone’s mind. Kanye West, for example, made headlines when he stopped a concert short and went on a political rant.

In 2016 we also said our goodbyes to such legends as David Bowie, who reshaped popular music with his progressive-minded persona-driven brand of glam rock n’ roll; to Prince, a genius, in so many ways; to pop icon George Michael, always suave and captivating; and to Leonard Cohen, the minstrel of candor.


By Michael Kostaras



1. IFPI (2016). IFPI Global Music Report 2016.

2. Ibid.

3. Nielsen. (2017). Year End Report U.S. 2016.

4. IFPI. (2016). Music Consumer Insight Report 2016.

5. Rys, D. (2017, January 06). 2017 Streaming Wars: Will Spotify, Apple Music or Amazon Dominate?  Retrieved from Billboard

6. Ibid.

7. IFPI (2016), Global Music Report, op.cit.

8. Levine, R. (2016, June 20). Taylor Swift, Paul McCartney Among 180 Artists Signing Petition For Digital Copyright Reform . Retrieved from Billboard

9. Russell, J. (2016, 12 8). Spotify has backed out of talks to acquire SoundCloud . Retrieved from Techcrunch.

10. Trefis Team. (2016, December 20). A Full Box For Pandora If It Is Acquired By Sirius XM. Retrieved from Forbes.

11. Christman, E. (2017, February 09). Pandora Predicts Subscriber Growth, Reports Record Q4 Revenues as Losses Mount. Retrieved from Billboard.

12. Peoples, G. (2017, February 16). Pandora Makes The Case For Building A Full Stack Streaming Music Company. Retrieved from Hypebot.

13. MUSO. (2016). Global Music Piracy Insight Report 2016. Retrieved from MUSO.com

14. Ibid.

15. Fiegerman, S. (2016, August 31). The Streaming Music War is Getting Ugly. Retrieved from CNN.com

16. Ingham, T. (2016, August 25). Yes, Lucian Grainge has ‘Banned’ Streaming Exclusives at UMG. Retrieved from Music Business Worldwide

17. Behr, A. (2016, September 1). From Frank Ocean to Beyonce, The Problem With Exclusive Streaming Deals. Retrieved from Independent. co.uk

18. Christman, E. (2016, 11 11). Dept. of Justice Appeals BMI Consent Decree Decision. Retrieved from Billboard.

19. Future of Music. (2016, August 4). ASCAP – BMI Consent Decrees. Retrieved from the FutureofMusic. org

20. Pollstar. (2017, January 06). 2016 Year End Special Features.

21. Faughnder, R. (2016, April 22). Coachella by the Numbers: A Breakdown of the Festival’s $700-million impact. Retrieved from the LA Times

22. Pollstar. (2017, January 06), op.cit.

23. Ibid.

24. Jones, C. (2016, November 23). The Chainsmokers’ Biggest Hit Gets Bumped Down The Charts.  Retrieved from WeGotThisCovered.com.

25. Billboard Staff. (2016, December 12). Billboard’s 50 Best Albums of 2016: Critics’ Picks. Retrieved from Billboard.

26. Bartleet, L. (2016, November 27). NME’s Albums Of The Year 2016. Retrieved from NME.com

27. Pitchfork Staff. (2016, December 13). The 50 Best Albums of 2016. Retrieved from Pitchfork.

28. The Grammy’s. (n.d.). 59TH ANNUAL GRAMMY AWARDS WINNERS & NOMINEES. Retrieved February 18, 2016, from Grammy.com.

29. Coscarelli, J. (2016, 12 10). Bob Dylan Sends Warm Words but Skips Nobel Prize Ceremonies. Retrieved from the New York Times.



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