music economy
According to Live Nation CEO Michael Rapino during the company’s earnings call on Thursday (May 1), every chief executive is being asked the same question this earnings season: Are you feeling a consumer pullback?
It’s a reasonable query given the worsening state of the economy. U.S. gross domestic product decreased at an annual rate of 0.3%, the U.S. Bureau of Economic Analysis announced on Tuesday (April 30). And on Thursday, news broke that U.S. joblessness claims for the week ended April 26 surged beyond expectations. Earlier in April, the University of Michigan reported that its consumer sentiment score fell to 57.0 in March, down from 71.8 in November. That puts the closely watched measure on par with scores during the 2009 fallout of the U.S. housing crisis and in August 2011, as consumers feared a stalled recovery.
But on Friday (May 2), a reprieve from the bad news arrived in the form of a better-than-expected jobs report. And judging from comments during this week’s earnings calls, many music companies remain confident that their businesses will weather whatever storms develop in 2025.
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“We haven’t felt [a pullback] at all yet,” Rapino said. Whether it’s a festival on-sale, a new tour or a standalone concert, Live Nation has seen “complete sell-through” and “strong demand” that surpasses 2024’s record numbers, he added: “So, we haven’t seen a consumer pullback in any genre, club, theater, stadium [or] amphitheater.”
To see how Live Nation fared during the last recession, you’d have to go back to 2009. The U.S. housing crisis had shaken the economy and GDP shrank 2.0% that year, but Live Nation’s revenue increased 2.3%. Then, as the economy rebounded in 2010, the company’s revenue jumped 21.1% in 2011.
Of course, live music took a nosedive during the pandemic, but the drop-off in 2020 and 2021 was caused by a decrease in the supply of concerts, not a dip in demand for live music. When artists returned to touring, fans showed up in record numbers.
Some parts of the economy can be trusted to stumble during a downturn. Case in point: U.S. advertising revenue fell 14.6% in 2009 and dipped 5.4% in 2020. Brands are quick to cut their ad spending when they anticipate a pending sales decline. For example, car dealerships frequently advertise on TV and radio, but cut back as auto sales fell 17.6% in 2009 and 20.3% in 2020.
A decline in advertising is harmful to some parts of the music business. Radio companies have struggled with weak ad revenues in recent years, and their stock prices have taken a beating. Through Friday, iHeartMedia’s stock price is down 50% year to date, and Cumulus Media, which de-listed from the Nasdaq today, has lost 82%.
But music is a “counter-cyclical” business, meaning it doesn’t follow larger economic trends, and the popularity of subscriptions has helped insulate the music industry from economic woes. It’s widely believed that consumers simply won’t part with their favorite music service. In fact, $11.99 for a month from Spotify or Apple Music, although a few dollars higher than two years ago, is considered by top music executives to be underpriced.
During Spotify’s earnings call on Tuesday, CEO Daniel Ek said “engagement remains high, retention is strong” and the ad-supported free tier gives users a way to remain at Spotify “even when things feel more uncertain” — not that Ek is uncertain about the company’s future. “I don’t see anything in our business right now that gives me any pause for concern,” he said flatly.
Universal Music Group (UMG) is on the same page as Ek. CEO Lucian Grainge attempted to ease investors’ concerns by explaining that he has witnessed music weather numerous recessions. “Music has always proven to be incredibly resilient,” he said during an earnings call on Tuesday. “It’s low cost, high engagement and obviously a unique form of entertainment.” In addition, added chief digital officer Michael Nash, UMG’s licensing agreements include minimum guarantees that provide “very significant protection against digital revenue downside risk this year.”
There’s always a chance that unforeseen events or a particular confluence of factors will ruin music’s winning streak. With subscription prices rising, a possible “superfan” subscription tier on the horizon, ticketing prices not getting any cheaper and tariffs increasing the costs of music merchandise, consumers may reach a breaking point. MIDiA Research’s Mark Mulligan argued this week that superfans are being “pushed to the limit” and concertgoers don’t have an unlimited ability to absorb higher ticket prices.
So far, however, the evidence suggests music fans’ spending is continuing unabated. Live Nation says its various metrics — ticket sales, deferred revenue for future concerts — point to another “historic” year in 2025. Rapino added that the company’s clubs and theaters haven’t reported a decrease in on-site spending. Part of that could be that Live Nation carefully curates an array of food and beverage options that maximize per-head revenue. But a more likely explanation is that people need entertainment now more than ever.
In 2020, the U.S. music business contributed $212 billion to the country’s gross domestic product, up from $180 billion in 2017, according to the latest iteration of a report titled 50 States of Music that integrates data provided by independent record labels, performing rights organizations, independent music venues, music museums and other organizations.
The booming music industry has also been good for the labor market. From 2017 to 2020, the number of jobs supported by the music industry grew 1.9% annually from 2.17 million to 2.54 million while overall U.S. employment growth was flat, according to the report’s study from two economists at the firm Secretariat. Direct employment — jobs in the music industry — grew from 1.13 million to 1.32 million over that time, while indirect and induced employment improved from 1.04 million to 1.22 million. Indirect employment includes jobs that result from the goods and services used by direct employment. Induced employment accounts for the jobs created by the additional spending of direct and indirect employees.
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Fueled by streaming services and a revitalized vinyl market, U.S. wholesale recorded music revenues increased from $5.78 billion to $8.02 billion from 2017 to 2020, according to the IFPI. That growth coincided with an uptick in music businesses. Over that four-year time span, the number of music industry businesses and establishments — spanning brick-and-mortar entities to digital companies — increased from 227,000 to 252,000.
In putting a dollar amount on the U.S. music industry, the report effectively underlines the stakes in failing to stave off the threat artificial intelligence (AI) poses to the business. A thorough study of music’s economic impact is important for an industry that frequently seeks lawmakers’ intervention against new technologies and threats to copyright. If music business revenue and employment are hit by AI, the losses would create a ripple effect that touches other businesses and workers.
“As Congress and state leaders grapple to figure out smart guardrails and innovative policies for the AI age, we face a truly unique, once-in-a-generation inflection point,” wrote Mitch Glazer, chairman/CEO of the RIAA, which funded the study behind 50 States of Music. Glazier continued that he welcomed “new opportunities, sounds and experiences made possible through responsible AI innovation” but warned of the risks of “irresponsible and unethical AI.” Unauthorized and uncompensated use of copyrighted music to train AI models “threatens to rip a gaping hole in the fabric of America’s music communities” and shift music’s economic impact to “global tech giants at the expense of the artists, writers and music companies who shape America’s 50 states,” he added.
California, where music contributes $51.4 billion to the economy, has the largest impact of the 50 states in terms of earnings, employment and value added. Texas, home to nearly 128,000 songwriters (per ASCAP, BMI, SESAC and GMR), ranks second at $26.6 billion, while New York is a close third at $24.9 billion. Florida, home to the Latin music business, is fourth at $9.3 billion. Driven by country music in Nashville and the blues in Memphis, Tennessee ranks fifth at $7.5 billion. And Pennsylvania, where music supports nearly 115,000 jobs, is sixth at $6.3 billion.
The report’s authors used data from sources such as the Census Bureau, the Bureau of Economic Analysis and private-sector data sets. Music’s economic impact was calculated by estimating its direct revenue and employment and then using what’s called a RIMS II multiplier — statistical tools developed by the Bureau of Economic Analysis — to estimate direct revenue’s downstream effects on local economies.
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