Has the streaming slowdown arrived?

ERA, the industry body of UK entertainment retailers, has released its annual forecast for the UK entertainment market. This shows significant growth in video, but less noticeable growth in music and games. A slowdown in streaming has been expected for some time, but the strong growth recorded in 2021 is a combination of a catch-up process in the global economy that year, followed by a recession and further impetus from the 2020 pandemic. There is an argument that it was backed by Delivered prepaid for non-DSP streaming. By Q3 2022, global label streaming revenue increased 7% compared to 31% in the same period a year ago. ERA estimates* that retail streaming revenue in the UK has increased by just 5%. Meanwhile, BPI, a figure based on real market data, reported an 8% increase in total audio streams in the UK. A clear streaming market trend is beginning to emerge.

2023 will be a challenging year. The sheer volume of disruptive trends is unprecedented in our time, and this comes at exactly the same time that the Western music streaming market is starting to slow down. But a slowdown doesn’t have to mean a decline, at least when it comes to subscriptions. MIDiA data shows that consumers tend to reduce their outings and attendance at physical live events before canceling their subscriptions. Therefore, streaming subscriptions (music, video, and games) could prove to be an affordable luxury that will keep consumers entertained throughout the year ahead. Retaining subscribers should therefore be an achievable goal, but adding large numbers of new subscribers may be a step ahead, especially in markets most affected by economic headwinds. Emerging markets may be another story.

However, ad supported is another story. As overall consumer spending softens, so does advertising spending. Ad revenue accounts for 27% of all streaming revenue, so if ad revenue declines significantly in 2023 (e.g. -8%), a bearish scenario could almost halt global streaming revenue growth There is a nature. Non-DSP was a major driver of industry growth in 2020 and 2021, but most of it is ad-supported, making this segment far more vulnerable to economic pressures than subscriptions. Non-DSP is the segment of the rich period and probably not the deficient period.

If the global streaming market ends 2022 with the 7% growth it currently tracks, it fits perfectly with the bearish scenario MIDiA announced last year. I would have preferred to track the 27% growth rate, but unfortunately, this may be one of those situations where his MIDiA glass half-empty view proved to be in the money.

The coming months will provide a clearer picture with full-year numbers reported by major labels, publishers and DSPs. Until then, consider this your first caveat.

For more insight into what will happen in 2023, visit Join the MIDiA Analyst Team for a FREE 2023 Prediction Webinar on Wednesday 11th^th January.

*ERA has significantly revised its 2021 figure, expanding it by a fifth to £1.6bn from the £1.3bn reported in 2021 and changing the assumptions underlying the estimate.