By Marcy Magiera
U.S. and Canadian sales of licensed goods based on music properties trended down for the second consecutive year in 2015, though not as steeply as in 2014. Music licensed goods represented $2.45 billion in North American retail sales in 2015, a drop of 1.7%, according to The Licensing Letter’s Annual Licensing Business Survey. In 2014, sales of music licensed goods fell 2.5%, after five consecutive years of growth.
In 2015, music licensed goods fell victim to some extent to the overwhelming popularity of movie properties that took up much of last year’s shelf space for pop culture, particularly Minions and Star Wars. For Star Wars, Disney mounted a licensing campaign unprecedented in both scale and timing behind December theatrical release Star Wars: The Force Awakens.
“We found that [music] was a bit soft at mass market and in young men’s,” said one licensing agent. “A couple of movie properties were capturing the consumer,” the agent said, pointing to Minions and Star Wars as appealing not just to children, but to every consumer segment on a global basis.
The performance of the music industry as a whole is an encouraging sign for music licensing revenues in 2016, however. Both music and concert ticket sales were up in 2015, which might have contributed to the slight bounce in licensed goods sales. It’s also possible that licensed good sales are a lagging indicator of music’s health.
CDs & Recordings
It is widely accepted that consumers are more engaged with music than ever before, despite their move away from ownership of physical CDs or digital downloads, and the proof was in industry revenues in 2015. After a slight decline in 2014, total U.S. retail sales of music rose 0.9% in 2015, to $7.0 billion, as streaming revenues finally offset declines in sales of physical product and digital downloads.
For the first time, streaming was the largest market segment, at 34.3%, up from 27% in 2014, with revenues exceeding $2 billion. Paid subscriptions were the biggest and fastest growing market of the streaming market, due to launch of new services like Tidal and Apple Music. Revenue from paid streaming subs grew 52% to $1.2 billion and the number of paid subscriptions grew 40% to an average of 10.8 million for the full year.
Concerts & Live Events
On the concert front, both revenues and admissions bounced back from the declines of 2014. According to Pollstar, the top 100 North American tours of 2015 grossed a combined $3.12 billion, up 14% from 2014, representing 42.08 million tickets sold, an admission increase of 10%. There was a 4% increase in average ticket price (to a record high of $74.25), to boot.
Artists & Groups
Popularity of musical acts is always cyclical, and sometimes the acts that sell the most concert tickets have less than noteworthy year-round licensing programs at retail. While One Direction, for instance, remained a huge global touring attraction in 2015, selling more tickets (though for less money) than No. 1 revenue generator Taylor Swift, and, ostensibly, lots of merchandise at show venues, industry pundits have for at least two years called the band lifeless at retail. On-site sales represent a relatively small percentage of licensed music product sales, sources said (and they are not counted by the TLL Survey).
Swift had a massive world tour that generated more than $250 million in primary ticket sales as she played to nearly 2.3 million fans, according to Pollstar. The $199.4 million in tickets she sold in N.A. now stands as biggest tour ever in N.A., surpassing The Rolling Stones in 2005.
Swift’s licensing program performed well at retail, as did Beyonce’s, said one agent. He noted, however, that the licensing upside is often more limited for female artists than it is for males. “Female is difficult in general,” the agent said, “until they make it into lifestyle brands.”
Female artists including Trisha Yearwood (Trisha’s Southern Kitchen), Gwen Stefani (Harajuku Lovers and other brands), Jennifer Lopez, and Madonna (Hard Candy) have successfully cultivated lifestyle brands and Celine Dion is currently wading into lifestyle.
Industry watchers are still waiting to see what sort of play Swift makes in the lifestyle area. The pop diva in late 2014 began attempting to trademark dozens of short phrases from her songs, such as “this sick beat” from her hit “Shake It Off,” for a variety of household items in what observers predicted might be a massive licensing play that has yet to materialize.
Product Categories
The bedrock of music licensing is classic rock, and the most classic of licensed products—the t-shirt. “Everything in music is apparel, and everything is driven from there,” said one Survey respondent.
Junior apparel in particular did well for classic rock properties, one source said, with young women snapping up tees from the likes of AC/DC (which returned to touring without Malcolm Young and sold $180 million in tickets globally for the biggest tour in its history, Pollstar reported), The Rolling Stones, Pink Floyd, and other bands.
“Mass and mid-tier had some successes,” in this area, the source said, noting that boutique and specialty chains and mom-and-pop stores did well with junior apparel, which largely turns on fresh t-shirt styles and fabrications. To witness the popularity of classic rock properties with young women who gravitate to well-designed t-shirts even though they may not be familiar with the bands, one needs look no further than teen retail favorites like Forever 21 and Brandy Melville, which are well-stocked with these shirts. “Classic rock is back again,” agreed another agent.
While growth continues in food and beverage products based on music licensed properties, particularly craft beers and spirits, a new consumable is also attracting a lot of music licensing activity: marijuana.
At $2.7 billion, legal marijuana is the fastest growing industry in America; it’s also a potent social cause. So it’s not surprising that so many musicians, spanning genres from rap to reggae and country to pop, have jumped into the business. Some of the biggest music celebrities lending their brands to legal marijuana products marketed in states where cannabis is legal for medical or recreational use include Bob Marley, Willie Nelson, Wiz Khalifa, The Weeknd, Melissa Etheridge, and Snoop Dogg, the rapper who is building a small business empire out of weed.
Royalties
As with most property types, royalty rates for music licensed merchandise held relatively steady in 2014. According to the TLL Survey, the average royalty in the U.S. and Canada was 8.22%, down 0.7% from 8.28% in 2014. Royalty amounts ranged from 4% to 20%.