Music Industry Revenue: Why Nigeria Has to Change Its Current Model
The current model of revenue generation in the Nigerian music industry has digital sales and physical sales as the major revenue generators. There is an ongoing conversation by industry stakeholders about low revenue generation in the industry and how the major loopholes (like piracy) can be plugged. The truth is, the Nigerian music industry is not performing at its peak potential and still has a long way to go.
The industry is majorly a virgin landscape lacking structure, data and a working model. There are a few big players like Mavin Records, YBNL Records, EME and HKN Records, which are all artiste-owned labels. There are also quite a number of independent artistes running their own show. With the little data available, it is hard to track record sales, royalties and artiste income.
Nigeria’s music market generated a revenue of US$51 million in 2014, up from US$47 million in 2010. Annual revenue is forecast to grow by an estimated CAGR of 11.3% to reach US$88 million in 2019.1 As stakeholders struggle to capture value from this market, it is evident that the current order has to be disrupted. Retail spending on digital music which overtook spending on physical music in Nigeria in 2013, will increase at a forecast CAGR of 21.4% in the next 5 years, to reach approximately US$70 million in 2019.2
It has been forecast that the Nigerian music market will expand at a CAGR of 11.3% over the next 5 years.3 As the sales of physical records decline, the rise in digital sales will more than compensate for physical declines.4 This , to the untrained eye sounds like great news for the tech industry, however Nigeria currently has less than half its population with internet connection.5 Broadband household internet connection is low, so almost all digital sales have been mobile ringtones and ring back tunes.6
The mobile device penetration in Nigeria is higher that its internet penetration. There is currently an estimated 152 million active mobile (GSM) lines in Nigeria.7 Discerning stakeholders of the music industry will then understand that to properly monetize, they will need to focus on Ring Back Tunes and live performances. Due to the poor quality of live performances in Nigeria and rising costs, live music’s share of total music revenue is set to shrink to just over 10% down from 16% in 2014.8 This can change with the concerted efforts of industry professionals focused on improving the quality and revenue of live music in Nigeria. Ring Back Tunes are a great tool to reach the grassroots of the country that live without access to the internet.
The current economic recession in the country may also affect earnings, either positively or negatively. It will be interesting to see how this plays out.
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1. Entertainment and Media Outlook: 2015–2019. Rep. no. 6, P.223, Price Waterhouse Coopers, Sept. 2015. Web. 20 Oct. 2016. <https://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf>.
2. Entertainment and Media Outlook: 2015–2019. Rep. no. 6, P.223, Price Waterhouse Coopers, Sept. 2015. Web. 20 Oct. 2016. <https://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf>.
3. Entertainment and Media Outlook: 2015–2019. Rep. no. 6, P.224, Price Waterhouse Coopers, Sept. 2015. Web. 20 Oct. 2016. <https://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf>.
4. Entertainment and Media Outlook: 2015–2019. Rep. no. 6, P.224, Price Waterhouse Coopers, Sept. 2015. Web. 20 Oct. 2016. <https://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf>.
5. “Nigeria Internet Users.” Internet Live Stats. International Telecommunication Union (ITU), World Bank, and United Nations Population Division., 1 July 2016. Web. 20 Oct. 2016. <http://www.internetlivestats.com/internet-users/nigeria/>.
6. Entertainment and Media Outlook: 2015–2019. Rep. no. 6, P.224, Price Waterhouse Coopers, Sept. 2015. Web. 20 Oct. 2016. <https://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf>.
7. Subscriber Statistics.” NCC. Nigerian Communications Commission, Aug. 2016. Web. 20 Oct. 2016.<http://www.ncc.gov.ng/index.php?option=com_content&view=article&id=125&Itemid=73>.
8/ Entertainment and Media Outlook: 2015–2019. Rep. no. 6, P.224, Price Waterhouse Coopers, Sept. 2015. Web. 20 Oct. 2016. <https://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf>.
