Streaming sales drive growth in Canada's sound recording industries

Released: 2021-03-30

Operating revenue in the Canadian record production and distribution industry rose 5.2% from 2017 to 2019. While sales in other formats, especially CDs and digital downloads, decreased significantly, streaming sales grew to $312.9 million in 2019, up 73.4% from 2017. The industry's operating profit margin also increased, from 6.3% to 7.9%, over the two-year period.

The record production and distribution industry accounted for over half (52.8%) of total operating revenue in the sound recording industries in 2019. Music publishers held the second-largest share (32.3%), followed by sound recording studios (12.1%) and other sound recording industries (2.8%).

The music publishing industry operates primarily by acquiring copyrighted musical works and promoting their use across various media and at live events, earning revenue from royalties and licensing agreements. Music publishers saw their operating revenue grow 7.8% from 2017 to 2019; however, operating expenses increased by 9.6% over the same period. As a result, the industry's operating profit margin decreased from 10.1% in 2017 to 8.5% in 2019. Royalty expenses accounted for a significant share of the industry's expenses, representing 42.8% of operating expenses in 2019.

Sound recording studios had a 4.2% increase in operating revenue from 2017 to 2019. This industry specializes in providing the facilities and technical expertise for recording in a studio, including mixing and mastering services. Studio employees often have specialized training and expertise, and salaries are a significant part of the industry's expenditures. In 2019, nearly one-third (32.3%) of the industry's operating expenses went toward salaries, wages, benefits and commissions, up from 31.4% in 2017.

Impacts of the COVID-19 pandemic on the Canadian sound recording industries

The sound recording industries were affected by the COVID-19 pandemic, although to a lesser extent than most other cultural industries in Canada. While many musical groups and artists depend on live concerts and events for much of their income, this is not the case for most companies in the sound recording industries. Revenue from streaming services accounts for a significant part of the record production and distribution industry's revenue, and the fact that many people spent more time at home during the pandemic facilitated increasing demand for that type of service.

On the other hand, some of these industries faced new challenges. For instance, many sound recording studios cancelled or delayed projects, including live recording sessions with artists. In addition, some studios provide audio post-production services for the film industry, and this work may have been pushed back because of delays in film production. However, some sound recording studios are able to do much of their work virtually, and this would have allowed these studios to continue to operate during the pandemic. Nonetheless, studios are expected to experience a decline in revenue as a result of the pandemic.

Because of business closures and lower demand for advertising, music publishers likely experienced a decrease in demand for music for use in television and radio advertising, as well as in use at public events, such as conferences and professional sports matches. This likely led to reduced opportunities for earning income from royalties.

As a result of these challenges, overall operating revenue growth is expected to have flattened in 2020. However, the sound recording industries are expected to be much less affected by the COVID-19 pandemic than other cultural industries, such as musical artists.

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