Music Market Expected to Grow by 1 Percent Annually Through 2017

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Madonna will take the stage to accept the award for Top Touring Artist this year, an award that recognizes the highest-grossing touring act of the year. Her album MDNA is being recognized as a contender for Top Dance Album.

A new report by PricewaterhouseCoopers indicates that concerts and digital music will continue to make gains, while CD sales suffer a "terminal decline."

Led by gains in concerts and digital music, the overall U.S. music business can expect annual growth of just over 1 percent through 2017, according to a new report by PricewaterhouseCoopers.

PwC believes the concert business will grow at a compound annual growth rate (CAGR) of 3 percent through 2017. The company estimated the value of last year's U.S. concert business at $8.61 billion and forecast growth to $8.9 billion this year and $9.2 billion in 2014. PwC has the concert business valued at $10 billion. The report doesn't mention the possibility of revenue growth through dynamic pricing or mobile ticketing, two of the more important developments in the live business.

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The report has the digital music business -- which includes both recorded music and publishing -- growing at a CAGR of 5.1 percent through 2017. At that rate, last year's $3.6 billion digital market will become worth $4.6 billion in 2017.

Digital growth will come from competitors trying to chip away at the dominant market shares of Apple and Pandora. PwC wisely notes that download growth was "disappointing" in 2012 but failed to mention the trend has continued in 2013 -- digital tracks are actually in negative territory this year. The forecasted digital numbers for 2016 and 2017 suggest little to no change in the amount of performance royalties paid by Pandora and other Internet radio services. The current slate of royalties expires after 2015. Success of Pandora-backed legislation, expected sometime this year, would most likely result in lower royalty payments.

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PwC expects the physical business to decline at a CAGR of 13 percent through 2017. The forecast has the annual deficits declining in successive years: a 15.9 percent deficit this year followed by 13.2 percent next year, 12.9 percent in 2015, 12.1 percent in 2016 and 11.1 percent in 2017. The report cites factors such as lost retail space at national chains and retailers' emphasis on other product categories.

In spite of growing vinyl sales, the physical market will be worth just $1.4 billion in 2017, according to the report. PwC cites a "terminal decline" in CD sales and does not believe the format will see "any kind of sales increase" ever again. The report twice suggests the CD will die eventually but doesn't say when that might happen. Given the growth in vinyl and the CD's slowing rate of decline, physical revenues would be well over $500 million ten years in 2023 if physical revenue declines at a steady rate after 2017.

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