5 Things to Know about German music market with Thorsten Freese
With a population of over 84 million and a GDP ranking it as one of Europe's economic powerhouses, Germany holds a significant position in the global music landscape. In 2023, according to the IFPI, Germany stood as the world's 4th largest recorded music market1.
This dynamic market reflects the intersection of traditional retail values and modern streaming trends, shaping the strategies and successes of artists and industry professionals alike. To understand the inner workings of today's German music industry, we had the privilege of interviewing Thorsten Freese, who heads up all Believe operations in Germany and is a recognized figure in the German music industry.
In our conversation, we'll delve into the intricacies of the German music market, exploring its unique chart system, music genre trends, and the impact of digital streaming on industry dynamics.
Germany has long been considered a market where the physical format was predominant, but this seems less and less true. If BVMI2 data is anything to go by, there was a considerable turnaround in streaming in 2018. What do you think triggered it, and what impact has it had on the local ecosystem?
The rise of streaming in Germany between 2013 and 2018 marked a significant shift. By 2018, digital music formats began generating higher revenue than physical formats, a trend that had become prominent globally a year earlier. Comparable to other markets, several factors contributed to this change: younger, tech-savvy demographics preferred streaming for its convenience and accessibility. Of course, this shift has also transformed our local ecosystem. In 2023, streaming already captured 74.8% of the market, but the physical market remained stable at 18.5%, thanks to a 12.6% increase in vinyl sales. Interestingly, rock and metal accounted for nearly half (48%) of all vinyl sales in Germany. The CD declined by 5.9%, however, still holds the second strongest market segment at 11.3%2. This balance has forced traditional retailers to adapt and pushed artists and labels to prioritize digital distribution.
It's interesting to see how artists and labels have embraced this shift. Many have adapted their strategies by strengthening their presence on socials and streaming platforms and providing exclusive content to deepen their relationship with fans. At the same time, physical distribution has been supported through creative marketing initiatives like limited vinyl editions and exclusive merchandise packages. These approaches have helped maintain the balance between the digital and physical markets.
Still on the subject of streaming, we can see that growth remains very strong: in fact, revenues from streaming have increased by 8.4% between 2022 and 2023 in Germany. Is it the rate of premium users or are there other factors at play? And could you provide some insight into which digital service providers are leading the way in Germany?
Yes, the corresponding increase in streaming revenue is largely driven by the growing number of premium users, now at 35%, up from 31% in 20222. This shift shows a maturing market where listeners value the convenience and extensive libraries of premium subscriptions. Other factors, like smartphone proliferation and Germany's diverse music scene, also contribute. Dominant DSPs like Spotify, Amazon Music, and Apple Music have capitalized on this growth. According to a 2023 ARD/ZDF study3, 40% of consumers surveyed used Spotify, 25% used Amazon Music and YouTube Music, and Apple Music was used by 13%. of them.
We must not forget that Amazon Music's market share is partly due to its bundling with Amazon Prime, which attracts an older audience compared to other streaming services. This demographic trend is particularly interesting for genres like traditional schlager, which appeal to older demographics. In contrast, younger audiences seem to be more inclined towards services like Spotify. This demographic diversity among DSPs highlights how different age groups gravitate towards different platforms. Additionally, the increase in localized content and partnerships with German artists has helped these DSPs strengthen their market presence. Exclusive releases and tailored playlists have created a more engaging experience for users. Furthermore, collaborations with local festivals and music events have enhanced their visibility and appeal, making streaming an integral part of the current German music culture.
The increase in [German] streaming revenue is largely driven by the growing number of premium users, now at 35%, up from 31% in 2022. This shift shows a maturing market where listeners value the convenience and extensive libraries of premium subscriptions. Other factors, like smartphone proliferation and Germany's diverse music scene, also contribute.
BVMI reported that pop and hip-hop were the top-grossing music genres in Germany last year2. How true is this? And what are the other genres, local or not, gaining traction these days?
Absolutely true! Pop and hip-hop continue to dominate here. A prime example of the success of hip-hop in Germany is Groove Attack artist RAF Camora. In the summer of 2023, he became the most streamed German musician of all time with 4.5 billion streams. No other act has been streamed more frequently in Germany since GfK Entertainment4 began official tracking. This milestone underscores the genre's significant impact on the German music landscape.
As in other countries, hip-hop now also dominates streaming in Germany - in particular German-language hip-hop/rap - which is reflected in the genre’s 23% share of streaming revenues in 20232.
While hip-hop (closely followed by pop with 25%) dominates, other genres are also gaining traction. Rock, metal, and also schlager remain popular, especially among older demographics, though they also attract fans from various age groups. Our labels Madizin and Nuclear Blast are pivotal in promoting and sustaining these genres. Despite pop and hip-hop's dominance, these genres, along with niche categories, enrich Germany's music scene, reflecting its diversity and resilience.
In 2007, the German music industry based its ranking system on retail value rather than units sold. So when a product has a high value and a high selling price, it is more likely to top the charts. How has this change affected the local industry, and is the system still relevant in the age of streaming?
Indeed, we have a quite unique chart system in Germany, prioritizing retail value over units sold. Unlike other countries, Germany focuses on the monetary value of music products. This method benefits physical sales and bundled offerings, allowing artists to secure top chart positions with premium-priced items. As you may guess this has significantly impacted the local music scene.
You can imagine that this system also presents challenges for artists who rely heavily on streaming revenue. Achieving top chart positions based solely on streaming is difficult due to the lower per-stream payout compared to physical sales. This raises questions about the system's relevance in an era dominated by digital consumption. There is ongoing debate about aligning Germany's chart system more closely with international standards. Despite these challenges, the system continues to honor traditional retail channels, highlighting the balance between embracing digital realities and preserving retail values.
Digitization is transforming all [music] genres. This transformation in music consumption has gradually led many artists, as well as their labels and managements, to seek modern and digital-savvy structures like Believe.
Let's wrap up by looking at the digitization of various genres. How does the German market fare in this regard?
In recent years, we've witnessed a rapid digitization across numerous genres. At the end, digitization is transforming all genres. This transformation in music consumption has gradually led many artists, as well as their labels and managements, to seek modern and digital-savvy structures like Believe, as their setups often became outdated.
Nuclear Blast, one of the world’s leading international metal labels, is part of Believe, so we know that the metal genre is also growing rapidly on Spotify and the other DSPs. At the same time, metalheads maintain a strong enthusiasm for physical music formats such as CDs and vinyl. Owning and collecting these formats is an integral part of metal culture. Many metal fans have a lifelong relationship with their favorite bands, and collecting physical albums is an expression of their musical journey. A notable project where the physical and digital worlds merged beautifully is with Slayer. We turned their eagle, the visual symbol of the band, into a steel box for a digital kit, which remains a very popular collector's item today.
Pop and schlager are another good example. Streaming has significantly gained traction in these two genres in recent years. Believe anticipated this development very early on and successfully positioned Madizin Music as a modern label for German-speaking artists in the market. Such a shift is crucial for music scenes to remain relevant in the digital age.
About Thorsten Freese
Thorsten Freese has known the digital music business from the very beginning: after several years as a producer and label operator, he founded MTunes in 2002, one of the pioneering companies in the digital music industry in Germany. Since the merger of his company with Believe, he has served as Managing Director of Believe Germany, initiating the acquisitions of Believe subsidiaries Soulfood, Nuclear Blast and Groove Attack/Rough Trade, and is responsible for all business and operations in Germany.
Sources
1. IFPI Global Music Report 2024 – State of the Industry
2. BVMI’s Musikindustrie in Zahlen 2023. BMVI stands for "Bundesverband Musikindustrie," which is the Federal Association of the Music Industry in Germany
3. ARD/ZDF OnlineStudie 2023
4. GfK stands for "Gesellschaft für Konsumgüterforschung“, which is the Society for Consumer Research in Germany
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