Music subscriber market shares Q2 2021

MIDiA’s annual music subscriber market shares report is now available here (see below for more details of the report). Here are some of the key findings.

The global base of music subscribers continues to grow strongly with 523.9 million music subscribers at the end of Q2 2021, which was up by 109.5 million (26.4%) from one year earlier. Crucially, this was faster growth than the prior year. There is a difference between revenue and subscribers – with ARPU deflators, such as the rise of multi-user plans and the growth of lower-spending emerging markets – but growth in monetised users represents the foundation stone of the digital service provider (DSP) streaming market. So, accelerating growth at this relatively late stage of the streaming market’s evolution is clearly positive.

Spotify remains the DSP with the highest market share (31%), but this was down from 33% in Q2 2020 and 34% in Q2 2019. With Apple Music being a distant second with 15% market share, and Spotify adding more subscribers in the 12 months leading up to Q2 2021 than any other single DSP, there is no risk of Spotify losing its leading position anytime soon – but the erosion of its share is steady and persistent. Amazon Music once again out-performed Spotify in terms of growth (25% compared to 20%), but the standout success story among Western DSPs was YouTube Music, for the second successive year. Google was once the laggard of the space, but the launch of YouTube Music has transformed its fortunes, growing by more than 50% in the 12 months leading up to Q2 2021. YouTube Music was the only Western DSP to increase global market share during this the period. YouTube Music particularly resonates among Gen Z and younger Millennials, which should have alarm bells ringing for Spotify, as their core base of Millennial subscribers from the 2010s in the West are now beginning to age.

But the biggest subscriber growth came from emerging markets. Between them, Tencent Music Entertainment (TME) and NetEase Cloud Music added 35.7 million subscribers in the 12 months leading up to Q2 2021. Together, they accounted for 18% of global market shares, despite being available only in China. Yandex, in Russia, was the other big gainer, doubling its subscriber base to reach 2% of global market share.

Combined, Yandex, TME and NetEase account for 20% of subscriber market share, but they drive 37% of all subscriber growth in the 12 months leading up to Q2 2021.

The strong growth in subscribers holds an extra meaning going into 2022. The surge in non-DSP streaming in 2021 means that the streaming market is no longer dependent on the revenue contribution of maturing Western subscriber markets (nor indeed ARPU-diluting emerging markets). With non-DSP streaming revenue looking set to have contributed between a quarter and a third of streaming revenue increase in 2021, streaming revenues look set for strong growth, even if subscriber growth lessens. That is what you call a diversified market.

A little more detail on the subscriber market shares report:

The report has 23 pages and 13 figures featuring country level subscriber numbers, revenues and demographics by DSP. The accompanying data set has quarterly subscriber numbers and annual revenue figures from Q4 2015 to Q2 2016 by DSP by country, with 33 markets and 27 DSPs. The report and dataset is available to MIDiA subscribers hereand also available for individual purchase via the same link.

Email stephen@midiaresearch.com for more details.

Major label revenue surged in 2021, but what does that mean?

2021 was an anomalous year for the recorded music market. Two of the majors did an IPO, the pandemic continued to disrupt the marketplace, and major label revenues grew at unprecedented rates. If the fourth quarter majors’ earnings follow similar seasonality patterns to previous years, collective major label recorded music revenue will be up by 29% in 2021, reaching $19.6 billion (a more bearish estimate is $19.3 billion). By way of comparison, 2020 growth was 6%, and 2019 was 10%. To put it another way, major label revenue increased by $787 million in 2020, and in 2021 it was up by $4.4 billion. 2021 was a red-letter year for the major labels, but was it a one-off or an industry pivot point?

To get to the answer, we first need to contextualise major label revenue growth within the wider market. 

Streaming 

Predictably, streaming was the core driver of major label revenue growth in 2021, accounting for 67% of the revenue, and up by 31% to reach $12.8 billion. That level of annual streaming growth has not been seen since 2016. 2020 streaming growth was 18%. But streaming’s leading player, Spotify, did see that kind of growth. Spotify’s full year 2021 revenues look set to hit €9.6 billion (which would be up by 22% from 2020), and if we only consider premium growth (i.e., the part that is not boosted by podcast revenue), then growth was just 19%. And it is not as if Spotify is losing much ground in the global streaming market – its subscriber growth was largely in line with the global market average (excluding China). So, the majors grew streaming faster, somewhere beyond Spotify.

The total market

The major labels’ total revenue growth also follows a different trajectory to other parts of the market, The year-to-date performance of just one of the top four recorded music markets matches the majors’ trend (bear in mind that these four markets were 62% of global label revenues in 2020, so they shape global growth trends):

  • US: 27.1% growth (H1) – RIAA
  • Japan: -1.0% (Jan-Nov) – RIAJ 
  • UK: 8.7% (FY) – ERA
  • Germany: 12.4% (H1) – BVMI

(It will be interesting to see how the IFPI allocates the revenue. There may well be quite a gap between their global total and the sum total of all the individual countries if this is indeed largely attributable to one off payments rather than reflecting organic, country level revenue.)

All of this means that the additional major label growth is likely reflective of factors such as:

  • Large, one-off payments from the likes of ByteDance, Twitch and Facebook
  • Licensing income from the same parties
  • Increased contribution from other markets
  • Market share increase from catalogue acquisitions 
  • Revenue growth from major-distributed independents
  • Organic market share growth

While all of these factors will be at play, it is the first two factors that are likely the most consequential. MIDiA estimates that these new non-DSP streaming income sources accounted for between $0.8 and $1.2 billion in 2021. Even at the lower end of the estimates, that revenue alone would have driven the same amount of growth in 2021 as all major label revenue growth combined in 2020. 

There is a clear narrative that post-digital service provider (DSP) revenue is now becoming a central growth driver for the recorded music business. Clearly a very beneficial narrative to have had during an IPO year, especially if the trend was accentuated by one-off payments and settlements – which would help explain the divergence between major label growth and local market growth. 

There are two key potential scenarios:

  1. Upfront payments for post-DSP streaming partners exceed organic mid-term revenue, resulting in slower growth rates in 2022 and 2023
  2. Post-DSP streaming partners meet / exceed expectations, making 2021 and 2022 look much like the late 2000s and early 2010s did for DSP streaming, with minimum guarantees being more often than not 

So, by 2023 we should be able to tell whether 2021 was a spike or a pivot point. If I was a betting man, I would probably put money on the outlook being closer to 2 than to 1.

2022 MIDiA predictions: the year of the creator

With 2021 nearly behind us, and 2022 fast approaching, it is that of year for the MIDiA predictions report. We have been publishing our predictions reports since 2016, and apart from being good fun to do, we have also established a pretty good track record of success. We had an 84% success rate for our 2021 report, and Facebook’s transformation into Meta certainly played to the report’s title: The year of the immersive web. The full 29-page report is available exclusively to MIDiA clients here. But, as with every year, here are a few of the top-level highlights to help you get your head around what 2022 might bring with it.

In addition to sets of predictions for music, video, games and sport, the report lays out the ten meta and cultural trends that will shape 2022.

  1. The year of the creator: all eyes are now on the creator economy
  2. Hybrid futures: the growth of AR and blended IRL / URL experiences
  3. Reasons, not ways, to spend attention: competition for time intensifies
  4. Metaverse edges towards primetime: the push beyond games
  5. NFT’s grow, but meet inflated expectations: boom and backlash 
  6. Asymmetry of competition: big tech will dig protective moats
  7. Lean-out: fans are leaning out, making their own fan content
  8. The remuneration revolution: creators need remuneration, not monetisation
  9. The whole world is a game: everything we do is becoming gamified, even if we do not realise it
  10. The internationalisation of culture: Money Heist, BTS and Squid Game are the start, not the end, of the trend 

I am going to dive into two of those here.

The year of the creator

2021 was a big year for content creators, fuelled by the growing accessibility of high-quality production tools and the fragmentation of consumption. 2022 will be bigger still. From social video, through to game streamers and independent artists, 2022 will be the year of the creator. But there will also be a growing need for a duty of care from platforms to their creators. Platform business models function by accumulating income from a large number of smaller contributing parts, which, in turn, contribute little individually, but form a majority as a whole. Creator platforms (from Splice, to YouTube and TikTok) are no different. The consequence is that creator platforms can prosper even when the majority of their contributors do not. Of course, the majority of creators will never be big, but the essence of the new creator economy is that success no longer has a fixed definition. The onus on creator platforms is to set realistic creator expectations – not to oversell a dream, but instead to enable each creator to fulfil their potential, whatever that might be. Creator platforms need to think of their creators not as wheat to be harvested, but as flowers to be nurtured.

Lean-out

Prior to the digital era, content could only be consumed passively in a one-way stream from distributor, through a designated channel, to a listener, viewer or player consuming on their own in a limited number of contexts. This one-way style is ‘lean-back’. Digital has prompted ‘lean-in’ behaviour, where consumers can engage with content by multitasking – socialising with friends online, researching the franchise, or following on other forms of the same IP. Now, creator tools are prompting a third method: ‘lean-out’. Consumers are now empowered to take that content of which they are fans and own it in new ways outside of immediate consumption, be that writing a fan musical on TikTok (e.g., Bridgerton), joining Discord servers, sampling for their own tracks, participating in a debate online (e.g., ‘did Karol Baskin kill her husband?’), playing chess (e.g., The Queen’s Gambit), or simply making and sharing memes. In 2022, this lean-out form of consumption will become a distinguisher between content that is simply good, and that which becomes culturally important.

As a reminder, the full report is available here.

What BandLab and Bruce Springsteen tell us about the music business at the end of 2021

2021 was another year in which capital continued to flow into the music business at pace. Two deals that got over the line before year end have shone an interesting light on the differing strategies that are underpinning this investment: Bruce Springsteen sold his catalogue to Sony Music for between $500-550 million, while BandLab raised $53 million against a valuation of $303 million. These two deals represent the opposite ends of music industry investment in 2021.

The Bruce Springsteen catalogue deal reflects the continuing surge in music catalogues as an asset class, with the total value of deals set to far exceed the $4.7 billion that was invested in 2019. The bulk of this investment has been driven by large, institutional investors, such as Private Equity (PE) and pension funds, as well as publishers and labels – many of whom have raised capital specifically to acquire catalogues. Big institutional money is rarely focused on high-risk opportunities, but, instead, often on low-risk, predictable revenue drivers. Music catalogue falls into this category. So, a bet on catalogues is a safe(ish) bet on today’s music business.

In contrast, the investment in creator tools company, Bandlab, reflects a bet on tomorrow’s music business – including investment from venture firm K3 Ventures. Today’s music business is dominated by music rights and by music rightsholders. A growing trend among investors (both venture and later stage) is making a bet that the future of the music business will increasingly be shaped by creators. 

So, we have a situation where big, safer bets are being made on rights, and riskier, bolder bets are being made on creators. There is little irony in the fact that if the riskier bets pay off then they could reduce the value of the safer bets, thus increasing the risk profile of those safe bets. Still with me?

BandLab’s $53 million investment reflected a 17% stake (based on the $303 million valuation). To acquire 17% of the $500 million Bruce Springsteen catalogue, it would cost $83 million (if it was available for purchase, of course). This means that there is effectively a 60% premium on investing in yesterday’s (proven) music business, versus tomorrow’s (unproven) music business.

Such is the nature of venture vs later-stage investments – and there are good arguments as to why this is not an apples-to-apples comparison – but it is nonetheless a useful lens through which to reflect on the music business at the end of 2021: the big money is banking on things staying the same, the riskier money is banking on things changing. Draw your own conclusions…

SEVEN (MORE) LESSONS FOR LONGEVITY IN TODAY’S MUSIC BUSINESS

This is a guest post from MIDiA’s Keith Jopling in which he dives into some of the key insights he has gleaned from talking to artists as part of his side-hustle ‘Art of Longevity’ podcast (which you should check out if you haven’t already done so!)

This year I had the pleasure of working with one of the greatest songwriters in history. Bjorn Ulvaes commissioned MIDiA to produce the report ‘Rebalancing the Song Economy’ at a time when the UK government was making a formal inquiry into the economics of music streaming. Bjorn was amazingly articulate (of course he was, check out his ABBA lyrics) on the challenges for songwriters today, but one thing he said really haunted me. During the press interviews (and in his Ted Talk) Bjorn told the world “I don’t think ABBA would have made it today”. Imagine if ABBA hadn’t ever broken out of Sweden?


Meanwhile, as part of the UK inquiry, another great lyricist, Elbow singer Guy Garvey, eloquently told MPs “If musicians can’t afford to pay the rent… we haven’t got tomorrow’s music in place.”


This concern about the artists of today not replenishing those of the past is one of the reasons I have become fascinated with longevity in today’s music business. Longevity has to be the primary goal for any serious artist, yet achieving it in today’s music business means working miracles. The volume of music and the number of artists creating and releasing it makes today’s ‘market’ ultra competitive.


The Art of Longevity podcast is now two seasons in and I’m becoming even more fascinated by how music artists can continue to succeed despite the music industry constantly shifting around them.


What I’ve discovered this time around is that there is no ‘mainstream’ music industry to aspire to at all (something that has changed since Elbow first gained real success with their fourth album ‘The Seldom Seen Kid’ in 2008). Chart success for example, does not equate to being in the mainstream. These days most establishes bands can focus their efforts and get a number one or two album but a week later, the world has moved on. Most artists understand this. Success is a relative term best defined by you – the artist – on your terms and no one else’s.


My guests in season 2 were: KT Tunstall, Ed Robertson (of Canadian legends Barenaked Ladies), Fin Greenhall (Fink), Los Lobos, Mew and Portico Quartet. Between them they have amassed 150 years of commercial and creative viability and they are all still going strong – perhaps stronger than ever. The seven lessons learned from my conversations with them are:

  1. HAVE THE CONFIDENCE TO DISRUPT YOURSELF BEFORE THE INDUSTRY DISRUPTS YOU
    The mainstream no longer exists but in the 80s it sure did and in 1987 LA rock band Los Lobos discovered it by accident. Their cover of Richie Valens’ ‘La Bamba’ (the theme song to a surprise hit movie by a first-time director with a largely unknown cast) became a smash number one hit in a dozen countries. How do you follow that? With an album of traditional Mexican music of course! Thing is, Los Lobos knew how much of a fluke La Bamba was for them and that they had little chance of successfully repeating it. So they didn’t try or let anyone convince them it was a good idea.

    When the Danish rock band Mew first had breakthrough international success with their 2003 album ‘Frengers’, they had arrived in a place most bands (especially from non-English speaking markets) dream of: signed to a UK major label and on a European tour with R.E.M. Their next record wasn’t a mainstream follow-up to Frengers however but an ambitious indie-rock opera – a nod to progressive rock that no other band (on a major label) dared make in 2005. The band never entertained any notion of building on the success of Frengers with a more mainstream record. Yet the dramatic and complex follow-up album became a classic and a fan favourite, and ended up presenting the band with its only number one single in their home country, ‘The Zookeeper’s Boy’.
  2. WELCOME IN THOSE LITTLE DETAILS THAT MIGHT CHANGE YOUR DESTINY AKA TRUST YOUR STUDIO TEAM
    Back in 1992, the Barenaked Ladies song ‘One Week’ finally broke the band in the USA and brought them international fame too. Although Ed Robertson had written the song and taken lead vocals duty (including that famous dexterous rap) Ed thought the idea of the record label, to make One Week the lead single for their new album, to be a joke. Then, the record’s producer (Susan Rogers) suggested the drum loop “wasn’t very cool”. Because of Susan’s input, the band changed the drums, a tweak which transformed the song and in effect, the band’s entire future. You need to be receptive to those little suggestions, accidents and tweaks that might turn out to be pivotal.

    That same year (1992 was a good one it seems) when Los Lobos hauled themselves into a downtown LA studio with six new songs and teamed up with producer/engineer partners Mitchell Froom and Tchad Blake, the band was exhausted from the previous album and gruelling tour. Yet out of these sessions came the album Kiko, the band’s first genuine masterpiece. Steve Berlin of Los Lobos told me it was by tiny details that Froom and Blake were able to elicit a performance from the band that made the difference:
    “Tchad (Blake) could even take the mistakes and turn them into something that sounded genius. When we got together and listened to the record in sequence, we were all stunned”.
    It was the beginning of a decade of innovation that the team of Mitchell & Blake brought to recording production for Lobos and many other artists. Many of their now highly sought after sounds are available commercially as samples. Those producers and engineers really do make careers.
  3. EARN THE RIGHT TO SAY ‘NO’ AND RECOGNISE WHAT THIS MEANS FOR YOUR CAREER
    After Fink made ‘Perfect Darkness’ (album number four) the band had earned the right to say “no”. No to playing small shitty venues. No to rushing out a follow-up record. No to some (of the many) sync offers that came rushing in. It was at that point, after seven years of saying yes to everything, that the band began to realise they had created something of real viability and were in it for the long game. They hadn’t hit ‘the big time’ (that might come later) but they earned the right to make their choices, including ‘no’.
    After the phenomenal success of her debut album ‘Eye to The Telescope’, Scottish singer-songwriter KT Tunstall began to feel the pressure from her label to “make another one of those”. In fact, KT began to get the feeling she was picking up a reputation for being “difficult” because she did not want to just repeat her debut. KT was hardly the first woman in this situation and she won’t be the last but, she stuck to her guns. Firstly, how would that be even possible when her debut was a decade or more in the making? KT had to navigate multiple challenges: make the sophomore record she wanted to make and fight off the insistence that she fit the mould of ‘female singer-songwriter’ that had become popular at the time (ironically down in part to KT’s success). In the end, her second album was a somewhat compromised product, with good songs but too much pop polish.
    Be ready to turn down what doesn’t feel right for you, even if those around you think it is.
  4. BE YOUR OWN COTTAGE INDUSTRY
    A common pattern with artists that have achieved longevity is that they tend to get started under their own steam. One of the best things about how the music industry has been transformed by technology, is that you can simply upload your songs onto the platforms and get working your socials, hard. However, is this really just the modern equivalent of the field of dreams approach? Build it and they will come…
    In reality it’s much harder of course. Many of the artists I’ve spoken with on The Art of Longevity gained early success without relying on any institutions at all – neither media or technology. Instead they have literally taken matters into their own hands. So often this is because those artists believe they are destined to make a career in music – maybe because they don’t feel they could do anything else.
    Portico Quartet spent their early years busking along London’s SouthBank. I bought a copy of the band’s very first, self-pressed four-track CD for £5, one of 10,000 sold. Recently the band’s saxophone player Jack Wylie told me:
    “We’d go off to buy big stacks of blank CDs at Maplins and we bought this burner machine that could do eight at a time. I think we managed to do 200-250 a day. As a student, it meant we could make a living without working in a bar”.
    When I ask artists what advice they might pass on to those artists starting out now, most are pretty vexed (what do you say?). So much of success in music is still down to luck. But the point is, you need to make your own luck. With those SouthBank busking sessions, home CD burner factory and the Hang drum, Portico Quartet created enough word of mouth to amass an early dedicated following thousands strong. What followed was a Mercury Prize nomination and so far, an 8 album career.
  5. TAKE YOUR TIME
    British indie wonders Alt-J took 2019 off from music altogether. Their prodigious drummer Thom Sonny Green was recently asked by The Observer if he worried they would be forgotten about. He admitted that he “thought about it every day”. In this day & age FOMO drives everything. The creator equivalent is ‘FOBF’: fear of being forgotten.
    But FOBF doesn’t bother Adele. And it doesn’t bother Jonas Bjerre of Mew. Over 25 years Mew has made seven studio albums which is one every four years. That’s not something Spotify would advocate as an operating model for bands these days, is it? But the truth is – there is no point racing your way to the front of an endless rush of music. The pandemic showed the true colours of many artists. Some quietly went away and took time out to work on their craft or take a break, while others couldn’t drag themselves away from social media and online duets. You cannot make memorable songs by fidgeting and frittering away ‘content’. Well you can, but the more confident way through is to quietly focus on your art. The fans will welcome you back long after the ‘followers’ have forgotten you existed.
  6. HAVE OTHER PURSUITS OF MEANING OUTSIDE OF YOUR MAIN MUSIC VEHICLE
    In life there are four elements: work, family, relationships and you – and a balance has to be achieved. Artists struggle with this balance. Between the intensity of writing and recording and the hard graft of touring, the obsessive element to being a musician makes work-life balance impossible. When bands achieve ‘fame’ (the ‘stratospheric rise to the top’ phase of Brett Andersen’s longevity curve) balance goes out the window altogether. Everything is work hard, play hard and burn out. Some band’s take to it and others don’t but for a while, everything looks amazing – records in the charts, video shoots, press interviews, international travel and a different hotel every night. The rock & roll lifestyle still exists, but expect it to last and you will be heading straight for the crash.

    As Ed Robertson told me: “The best part of the roller-coaster is the ride back down”. Jonas Bjerre of Mew makes videos, film scores and many other types of visual art. KT Tunstall took time out to make film scores (attending Stephen Spielberg’s school to learn the art) and musicals. In this day and age, you need more than just your album-touring cycle to engage your fan base anyhow, so you can invite them in on your other creative projects too. What matters is that you make the time to regenerate, make the art you need to make and that you keep in touch with your fans. Everything comes back around.
  7. GET EVEN BETTER LIVE (AND STREAM IT)
    Yes, it comes back to live once again. Without exception all of the artists so far I’ve spoken with for The Art of Longevity have honed the craft of performance. But the emergence of live streaming has meant a new way to connect with your audience and practice the art of performing music that way, without having to submit fully to a life on the road. Live streaming presents a new way to be creative and to connect with your most loyal fans. It’s a different experience to the visceral contact of a real life show, but the format is here to stay so invent another aspect to your ‘brand’.

    The first seven secrets to longevity are on the Song Sommelier blog. The Season 1&2 archive for the Art of Longevity is on the podcast page

Audiomack and the coming monetization / remuneration tipping point

The music business is approaching a monetization / remuneration tipping point. Long- and mid-tail creators are fast realising that, even with the most revolutionary of changes to royalty structures, streaming is never going to deliver enough income. Streaming is a highly effective monetization tool for larger rights holders and creators but has a remuneration problem for the long- and mid-tail. Such is always the case of platform businesses (which harvest micro activity to deliver macro platform-level revenue). What is different in music is that creators are sold the dream that a) they can ‘make it’ (however they may interpret that), and b) the platforms are designed to democratise the means of distribution, and thus level the playing field. With the number of releasing artists growing by a third in 2020 alone, the remuneration problem is getting worse, not better, due to the simple arithmetic of the royalty pot growing more slowly than artists. The solution? Models that let artists build fanbases and remuneration, not audiences and monetization. Audiomack just took a step down this road. Here’s how, and why it is a smart move.

An elegantly simple, yet multi-faceted strategy

The simplicity of what Audiomack announced (‘support buttons’) belies its cleverness. The basics are, as Music Business Worldwide explained:

Fans fund artists directly by purchasing ‘support badges’ for individual song and album releases. Once a fan buys a badge, Audiomack says that their contribution “is forever memorialised” on their Audiomack profile and the artist’s individual song or album page.

This does three things simultaneously:

  1. Drives artist remuneration
  2. Monetizes fandom
  3. Empowers fan identity

Audiomack is small, but when small can also be beautiful 

With 3% US weekly active user (WAU) penetration compared to Spotify’s 27%, Audiomack is a small but important player in the streaming world. Yet scale is beginning to look less important to many creators. Streaming services are fantastic at building audiences, but they are far less able to build fanbases, and even worse at letting artists engage with those fanbases (YouTube and Soundcloud notably excepted). Big streaming numbers might look good, but risk being little more than vanity metrics unless they are huge – especially when they do not give enough value directly back to the creator.

In many respects this is just like the old radio days. An artist might feel good about getting radio spins and that exposure may in turn have led to other things, but the actual spins themselves delivered little or nothing in terms of actual income. So, creators are compelled by inference to think of streaming as cool marketing that drives everything else. Yet, if it is just marketing, then a) what if there are other less stressful marketing alternatives, and b) should they not be putting more effort into feeding the places that drive meaningful income? If streaming drives audiences and marketing, long- and mid-tail creators need to focus their efforts on places that drive fanbases and remuneration instead. As we have previously argued, ‘middle class’ creators need niche, not scale.

Audiomack hits the middle ground by combining the benefit of streaming’s scale with a focused and super-engaged user base (Audiomack usage spikes among many important music segments, such as playlist curators, karaoke users and hip hop fans). The likely conversion rate for fans rather than just listeners will likely be higher for Audiomack WAUs than, for example, Spotify WAUs. 

You do not need NFTs to do digital collectibles

But remuneration is just half of what Audiomack is doing here. It is the fandom and fan identity play that is particularly interesting. By allowing fans to collect badges on their profiles, they become a way for those consumers to demonstrate their fandom and express their identity. This also comes at the time when the digital sphere is electrified by NFT buzz. Support badges are an illustration of how NFTs do not even need to be NFTs. Even though Audiomack WAUs are far more likely to know what NFTs and Blockchain actually are, crucially they are much more likely than average consumers to want to buy digital collectibles from their favourite artists, regardless of what the tech might be.

It is always useful to remember not to get too carried away with specific tech but instead focus on the underlying user needs. The value of collectibles of any kind is context: where you have them and who can see them. Yet, currently NFTs lack a universal home and thus their cultural impact is not maximised. Audiomack’s support badges show that digital collectibles do not need to live on the blockchain. For further proof, just take a look at the multi-billion dollar business Tencent Music Entertainment has built selling ‘social entertainment services’ (VIP gifts, badges etc.) to the users of its music apps.

Audiomack’s support buttons are not about to fix the entirety of music creator remuneration, but they do represent an important step on the journey and set a standard others should follow. 

Music market shares: independent labels and artists are even bigger than you thought

It has been a long time since the music industry has been in such good shape. So long, in fact, that there are not too many executives left who worked through the pre-crash days. 2021 was the year in which the major label groups capitalised on the momentum, with Universal and Warner going public, and Sony going on a spending spree. This was off the back of a strong 2020, in which the majors collectively generated $15.1 billion, giving them a market share of 66.1%. So far, so normal, but all is not quite as it seems. This market share may be how the world sees the majors’ success, but it significantly underplays the revenue contribution of independents. MIDiA decided to fix that.

At the start of this year MIDiA fielded a large-scale, global survey of independent labels, collecting billions of dollars’ worth of revenue figures. We think that it is the most comprehensive survey of the independent sector done yet. In the survey, we asked labels about a range of factors, which enabled us to paint a complete picture of the state of the independent sector in today’s music business. Crucially, we collected detailed data on distributors, and this is where the under reporting of independents comes into play.

The undoubted benefit of the streaming era is that it presents artists and labels of all sizes with the ability to reach global audiences. But most independent record labels do not have sufficient scale nor resources to license and distribute directly to streaming services, and thus turn to the ever-expanding marketplace of digital distributors. Never shy to an opportunity, the major record labels have established themselves as key players in this space, distributing independent labels either directly or via their distribution arms. The value that they deliver to independents is clear, but the revenue goes via the majors’ accounts, and so major label revenues are boosted by independent revenue, thus inflating the market share of the majors. With the data we tracked in our independent label survey, we were able to unpack this ‘embedded’ distributed independent label revenue from the majors’ total to arrive at the ‘actual’ market share of independents, based on who holds the copyright, not simply on who distributes it.

Measuring market share on this ‘ownership’ basis, independent market share (which includes artists direct) goes from 33.9% (the ‘distribution’ basis) to 43.1%, i.e., an additional 9.2% of share. Or, put another way, an addition of $2.1 billion. The independent share was up from 41.3% in 2018, and in 2020, independent revenue (on an ‘ownership’ basis) grew by 12% compared to a total recorded music market growth of 12%. All of which means that independents (labels and artists) are a) bigger than standard industry measures suggest, and b) growing faster than the total market and are thus increasing market share. Which makes the majors’ strategy even smarter. If they were not so active distributors of independents, they would simply be ceding all of the revenue, instead of, as they are, capturing some it and being able to report the market share as their own.

These findings and much more (including regional market data and data on label operations (e.g., A+R, marketing, catalogue size, years in operation)), are available to MIDiA clients in this full report.

All independent labels that took part in the survey have already received a copy of the report. If you want a copy of next year’s edition, be sure to take part in the next survey when we announce it!

The attention economy after the lockdown boom

The attention economy is the cornerstone of all entertainment businesses. Throughout the 2010s, it just grew and grew, with more and more digital entertainment options filling consumers’ downtime. Staring out of windows and being bored at bus stops was replaced by Netflix, Fortnite, Spotify, Instagram and TikTok. Then, as the decade drew to a close, the attention economy became saturated. Instead of competing for unused hours, everyone was competing with everyone else. Cue Netflix’s cofounder and CEO, Reed Hastings, to claim he was competing more with Fortnite than he was HBO. This binary equation did not have time to really bite before the global pandemic hit, suddenly turning back the attention economy clock. More people stuck at home with more time on their hands and money in their pocket resulted in a 12% boost to the attention economy. But it was clear that as soon as the time came for pre-pandemic routines to return, the temporary boom would fade, sending the attention economy into negative growth. That time has come.

The attention recession is here

When MIDiA first predicted the coming attention recession, it felt like a world away to most entertainment companies because the high tide of lockdown raised all entertainment boats. Most entertainment formats grew. But the thing is, some grew faster than the 12% average, while others grew more slowly. This meant that, in isolation, a given entertainment company might have reflected on record performance, while, in reality, they were losing ground on competitors – both within and beyond their respective industries. This was an esoteric concept when everything was up, but once pre-pandemic routines started to return, those that lost share during the lockdown era were the least well placed to deal with the attention economy contracting once more. Entertainment audiences developed new behaviours that were sustained over such a long period that they became habits – and habits can be hard to shake. 

By the end Q2 2021, 42% of the extra time gained during the pandemic had already gone. Combined average weekly entertainment hours had gone from 53.1 hours in Q4 2020, to 50.7 hours. While this was still up from the Q2 2020 total of 47.4 hours, the first phase of the attention economy’s contraction is clear to see. Crucially, though, the fall back was not evenly distributed. Games, news and audio (podcasts, audio books, radio) all fell by double digit percentages in Q2 2021, while music and video fell by much smaller amounts. Meanwhile, social media and social video actually grew. The arithmetic is brutally simple: if social grew while total time declined, their win was someone else’s loss.

The contraction still has much distance to run

With Covid infection rates rising, and lockdown measures returning in some markets, there is a reasonable chance that the contraction may lessen, or even pause, in affected markets in Q4 2021. But the underlying trend has an inevitability to it. Whether it is now or next year, the attention recession is going to bite – and it is going to bite hard.

In such a fiercely contested environment, every form of entertainment, from music, to video, to games, is going to need to give its audience reasons, not just ways to spend attention. Every minute of attention is going to be hard earned2022 and beyond will be shaped by fierce competition from entertainment companies that are trying to hold onto as much of their recently gained time as possible, which, in the finite attention economy, will mean others will not only lose time, but end up lower than pre-pandemic levels. Matters will be complicated further by consumers multitasking more than ever in order to try to squeeze in as much entertainment as their waking hours will permit. While this will tick the hours-spent box, it will devalue that time spent, to the extent that attention may not even be attention at all.

The findings in this post come from MIDiA’s latest report Attention economy: After the lockdown boomThe report contains detailed data and analysis of just how media consumption has changed across 15 different forms of entertainment. If you are not yet a MIDiA client and would like to learn how to get access to this insight, email stephen@midiaresearch.com.

Tribes are the future of fandom (and that may or may not be a good thing)

At MIDiA, we spend a lot of time exploring the fan economy and how new forms of fandom are redefining media businesses. The most significant underlying dynamic is the fragmentation of fandom: the dynamic whereby we move ever further from mass-reach media, where everyone is exposed to the same content, to a world where entertainment exists in a complex mesh of filter bubbles. Niche becomes the new mainstream. Whereas, as Asian entertainment companies have become adept at industrialising fandom in this new paradigm, Western companies are less so. In music, big record labels still have a mindset of wanting to create mainstream, global hits. But the fandom playbook is changing. Global success now depends less on how wide your message can reach, and more on how deep it can go. Mass reach is becoming superseded by conversion, and mainstream is become replaced by tribes.

What do Donald Trump and tribal fanbases have in common?

Tribalism is, for better or for worse, central to how humanity functions, and, of course, underpins millennia of armed conflict. How tribalism can manifest among strident fanbases is simply a lighter shade of the same dynamic that can send countries to war, part of the same sliding scale on which Trump operated. In fact, the tactics of the Trump movement often bore more resemblance to those used by K-pop acts than those used by political opponents.

Just like a contemporary, always-on artist, Trump fed his audience with an immense amount of content, access and engagement, and even did a live national tour. Like some of the most tribal of music fanbases, Trump nurtured a sense of otherness among his supporters – it is them against the world and the system is rigged against them. There is perhaps no better way of strengthening a tribe’s sense of oneness than strengthening its sense of otherness.

Tribalism and the role of us-vs-them

Fandom trades on basic human instincts and psychology, particularly two of the ‘deficiency needs’ in Maslow’s hierarchy of human needsbelonging and esteem (political fandom also trades on a third need: safety). Any kind of fandom depends on people feeling like they are a part of something, and how that something plays a role in identifying who they are. Tribal fandom takes this one step further, distilling this shared identity to an ‘us-vs-them’ mentality. Fans become focused on identifying, not just what makes them, well, them, but also what makes the rest of the world…not them. At its worst, that can be used by politicians, like Trump, to stoke fear against immigrants, liberals, people of colour, or basically anyone that is not part of their tribe. In less severe forms, it can manifest as artist fanbases mobilising en masse on social platforms against something they do not like. The sense of oneness, defined against the otherness of the rest, enables them to feel like the establishment is against them, even when they become the establishment, whether that be becoming the political party in power or the band that sets YouTube streaming records.

This flavour of tribal fandom has been made possible by social media and the broader way in which it facilitates online conversation. Often, social media facilitates a hyper-defensive style of discourse, with the loudest voices winning out, even if they are not the majority. Indeed, the fragmentation of fandom means that the whole concept of ‘majorities’ are becoming a thing of the past. In a political and business environment, now defined by the claims of the Facebook whistle blower, Frances Haugen, there is a growing understanding that a recalibration of social media is required, and ideally before Facebook Meta simply migrates social into the metaverse, warts and all. 

Fandom’s industrial revolution

But there is also vast positive opportunity within tribal fandom. As Chartmetric identifies, what sets K-pop artists from big Western artists is that they convert the vast majority of their audience into fans. There is little wastage. By contrast, big Western artists often have bigger total audiences, but a much smaller share that are ‘fans’, e.g., artist follower and active listener counts. This is simply taking Kevin Kelly’s 1,000 true fans conceptand recreating it on an industrial scale. In fact, you could argue that we are entering fandom’s industrial revolution phase. As this epoch plays out, the most effective marketing and monetisation across all forms of entertainment will be that which focuses on tightly defined tribes, rather than mass market reach. The shift from cultural moments to cultural movements is only just beginning. Politics (e.g., Trump and the Brexit campaign) have learned the tricks well, as has a select group of entertainment companies (e.g., Netflix and Big Hit Music). The coming years will be shaped by everyone else playing catch up.

Facebook is about to disrupt itself out of existence…again

Facebook’s rebranding to Meta can be interpreted in many ways. It can be seen as: following Google / Alphabet’s lead in communicating a new chapter in its business; putting distance between the company and its most well-known app, ahead of it beginning to decline; shifting the story away from whistleblower and ethics narratives; signalling a major strategic reboot. It is, of course, a combination of all of the above. In fact, Facebook is perhaps the most successful example of a global tech company that is embracing Clayton Christensen’s disruption innovation theory. Namely, that in order to compete in a new market, you have to radically change what you do, how you do it, and, crucially, your values. Facebook already went through this entire cycle when it pivoted towards messaging apps, and now it is about to do it all over again.

Strategy repeating itself?

Facebook’s Meta shift has a neat symmetry with its messaging app strategy – coming nearly ten years to the day after the app store launch of Facebook Messenger. When Facebook launched in 2004, the social media world was dominated by highly linear, desktop experiences, like MySpace and GeoCities. Facebook moved the needle, but it was a product of its time and generation. By the turn of the following decade, the world was changing, and with it cane a new generation of mobile-centric consumers – an opportunity that Evan Spiegel and Co seized, with the launch of Snapchat in 2011. As the dominant social platform, Facebook could easily have played it safe, developing a series of ‘good enough’, sustaining innovations to try to keep one step ahead of the noisy, but comparatively tiny, mobile-centric competition. Instead, it did something that big established companies rarely do – it decided to compete head on with it itself. Facebook decided to disrupt itself before the competition did.

Textbook Christensen

Facebook’s messaging app strategy was textbook Christensen. To really drive transformative change, you need to change your entire company and values, which is almost always best achieved by either acquiring companies or launching new divisions, so that you can learn to think and behave differently. After all, as a company, you have to respond to dramatic change in a dramatic fashion, because, up until now, your established way of doing things has resulted in you falling behind. So, in 2012, Facebook acquired Instagram for $1 billion (to initially be run as a separate entity), and then WhatsApp in 2014 for $19.3 billion. Facebook is now the biggest messaging app company on the planet, though the world has changed so much, these apps are often not even called messaging apps anymore. They are simply social apps. That is the scale of the transformation that Facebook achieved, and the metaverse is next.

Ramifications

If Facebook Meta follows a similar path for its metaverse strategy as it did for messaging apps, then a couple of major acquisitions will follow. It would be the wise move to do so, and hopefully Meta’s commitment to spending $10 billion on the metaverse does not reflect the hubris of a company that now thinks it is so good that it can do everything itself. If it is, then the odds are that Meta will not be the key metaverse player. But, if Meta does follow the Christensen playbook and become the central force of the metaverse, then there some major permutations, and even responsibilities, for Meta:

  • If the metaverse becomes the future of social then, unless there is some kind of cultural reset, all of the negative, dark sides of social will simply migrate over and become magnified. Imagine how psychologically damaging getting trolled and abused in virtual reality could be, especially for impressionable, younger people
  • The filter bubbles formed in two-dimensional social media already enable false narratives, like QAnon, to feel entirely real. Imagine just how much more real false narratives could feel in immersive environments

The immersive web

Societal risks and responsibilities aside, the shift to the metaverse represents a broader paradigm shift in digital entertainment and connectivity. MIDiA terms this as the Immersive Web, and, in fact, Facebook’s Meta announcement is a neat validation of the title of our 2021 Predictions report: ‘The Year of the Immersive Web’. Whether lightening can strike twice for Meta remains to be seen, but if it follows its 2011-2014 blueprint, then it has to be in with a shout of being the dominant metaverse player. Metaverses, though, are still heavily rooted in games, and while Meta is making a big bet on their future existing outside of games, there is no doubt that some gaming dynamics and experiences will still be part of what the future of metaverses are. The question is whether that means that the addressable audience is going to be narrower than it was for messaging apps, at least within a meaningful time frame (e.g., 5-10 years)? If not, then the risk is that Meta could end up winning the wrong war and building the future of games, instead of the future of social.