About Mark Mulligan

Music Industry analyst and some time music producer. Vice President and Research Director with Forrester Research

Will the recession change Big Tech’s view on entertainment?

Music start up Utopia just announced a round of layoffs, fitting into a much bigger dynamic that may reshape the entertainment landscape. There are many reasons why the coming global recession will be unique, but the one that is most relevant to the digital entertainment sector is that it is going to be the first one since modern consumer tech has been truly mainstream. This matters, not just because of the unchartered territory this reflects, but also because tech companies (even the biggest) operate differently than traditional companies, placing much bigger bets on future growth. A strategy that works well in times of plenty, but that is undergoing rapid re-evaluation in the face of an onrushing recession. Big tech firms are reducing headcount, especially in the bets that plan to make profit in the future, but not yet. Most forms of digital entertainment fall in this bracket. Streaming music and video have long been loss leaders for the tech majors, but can that continue in a recession? 

2007 was the year the last recession started and the consumer tech world looked very, very different to today. The first iPhone was not sold until June 2007; Facebook started the year with 14 million users; Netflix launched its streaming service; but Spotify was still a year away from launch; Instagram would not be launched for another three years; and Snapchat for another five. So, when the next recession most likely hits in 2023, it will be the first one in which consumer tech has been mainstream.

All of those companies, and most of the rest that drove the consumer tech revolution, grew fast because they aggressively invested in future potential, rather than wait to fund it organically. It is a mindset that has its origins in the VC world view of: build product and customer base first, worry about profit later. Without that approach, it is probable that the consumer tech sector would not be anywhere near as big and developed as it is now. But the strategy requires the basic premise of next year bringing more growth, otherwise the model falls down. Which is why we are now seeing retractions across big tech. Meta laid off 11,000 employees, many from its VR Labs division; Stripe cut 1,000 jobs because it overexpanded during its lockdown-boom; Apple froze hiring outside of R+D; and 10,00 layoffs look on the cards for Amazon

Out of all this redundancy mayhem, one particularly interesting figure emerged: Amazon is on track to lose $10 billion a year from its ‘Worldwide Digital’ team, which includes Alexa, Echo, and its streaming businesses. Amazon makes its money from Cloud services and commerce, devices and content are growth categories that it is investing in, both for future growth and because they help its core business. Very similar arguments can be made for Apple’s streaming businesses (video and music) and, at the very least, for YouTube Music and YouTube Premium.

Which raises the question, if the tech majors start reigning in their non-core expenditure, where does this leave streaming? Practically speaking, it is highly unlikely that the tech majors are going to face such difficulties that they will have to think about shuttering their streaming services, but they may well have to trim spending. And if that happens, it is video that is far more exposed than music, because streaming video requires large investments in original content, whereas music rights costs are fixed. All that said, any music rights deals that are up for negotiation with tech majors from this point on will almost certainly see the licensees pushing for reductions anywhere they can find them.

Artists – take our survey and get a free MIDiA report

With 2022 coming to a close, and Spotify’s Wrapped just around the corner, artists are beginning to look back across the year at how they performed and what they have achieved, and whether it lines up with their hopes for the coming year. If you are one of these artists, we would love to hear from you. MIDiA has launched a new artist survey, designed to take the pulse of artists and their careers. You can complete the survey by following this link.

In the survey, you will be asked about topics such as:

  • How streaming is working out for you
  • What sort of career you are pursuing
  • What tools you use, such as distributor platforms
  • How you feel about navigating today’s streaming-centred music business

All respondents to the survey will get a free copy of our report, Music creator survey, Redefining success, which presents the findings of our most recent major global survey of artists. This will give you a benchmark to monitor how your career is shaping up against other artists, and allow you to compare your aspirations and approaches with theirs.

The coming long-tail cull

When governments plan to introduce controversial new policies, they prepare the ground in advance (dropping hints in speeches, privately briefing journalists, etc.), so that by the time the new policy finally arrives, it does not feel quite so controversial. A similar process is currently playing out in the music business. The biggest major label executives are starting to seed a narrative into the marketplace about the potentially corrosive effect that the rapidly-growing long-tail of music and creators is having on consumers’ music-streaming experiences. Of course, it also happens to dent major label market share too, but the issue is not quite as clear cut as it might first appear.

There are three main industry constituents that are at risk from the fattening of the long tail:

  1. Major labels and their artists
  2. Consumers
  3. Long-tail creators

Let’s look at each of those in turn:

1 – Major labels

The first on the list is the most obvious, and also the easiest, to demonstrate. Over the course of the five years from 2016 to 2021, the majors grew recorded music revenue by 71%, which is impressive enough, except that artists direct (i.e., artists who distribute without record labels) grew revenues by 318% over the same period. Consequently, artists direct increased global market share from 2.3% to 5.3% while majors went from 68.8% to 65.5%. Meanwhile, the top 10 and top 100 tracks continue to represent an ever smaller share of all streaming. The very least that can be said is that majors and their artists have collectively grown more slowly than long-tail creators, and at the most, the case could be made that long-tail creators have eaten into major’s growth.

2 – Consumers

This one is far harder to make a definitive case either for or against. Consumers tend not to categorise music anywhere near as precisely as the music business. For example, only a third of consumers say they mainly listen to older music, despite industry stats showing that catalogue consumption dominates. Most consumers do not consider music to be ‘old’ as soon as the music business does. So, imagine how difficult it would be for consumers to delineate ‘what is long tail?’ They may say in surveys ‘music isn’t as good as it used to be’, but they could equally be referring to majors’ music as the long tail. So we are in the realms of measuring second-order effects (are consumers disengaging from streaming? Not yet, but they might) and of making logical assumptions. If consumers consistently hear poorer quality music, then it is reasonable to assume that their satisfaction would decline. However, DSP algorithms push music that matches users’ tastes, and there is so much high quality in the long tail that there is no particular reason to assume that more long-tail consumption should inherently equate to an increase in consumption of poorer-quality music. And do not forget, consumers have demonstrated plenty of tolerance for ‘average’ music in mood and activity playlists.

3 – Long-tail creators

It may sound oxymoronic to suggest that long-tail creators could be hurt by the rise of the long tail. But, as Will Page put it, the rise of the long tail means that “there are more mouths to feed”. The fractionalised nature of streaming royalties means that the more long-tail creators there are, the lower per-stream counts there are and, even more important, the harder it is to cut through. The irony is that it is easier to make the case that the long tail is eating itself than it is to establish causality between its rise and majors’ loss of share.

Divide and conquer

Of course, the missing constituency is the DSPs themselves, but they do not warrant a place here, because they are the ones with the power to scale up or down long-tail consumption via their algorithms. It serves DSPs to have listening fragment to a degree as it lessens the share and, therefore, the power of any individual label. But if DSPs ever thought they were pushing too far, then they would rein in the algorithms.

Where next?

So where does all this leave us? In the ‘do nothing’ scenario, listening continues to splinter, majors lose more share, long-tail creators find it harder to cut through and earn while consumers may (or may not) see any meaningful change to their listening experiences. In short, the head loses out, as does the long tail, while the market further consolidates around the ‘body’ of streaming catalogue (which, by the way, the majors are already key players in and could easily ramp up their focus – as WMG is already doing). 

The ‘do something’ options fall into two key groups:

  1. Gate / limit consumer access to catalogue
  2. Gate / limit creator access to royalties

There are many ways to achieve the first (preventing long-tail music getting onto DSP catalogues; lowering long-tail priority in algorithms; creating a separate tier of catalogue; deprioritising / blocking it from search and discovery, etc.). All of this risks looking very much like the establishment trying to prevent the next generation of creator and industry breaking through. That is without even considering the moral dilemmas of choosing who is ‘in’ and who is ‘out’.

Option two, however, could be more altruistic than it looks. For an enthusiast hobbyist with a few hundred streams, royalties are going to be little more than a novelty. But for a hard-working, self-releasing singer / songwriter with tens of thousands of streams, the hundreds of dollars are already important. Let’s consider that there was a pay-out threshold, where 1,000 annual streams are the point at which royalties are paid, with all the royalties associated with the sub-1,000 stream artists being distributed between all other artists. Suddenly, those slightly more established long-tail artists can earn more income. 

None of these options are without challenges and moral dilemmas. But the direction of travel appears to be towards something being ‘done’ about the long tail. If that really does end up having to happen, then let us at least try to ensure that the changes benefit long-tail artists too, not just the superstars.

Why Amazon Music is primed for success

Amazon Music today announced that it was extending the number of songs available on its Prime Music tier from two million to one hundred million. It is kind of a big deal, but not that big a deal when you consider the actual value of these additional 98 million tracks. With around 2.5 million new songs being uploaded to streaming services every single month, the simple truth is that most people will not listen to most of the catalogue. Prime Music already had a good chunk of the most valuable tracks, now it has all of them, alongside tens of millions of streaming detritus. And yet, the catalogue increase is actually really important, but because of what it represents rather than what it actually is.

A dark horse no longer

Back in the mid-2010s, MIDiA first identified Amazon as being the dark horse of streaming music, but these days there is no doubting Amazon Music’s thoroughbred pedigree. It has the third-largest subscriber count of any Western streaming service and will likely pass Apple Music in second place sometime within the next twelve months, quite possibly sooner. But what makes Amazon Music so important to the music industry is not just its size but its audience segmentation. Which is a good part of the reason it just unlocked those extra 98 million tracks for Prime Music users.

Prime Music has come a long way

When Amazon launched Prime Music, it was not exactly with exuberant support from music rightsholders. So much so that Universal Music did not license it until 15 months later (making Amazon the only global scale streaming service that was able to successfully launch without all three majors on board). At the time, Prime Music looked risky to rightsholders: just as subscriptions were beginning to get traction, along comes a service that gives consumers a music subscription experience, free at point of access. So, rightsholders insisted on a limited catalogue size to ensure that it did not risk cannibalising potential 9.99 subscriptions. Over the years, rightsholders unlocked extra slices of catalogue, but today’s announcement is the genuine step change. 

A segment-based approach

So what changed? The market did. Now, as subscriptions reach maturing in most of the world’s bigger music markets, rightsholders are shifting focus from full frontal growth to a more segmented approach that can unlock growth pockets in otherwise mature markets. This is no easy task when they provide broadly similar licenses and the same catalogue to all streaming partners. But Amazon has managed to make a silk purse out of sow’s ear, launching a stack of different streaming products and deploying them strategically across different markets. If you need convincing, take a look at its product availability list. While most streaming services have built their audiences around mobile-centric millennials, Amazon has managed to build an audience that looks very different. 34% Prime Music users listen to music on a smart speaker compared to 14% overall consumers, while 22% are aged 55+ compared to 9% Spotify users. 

Competing around everyone else

Rather than just competing with the other streaming services, Amazon Music has competed around them. In doing so, it has expanded the addressable market for streaming, helping mature markets still grow strongly (while YouTube Music has been having a similar effect at the opposite end of the age spectrum, converting younger subscribers at scale). It is in this later stage of streaming growth that the more segmented partners, like Amazon and YouTube, become so important to music rightsholders. Unlocking 98 million more tracks, reflects both this elevated importance and an understanding among rightsholders that enhancing Prime Music will grow the market around Spotify and co., not at the expense of them. 

Another super power

On top of all this, Amazon Music has another super power at its disposal: emerging markets. These regions have long been identified as the driver of future growth, but they have also struggled to deliver in many cases. Markets like India and China number their free streaming users in the hundreds of millions, but paid users in the tens of millions (in China’s case) and single millions in India. Ad-supported revenue massively lags subscription revenue, even in Western markets, but in lower per capita GDP markets, ad spend is even smaller. Prime Music is proving to be a happy middle ground in markets like Brazil and India, striking the balance between scale and ARPU. With premium subscriptions needing time to find their audiences, Amazon looks set to become an ever more important partner in some of the key emerging and mid-tier markets.

When Amazon first launched Prime Music, the value proposition: pay for free shipping and get a music service for ‘free’, or as Amazon puts it, as a perk of membership. Now though, Prime is becoming much more than just free shipping, it is an ever-expanding household subscription in which entertainment now plays a central role (the recently announced Amazon Music Live / Thursday Night Football line-up is a case in point). As we enter a global recession, where consumers will likely cut back on buying things, a free shipping subscription could look like an unaffordable luxury. But a music and video service that has the benefit of free shipping suddenly looks like a value-for-money proposition. Prime may not be recession proof, but music and video certainly reduce its exposure to risk. The value equation in Prime Music is beginning to shift, as is Amazon’s role in the global music business. From dark horse to top-tier player in half a decade is no mean feat. 

The music industry needs a new format

Non-DSP streaming was one of – arguably the – differences between steady growth and stellar growth for the music business in 2021. With three billion dollars of retail revenues in 2021, non-DSP has quickly become a key source of revenue, but not without bringing its own set of challenges. Music rightsholders have been criticised in the past, including by MIDiA, for being too prescriptive in their licensing approaches, often curtailing the potential of new ventures. The homogenised nature of Western DSP streaming being a case in point. But with non-DSP partners, rightsholder recognised that it was still too early to define exactly what the dominant use cases would be and opted for blanket type deals instead, thus monetising new partners while leaving room for innovation. Now though, creators and rightsholders alike are coming to the point of view that the time is right for greater clarity and definition, with calls for ad revenue share as a starting point. But even if these changes were to come into play, there is a much more fundamental issue at hand: the music business does not have a format to license to non-DSP partners.

Value gaps

Much has been made of the comparison between YouTube and TikTok, and their perceived ‘value gaps’ (YouTube’s former value gap, and TikTok’s current one). YouTube’s road to music industry partnership was a rocky one, but now the relationship is positively rosy, as is YouTube’s contribution to music industry revenues. In 2021, YouTube delivered around $3.4 billion in revenues to record labels alone, with ad supported accounting for around two thirds of that. YouTube has gone from pariah to the second largest contributor of label streaming revenue. But, regardless of all the infighting, negotiating and lobbying that happened in the intervening years, it would not have been able to become the success it has were it not for the fact it was already using a well-established music industry format: music videos. This contrasts with non-DSP partners, like TikTok, Meta and Snap, that are, instead, licensing music to soundtrack their formats. In many respects, this is 21st century sync, soundtracking the parts of digital entertainment where traditional sync does not reach. Indeed, the deals also tend to be classed as sync deals. 

Sync’s strengths and weaknesses 

Sync’s strength is being able to take music to places where music formats do not exist. Its problem, however, is that there has always been a massive value gap between its cultural impact (not least giving music exposure) versus its revenue contribution (less than 10% of 2021 retail revenues). But there is an even bigger challenge with this new ‘digital sync’: whereas traditional sync simply enhances traditional audio-visual formats (TV, games, ads, etc.), in many of digital sync’s use cases it is actually a central component of the experience. Duets, lip-syncs and other lean-through behaviour has music at its core. Without music, the behaviour does not exist. So a licensing structure that leans on monetising a soundtrack falls short of music’s defining role in many of these non-DSP experiences. On top of this, there is much that music creators do on non-DSP platforms (e.g., live chats, non-music posts) that delivers value to the platforms (by generating ad impressions) but do not generate income for those creators nor their rightsholders (if they have them).

A new format for non-DSP

So, how can this circle be squared? The solution is simple in concept but complex in practice: the music industry needs a new format for non-DSP environments, one that will ideally pave the way for metaverse monetisation also. Non-DSP music behaviours rarely revolve around the full-length song, nor full-length music videos. Instead, they revolve around components and snippets of songs, as well as the music creator’s non-music activity. The music industry needs a licensable format that reflects this new usage, not least because everything points to ‘lean through’ and the consumerisation of creation growing, not shrinking. A 15-30 second music format would be one solution, but that would likely be too static, as the more that creator culture grows, the more cultural value will reside in the music being modified by users – as illustrated by TikTok’s new partnership with Stemdrop – which could also form part of a new format structure. And, of course, it would miss the non-music activity. Last year, MIDiA published a report with Utopia (free to download here) that proposed a creator right that would ensure that value accrues to the creator for all their activity, not just musical. It may sound far-fetched, but it is not much different than an actor getting paid for appearing on a TV show.

The solution likely lies in a combination of short-form music formats and new licensable rights – which does not necessarily need to have legislation, there are other widely licensed ‘rights’ that do not legislative underpinnings. As I have already said, the concept is simple, the implementation is difficult. But things worth doing are often difficult to do. Over to you, music industry!

TikTok Music could change the game

There has been talk for some time now of TikTok parent ByteDance launching a music streaming service in Western markets. It already has Resso in Indonesia, India, and Brazil, but has spiked interest recently with trademark registrations, new Twitter accounts, and reports that ‘more than a dozen’ new markets are being prepped. TikTok has become one of the central forces in the digital music market ecosystem, eroding the cultural capital of traditional streaming services. It is a logical leap to assume that if TikTok becomes a key force in music discovery, it could do the same for consumption. While this is certainly the case, ByteDance’s streaming opportunity is a whole lot bigger and more disruptive than Resso:

TikTok Music: Resso is a perfectly decent streaming service, but similarly to YouTube Music, it only scratches the surface of what it could be. Both TikTok and YouTube have unique content, behaviour, features, and culture that stand in stark contrast to standard streaming. It is difficult to translate much of this because of licensing constraints but doing so should be the priority for both TikTok and YouTube. This will drive differentiation and help the industry carve out genuine new growth pockets rather than just unearthing the remnants of the addressable base for standard streaming. Of even more relevance to the music business, unless rightsholders can empower ByteDance’s streaming offering with something truly different, is the risk that its growth will largely comprise of switching Spotify subscribers. The music business needs the maturing streaming market to be about growth, not substitution. Perhaps TikTok Music Twitter profiles point to something bigger and bolder than Resso.

Discovery is consumption: People used to discover music on the radio and then go and buy it. That model has been turned upside down. Now, people (younger audiences in particular) discover most of their new music on TikTok or YouTube before going to radio-like streaming services to consume it. What is more, much of the ‘discovery’ that happens on TikTok is consumption. It is not just consumption either, it is consumption that streaming cannot replicate. This is before even considering the importance of ‘lean through’ creative behaviour, such as doing a duet or a dance challenge to your favourite artist’s new track. Music is the soundtrack and often the catalyst to this ‘consumption’, but when that music is listened to on streaming, it is stripped of all that creative and cultural context – It is like only listening to the soundtrack of a movie. Movie soundtracks do well as formats, but they only exist because of the movies as that is where the real value lies. All of this is why a TikTok Music service could be so exciting as it could provide both the creative and cultural context, not just the stripped-down audio file.

Ecosystem: The single most important factor of all though is TikTok’s ecosystem play. In the traditional streaming value chain, you have creators, rights, distribution, promotion, and consumption. TikTok achieves these with its superpower: its audience. Creation comes from the audience, who then distribute and market the content (via the user-centric algorithm framework, user shares, recreation, and other means), and then, of course, the audience consumes. It is a self-contained, virtuous cycle – An ecosystem. Right now, artists are pumped into the system by label marketing teams, and independent artists can push out of the system into traditional streaming with SoundOn. Yet, over time, TikTok’s creation, distribution, and consumption will become ever more self-contained, making TikTok part of what MIDiA identified as the music industry counter-culture. TikTok Music could be a major step on that journey.

Label executives: take this survey and receive a free MIDiA report

MIDiA is fielding a survey exploring the changing role of music streaming services in today’s music business and we want to hear your opinions. Specifically, we want to hear the opinions of record label executives. Whether you run your own small label or are a strategy manager in a major, we want to hear your views.

You can take the survey here: https://www.surveymonkey.co.uk/r/LGYFBZL

MIDiA will treat responses with utmost confidence. They will only ever be viewed at the total respondent level, so no individual responses will ever be seen.

We appreciate time is a scarce commodity, especially in these challenging times. So by way of thanks for participating, all respondents will receive a free copy of MIDiA’s landmark report: The future of music: the rise of a counterculture industry. Retailing for £7,500, this report lays out a bold vision for the new music business that is beginning to take shape. One in which next-generation platforms carve out a new, creator-centric music business that runs in parallel to the traditional business but that also competes with labels and DSPs alike. It is a great report! 

If you have any questions or concerns regarding the survey, please email srishti@midiaresearch.com

The creator economy’s post-lockdown growth

The Covid pandemic created a unique catalyst for the music creator economy. More time on hands and more cash in pockets gave novices and veterans alike the opportunity to spend both more time and money making music. Though the pandemic was a peak, it also marked the start of a new era for the music creator economy across every one of its aspects, from revenue to creation to remuneration. In MIDiA’s new landmark report ‘State of the music creator economy’ we provide the definitive assessment of this exciting marketplace, covering everything from creator behaviours, creator personas, all the way through to workflows, market sizes, and growth forecasts. The full report and datasets are available to MIDiA clients here. Here is an overview of some of the key themes explored in the report.

A new generation of music makers

The music creator tools space is being transformed by the increasing availability of simple, affordable music-making tools, plus a new generation of consumers that is steeped in creator culture. We are entering a new era for the music creator economy. Yet, despite all the dramatic changes, underpinning this new era of creator behaviour are suites of complex software that arose over two decades ago and, at their core, have seen little substantial change. The digital audio workstation (DAW) is the foundation of modern music making, but was not designed for the modern music maker. This presents fertile soils for seeds of disruption as more casual music making, centred around mobile devices and sharing music online, becomes the new top of funnel for the music creation space, and the music industry as a whole. 

Having grown up as social media mainstreamed creativity, the new generation of music makers expects to achieve professional results quickly. However, as their aspirations clash with the harsh reality of streaming economics, more creators are seeking out a diversity of income streams — from selling beats to mixing and engineering — underscoring the need for creator tools companies to help drive creator remuneration. Combined with the growth of casual creators, catalysed by embedded tools on social platforms, like TikTok and BandLab, the result is a newfound fluidity in defining what it means to be a music creator. 

Though much of that generational shift will take time to permeate through to the current market, seismic change is already manifesting. Nowhere is this better seen than in the that hardware music creators use. As recently as five years ago, music creators would have invested in hardware mixing desks, synthesisers, and outboard effects. But today, the most widely owned hardware is devices that plug into computers, such as controller keyboards and audio interfaces. These affordable devices free up creators to spend on the software and sounds on their computers, relying on the hardware to control sound making, rather than actually making the sound.

And it is the spending on software, sounds and services that is currently propelling the market. With an average creator spending more than $600 a year on music creation, promotion, distribution, and commercial tools. For beginners this can mean spending three and half times more than they earn from music, while for advanced creators it is a little over one tenth. In total, the music creator tools market was worth $4.1 billion in 2022, across learning, collaboration, production software, sounds, funding, commerce, distribution, marketing and commercial, with distribution and production software being the two largest segments.

In 2021, the cumulative number of creators paying for software, sounds, skills sharing, and learning was under 30 million – by 2030 there will be nearly 100 million with learning and skills sharing becoming the largest single group of buyers. Learning and skill sharing were among the fastest growing components of the music creator economy in 2021, with strong rise in both formal and informal learning as well as in skills sharing. Just under half of the learning revenue was from companies that were largely or entirely focused on music production learning. With 83% of creators feeling that they still have much to learn and improve upon, the opportunity for learning is pronounced and will become even more so because of the fast-changing nature of the sector.

However, much of all this may seem like a separate and parallel industry to those in the traditional music business (labels, publishers, streaming services, etc.), the creator tools market that commands much of the attention, time and spend of artists and songwriters. Streaming is only around a fifth of the income of the average creator, with many aspects of the creator tools marketplace representing new ways that they can earn meaningful income, whether that is selling singing sessions on skills marketplaces, writing soundpacks for sounds platforms or producing tracks for other creators. Furthermore, clear connections are being made across the two industries, such as Avid and LANDR both offering distribution, Sony Music Publishing striking a partnership with BeatStars and Spotify launching a bundle subscription for its Cloud DAW Soundtrap. The most impactful synergies, however, will come from audience platforms, like TikTok and Shorts, that are already home to music creators and already provide their own creator tools. But what they have that rightsholders and most creator tools companies do not, is audience. As the culture of creation spreads towards audiences themselves, it is these sorts of companies that have the ability to play the most transformative role in the future of music creation.

If you are interested in learning more about MIDiA’s state of the music creator economy report, email stephen@midiaresearch.com

Time to jump off the algorithm highway

Life is perpetual change, so it is perhaps overdoing it to suggest that the music business is at a cultural pivot point. Yet, what comes next has the potential to be looked at, years from now, as a dividing line between before and after. For more than half a decade, the music business has been hurtling down the algorithm highway, repurposing artist development, marketing, fan engagement, and even the structure of the song itself in order to stay the path. Everything is splintering, from attention to remuneration, with creators and rightsholders alike finding themselves feeding a beast whose hunger is never sated. Much like an addict who wants to quit but cannot, the music business understands the problem and the costs it incurs them, yet they dare not jump off the algorithm highway for fear of being left behind by those who do not. And yet, jumping is exactly what is needed, to halt the perpetual commodification of both music and creators. It is a leap of faith, but onto a welcoming crash mat: scenes.

At Future Music Forum this week, myself and fellow MIDiA analysts Tatiana Cirisano and Kriss Thakrar talked a lot about MIDiA’s new research into scenes and identity (MIDiA clients can read our latest report on the topic here). Regular readers will be familiar with our work on fragmented fandom and how the splintering of consumption has created a parallel splintering of culture, with new hits becoming smaller and more short-lived. In this song economy environment, it is the song, not the artist, that is the central currency, thus making nurturing smaller fandoms mission critical. But fandom itself is the symptom, the cause is identity, and this, along with the scenes in which it manifests, is where the future of music marketing lies.

Algorithms have assumed a central role in the success of artists in today’s music business, with marketers forever trying to improve their understanding of their inner workings in order to gain advantage for their artist. It is, in many respects, a fool’s errand, as it is in the platforms’ interest to continually evolve the algorithms in order to ensure it is themselves that determine success, not third parties. Nonetheless, there are ways to succeed in the song economy: you may not be able to beat the algorithm, but you can join it. This means thinking and behaving like an algorithm, to hold virality by the hand. Just like an algorithm, this means real-time multivariate testing within target segments, and progressively expanding only to next-level associated segment, resisting the ability to go big as soon as something fires. But using the algorithm as a marketing discipline truly effectively entails a degree of ruthlessness that many artists and labels would find unpalatable. Algorithms find success by casting out failure instantly, instead only amplifying that which resonates within target segments. So a label pursuing this approach would need to be willing to ditch a campaign incredibly early if it does not, however much the label might believe in the release or however big a priority the artist might be. Artist rosters would become a production line of bets, as quickly discarded as signed. Failing fast is as important as succeeding fast in the song economy. 

This ruthlessness does not sit well with the traditional model of building an artist but, as dystopian a vision as it might be, is the exact path that labels already find themselves on. Scenes represent an alternative way forward.

Scenes and identity

Scenes have always existed, but now there is a growing proliferation of online scenes that allow a degree of specificity that was simply not possible previously. As Tatiana puts it:

“Not only can people find people across the globe with the exact same interests and values, algorithms actually push those people closer together”.

Though scenes can be transitory and ephemeral, subject to fast-shifting cultural trends, the really valuable ones are those that are rooted in identity, that speak to who people are about. The eBoy scene, with Young Blud as an icon, is a case in point, reflecting the values of a tribe that does not identify with the Instagram-perfect archetype of appearance. 

These scenes sometimes revolve around music, but most often, music is simply the soundtrack, with a number of artists emerging as icons, not because they have cynically targeted them but because they come from those communities and reflect their values. Fandom is an output of this shaping of identity. It is simultaneously a way of showing how much identity matters to you and of reinforcing that identity. In fact, fandom is identity’s virtuous circle of influence, with people’s fandom reinforcing their identity and communicating it to their scene community, thus reinforcing their bonds within it.

Identity is fandom’s ground zero. Music marketers that are able to identify and nurture it (rather than simply attempt to harvest it) have an opportunity to forge a depth of artist-fan relationship that will endure far beyond the whim of any algorithm, survive both hit and miss singles, and will not disappear into the black hole of lean-back consumption. 

Streaming put fandom on hiatus. Scenes represent an opportunity to reforge fandom for the modern era, an incubator for artist careers. In short, an antidote to the song economy.

WMG is moving beyond superstars – and that is a good thing

Warner Music Group’s (WMG’s) Steve Cooper recently stated that the major is no longer financially dependent on superstars – which is, of course, quite a different thing from not being culturally dependent on them, but we’ll get to that. For a major’s CEO (exiting or not) to make such a claim is both bold and a reflection of the reality on the ground. In fact, it is a natural milestone in a trend MIDiA identified years ago: fragmented fandom. As streaming audiences and consumption fragment, so does the impact of superstars. As with any transition, the shift is not linear and there will continue to be more Olivia Rodrigos and Billie Eilishes, but they will be fewer and farther between, and crucially, they will be smaller than their pre-fragmentation peers.

Superstars getting smaller is music to the ears of independent labels and artists alike, but it is far from the death knell for big labels. Instead, it simply reflects the new environment in which they will operate. Indeed, Cooper said WMG is pursuing a “portfolio” strategy “across a bigger number of artists” to reduce financial “dependency on superstars”. This comes after BMG’s CEO, Hartwig Masuch, said of their latest results: “The extraordinary thing about our first half result is that we grew revenue 25% with virtually no hits”. Having no superstars does not mean having no hits, instead it means more, smaller hits.

In 2019, MIDiA wrote that “Niche is the new mainstream”, that the water cooler moments of the linear era were being replaced by cultural moments. Audiences are in different places at different times, with algorithms delivering them different personalised content. Concepts, such as ‘song of the summer’, are becoming different for everyone. Each listener has their own song of the summer. In the era of fragmented fandom, water cooler moments across the masses, where everyone heard the song on the radio at the same time, are replaced by smaller groups of people finding pockets of likeminded fans across the world.

The consequence for artist marketing is a progressive shift from ‘carpet bombing’ mass media in order to build artist brand reach, to campaigns that, instead, reach real fans with laser-focused targeting. In the old model, a superstar artist was a household name, with mum and dad just as likely to know them as their kids. But what was the value of mum and dad knowing the artist if they were not the target audience? It might play to the artists’ egos, but it was an inefficient spend of marketing budget. Now, targeted marketing reaches the consumers who care. The result is smaller, but more passionate, fanbases. This is marketing to build fans rather than audiences. It is just a shame that western DSPs are built for passive audiences rather than fandoms. That will need to change. DSPs paradoxically triggered the fragmentation, but they do not provide the mechanisms for artists and labels to benefit. A cynic might argue that that is by design.

Indeed, the fragmentation of listening that streaming is pushing consumption towards the middle, away from the superstars, as Music Business Worldwide’s Luminate chart for streams of the US top-10 tracks shows.

For the superstars who are used to mega-fame from the pre-fragmentation days, a new release’s performance can look like diminishing success when measured by traditional metrics – just ask Beyonce. But, because fragmentation means it is truer fans that engage with the music, the cultural relevance of these smaller hits can actually be bigger – again just ask Beyonce.

There are, however, extra complications. As we are currently in a transition phase, pre-fragmentation hangovers are muddying the streaming waters. Pre-fragmentation hits stick around for longer on streaming because they had the pre-fragmentation brand reach. Since they benefited from the old-world mainstream media exposure, their hits cut through on streaming in a way that newer ones often struggle to. These pre-fragmentation hangovers have the effect of fragmenting new hits even further as they take up so much of streaming’s consumption. The result is that streaming is not so much a level playing field as a field of all levels.This transition phase will play out, and while it does, there is a world of opportunity for artists and labels that can harness the deeply held fandom that fragmentation creates.

The rise of scenes

The most exciting knock-on effect of fragmentation is the rise of scenes and micro scenes. In the old world, consumers had a limited range of things with which they could identify themselves, as everyone was watching the same TV, reading the same magazines, listening to the same radio, and shopping in the same shops. Now, consumers can build their own identity from an ever more diverse set of attributes, across fashion, music, TV / film, games, politics, etc. 

As my colleague Tatiana Cirisano put it:

“The result is that scenes are becoming more complex and splintered. Consider the seemingly endless range of subcultures on TikTok, from #cottagecore to #EGirl, or the Instagram account @starterpacksofnyc, which has garnered more than 64,500 followers by crystallising super-specific, yet eerily-familiar, personality types.”

This rise of scenes is what will shape the future of marketing, with scenes becoming the new territories, transcending borders and cultures. Superstars will get smaller, but they will get better at monetising their superfans (this is why Taylor Swift’s Universal Music Group deal includes a broader range of rights than just recordings, as her sales were only going to go in one direction). Superstars are not dead, they are changing, become smaller and less, well, super. It is an inevitable second-order consequence of streaming splintering listening and the smart labels will harness the trend rather than try to fight it.