Where did Disney and Live Nation’s missing $10 billion go?

In both economic and pandemic terms, we are in a relatively quiet period compared to the first half of the year. COVID-19 is at much lower levels in most countries and there are multiple sectors, such as housing and auto, that are reporting booms. These positive indicators will likely be both a pre-recession bounce and the lull before COVID-19’s second peak. However, there is a crucial subtext here, which is that one sector’s loss is often another’s gain. COVID-19 saw winners and losers, as any post-recession recovery is defined by ‘scarring’ where some companies and formats build where others have failed. For entertainment companies that lost revenue during the first half of the year, the question is whether they will regain that revenue or whether their lockdown legacy will be a long-term contraction.

Live Nation and Disney (because of its theme parks) were two of COVID-19’s biggest and highest-profile entertainment company casualties. Live Nation’s revenues fell from $3.2 billion in Q2 2019 to $74 million in Q2 2020, a 98% decline. Disney’s fall was less in relative terms (-38%) due to having a diversified business but more than double Live Nation’s loss in actual terms. Between them, Disney and Live Nation lost nearly $10 billion of revenue which can be bluntly equated with $10 billion of consumer entertainment spend that went unspent in Q2 2020. The big question is whether that spend remains dormant, waiting to be tapped when doors open again, or has it gone elsewhere – and if so, can it be won back.

The lockdown winners were companies that could trade on consumers being cooped at home: games, video, home shopping, video messaging etc. Some of these were stop-gaps that consumers turned to in order to fill the void; others represent long-term behaviour shifts. Here are some of the places consumers shifted their spend, and how it might impact recovery for entertainment businesses:

Home improvements: One of the areas to see strong lockdown growth was home improvements – people stuck at home staring at the DIY jobs they had always meant to get around to doing and now had both the time and the money to do them. Home Depot saw its Q2 2020 revenues increase by $7.2 billion, nearly three quarters of that lost Disney and Live Nation revenue. Obviously, these are not like-for-like shifts as different geographies are involved, but the direction of travel is clear. The beauty of the home improvements business model is that there is always another room to do, another project to start. The risk for entertainment companies is that a portion of these new home improvers may have got the DIY bug and will have less spend to shift back to entertainment.

Home shopping: Amazon was a huge lockdown winner, growing quarterly revenues by 42% compared to 2019, representing an increase of $38.3 billion. Those revenues include, among other things, its cloud business, which rode the wave of many of lockdown’s other success stories. Additionally, the shift to home shopping has been pronounced. Amazon’s growth has extra implications for entertainment companies. Its subscriptions were up 29% which largely refer to Amazon Prime, which of course comes with music and video bundled in and will in turn compete directly with pure-play propositions like Spotify and Netflix. This will take on added significance during the recession: when cost-conscious consumers are forced to cut back on spending, an all-in-one entertainment bundle that includes home shipping looks a lot more cost effective than a handful of standalone subscriptions. Amazon Prime is not recession proof, but it is certainly recession resilient.

Changing of the guard: Some of most interesting shifts are actually within entertainment. For example, AMC cinemas saw quarterly revenues fall by a catastrophic 99%, representing a quarterly loss of $1.5 billion while over the same period Netflix gained $1.3 billion. Again, the geographies are not directly comparable but the direction of travel is clear: old video being replaced by new video. A similar changing of the guard is happening in digital advertising. Alphabet, the powerhouse, saw revenues fall by 2% while Amazon saw its ad revenues grow by 40%. Turns out that advertisers will pay a premium to reach customers that are one click away from a purchase. Who’d have thought it…

The list of examples of lockdown shifts goes on and on. In fact, so much so that MIDiA is currently working on a major new piece of research exploring these shifts and what the long-term implications are for entertainment businesses. We’re calling it ‘Post-Pandemic Programming’. There will be a series of in-depth reports for clients and also a webinar and podcast mini-series. So, watch this space!

But returning to the above findings, the key takeaway is that companies that lost entertainment spend during lockdown should not assume that this spending is waiting in consumer’s bank accounts, ready to be spent as soon doors open again. Pent-up demand will ensure much of it will but some of it is probably gone for good, allocated to new habits developed during lockdown but that will persist long after. This is not to say that those companies cannot return to previous heights, but to do so they will need to unlock new spending from new customers. Which may not be the easiest of tasks during a global recession.

Artists are Learning How it Feels to be a Songwriter

The ‘broken record’ streaming debate that continues to rage on is a natural consequence of the instantaneous collapse of live music revenue following lockdown. As soon as it was clear that live was going to be gone for some time, MIDiA predicted that the artist backlash against streaming royalties would be a natural, unintended consequence.

With many artists used to live comprising more than half of their income and streaming by contrast a sizeable minority, it was easy for them focus less on whether streaming paid enough and more on how many extra fans it was bringing to their concerts.

In the absence of live, all eyes are on streaming. As I’ve written previously, there isn’t a silver bullet solution to what is a complex, multi-layered problem. But there is a really important issue that artists’ lockdown plight shines a light on: the long-term plight of songwriters. Here’s why.

Streaming did not grow in a vacuum

The streaming economy did not grow in a vacuum. It rose in the context of a thriving wider music industry where artists were earning good money from live, merch and (for some) sponsorship. Nor did streaming ever consider its relationship to live as being neutral. Spotify in fact is vocal in its belief that it  ‘supports and extends the value of live’.

This matters because it encourages artists to think about streaming delivering a wider set of concrete income benefits than the royalty cheque alone. The streaming case is that without it, artists would be playing to smaller crowds and selling less merch. A high tide raises all boats.

Without the halo effect benefits though, artists would have found it much more difficult to adjust to the shift of paradigms from a series of large one-off income events (i.e. selling albums) to a longer-term, more modest monthly income, namely trading up front payments for an annuity. Artists would have found it as difficult as…well…as they are now. This is how it feels not to have live music and merch paying the bills. This is how it feels to be a songwriter.

Songwriters only have the song

Professional songwriters (i.e. not those that are also performing artists) may have many income streams (performance, sync, mechanicals, streaming) but they all depend on the song. The songwriter lives in a song economy. The artist lives in a performance/ recordings/ clothing/ collectibles/ brands economy. Songwriters do not tour or sell t-shirts. As a consequence, they have been paying closer attention to streaming royalties over recent years than artists have. Now that artists are also unable to tour or sell shirts (at least in the same volumes) streaming royalties suddenly gained a new importance to them also.

The good news for artists is that live will recover (though it will take until late 2021 to be fully back in the saddle). The bad news for songwriters is that there is no easy or quick fix and things will get worse before they get better. One of the key imbalances is in streaming. Music publisher revenue is around 2.8 times smaller than label revenues but streaming royalties are four times smaller. As streaming becomes a progressively larger part of the wider music economy, if the current royalty mix remains, songwriters will earn a progressively smaller share of the total.

A generation of whom much is asked

Artists are fighting an important fight now, but when live picks up post-lockdown, songwriters will still be fighting their fight. This is not to in any way diminish the importance of artists getting a fairer share from streaming services and record labels, but it is to say that much of their pain will ease when their other income streams come back online.

Be in no doubt. Songwriters have a long and windy road ahead of them.

Songwriter’s streaming era plight reminds me of Franklin D. Roosevelt’s 1933 quote:

“To some generations much is given. Of other generations much is expected.”

But just as streaming does not exist in isolation, nor do songwriters. They are the foundations of the entire industry. There is a well-used saying that ‘everything starts with the song’. It doesn’t. Everything starts with the songwriter.

Quick reminder: if you are an artist and you haven’t yet taken our artists survey, then there is still time! We are keeping the survey live for a few more days. All individual responses are 100% confidential. All artists get a full copy of the summary survey data so you can benchmark yourself against your peers, including how they are dealing with the impact of COVID-19. The survey questionnaire is here.

The Global Music Industry Will Decline in 2020

Sorry to be the bearer of bad tidings but the global music industry will decline in 2020.

Although we are now nearing the post-lockdown era in many countries across the globe, we are only just at the start of the recession phase that is coming next. Over the coming months we will start to see concrete examples of the downturn (including Q2 financial results) that will transform the recession from an abstract possibility into something far more tangible.

Although live music is the most obviously impacted, all elements of the music industry will be hit. In a forthcoming MIDiA client report we will be publishing our detailed forecasts of exactly what this impact could look like. In this blog post I am sharing some of the top-level trends.

music industry revenue forecasts 2020 midia research

In order to forecast recessionary impact on music revenues MIDiA broke down all of music’s sub-industries (recorded, publishing, live, merch, sponsorship) and all relevant sub categories (streaming, sync etc.), and then divided these into the financial quarters of the year. We then modelled the impact of lockdown, longer-term social-distancing measures and the recession on each of these quarters. We then put this model through bear, mid and bull cases. The sum totals are what you see in the chart above. In all cases, the Q2 decimation of live revenue and the subsequent slow clawback in the remainder of 2020 account for the majority of the decline.

In our mid case (i.e. what we consider to be the most likely case) we forecast a 30% decline on 2019 revenues with the following sector-level changes:

  • Recorded music (retail values) +2.5%
  • Publishing -3.6%
  • Live -75%
  • Merch -54%
  • Sponsorship – 30%

This is how we are thinking about each sector:

  • Recorded music: Music streaming will be far less affected by a recession than many other sectors. But under no circumstances is it immune, and ad supported in particular is anything but ‘resilient’. When the recession bites, consumers will cut discretionary spending, including subscriptions. We expect the increase in existing music subscriber churn to be relatively modest but the growth of new subscribers to slow in markets hardest hit by a recession. Unfortunately, millennials – streaming’s heartland – are the most vulnerable to job cuts. Ad supported is going to struggle whichever way you look at it. Spotify was struggling to make ad supported work even before the recession, while Alphabet was seeing a weakening Google ad business even last year. But it is the other parts of the labels’ businesses that lockdown has hurt most so far: physical sales due to store closures; sync due to the halt in TV and film production; performance due to store and restaurant closures. Q2 revenues could average out at between -2% and +1.5% up on Q1. If the recession deepens significantly in the second half of 2020, the combined effect of higher unemployment and reduced consumer spending could result in a worst case scenario of -4.0% annual growth for recorded music. If the economy recovers in 2021, recorded music revenue will return to growth also.
  • Publishing: Music publishing has been a steady earner for so long and as a consequence has enjoyed an influx of investment in recent years. 2020 though looks set to be a year of revenue decline. Our base case is for a -3.6% change on 2019. Key to this are: reduced syncs due to the halt in filming; reduced performance royalties due to a) live music decline; b) commercial radio declines; c) retail and leisure closures. Physical mechanicals, though small, will be hit by store closures. If the economy recovers in 2021, music publishing revenue will return to growth also, though performance revenues will see long-term transformation due to changes in lifestyles, e.g. more homeworking means less commuting (less radio) and less time spent in urban centres (less retail and leisure) both of which impact publisher income. If the economy recovers in 2021, publishing revenue will return to growth also.

 

  • Live: Even if live events can be put on in Q3, reduced capacities and some venues not being able to operate at all will mean that live revenue growth will be a slow clawback – a process that will run into 2022 and that will only be partially offset by the (much needed) growth in virtual event revenue.
  • Merch: Although there have been some great merch success stories during lockdown (including veteran UK synth poppers OMD selling £75,000 of merch during one live stream) merch sales are so often closely tied to live. Once the lockdown bump is over, the natural cycle of merch sales will remain disrupted by live’s slow clawback.
  • Sponsorship: Artist sponsorship will be hit by brands scaling back their marketing budgets as the advertising economy contracts.

In addition to the forthcoming MIDiA client report we will be exploring these themes and others in our free-to-attend webinar next week: Recovery Economics: Bounce Forward Not Back. Register here.

Recovery Economics | Bounce Forward not Back

COVID-19 social distancing measures caused unprecedented dislocation to the entertainment economy. With a recession now a question of ‘how bad’ rather than ‘if’, entertainment companies have to adapt their businesses and identify new partners to maximise opportunities in the post-lockdown era. This requires a detailed understanding of how the underlying user need states of their customers changed during lockdown, how these changes will in turn evolve, and how they can meet this new demand.

To help entertainment businesses and creators understand these dynamics and navigate the choppy waters ahead, MIDiA Research has created a new research stream entitled Recovery Economics. Recovery Economics explains what the post-lockdown era will look like, which market and audience fundamentals will remain changed and the risks and opportunities these will result in.

MIDiA clients can already access the first two Recovery Economics reports here in our exclusive COVID-19 research practice, with more reports to follow. And following on from the runaway success of MIDiA’s first COVID-19 webinar, we are showcasing some of the research highlights in another free-to-attend webinar: Recovery Economics: Bounce Forward not Back. Spaces are strictly limited so sign up soon! In the meantime, here is an introduction to Recovery Economics.

Recovery Economics - MIDiA June 2020

Recessions are no new thing to the global economy, but the scale and impact of the coming recession looks set to be unlike any that has been experienced in the living memory of today’s business world. Although it is COVID-19 effects that are the fire’s spark, these factors will still underpin the recession’s impact on entertainment businesses.

The crucial difference is the recession prologue that was lockdown. We can hope that COVID-19 dissipates far more quickly, but at this stage it would be imprudent of any business not to at least plan for things being markedly different for some time so that it can identify how to adapt and even thrive during such a scenario. It is time to prepare for the new normal.

recovery economics midia research

Politicians talk of a lockdown ‘bounce-back’, with business returning to normal after its enforced hiatus. In practice, recessions do not work this way. Instead, the dislocation that caused the economy creates permanent scarring, with the effect persisting into the future even once the causal factors are gone. This dynamic is known as hysteresis, as economist Michael Roberts puts it:

“Hysteresis is the argument that short-term effects can manifest themselves into long-term problems which inhibit growth and make it difficult to ‘return to normal’.”

For the purposes of understanding how the coming recession will impact entertainment businesses, the crucial consideration is what ways lockdown impacted consumer demand and supply chains will have long term effects. The length and severity of the recession will be crucial in determining this as will the degree to which social distancing measures remain a feature of the economy.

Perhaps the single most important factor to consider is changed need states. User need states underpin all businesses. For consumer entertainment businesses this is particularly true. Lockdown’s reframing of consumption paradigms showed us that some businesses did not have a plan B when need states became void states (e.g. live) while others were dependent on specific use cases (e.g. radio and music streaming on the commute).

In the post-lockdown era, some void states will return to need states – but slowly, while some of the new need states that emerged in lockdown (e.g. more video conferencing, YouTube fitness trainers, wellness / mindfulness apps) will continue to prosper in the post-lockdown era.

The boredom dependency

For music streaming, podcasts and radio, the biggest need-state change will be the commute. For so long a source of captive audiences, the commute is entering terminal decline. Post lockdown fewer employees will be fully office based. Some will be entirely home-based. Nearly a third of consumers said that during lockdown they have been using their commute time to do something else rather than listen to audio. This dynamic will lessen post lockdown, but it is not going to go away.

Lockdown revealed the vulnerability of entertainment’s boredom dependency. The obvious weakness of relying on people to consume because they have nothing better to do is that as soon as they can do something better, they will. Entertainment companies will have to plan for a steady erosion of boredom-driven consumption.

For more on Recovery Economics, insight into what forms of entertainment will do best post lockdown and how to map how it will affect you, join us on June 10th for: Recovery Economics | Bounce Forward not Back

If you have any questions regarding registration contact dara@midiaresearch.com.

Travis Scott has Only Scratched the Surface of Music Games Tie Ups

travis-scott-fortnite-concert-1280x720In February 2019 Marshmello caused ripples of almost tidal proportions across the music business when 10.7 million Fortnite fans watched him perform a ‘concert’ in the game. Then in April 2020 Travis Scott followed in his shoes with his own Fortnite concert, pulling in 12 million players. Given that this was in the COVID-19 lockdown the 1.3 million increase was a relatively modest increase. However, Fortnite publisher Epic Games had learned its lessons from the Marshmello event and rather than limit audience demand to one event, turned it into a residency with a further 15 million players watching over four subsequent replays of the event. This took the total to 27 million, though there will be a substantial number that attended multiple performances.

What is clear is that a format has been established and that Epic Games is honing its promoter skillset. Fortnite events are labour intensive efforts to put on and currently do not scale well (hence only two events in 14 months). But there is a much bigger opportunity here for artists and one that gains new significance in the lockdown era.

The impact of COVID-19 recurring

With the cessation of live music in lockdown, artists have seen a dramatic fall in income. Established artists can expect to earn between 50% and 70% of their total income from live—that just disappeared. However fast lockdown measures are eased, live entertainment is going to take a long time to return to normal. Indeed, it may never do so.

Virologists point to the Spanish Flu outbreak after the First World War as the relevant precedent for understanding how the COVID-19 pandemic may play out. That was a far deadlier outbreak, infecting a third of the world’s population and killing up to 50 million. But crucially, it was not a single event. It had four major outbreaks over two years. It is likely that COVID-19 will not simply go away but instead will return, either in waves or as a continual background oscillation of infection.

As of May 1st 2020 less than half a percent of the world’s population has been infected with COVID-19. Even allowing for that being just a tenth of the actual cases, that means that 95% of the population has not had COVID-19. Consequently, the majority of consumers are going to be concerned about returning to potentially infectious environments.

The combination of easing lockdown measures and weak consumer confidence means that live is not going to return to normal anytime soon. Social distancing measures will likely see rows of empty seats in larger venues and smaller, standing-only venues may struggle to operate at all. Reduced, spaced-out crowds will both harm the live experience and prevent many live events from being commercially viable to operate. Consumer concern may even make it hard for reduced capacities to be met. So, artists are not going to be able to reasonably expect a strong return of traditional live income in the mid-term future.

Lockdown lag

Live’s lockdown lag may have the knock-on effect of making artists take a more critical view of their streaming income. When live dominated their income mix, streaming’s context was a meaningful revenue stream that built audiences to drive other forms of income. It was effectively marketing artists got paid for. Now that artists are becoming more dependent on streaming income, the old concerns about whether they are getting paid enough will likely come back to the fore. It is in the interests of both labels and streaming services, that labels use this as an opportunity to revisit their streaming splits with artists. Labels cannot afford to have artists united against the labels’ primary income stream.

Live streaming is not yet ready for prime time

Live streaming of concerts is gaining traction but lockdown came a little too early for the sector. It is under developed, under monetised, under licensed, under professionalised and lacks the discovery layer crucial to make it ready for prime time (perhaps an opportunity for streaming services). On top of this, it does not create the same scarcity of experience that live music does and the rise of virtual festivals with artists playing just a few songs makes live more like a playlist experience, which favours the platforms over the artists. Enter stage left games.

top ranked games for artist fanbases

Travis Scott fans are 2.3 times more likely to play Fortnite than overall consumers, but there are 80 other artist fanbases that are more likely to play Fornite than Scott’s. How do we know this?

Every quarter MIDiA fields a music brand tracker that – among many other things – tracks which games artists’ fans play. Looking across the 10 artist fanbases most likely to play three of the top games reveals a huge amount of untapped opportunity. The old model for games and music was sync. That is still a major opportunity but in the lockdown era the potential scope is so much wider.

Not every game is well suited to hosting virtual, gameplay concerts, but the console ecosystems can support so much more. Imagine if Flohio, Ben Howard, Koffee or Slowthai were to do put on exclusive performances live streamed to FIFA players via Xbox Live followed by a gaming session to which players would pay for a premium ticket to play against their favourite artists in an eSports type set up. Tickets would be limited, to create scarcity.

Lockdown economics

The lockdown lag will create a whole new set of economics across all industries. For music it will be about exploring new income streams to recast a new music business. Games will play a major part. No longer simply a place to sync music, games will become platforms for driving artist-fan engagement.

In the Attention Economy everything is connected. In lockdown economics those connections become productised and monetised, with benefits for all. Think of this like the K-Pop and Japanese Idol models, with superfans paying for extra access to their favourite artists. Instead of handshakes and meets and greets, we have gaming sessions and exclusive concerts. Artists benefit by connecting with fans and driving income; labels get to be participants in new revenue streams and help offset growing artist concern about streaming pay-outs; games companies get to add new revenue sources and products.

A dystopian virtual future

A final thought to leave you with. Tim Ingham’s recent piece suggested that Epic Games’ long view might be to create virtual artists, with the thinking being that the Marshmello and Travis Scott concerts were already in practice virtual artists. What if Epic Games is using these concerts to learn the ropes so that it could create its own roster of virtual artists. It could follow the Japanese and Korean music agency model of building rosters of employee artists, that operate under a work for hire basis. Epic Games would own 100% of all rights while the artists perform under stage names and as game avatars. Epic Games could make these virtual artists part of the Fortnite game itself to help build tribalism and fandom, and it of course already has a highly effective virtual merch store.

In doing so, Epic Games would create a games-centric music division that operates entirely outside of the confines of the traditional music industry. Dystopian perhaps, but also entirely feasible, which is why artists and labels should probably think less about becoming integrated into the games themselves and focus more on connecting their real selves with their gaming fans.

If you are a MIDiA client we will be publishing a report on this topic shortly with thousands of data points. If you are not yet a MIDiA client and would like to learn how to get access to this data email Stephen@midiaresearch.com

Lockdown Listening and the Independent Artist

After an initial lockdown lull, streaming levels are – on the surface – beginning to normalise. Underlying the macro-level normalisation, ‘lockdown listening’ is in fact resulting in dramatic shifts in listening behaviour, from using the commute time for activities other than listening to music, through using smart devices to listen at home to spending more time on YouTube. (MIDiA clients can access our latest data on these trends in our latest report COVID-19: Lockdown Listening).

Some of these shifts will have long-term effect while some will last little longer than the lockdown, but now that many artists are losing between 50%-70% of their income with the cessation of live, no artist can afford not to jump on the unique opportunities lockdown listening is throwing up, however fleeting they may be. Moreover with recording studios closed, projects getting put on hold, releases pushed back, not enough music is getting to market when it is needed most. This disruption to music’s supply chain is not going away until lockdown is and independent artists are beginning to look like they could be best placed to respond.

A COVID bounce for independent artists

In 2019 artists direct (i.e. those without record labels) was the fastest growing segment of the total recorded music market, growing by 32.1% in 2019 to reach $873 million, representing 4.1% of the total market, up from just 1.7% in 2015. Momentum was already with independent artists before lockdown, now there is a growing body of evidence that they are prospering in the lockdown listening era too. In Sweden – streaming’s bellwether – indie distribution platform Amuse saw one of its independent artists get 19 of the Top 50 tracks on Spotify’s daily chart in Sweden on March 11th and overall DIY user uploads rose 300% year-on-year for the whole month. Although daily Spotify charts need treating with some caution – especially the Swedish one which seems to routinely throw up disruptive outliers – the underlying trend is clear: independent artists can get a seat at the top table, in fact they can get a lot of the seats. Frequently this then results in majors snapping up artists, such as Lil Nas X and Arizona Nervas.

Release schedule disruption

What is unique about lockdown listening is that we are going to start to see gaps in release schedules. The longer that studio and mastering facilities remain closed, the wider the release schedule gaps will become. Right now, labels still have schedules filled with music that was written, recorded and mastered prior to lockdown. As more lockdown time passes, the more that stockpile will be eaten into. Big label artists have big label sounds. They are teamed up with top-tier writers, session musicians, producers and production facilities. This pre-lockdown advantage becomes a hindrance during lockdown. In contrast, independent artists that are accustomed to doing some or all of their recording and production themselves, lockdown listening is an opportunity to get ahead by releasing music more frequently and consistently than big label artists can. Independent artists platform CD Baby noted it had seen a 30%-50% increase in the amount of music being released since mid-March.

Live streaming to connect with fans

Lockdown may have seemed to have thrown the dynamics of artist careers upside down but in many ways, it is in fact compelling artists to get back to basics of the most important thing: the relationship with their fans. One of the growing failings of the streaming environment has been the demise of places where artists and fans can truly connect. Facebook became a place for labels and managers to sell stuff, Instagram a place for filter-perfect artificiality and streaming just a place for listening. Although there are platforms that nobly break these new rules – Bandcamp especially, fans increasingly relied on live as the place to connect. The immediate cessation of live has seen a surge of live streaming as artists look to maintain that connection. Bandsintown data shows that the number of live streamed shows continues to accelerate, up from less than 400 per day in late-March to more than 2,000 a day by mid-April.

A new artist-fan relationship

With so many live streams and no ‘programming guide’ or meta-schedule, artists have had to double down on social media activity to keep their fans informed. They have also realised – superstar missteps aside – that during these times, fans value seeing their favourite artists without the production values, without the Instagram filters, as people just like them getting through this. This taps into the psychological phenomenon where our brains respond in a particular way when we see someone that we are used to seeing in professional media contexts suddenly looking like someone just like us.

There is a real opportunity here for artists big and small to take these newly redefined relationships into the post-lockdown world. There is a dilemma though: if they don’t, they may face fan backlash, but if they do, they will have to rebuild a new artist persona that trades less on the enigma of star quality than their human qualities. This would mean an entire rewriting of the nature of fame and fandom.

Throughout the history of recorded music, artists have been one step removed, with air of mystique and otherness. The last decade has seen this softened but lockdown may be catalysing a far more dramatic shift. If it does, what we may see may actually be a normalization of fan relationships. Newer, independent artists usually depend on a deeper, loser connection with their fanbases, so many of them already arrived at this point before lockdown. Lockdown is pushing the independent artist rulebook for fan engagement mainstream.

Streaming Services Are Going to Have to Change Their MO

New music is the fuel in the streaming engine, creating a virtuous circle of increased label and artist output to meet DSP-stimulated user demand. Now though, with COVID-19 disrupting the production of music, everything is set to change. The streaming services haven’t realised it yet, but their underlying modus operandi (MO) is going to need to change, too.

charles-deluvio-6k4HkET8dPM-unsplash

When new music is all you have to position around

Disney launched Disney+ into a crowded video subscription marketplace and hit 50 million subscribers after just five months. This could not have happened in the music streaming market for the simple reason that all music services carry pretty much the same catalogue. There is no Mandalorian effect possible for music. Content differentiation is a non-starter. Worse still, music streaming services all look the same, so differentiating on user experience is out of the picture too. They also all cost the same and largely work on the same devices. Consequently, they have to differentiate on how they deliver music via algorithms and curation. This in turn has led to the weaponisation of new music discovery. The MO is simple: our value to you, the user, is delivering relevant new music at high volume and velocity. Record labels fed the beast, increasing the amount of new releases. Then came COVID-19. Suddenly studios closed down, releases got pushed back, projects put on hold. How do you continue to position and differentiate around the quantity of new music you deliver if that quantity is going to lessen?

Music’s lockdown ‘feelgood’ factor

Streaming services – and labels – are going to be able to offset some of the impact of reduced output by promoting older music. In fact, this is exactly what consumers want right now. In MIDiA’s latest COVID-19 Impact survey, more than a third of consumers stated that they are listening to music that makes them feel more positive. Meanwhile they are listening less to new music and instead more to songs the already know. Although new releases have every chance of making you feel positive, familiar music with positive memories guarantees the feelgood factor in a way that unfamiliar music cannot. Consumers are turning to radio because they value the connection with the presenters during lockdown. In these troubled, isolated times, music plays an invaluable role and in turn streaming services do also.

Preparing for a recession

The problem is not with streaming services per se. Instead it is the question of what streaming services stand for in a mini-era of catalogue renaissance after years of expensively building brand values centred on new music. Fixing the curation and the programming is the (relatively) easy part. But if lockdown measures persist into the latter part of the year – which could easily happen, despite the hopes of Donald Trump and Jair Bolsanaro – then new music will be an ever-smaller part of the streaming offering. And if lockdown measures do persist for that long, then we will likely be feeling the impacts of a recession by then. MIDiA’s March Recession Impact report revealed that around a fifth of consumers would consider cancelling their music subscription if they had to cut entertainment spending. This may seem like a subtle nuance, but if by then streaming users have become accustomed to listening to old, familiar tunes then as they are faced with the difficult decision of where to cut spending, they will know that streaming is not delivering on its original new music promise. Add into the mix that being able to listen to music on the go is a crucial subscription value add, but in lockdown phone listening is losing ground to smart device listening as mobility is discouraged.

Communicating new brand values

Streaming music, and recorded music more generally, is in a really good place right now. It is bringing much-needed light into the locked-down homes of hundreds of millions. Moreover, it is actually better placed to deal with the disruption to content production than the streaming video space because listening to older music is central to music consumption, while watching reruns of old TV shows is something you do when there is nothing better to watch. So, the coming catalogue shift is not an existential challenge for streaming. Rather than a product or programming problem, it is about brand positioning and communicating core values. Nonetheless, these soft tools are crucial and unless the groundwork is laid now, a serious problem could manifest in six months or so if the economy enters a recession. Time for those marketing and branding teams to earn their crust.

Note: If you were wondering why I haven’t discussed how all this might affect independent artists – that’s next week’s post!

Free COVID-19 Impact Webinar

MIDiA Research is running a free-to-attend webinar on Wednesday, April 15th: COVID-19 Impact on Entertainment Demand and Behaviours.

MIDiA COVID-19 Webinar imageRegular readers will know that MIDiA has been publishing COVID-19 impact research, data and analysis since lockdowns started taking effect in the West. In this webcast, we will be presenting some of our latest research findings as well as having a panel discussion featuring the BPI’s CEO Geoff Taylor and some of the MIDiA team, including:

  • Keith Jopling (music and radio)
  • Tim Mulligan (video and TV)
  • Karol Severin (games)
  • Alistair Taylor (sports)
  • Hanna Kahlert (culture)

The panel will explore how consumer lockdowns have impacted media consumption, who are the market winners and losers, and what the likely long-term effects will be.

We have already had a very large number of sign ups so places are now limited. Click here to register: WEBINAR REGISTRATION

If you are a MIDiA client, we now have a new COVID-19 research vertical here.

If you are a small-to-medium sized independent entertainment company, you can take advantage of our COVID-19 research package here.

And if you haven’t done so already, you can download the free MIDiA COVID-19 impact report here.

Stay well and healthy.

Exclusive COVID-19 Research Package for Independent Entertainment Companies

During these unprecedented times, the entertainment industries are experiencing rapid change and have been forced to adapt accordingly – from the near collapse of live entertainment, through the cessation of filming and recording, to the surge in home entertainment consumption. This is a period of huge uncertainty for everyone, from both a personal and a business perspective. At the same time, though, lockdown measures have turned the majority of consumers into captive audiences for entertainment. The content companies that survive the pandemic’s socio-economic dislocation – some will even thrive – will be those who best understand where and how to allocate their resources. For smaller companies with limited resources, such decisions can be ‘make or break’ at the best of times, let alone during COVID-19.

This is why MIDiA has put together a special, heavily discounted research package for small- to mid-sized independent entertainment companies to help them with commercial and marketing strategy during this challenging time. This exclusive offer has been designed specifically for independent labels, publishers, talent agencies, TV / film production companies, games publishers, sports agencies and any other small, independent company focused on the entertainment sectors.

MIDiA’s main subscriptions have a 12 month duration, but we appreciate that few smaller companies can afford to take on a long-term commitment right now, so we have created a discounted three month package for small- to mid-sized entertainment companies. Included in this package are three months’ access to:

  • MIDiA’s COVID-19 research vertical
  • One research vertical (chose from Music, Video, Games, Sports)
  • The Media and Marketing vertical
  • Access to Fuse, MIDiA’s proprietary data platform

Access covers both new reports and all previously published reports and data in the respective coverage areas.

Our COVID-19 vertical is unsurprisingly a brand-new service but already has three reports – and we’ll be publishing one or two new COVID-19 reports every month throughout the worst of the pandemic. This research deep dives into the near- and long-term impacts of COVID-19 on entertainment businesses and includes industry analysis, consumer insight and market models. To get a better feel for our COVID-19 coverage, take a look at the shorter, free version of our first COVID-19 report here.

The price for all of this is £3,500 ($4,300).

If you are a small- to mid-sized independent entertainment company and would like to learn more about this special package, then email one of our team:

stephen@midiaresearch.com (music companies)

colette@midiaresearch.com (video, games and sports companies)

The COVID Bounce: Part II

In their early stages, COVID-19 self-isolation measures have quickly created new consumer behaviour patterns, oriented around four key axes:

  1. Communication
  2. Entertainment
  3. Information/news
  4. Education (for children at home)

COVID-19 top apps downloaded midia research

The demand for the first two of these behaviour groups is clearly illustrated by the mobile apps that consumers are downloading. Across the Apple App Store and Google Play Store, the top 10 most downloaded free apps are dominated by video communication apps and games. These types of companies have been some of the biggest winners in the early stages of COVID-19.

Meeting the demand for human connection

The top two apps are ones that have been around for a long time but have found their moment in the current crisis. Following years establishing itself as a tool for business, Zoom has become the go-to for work-from-home staff, consumers and a host of people and small businesses looking to continue classes with students such as music classes, fitness and yoga. Zoom has managed to achieve that most elusive of consumer market forces: to become synonymous with an entire product category, much like Spotify has for music, Netflix for video, Google for search and Amazon for e-commerce.

Multiple other video communication apps such as Google’s Hangouts have also grown strongly, but the biggest business-focused winner after Zoom is Microsoft Teams. Over the last half a decade, Microsoft – the original tech major – has been rebuilding its business, establishing itself once again as a global power player. With its strong focus on enterprise and utility capabilities, Microsoft could be better positioned than the consumer-facing tech majors (Alphabet, Amazon, Apple, Facebook) to weather the likely COVID-19-driven recession. Apple’s Facetime has also experienced strong usage during the COVID-19 dislocation, but because it is a native iOS app does not appear in the app store charts.

Houseparty has grown fast… perhaps too fast

Houseparty has achieved a similar role for the pure-consumer side of the equation. After years of modest success – it was launched in 2016 – it has rocketed up the app store charts, with its highly social, fun focus giving it particularly strong reach among younger age groups. The early signs though are that Houseparty’s owner Epic Games may not have been fully prepared for the surge in usage. While its original Gen Z and Millennial target user groups may have been tolerant of the wide social reach Houseparty delivers, there are widespread accounts in the media of older consumers reacting badly to features such as people unexpectedly joining parties who they are not close to but were automatically added when they synced their contacts to the app. Also, as with any rapid growth comes the risk of scams, as illustrated by frustrated users complaining that their payment details have been hacked via the app. Although Epic Games claims it has been the victim of a smear campaign these are all the sort of unintended consequences of rapidly growing into new user segments. Houseparty is running to keep up and risks a consumer backlash if it cannot respond quickly and robustly enough. Epic Games of course knows all about global scale success so should be able to bring the expertise to bear.

Filling the down time

The other big app gainers are games, with four placings in the top 10. While games as a wider sector has been a key beneficiary of the COVID-19 dislocation, mobile games tend to skew more towards casual gamers. Popular mobile games are often easy to play, giving them wider appeal. The four games in the top 10 – Save the Girl!, Perfect Cream, House Restoration and Park Master – are clear illustrations of bored consumers looking to fill the extra time they have on their hands. Mobile games were early winners in the attention economy but lost market share as other forms of media grew in competition. Now, with an average of 15% of new attention time being available for employed consumers – due to no commuting or going out for leisure – mobile games is enjoying a similar dynamic as in the early days of the app economy. With disruptions to TV, film and music production, this boom will likely extend – albeit at lower rates – beyond the social-distancing phase, until other media categories can produce enough new content to win back more consumption time.

Post-COVID new world order

When the COVID-19 dislocation finally ends, consumers and businesses alike will return to a state of greater equilibrium. The transition will be steady rather than instant, and newly-established behaviours will take time to change. However, the point from which they will change will be different from today as consumers and businesses are still only beginning to establish new forms of normality in these abnormal circumstances. However, what is clear is that consumers and businesses will take with them into the post-COVID world new perspectives on life and behaviour.

Video messaging was already on a strong upward curve but COVID-19 has accelerated that by rapidly expanding its business use and pushing it to older, more mainstream audiences more quickly than it would otherwise have done. When the COVID-19 dislocation subsides, video messaging is one of the activities that will have a higher usage watermark than before the crisis.