The COVID Bounce and the coming Attention Recession

2020 was by any measure a unique year in modern times. While the societal impact of the pandemic was, and continues to be, horrific, for the entertainment industries it was a year of plenty. At the start of the pandemic, MIDiA Research estimated that there would be an extra 15% of consumption time for the average working consumer. Well, now that the end of year data is in, we can confirm that this ‘COVID bounce’ did in fact happen, with overall consumption time up by 12%. When you consider that the working population is only a subset of the overall population, that 12% means that we were pretty much on the money with our prediction. But while this uplift was seen right across entertainment, some formats did better than others and, crucially, some of that extra time will diminish whenever it is that the population starts returning to work and going out again. Which means that for the first time ever in the Attention Economy, there will be an Attention Recession, with very obvious potential ramifications for all entertainment companies.

The full results of MIDiA’s highly detailed COVID media consumption study is now available to MIDiA clients in the report ‘Media consumption: Lockdown’s attention boom’ and the accompanying dataset. Here are a few of the high-level findings.

  • Everything was up: 2020 was a case of a high tide rises all boats, with all forms of entertainment increasing average consumption time. Video consolidated its position as the leading format in terms of hours spent, but the largest percentage gains were in games (30%) and non-music audio (24%). Consumers even increased their time doing nothing / chilling, illustrating that despite the unsettling chaos of the pandemic, consumers found more time to relax and also to contemplate. Interestingly, doing nothing increased by a greater rate than listening to music.
  • Audiobooks were audio’s big winner: While podcast listening was up by an impressive 35%, audiobooks were lockdown’s biggest winner, increasing average time by nearly 50%. The radio and music businesses’ obsession with podcasts is understandable given how much focus the likes of Spotify, Amazon and Apple have placed on them, but the audiobooks category has emerged as the dark horse of the piece. When all audio time is considered together (radio, music, streaming, podcasts, audiobooks), audiobooks now account for a similar share of total time as podcasts do. Though music streaming was up too during lockdown, it grew more slowly than podcasts and audiobooks so was flat in terms of total share. Radio lost share. The shift is reflected in Spotify’s numbers: its average content hours per monthly active user (MAU) fell by 1% in 2020. Given that this figure includes podcasts, the inferences are: a) Spotify lost share of audio time, and b) music hours fell. It wasn’t just Spotify that did not keep pace with the audio boom. Even apps like the BBC’s Sounds saw a fall in the ratio of weekly to daily users. 
  • Casual gamers boosted games: Games’ growth was driven both by core gamers using the former commute time to get in some extra time on their consoles and gaming PCS. But the biggest growth was driven by mobile casual games. In previous years, mainstream consumers had driven a games surge, adopting titles like Candy Crush, but then shifted much of this time to the likes of Netflix and Spotify as the Attention Economy saturated. With more time on their hands in lockdown, mainstream consumers flocked to casual games once again. This will be a likely casualty of the coming Attention Recession.
  • Music is just one lane in audio: COVID-19 catalysed many pre-existing trends; the audio shift was one of those. Just as Netflix took TV out of the TV, podcasts took radio out of radio and contributed to a wider trend of consumers taking an increasingly format-agnostic view of audio. Breaking long-held habits in lockdown, audiences were able to try out new things and, given that we are nearly a year into the lockdown era, establish new behaviours that will remain to some degree post-pandemic (if that is ever a phrase that will really ring true). Traditional habits like the commute and exercise will now see audiobooks and podcasts competing for music time like never before. For music companies, this means that they need to understand they are now in the audio business and they are predominately just competing in one lane. This does not mean that they inherently need to become ’audio businesses’, but it does mean that they need to build strategies that account for this shift. Meanwhile, Amazon once again emerges as the dark horse with music, podcasts and – via Audible – audiobooks. Amazon looks set to be a big beneficiary of the lockdown legacy.

If you are not yet a MIDiA client and would like to learn how to get access to the ‘Media consumption: Lockdown’s attention boom’ report and data then please email stephen@midiaresearch.com.

2021 Predictions: The year of the immersive web

As we approach the end of 2020 it is time to look forward to what 2021 may bring. MIDiA has published the fifth edition of our Annual Predictions report which clients can read here. There are 27 predictions in the report, but I am sharing a few of them here. MIDiA has a pretty good track record with its predictions; 79% of our predictions for 2020 were correct.

These are the seven meta and cultural trends that we believe will shape 2021: 

  1. The immersive web
  2. Recessionary impact
  3. The great reaggregation
  4. The return of synchronous experiences
  5. Social consumption and micro communities
  6. Video streaming as a cultural catalyst 
  7. The end of influencers

The immersive web

Web 1.0 was an information dump; web 2.0 added multimedia and social. Now we are entering the third phase, which MIDiA terms the immersive web. As is usually the case with big epoch shifts, this will not be a clear and sudden change but instead a steady change – a change that is, in fact, already happening. The immersive web is characterised by environments in which we do not simply conduct extensions of IRL activity (e-commerce, video calls) but ones that create behaviours and relationships that only, and can only, exist within these environments. Apps and platforms like Roblox, TikTok and Discord are early iterations of the immersive web, but merely hint at what will come. The trend will be driven by Gen Z, who have grown up with social apps from the playground onwards. Gen Z relies more than any previous generation on such apps for social interaction and expression, forming muscle memory for digital-first relationships. The COVID-19 lockdown measures have accentuated this shift, further solidifying Gen Z’s receptivity to future immersive web experiences.

Music

Here is a short version of some of the trends we expect to shape music in 2021:

  • The start of an artist economy: Streaming is a song economy of which the scale benefits rights holders far more than creators. The industry needs to work towards a collection of models that work for artists. Components could be micro-communities (see below), sounds platforms, ticketed live streams, skills marketplaces, and virtual merch. 
  • The rise of micro-communities: Niche is the new mainstream. The next phase of this market dynamic is the emergence of micro-communities; small audiences of dedicated fans who almost consider it an honour-bound duty to support their artists. 
  • The creator tools revolution: Creator tools, particularly music production and collaboration, will be one of the most important market shifts in 2021. Companies like Splice, LANDR and Output will continue to build scale in 2021, changing both the culture and business of music. 
  • Live streaming professionalises: With live unlikely to be anything close to full capacity until the latter part of 2021, live streaming will be used by a growing body of artists as a genuine revenue driver, rather than the audience engagement role it played in much of 2020, driven by increased professionalisation, better distribution and more sophisticated monetisation.
  • Music continues to deliver as an asset class: Although the pandemic dented music publishing’s long-term growth story, music catalogues retain strong appeal as an asset class, not least because they are performing better in relation to many asset classes that have been hit hard by the pandemic and that look vulnerable to the coming recession. The imbalance between supply and demand remains, so expect prices paid to continue to accelerate. 
  • UGC continues to accelerate: User-generated content (UGC) music revenues reached $4 billion in 2020 and will push up to $4.9 billion in 2021. The crucial difference between UGC music now compared to five years ago, is that the focus is on genuine user creativity rather than users simply uploading others’ music.

2020 was a year like no other in modern times, with the impact on digital entertainment both pronounced and creating the foundations for accelerated innovation in 2021. Whatever may happen to the global economic and health outlook, digital entertainment will go through further dramatic change in 2021.

New Webinar on What Comes After Lockdown

0Want to know what happens in the post-Lockdown era? Join us for our free-to-attend Recovery Economics webinar tomorrow (Wednesday 10th June) at 4pm BST / 11am EST / 8am PT for insight on music, radio, games, TV, sports and media.

We will be presenting an overview of MIDiA’s latest research thesis: Recovery Economics. This is our framework for identifying which changed need states that emerged during lockdown will form the basis for new behaviours post-lockdown and what you need to do in order to adapt to this new normal.

What is clear is that simply doing more of the same is not a strategy. The Covid-19 lockdown created severe dislocation across many entertainment sectors but also a host of new growth opportunities. As we emerge from lockdown and enter the early stages of a global economic recession, some of these ‘new-normal’ business models will grow further, presenting increased competition for the ‘old normal’. New and established players alike will have to play by different rules in this coming period, dealing with challenges such as permanent changes to lifestyles, weakening consumer spending and ever growing competition for attention.

In the webinar we will explain how this will look across the music, TV, film, games, radio, sports and media industries.

Register now!

How Coronavirus Will Affect the Entertainment Industries

The coronavirus is a global pandemic. Regardless of what its actual infection and mortality rates might be, it is already having seismic impacts on stock markets and consumer behaviour – the result of which might be to tip the global economy into recession. It is also creating the largest home working experiment in history. Even if coronavirus doesn’t tip us into recession, the next few months will see major disruption of consumer behaviour patterns with major implications for the entertainment industries. However, to introduce an element of calm into the hysteria, coronavirus appears to be following the s-curve (scroll down to chart). So although the data we are currently looking at is two weeks out of date (ie factoring in the incubation period) the early signs are that it tops out as a small minority of the population).

In Q4 2019 MIDiA fielded questions to consumers about how they would change their leisure and entertainment spending if a recession took place and they had to reduce their overall expenditure. The full findings of this exclusive research will soon be published in a MIDiA report: Recession Impact | Cocooning Will Protect Entertainment Spend (the latest in our series of Recession Impact reports). Here are a few highlights and how they relate to the current coronavirus spread.

In the last economic downturn, consumers cocooned, opting to stay in more in order to save money. The signs are that this pattern will be replicated if another recession comes, particularly so because of public concerns about health risks in public places. When we asked consumers which three types of leisure and entertainment spend they expected to cut back on most, going out and eating out were by the far the two most widely-cited options. Live music was also widely cited among concert goers but less so than going out and eating out, with around two thirds of concert goers not planning to stop going to gigs – cancellations allowing. The difference between now and the last economic downturn is that digital content services have boomed, so consumers now have much better home entertainment options than they used to. Cocooning is therefore an even more appealing prospect. Indeed, there are probably already many people looking forward to binge watching themselves through a few virtual boxsets.

Crucially, streaming looks to be relatively well placed. Just over a fifth of consumers expect to have to cancel a video subscription and the same goes for music. However, the impact on music would be more pronounced due to the majority of music subscribers only having one music subscription. So, a consumer cancelling a music subscription means a lost subscriber. But with more than half of video subscribers having more than one video subscription, a cancelled video subscription would most often simply mean one less subscription in the market rather than a lost subscriber.

Of course, when push comes to shove, consumers may find themselves cutting back more dramatically, with streaming music particularly vulnerable because:

  1. Younger people are normally the first to lose their jobs and millennials make up the lion’s share of music subscribers
  2. Downgrading to a free tier still leaves the consumer with a decent music experience, and that’s without even considering the role of YouTube

Across both music and video, a long-term recession – if it happens – would see a growing role for ad-supported. YouTube looks best placed to prosper, not least because Spotify has not had the best of times growing its ad business. Pandora may also benefit, as may the likes of Peacock in video.

In short, whether it be subscriptions or ad-supported, coronavirus may actually benefit streaming business models, especially video. If a recession comes then entertainment spend will be hit, but significantly less so than leisure. These are worrying times, but at least we’ll be able to binge watch our way through them.

Spotify AND Apple Lead Podcasts – It’s All Down to How You Measure It

midia podcast tracker q4 2020The podcast platform data from MIDiA’s Q4 tracker is in. These are the high-level findings:

  • Apple still leads overall: A recent report showed that Spotify has become the leading podcast platform in the US. MIDiA’s Q4 Tracker data shows that among regular podcast users, Spotify is very nearly but not quite the leading platform in the US, just trailing Apple’s podcast app – though the difference is so small that it could be within margin of survey error. However, when Apple Music is factored into the equation, Apple remains the leading platform.
  • Spotify the leading single platform: In terms of single platforms – i.e. considering Apple Music and Apple’s podcast apps separately – Spotify has quickly established a leading position across all markets surveyed except the US. Spotify is betting big on podcasts, but this bet is as defensive as it is offensive. Spotify knows that its users over index for podcasts – 28% use them weekly, compared to 15% of overall consumers. If it did not go big with podcasts it was always at risk of losing share of ear as podcasts grew, in the same way Amazon lost CD buyers to Apple’s iTunes. It has taken Amazon years to start winning back the spend of its music consumers, but it could tolerate that inconvenience as it makes most of its money elsewhere. Spotify has no such luxury.
  • National broadcasters faring well: Radio broadcasters lost their younger music audiences to streaming. They were not going to sit back and let streaming services then go and steal their older, spoken word audiences without a fight. In many respects, radio broadcasters have a greater chance of being power players in podcasts because their decades of programming expertise will take time for streaming services to learn. With music, they were sitting on the shoulders of a decade of experience learned by Apple’s iTunes. The three national broadcaster apps we tracked (BBC Sounds, NPR One, CCBC Listen) had mixed fortunes, but all have solid adoption. None more so than BBC Sounds, which is the second-most widely used single platform in the UK – a testament to the BBC’s sometimes controversial Sounds strategy. However, one major factor is that broadcaster podcast app users are much older than streaming service podcast users, and indeed of dedicated apps like Acast and Stitcher. This shows that broadcasters are doing a good job of bringing their older audiences over to podcasts but are not yet making podcasts an entry point for younger users lost to streaming.

These findings come from MIDiA’s quarterly tracker survey and will be presented in much more detail in MIDiA’s forthcoming ‘Podcast Platforms’ report.

If you are not already a MIDiA client and would like to learn more about how to get access to MIDiA’s research, data and analysis, then email stephen@midiaresearch.com

The Attention Economy Has Peaked. Now What?

Regular followers of MIDiA will know that we’ve been writing about the attention economy for a number of years now. Throughout 2019 we have been building the concept that we have arrived at peak in the attention economy – that all of the addressable free time has been addressed. In 2017, Netflix’s Reed Hastings said sleep was his biggest enemy. By 2019 he claimed Netflix was competing more with Fortnite than HBO (it wasn’t really, but the concept of competing in adjacent markets is valid). In the old world, media was nicely siloed by dedicated formats and hardware (print newspapers, books, DVDs, CDs, radio sets). Now, though, we access through devices where everything is separated by nothing more than a finger swipe. Attention saturation was always going to be an inevitability, not a possibility. The important question is not why this happening, but what will come next and what the right strategies are for surviving and thriving in this post-peak world.

A mine full of canaries?

What got MIDiA first thinking about peak attention was seeing the mobile gaming audience declining every quarter in our quarterly tracker surveys. Mobile games were the canary in the mine for peak attention. When we first got mobile phones, we didn’t have a huge amount to do with them. We couldn’t watch our favourite shows, and we couldn’t easily (legally) listen to new music. So many consumers filled their ‘dead time’ by playing games, as they were de rigueurin the early days of the app stores. Before long casual gamers were the core audience of titles like Angry Birds and Clash of Clans, while your middle-aged aunt was spamming you with Facebook invitations to play Candy Crush Saga. Once Netflix, Spotify and others had got traction, however, those casual gamers started reverting to consuming the content they actually liked the most. The result was a long steady decline in the mobile gaming audience. Now, music looks like it may be following suit.

another canary

Across the US, UK, Australia and Canada, the share of people that listen to the radio declined steadily between Q1 2018 and Q2 2019. Meanwhile, those streaming audio for free remained relatively flat. The net result is that the combined audio audience declined. So many lapsing radio listeners exited the audio market as a whole (though a share shifted to podcasts, which is not considered in the above chart). The ‘share of ear’ battle is looking a lot like a minor theatre of conflict in a much larger conflagration. Amazon will continue to do a good job of shifting older, high-net-worth consumers to streaming, but that is not enough to stem the tide – especially as Amazon’s global footprint is unevenly distributed.

This is what happens in the era of attention saturation.

Social video is eating the world

Four years ago, MIDiA argued that video was eating the world. Now social video is eating the world. Video is becoming the omnipotent format through which we communicate, consume and share. Social video is eating everything. Captioning looked like it was heralding a new era of silent cinema, but it was in fact a trojan horse – a means of enabling us to fit extra video consumption into our wider consumption patterns. Over time, though, sound has become more important and with the increased tolerance of video we are now far more willing to unmute. Nowhere is this better seen than Instagram and TikTok. Audio is the victim in that equation. Not only are there are many other scenarios where audio is slipping, there are even more scenarios where other media formats are losing out. For example, Epic Games’ decision to allow Fortnite players to watch live video of the Fortnite World Cup while gaming hints at how games companies understand that there is a delicate balance between video extending brand reach and competing directly for gaming time.

Looking back gives us a feel for what comes next

Understanding what comes next in a saturated attention world requires looking back at previous markets that have peaked. The mobile phone and PC markets give us some pointers, butthe industrial revolution’s impact on the labour market is an even more useful analogue. Attention is like labour. It is a product of human behaviour and it is scarce. Digital content is analogous to the labour market, and content supply is now beginning to exceed attention output. This is already translating into increased customer acquisition and retention costs.

This is exactly the wrong time for bringing more content to market, but that is exactly what is happening. Nowhere is this better seen that the video subscriptions space with a blizzard-like flurry of new services from Disney, Warner, Apple, Discovery and NBC.

The net result of an over-supply of content is that attention saturation will become an attention deficit for many players, Netflix included. The marketplace needs a new currency for measuring success and monetising audiences.

The MIDiA Attention Economy Event

This is where I am going to cut to credits, leaving you on a cliff edge. For those of you in London next Wednesday (November 20th), come along to our free-to-attend attention economy event, where you can hear my colleague Karol Severin present our attention saturationresearch and our take on what will be the next audience currency that content providers will need to compete for. For those of you not in London there will also be a live stream, which you will be able to find here at 7pm GMT. Also, check back in next week when I will post the next chapter in this story.

NOTE: I shamelessly sat on the shoulders of giants in this post – these ideas were collectively crafted by the entire, amazingly talented MIDiA team.

Take Five (the big five stories and data you need to know)

Apple ups its artist analytics but do artists care? Kobalt and Spotify both helped reshape the music industry’s understanding of what role data should play and how it should be presented. Apple announced its Apple Music for Artists (AMFA) is coming out of betawith a whole host of cool dashboards and analytics that dive down to city level. Powerful stuff indeed. The problem, though, is not data scarcity but data abundance. Overwhelmed by dashboards and tools, artists and their managers are becoming victims of data paralysis.

Streaming video endgame:Paradigm-shifting announcements don’t come along often and when they do it is not always obvious that they are so important. This is one of them: Disney announced it will bundle its forthcoming Disney+ with Hulu and ESPN+ all for just $12.99.For a tiny fraction of a cable subscription, Disney is giving the average family everything it needs from a TV package. The bundle simultaneously competes with Netflix and the traditional pay-TV companies Disney relies upon for carriage fees. This is go-big-or-go-home for Disney and is perhaps the biggest, boldest move yet in the streaming wars.

 

Star Wars – too much too soon: When Disney bought Lucasfilm for $4.1 billion in 2012 it was a statement of intent, particularly following the 2009 acquisition of Marvel. Marvel prospered with the almost TV-episode frequency of releases; the Star Wars franchise less so. With toy sales down, Galaxy’s Edge underattended, and disgruntled fansCEO Bob Iger cited ‘Star Wars fatigue’ and committed to slowing the release schedule. The temptation to saturate markets to compete in the attention economy can be hard to resist.

Pluto drives Viacom growth: Viacom’s ad-supported streaming service Pluto TV hit 18 million active users at the end of July, up from 12 million at the start of the year– with its connected TV user segment growing 400% year on year. Growth is so fast that 50% of ad inventory remains unsold. Nonetheless, coupled with Viacom’s Advanced Marketing Solutions (AMS) division US ad revenues returned to growth (6%) in the quarter while total Viacom revenues were up 6% also, to $3.35 billion. Maybe you can teach an old dog new tricks.

Sports bubble? What sports bubble? With pay-TV companies losing subscribers and overspending on drama to hold off Netflix, budgets for sports rights are going to feel the pressure. But in the English Premier League (EPL) the mantra is make hay while the sun shines. Total transfer spending before the pre-season deadline reached £1.41billion which was fractionally below the £1.43billion record set in 2017. More than half the clubs broke their individual player transfer records. The market will likely get even more heated when streaming players start increasing their spend, but if they get a market stranglehold they will do what they do best: ‘bring efficiencies into the supply chain’, which is west coast code for squeezing suppliers. Be careful what you wish for sports leagues.

Take Five (the big five stories and data you need to know) August 5th 2019

Spotify – steady sailing, for now: Spotify hit 108 million subscribers in Q2 2019 – which is exactly what we predicted. Spotify continues to grow in line with the wider market, maintaining market share. Subscriber growth isn’t the problem though, revenue is. As mature markets slow, emerging markets will keep subscriber growth up but with lower APRU will bring less revenue. Spotify needs a revenue plan B. If podcast revenue is it, then it needs to start delivering, fast.

Fortnite World Cup: It can be hard to appreciate the scale of transformative change while it is still happening. A few years from now we’ll probably look back at the late 2010s as when e-sports started to emerge as a global-scale sport in its own right. Epic Games’ inaugural Fortnite World Cup pulled in 2.3 million viewers on YouTube and Twitch, was played in the Arthur Ashe Stadium and the singles winner picked up more prize money ($3 million) than Tiger Woods at the Masters and Novak Djokovic at Wimbledon.

Facebook trying to do an Apple, and an Amazon: With 140 million daily users of its Watch video service, Facebook is positioning to become the video powerhouse it always looked like it could be. Now it is trying to follow in Apple and Amazon’s footsteps and make itself a video device company too. Currently in talks with all its key video competitors, Facebook wants to add streaming to its forthcoming video calling device. That would leave Alphabet as the only tech major without a serious video household device play (unless you count Android TV).

Ticking time bomb?: Having recently hit 120 million users in India, TikTok clearly has scale, but it also has a rights problem, calling in the UK Copyright Tribunal to resolve a dispute with digital licensing body ICE, which characterised TikTok as being ‘unlicensed’. This feels a lot like the days when YouTube was first carving out licenses. Sooner or later TikTok is going to need a licensing framework that rights holders will sign off on. Matters just took a twist with TikTok poaching ICE’s Head of Rights and Repertoire. It’ll take more than that though to fix this structural challenge. 

We’re competing with Fornite: Yes, more Fortnite….fresh from World Cup success and on the eve of the Ashes, the English Cricket Board said ‘There’s 200 million players of Fortnite…that is who we are competing against.’ Do not mistake this for a uniquely cricket problem, nor even a uniquely sports problem. In the attention economy everyone is competing against everyone. And while Fornite might be the go-to for middle-aged execs bemoaning attention competition (yes that means you Reed Hastings) the trend is bigger than Fortnite alone, way bigger.

Niche is the New Mainstream

Fandom is fragmenting. Streaming personalization and falling radio audiences are combining to rewrite the music marketing rulebook, ushering in a whole new marketing paradigm. Hits used to be cultural moments; artist brands built by traditional mass media. However, this fire-hydrant approach to marketing lacked both accountability and effective targeting. Now, hyper targeting, both in marketing campaigns and streaming recommendations, is creating a new type of hit and a new type of artist. Global fanbases are being built via the accumulation of local niches, while a few big hits for everyone are being replaced by many, smaller hits for individuals. Niche is the new mainstream.

The marketing rulebook is being re-written

Three trends have reshaped how music marketing works:

  1. Digital targeting: The rise of social media provided label marketing teams with masses of data and unparalleled targeting
  2. Linear decline:The steady decline of linear radio and TV audiences is eroding these platforms’ contribution to music marketing effectiveness
  3. Streaming curation:Streaming algorithms and curation teams are overriding label marketing efforts, delivering users what the streaming services want to deliver rather than what labels want to

fragmented fandom midia research - niche is the new maiostream

Artist marketing used to be about building exposure and brands across mass market analogue platforms. With radio, TV and print all in decline – especially among the crucial younger audience segments – that approach is being replaced with targeted digital campaigns which in turn are fragmenting fandom and transforming what global fanbases look like:

  • The marketing transition:Marketing of media brands is locked in a transition phase, moving from the old model of one-to-many messaging to targeted digital campaigns. As in all transitions, the old and new models will co-exist for some time. For music marketers though, there is a greater need for emphasis on digital because this is where the younger music fans are that are so crucial to the success of so many frontline acts.
  • Democratization of access:In the old model, mainstream linear media (TV and radio especially) was the power tool of big record labels. Access to these finite schedules is inherently scarce and bigger record labels have an inbuilt advantage due to their scale and influence. In on-demand environments access is democratized, with anyone able to run their own self-serve campaigns on platforms such as Facebook, Snapchat, YouTube and Google search. The result is that labels and artists of all sizes can reach their global audiences.
  • From cultural moments to cultural movements:Linear schedules have the unrivalled ability to create simultaneous audiences at scale around a specific piece of content. Creating these cultural moments remains the crucial asset that TV and radio bring. But the weakness of this approach is that much of the impact is diluted. It is carpet bombing compared to the laser-guided missile of digital marketing, resulting in a lot of wasted exposure and effort. Mass reach is progressively less useful for driving fandom. Against this, the hyper-targeting of digital creates super-engaged fanbases that can often thrive under the mainstream radar. Kobalt artists such as Lauv (2.5+ billion streams) and Rex Orange County (0.8+ billion streams) are examples of this new paradigm, creating global-scale cultural movements rather than linear cultural moments. Niches thrive in this world of fragmented fandom, but niche no longer inherently means small. Indeed, the cumulative effect of many local niches is global-scale fanbases. Niche is the new mainstream.

The old living side by side with the new

As when every new paradigm shift occurs, the old and the new will live side by side. There will still be plenty of artists that appeal to younger audiences that become household names too across mainstream media – look no further than Billie Eilish. But make no mistake, the shift is happening. More and more global artist success stories will happen outside the mainstream. These fan bases will be increasingly passionate and loyal, acting as strong platforms for building impactful artist stories. Success will be built around audiences that want a piece of everything that artist has to offer, from streaming to merch to tickets. This is how independent artists and many independent label artists have been building careers for years. They no longer have the exclusive, however.

Fragmented fandom is an asset, not a challenge

Artists that once would have been household names – mass media brands with large but often passive fanbases – are now rising as under-the-radar superstars. It has never been more important for this to happen. With streaming pushing more listeners towards tracks and away from artists and albums, building passionate clusters of fans is not just key to success, it is the very thing that success will be built on. Fandom is fragmenting but it may be the best thing that has ever happened to it.

This blog post pulls insight from a forthcoming MIDiA report Music Marketing: Niche is the New Mainstream that will be published in MIDiA’s new Marketing and Brands service. To find out more about how to get access to this research practice – a must have for anyone involved in marketing of media brands – email stephen@midiaresearch.com

Podcasts: a Netflix Moment for Radio But Perhaps not the Future of Spotify

spotify gimlet anchor podcasts midiaWednesday was a busy day for Spotify: it reported above-expected subscriber growthto hit 96 million paid subscribers, strong total user growth to hit 207 million MAUs, improved margins and its first ever profitable quarter, registering an operating profit of €94 million. And the news didn’t stop there, Spotify also announced the acquisition of two podcasting companies, Gimlet and Anchor.Spotify unsurprisingly referenced podcasts in its earnings note, pointing to 185,000 podcast titles available, ‘rapidly’ growing consumption and 14 exclusives to including the 2nd season of Crimetown, The Rewind with Guy Raz, and the Dissect Mini Series hosted by Lauryn Hill. Podcasts is clearly becoming a big part of Spotify’s plans and the rationale is simple: more owned content, and more cheaply licensed content means higher margins than can be generated by record label content. But for all its commitment to the format, Spotify may find the podcast battle harder to win than expected.

An opportunity with many intertwined layers

After many years stuck on the side lines, podcasts are now becoming sought after by everyone from radio companies, streaming services, newspaper publishers to TV companies and many, many more. Media brands of all forms see podcasts as a part of their future, a way to increase and diversify listening time (streaming services); fight back against streaming (radio); reach new audiences (news); and extend audience engagement (TV). To some degree podcasts can probably deliver on all those expectations, and while the creative possibilities are clear, the path ahead is not so straight forward:

  • A Netflix moment for radio: Netflix transformed the TV market not just by giving consumers a cheap, value-for-money way of getting great TV, but by changing forever the way in which TV is made. No longer shackled by the constraints of linear schedules and needing to keep everyone on the sofa happy at the same time, studios and networks started smashing the boundaries of what could be made and what a TV show looks like. We are now in the golden age of TV. Podcasts do the same for radio, allowing every niche topic under the sun to be explored in huge detail and without any constraints on number or length of episodes. Podcasts create even more of a blank canvass for what was once only radio content than Netflix did for what was once only TV content.
  • Apple iTunes stranglehold: Apple is the powerhouse of podcast distribution. In what is otherwise a highly fragmented podcast distribution landscape, Apple is as close as it gets to a unified podcast platform – which is also integrated into Apple Music. During podcasting’s wilderness years, Apple quietly built up a loyal base of podcast users. Given that more than half of Spotify’s subscribers are iOS users, those that are podcast users are most likely also Apple podcast users. Spotify will have to bank on converting those users while simultaneously flicking the ‘market creation’ switch by converting new users to podcasts. A double challenge.
  • Radio:As MIDiA identified early last year, radio is streaming’s next frontier. Spotify has built a sizeable ad supported audience – 11 million as of Q4 2018 – but it has not yet built a viable ad model – ad user ARPU is just $0.28 which is just one cent up on Q4 2017. To persuade radio’s big advertisers to switch, it needs to woo more of radio’s core audience but it currently lacks the content assets (news, weather, sports etc). Podcasts are a step in that direction but radio companies will feel they have a better chance of owning this space than Spotify, and many are currently investing heavily in podcasts. As Apple has been learning with Beats 1, just because you want to do something does not mean you necessarily can, even if you hire many of the industry’s power players.
  • Programmatic ad buying:Spotify is doubling down on its programmatic ad buying and this will be crucial to monetizing podcasts. Spotify reported in its Q4 earnings that programmatic is growing fast and, along with self-serve, now accounts for 25% of all ad sales – though as ad ARPU is flat (up just $0.15 y-o-y), it is not growing fast enough.
  • Use cases:Lastly, but most importantly, the underlying use cases for podcasts potentially limit the market opportunity for podcasts. The addressable audience for podcasts is not all the time spent listening to audio. Listening to music is a lean back experience that we can do while doing other things like work and study. Podcasts tend to require more of our attention and thus the use cases for podcasts are more limited. Also, unlike TV shows, users are less likely to have a large number of podcasts on the go at the same time. Spotify will hope that it will be able to generate appointment-to-listen behaviour, with users tuning in for their favourite podcasts on a specific day. But that necessitates users re-learning how they use Spotify.

The podcast opportunity is undoubtedly strong but there will be many competing to be the owner of podcasting’s future and radio may well do a better job of winning this battle than it has retaining its music listeners. Spotify is betting big on podcasts being part of the future of streaming, but the future of podcasts may lie elsewhere.