How the DNA of a hit has changed over 20 years

Recorded music has always evolved to fit the dominant format of the era, from three-minute songs to fit on 7-inch vinyl, through eight-song albums to fit on LPs, through to 16+ song albums to fill CDs. Format-driven change is nothing new, but streaming’s impact on the making of music itself is arguably more revolutionary than that of previous formats because it is both the consumption and discovery format rolled into one.

In the heyday of the album, the focus would be both on what makes a great album and what tracks would work on radio, and later MTV. Now all the considerations are rolled into the song itself, the central currency of the streaming era.

20 years of dna of hits

To illustrate just how significant this change is, we have taken a snapshot of the Billboard Top 10, now and 20 years ago. The caveats here are that this is just that: a snapshot in time, rather than a comprehensive data analysis – and it is a view of just the very top of the pile, the megahits of the day. Nonetheless, it provides some clear illustration of how the DNA of a hit has changed over the course of 20 years:

  • Shorter, snappier songs: The average length of the top 10 hits has fallen by 16% to 221.5 seconds (three minutes and 42 seconds, down from four minutes and 22 seconds). Meanwhile, intros have fallen from 13.1 seconds to 7.4 seconds. In the streaming economy where release schedules are weaponised with increased volume and velocity of releases, there is often just one chance to catch the attention of the listener. With ever fewer younger music fans listening to radio, there is little opportunity for the listener to hear the track again if they skip it in their streaming playlist.
  • Hip Hop’s apogee: The July 2000 top 10 was evenly split between pop, rock and RnB, with the latter two having the edge. In today’s top 10 Hip Hop reigns supreme, accounting for six of the top 10 tracks. Starting with the rise of EDM and now continued with Hip Hop, the hits business has become more focused, doubling down on one leading genre and in turn making it even more dominant.
  • The industrialisation of songwriting: As the buy side of the song equation, record labels are reshaping songwriting by pulling together teams of songwriters to create genetically modified hits. The more top-class songwriters, so the logic goes, the greater the chance of a hit. The average number of songwriters increased from 2.4 per track in 2000 to 4 in 2020. The upside for songwriters is more work, the downside is having to share already small streaming royalties with a larger number of people. Interestingly, the average age of songwriters increased from just under 27 to just over 31. It points to longer careers for songwriters but it does beg the question whether this means songwriters’ life experiences are that little bit more distant from those of young music fans.
  • The rise of the featured artist: Adding super star collaborators onto tracks has become a go-to strategy for streaming-era hits. In the July 2000 top 10, none of the tracks had a featured artist, by July 2020 that share had jumped to 60%.

The dominant theme underpinning these changes in the DNA of hits is reducing risk. More songwriters, more collaborations, shorter songs, shorter intros, fewer genres all point to honing a formula, following a blueprint for success. This evolution will continue to gather pace until the next format shift rewrites the rules. Until then, record labels, songwriters and artists need to ask themselves whether they are striking the right balance between business and creativity. If they are not getting it right, then the inevitability is that (at the hit end of the market) pop will eat itself. And if it does, expect an audience shift away from the increasingly homogenised head, down to the more diverse tail.

Music Streaming Needs a New Future

While doing some research on the Chinese streaming market I came across this fantastic UX tear down of Xiami Music. I recommend you read it in full. The day before I found this – also must-read –article on Beyoncé’s streaming strategy, which explains how she uses different platforms to segment her fanbase (Tidal – super fans, Spotify engaged fans, Netlix, passive fans). These two articles may seem entirely unrelated, but they are in fact two sides of the same coin: fandom.

Regular readers of MIDiA’s output will know that we have made fandom one of our central research themes, most recently identifying it as one of the next five growth drivers for the music business. We have also discussed at length how Chinese streaming services have built businesses around monetising fandom while Western streaming services instead simply monetise consumption.

Now I am going to take this thinking one step further by proposing a new way to consider how to segment the music consumption journey and how Western companies can become part of this new vision.

the three srtags of the music journey

Consider music consumption as three key steps:

  1. The song
  2. The (artist) story
  3. The fan

Streaming services now own the song. Social is doing an okay, but far from perfect job of owning the artist story. But no one – digitally – is owning the fandom. Music fans have to hop from one place to another to join the dots. This of course contrasts sharply with Chinese streaming services which own all three steps in the music journey. Let’s take a look at Xiami Music to illustrate the point.

XiamiI have written a lot in the past about Tencent Music’s portfolio of apps. Alibaba’s Xiami Music is one of the smaller players and its end-to-end value proposition is all the more impressive for that: this sort of functionality is table stakes for competing for audience attention in the Chinese market.

Delivering the music is almost just the starting point for Xiami Music, wrapping the music with endless additional context and features including (but by no means limited to): music videos, lyrics, commentaries, reviews, news, comment streams, virtual tipping, badges, trophies, lyrics poster, you can even grow your own Tamagotchi. As Siew writes in his UX tear down:

“Every piece of music has its own entourage — live versions, videos (the official one and the live ones), behind-the-scene footage, outtakes, remakes or covers, reviews etc.

Xiami has taken a leaf out of WeChat’s playbook. Everything you need about a song, an album, or an artiste/band, you can get it on Xiami. No need for you to google for lyrics, head to YouTube for a video, or launch Twitter/Weibo for news.”

Time to stop leaning back

Another insightful observation that Siew makes is that Xiami Music – as with other Chinese streaming apps – has a white background to make it easier to read and interact with lots of content. Whereas Western streaming apps have dark backgrounds as they behave as largely passive vehicles for delivering music: find your playlist, press play, close screen.

There is a fundamentally different UX ethos:

  • Western apps: lean back, listen with minimal friction
  • Chinese apps: lean forward, dive in, interact

Years ago (11 to be precise) I laid out a vision for lean forward music experiences, where interactive context and social features were built around the music. Now is the time for Western streaming services to push themselves out of their UX comfort zones and start to own stages two and three of the music journey.

Lead, don’t follow

It is important that they do not all follow the same path. Differentiation – or the abject lack of it – is the Achilles heel of Western streaming services. The hope here is that they each pursue their own path and use this blank canvass to develop their own unique identities. Which will make it easier for record labels and artists to follow Beyoncé’s approach of segmenting their audiences across different platforms.

Of course this will take time. It may even take another 11 years (though hopefully not). In the meantime radio companies should be seeing this as a great opportunity to carve out a role for themselves in step two (artist story telling). Most have realised by now that they cannot compete with streaming but instead should compete around it. Get it right and radio could become the home of artist storytelling, a genuine complement to streaming consumption. Meanwhile, TikTok may well be best placed to act fast to own step three (fandom) before the Western streaming services can get their respective acts in gear.

There is nothing quite like some fierce competition to focus the mind.

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!

The Music Industry’s Next Five Growth Drivers

The risk with trying to imagine what the future might look like is to simply think it is going to be a brighter, shinier version of today. At this precise moment in time, this has perhaps never been truer.

The COVID-19 lockdowns were a seismic shock to the economy, one which will take months, possibly years to recover from. Entertainment consumption patterns have been transformed, with some need states becoming void states in an instant, while new ones have filled their place.

Whether COVID-19 goes for good in the coming months or whether it is with us for years to come, some behaviour patterns have changed for good, creating new opportunities, many of which (e.g. virtual events) have yet to be properly monetised. So at a time when it seems that the whole world is creating music forecasts, it is now the time to think about what comes next rather than just predicting how big the long established revenue streams will get.

With streaming growth slowing and creators feeling short changed, it is time to think about what plan B is, for the sakes of both the industry and the creator community.

At MIDiA we are currently compiling our music industry forecasts with a lot of detailed work being put into estimating how COVID-19 and the coming recession will impact a revenue growth. We’re modelling everything from ARPU, churn, net adds, and disposable income patterns through to store closures. We’re confident that this new methodology will make our already reliable forecasts even better (for the record our 2019 subscription forecasts with within 4.5% of the actual figures).

We’re also going to push ourselves out of our comfort zone and over the course of the year forecast some new revenue streams for which a comprehensive set of historical data does not exist. This means our chances of making incorrect calls is higher, but we’re doing it because we think it is crucial to start trying to frame what the future landscape will look like.

Here are the five emerging revenue sectors that we think could collectively be the music industry’s next growth driver

  1. Contextual experiences: Two big lockdown winners have been mindfulness / meditation apps and online fitness training. With it looking likely that consumers will be spending more time at home and away from public places for some time to come, the opportunity for these categories is twofold: 1) build audience now, 2) establish behaviour patterns that will outlive lockdown.

    Music is often a core part of these but it is not always licensed. The example of artists and rightsholders making music available to fitness trainer Joe Wicks illustrates the point. To date, streaming services have provided the soundtrack to such activities with contextual playlists (chill, study, workout). But it is of course far better for the context itself to deliver the music. We expect the next few years to see categories like online wellness and fitness to eat into the time that people were previously using streaming for the soundtrack. Instead of bring your own music, the trend will be the context will bring it. UMG’s Lego partnership is a case in point.

  2. Creator tools: There is an increasingly diverse mix of tools for music creators, including production, collaboration, sounds, reporting, mastering and marketing. The vast majority of the millions of independent artists will spend much more on creator tools than they will ever earn from their music. The revenue opportunity is clear, but there is more to it than that.

    Artist distribution platforms built a role as top of funnel tools, helping labels find the next big hit. But the music creation itself, enabled through online SAAS tools is in the fact the real top of funnel. Anyone who can establish relationships there does so before they release music. Right now, Spotify looks better placed to capitalise on this opportunity than labels. But labels should be paying close heed. Just in the way that distribution platforms came out of nowhere to become an established part of the label toolkit, so will artist tools. Simply put, creator tools will become part of what it is to be a music company.

  3. Virtual events: As we wrote about earlier this week, there is a huge opportunity to make virtual events (live streaming, listening sessions, avatar performances) a major income stream. The sector is in desperate need of commercial structure and product tiering, but it can happen. A freemium model with free, pay to stay, premium and super-premium tiers will enable this fast-growing sector to be more than a lockdown stop gap.
  4. Fandom: Regular readers will know that MIDiA has long argued that phase one of streaming was monetising consumption and that phase two will be about monetising fandom. Tencent Music Entertainment already does a fantastic job of this with live streams, virtual gifts and virtual currencies. So do K-Pop artists and Japanese Idol artists. Now is the time for western social and streaming platforms to wake up to the opportunity. Virtual merch, artist badges, premium chat, artist avatars—there are so many opportunities here waiting to be tapped.
  5. Social music: As an extension of fandom, the fact that the vast amount of music-centred social activity on Instagram, Facebook, Snapchat and TikTok has not yet been properly monetised is a gaping hole of opportunity. TikTok will be crucial. As my colleague Tim Mulligan wrote, TikTok is having its ‘Snapchat moment’, trying to identify what commercial route it will take. I’d go even further and frame it as a YouTube or Facebook moment. Both those platforms went on to massively expand their remit and build diversified business models.

    TikTok clearly has momentum that far exceeds that of previous similar apps. It can either choose to just carry on being good at one thing or instead become the next big social platform, growing as its audience ages. Just like Facebook did. TikTok now is where YouTube was back in the late 2000s. If rights holders can establish an entirely new monetisation framework then TikTok could become the biggest single driver of future revenue.

As with any future gazing, the odds are that not all of these opportunities will transpire, but what is clear is that the current dominant format is not enough on its own. Rights holders and creators alike need new future revenue streams to offset the impact of slowing revenue growth and royalty crises.

The last time the music industry had one dominant format and no successor was the CD and we all know what happened then. The music industry is not about to enter a decade of freefall this time, but it is at risk of stagnating, especially as its leading music service is now so eager to diversify away from music that it offers a podcaster more money in one deal than most artists will ever earn in their lifetime from it. Let’s make this next chapter of the industry’s growth about innovation, growth, new opportunities and fresh thinking.

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.

The Song Economy

The following is a guest post from MIDiA’s Consulting Director Keith Jopling

When Journey’s song Don’t Stop Believin’ was originally released as the second single from the album Escape in 1981, it was a modest US chart hit (Billboard Hot 100 no. 9). Fast forward 28 years, in 2009 the track had two very prominent syncs: The Sopranos finale and Glee (the song featured in six episodes). From there, the song’s ascendance into global popular culture (and commerce) is well known. In 2009 it re-entered the Billboard Hot 100, this time peaking at no. 4, and finally became a UK top 10 hit following several renditions on The X Factor. However, it is on streaming platforms where the song truly thrives, steadily working its way into the ‘one billion club’ (at 757 million just now, but clearly in it for the long game).

Sony Music understands this success very well indeed. Don’t Stop Believin’ is an evergreen streaming success for the label. It is revered. Sony Music also has similar success with another 1981 song, Toto’s Africa (actually a 1982 release chosen as the third single from Toto IV). Africa was a much bigger hit on first release than Don’t Stop Believin’ and has had continual success on radio. And again, Africa has seen a meteoric rise on streaming – sitting at 711 million. Both these early eighties tracks are millennial sensations, and both are mini-industries in their own right.

My third example just happens to be another Sony Music track, though this post is not about Sony as such. Nevertheless, there is no doubt that SME has been instrumental in the calculated success of Mariah Carey’s All I Want For Christmas. This 1994 release was in fact the number-one streamed song in Germany for all of 2019.  Consistently a top 10 streaming catalogue hit for the label since the dawn of the streaming era, 2019 (thanks to a finely-tuned and bigger marketing campaign) amounted to a new peak for the track – the year in which it finally made the holy grail some 15 years after release: Billboard no. 1.

As I said, to even out the copy a bit – every label and publisher with known catalogue – Queen, Elton John, Radiohead, Led Zeppelin, R.E.M. to name just a few, is operating at full-tilt utilisation of song assets – even if that means investment in other media assets. It’s movies, documentaries, new videos, re-masters, re-issues and myriad of strategies to generate more and more streams. No wonder Def Leppard, Peter Gabriel and other long-term streaming hold-outs finally succumbed only last year. They saw the future clearly but took their time to realise they will just have to learn to love it or lump it.

The three songs illustrate the development of the song economy. The Song Economy is the new music industry’s growth engine. It’s why publishing and songwriter catalogues are being acquired at multiples of between 10-20 of annual royalty revenues. It’s why playlists are the most valuable real estate on streaming platforms. It’s why labels and publishers are staffing up their sync teams around the world. It’s why some publishers – the administrators of the music business – are investing in creative and marketing talent and signing artists with great songs before their record label counterparts. And it’s why those publishers and labels are being pulled together under one leadership, from Downtown to Sony Music.

The Song Economy is critical for new songs just as it is for old ones. Hit songs are more important than they have ever been. That’s why, according to New York-based Hit Songs Deconstructed (which does indeed deconstruct the elements that make a major hit song, so that others can do their best to emulate that success) has been reporting a steady rise in the number of songwriters per hit (in 2018-19 a quarter of Billboard top 10 hits had no less than four songwriters) as well as producers (two per hit is more usual than just a single producer).

In all of our future-gazing industry work at MIDiA, we often look at what will drive the next big growth curve for music (indeed, we report on that very thing here), expecting that to be a new tech platform or a brand new music format. However, the real driver perhaps for the next few years at least, will be the micro-growth driven by individual songs – those big enough to qualify as mini industries. 

Sure – streaming has made it much more competitive for songs, composers, artists and their representatives. But those songs that break through into millennial streaming culture (or blow-up in Gen Z streaming culture as memes and TikTok sensations) will be pinching share of ear from the rest. At the same time, songs in popular culture are helping to keep music up there in the attention economy – competing with TV, games, books, spoken word and sports. Indeed, it is only those mini-industry songs that can claim a spot across every slice of media, through sync to podcasts to multiple forms of video. Those are the songs we want to know all about and hear over and over again.

Those songs have always been pots of gold to the industry, but in the global streaming economy they have become something quite different. They can be revived and multiplied. They can be hits over and over again. They are, in fact, industries in themselves. Welcome to The Song Economy. Don’t Stop Believin’!

Keith Jopling is MIDiA’s Consulting Director – contact him on keith@midiaresearch.com. He also helps drive The Song Economy via the discovery & playlist venture https://www.songsommelier.com/

The Future of Music: A Vision of Post-Format

Formats have shaped and dictated the evolution of recorded music. The constraints that formats set have, in turn, become the creative frameworks within which music has operated. Now, in the internet era, formats are becoming a thing of the past – and yet the way in which music is made and distributed still conforms to the old physical world. It is time for a change in how we think about music, right from the creation process through to what a song actually sounds like. Here is a vision for what the future of music could be.

Bringing dead sounds back to life

When Edison invented the phonograph, a denigrator called it a machine ‘that brings dead sounds back to life’. Conditioned by the recorded era, it is hard for us to conceptualise a time when music only existed in the moment and was never heard exactly the same way twice. Nevertheless, this is a historical anomaly – a legacy of physical media. Songs became fixed, static and permanent because that was the only way we could squeeze music into little discs – mummified echoes of live performances.

Over time, as recording techniques and technology improved, the recorded song developed into its own art form, with multitrack recording, effects, synthesis and programming enabling the creation of sounds that could never be truly replicated live. Now, with physical media accounting for an ever-smaller share of music consumption, there is no need to adhere to its constraints. We have 14 track albums because CDs were designed to fit Beethoven’s 9thSymphony; we have static recordings to serve legacy distribution models; we have three minute songs to fit radio schedules. All three straightjackets can be discarded. Here is how:=

  • Write and produce for the medium: We are already locked into a process of music being designed for Spotify success, through so-called Spotify Core and with the industrialisation of song writing seeing songs stitching together the best hooks from multiple songwriters. Much of this can be reductive, dumbing down to the lowest common denominator.However, it is the execution and intent that requires attention, not the strategy. In fact, it needs pushing further – much further. TikTok, YouTube, Instagram, Snapchat and Spotify are all dramatically different propositions with equally diverse use cases. So why would we expect a song to perform equally across each one? What video producer would create a meme for Netflix, or a two-hour movie for Snapchat? It is time to follow video’s lead and write for where the song is going to be listed to most. Lil Nas X when writing Hometown Road was focused on making something viral, something that would blow up on TikTok. The idea that songs should have fixed lengths, choruses, verses – all of this can now be played with in the mainstream in the way that it has been on the experimental fringe of music for many years. This time, it is to give listeners what they want rather than for avant-garde expression.
  • Ditch / evolve the album: Just 16% of consumers listen to traditional albums and an even smaller 10% listen to full albums on streaming. 59% of consumers say they are listening to albums less because of streaming playlists. The album is not dead, but its addressable audience is far smaller. Now a new generation of artists is coming through who grew up with playlists, not albums, so do not even think in album terms. Of course, many artists, especially older ones, still want to write albums and they absolutely should do so. They should not, however, expect the majority of their audiences to listen to them in full. There will always be exceptions (Ed Sheeran, Adele etc.) but the direction of travel is clear. Artists and labels need to rethink what the album should be. We’re beginning to see artist contracts that stipulate numbers of tracks rather than albums. This is hugely positive and will enable far more creative freedom. Artists need to start pushing the boundaries, pulling every lever available (e.g. more tracks, fewer tracks, all tracks at once, over time, mixing in spoken word, images and video, EPs etc.). The only rule should be that there are no rules.
  • Fill the space between recorded and live: Despite its ‘dead sounds’ origins, the recorded song is an established entity with established consumption patterns that is not going to disappear in any meaningful timeframe. But that does not mean that it has to be the only entity. Technologies such as live streaming, real time tipping, comment streams, virtual gifts and collaboration tools can be used to create music experiences that are neither live nor recorded, but something in between. Imagine an artist doing a pay-to-view live stream in the studio, with a set of beats in a shared folder that the audience can drop in and out but that only changes what they each individually hear. Then the guitarist starts cycling through a few riffs, and the viewers upvote their favourite one in the comment stream. Then as the keyboard player starts, listeners change the synth patch, but again just for their own stream. Think of this not as a blueprint for what the format could be, but an illustration of how to think about it. To create something that is unique, that exists in the moment and creates an indelible bond between artist and fan. 

This was not a definitive list of what post-format innovation needs to do but instead three principle areas of focus and illustrations of how to structure thought. Now it is time for creative artists, writers, labels and tech companies to pick up the baton and run with it. Standing still is of course an option, but in the increasingly competitive attention economy, if music does not up its game there can be no complaints if it loses share to video, games and social.

Songwriters Aren’t Getting Paid Enough and Here’s Why

Music Business Worldwide recently ran a story on how Apple has proposed a standard streaming rate for songwriters, with Google and Spotify apparently resistant. Of course, Apple can afford to run Apple Music at a loss and has a strategic imperative for making it more difficult for Spotify to be profitable, so do not assume that Apple’s intentions here are wholly altruistic. Nonetheless, it shines a light on what is becoming an open wound for streaming: songwriter discontent. In the earlier days of streaming artists were widely sceptical, but over the years have become much more positive towards the distributive medium. The same has not happened for songwriters for one fundamental reason: they still are not paid enough. This is not simply a case of making streaming services pay out more; rather, this is a complex problem with many moving parts.

Songwriters don’t sell t-shirts

Streaming fundamentally changes how creators earn royalties, shifting from larger, front-loaded payments to something more closely resembling an annuity. In theory, creators should earn just as much money, but over a longer period of time. If you are a larger rightsholder then this is often wholly manageable. If you are a smaller songwriter or artist, then the resulting cash flow shortage can hit hard. Many artists, especially newer ones, have made it work because a) streaming typically only represents a minority of their total income, and b) the increased exposure streaming brings usually boosts their other income streams such as live performances and merchandise. Professional songwriters however – i.e. those that are not also performers – do not sell t-shirts. Royalty income is pretty much it. There is a greater need to fix songwriter streaming income than there was for artists.

The four factors shaping songwriter income

There are four key factors impacting how much songwriters earn from streaming, and most of them can be fixed. To be clear, though, just fixing any single one of them will not move the dial in a meaningful-enough way:

  1. Streaming service royalties: Songwriter-related royalties are typically around 15% of streaming revenues, which represent around 21% of all royalties paid by streaming services – around 3.6 times less than master recordings-related royalties. This is better than it used to be, when the ratio was 4.8. However, there is clearly still a large gap between the two sets of rights. Labels argue that they are the ones who take the risk on artists, invest in them and market them. Therefore, they should have the lion’s share of income. Publishers, on the other hand, argue that they are increasingly taking risks with songwriters too (paying advances) and working hard to make their music a success, e.g. with sync streams. They also argue that everything is about the song itself. Both arguments have credence, but the fact that streaming services have historically negotiated with labels first helps explain why there isn’t much left of the royalty pot when they get to publishers. There is clearly scope for some increase for songwriters, but if there is not an accompanying reduction in label rates – not exactly a strong possibility – then the net result will be reduced margins for streaming services. Given that Spotify has only just started generating a net profit, the likely outcome would be to weaken Spotify’s position and skew the market towards those companies who do not need to see streaming pay – i.e. the tech majors. If the market becomes wholly dependent on companies that thrive on squeezing suppliers… well, good luck with that.
  2. CMOs: Many songwriter royalties are collected by collective management organizations (CMOs). These (normally) not-for-profit organisations administer rights, take their deductions and then either pay to songwriters directly or to publishers who then pay songwriters (after taking their own deductions). It gets more complicated than that, however. If a songwriter is played overseas, the local CMO collects, deducts and then sends the remainder to the CMO where the songwriter is based (however there are a good number of exceptions to this with a number of CMOs not deducting for overseas collections). That CMO takes its deduction and then distributes. It gets more complicated still – some CMOs apply an additional ‘cultural deduction’ on top of their main fee before distributing. So, if a US hip-hop artist gets played in Europe, the local CMO will take its cut, and an administration fee. Then it goes to his local CMO which takes its fee before sending it to the publisher which then takes its own cut (typically just 25%) which however is much better than label shares.
  3. The industrialisation of song writing: With more music being released than ever, songs have to immediately grab the listener. To help ensure every part of the song is a hook and to try to de-risk their artists, bigger labels commission songwriter teams and hold song writing camps, where many song writers get together and write the tracks for albums. This means that the royalties for every song are thus split into small shares across multiple songwriters. Drake’s ‘Nice for What’ has 20 songwriters credited. That means the already small royalties are split 20 ways.
  4. The unbundling of the album: When music was all about selling physical albums, songwriters used to get paid the same mechanical royalty for every song on the album, regardless of whether it was the hit single or filler. Now that listeners and playlists dissect albums, skipping filler for killer, a weak song simply pays less. Tough luck if you only wrote the filler songs on the album. On the one hand, this is free market competition. If you didn’t write a song well, then don’t expect it to pay well. Some songwriters argue that it should go the other way too, though – if they wrote the song that made the artist a hit, then shouldn’t they be paid a larger share? 

Here’s another way of looking at it. With the above analysis, this is how many streams the songwriter needs to earn income based assuming the songwriter is equally sharing income four ways with three additional songwriters:

songwriter streaam income

It is incumbent on all of the stakeholders in the streaming music business to collectively work towards making earning truly meaningful income from streaming a realistic objective for songwriters. No single tactic will move the dial. Increasing the streaming service pay-out from 15% to 20%, for example, would still see the above-illustrated songwriter only earn 25% of that. All levers need pulling. Until they are, songwriters will feel short-changed and will remain the open wound that prevents streaming from fulfilling its creator potential. Ball in your court, music industry.

Note – since originally publishing this post I have had useful feedback from a number of rights associations and publishers. My assumptions actually translated (unintentionally) into a worst case scenario that was not representative of usual practise. The post has been updated to show a more typical revenue flow. The underlying arguments of the piece remain unchanged.

The Frank Ocean Days May Be Gone, but Streaming Disintermediation Is Just Getting Going

Aaron_Smith
At the start of this month Apple struck a deal with French rap duo PNL. PNL are part of a growing breed of top-tier frontline artists that have opted to retain ownership of their masters. In our just-published Independent Artists report (MIDiA clients can read the full report here)we have sized out the label services marketplace, and when it is coupled with artists direct (i.e. DIY) the independent artist sector was worth 8% of the entire recorded music business in 2018.

While that number may sound relatively modest, it is growing fast and represents the future. Traditional label deals are not disappearing, but they are becoming just one component of an increasingly complex recorded music revenue mix. This is the industry context that enables initiatives such as Apple’s PNL deal and both Spotify and Apple backing Aaron Smith, who incidentally is signed to artist accelerator Platoon, which is a company that Apple acquired in December 2018.

Independent artists open up new opportunities for streaming services

When Apple did its exclusive with Frank Ocean back in 2016it caused such an industry backlash that UMG head Lucian Grainge banned his labels from doing exclusive deals and the movement seemed dead in the water. If there was any doubt, Spotify kicked up so much label ill will when it launched its Direct Artists platform that it officially shuttered the initiative in July. However, now we are seeing that there many more ways to skin the proverbial cat. It is perfectly possible to disintermediate labels without having to actually disintermediate them. Doing an exclusive with an independent artist or giving him / her priority promotion is doubly effective for streaming services as:

  1. Record labels have no right to complain because independent artists have just the same right of access to audiences as label artists
  2. The more exposure independent artists get, the more their market share will grow, which will lessen record labels’ market share, which makes it harder for them to resist and easier for the streaming services to start making bolder moves down the line

Ambiguity will be the shape of things

Even this structure plays into the traditional view of labels versus the rest. The new truth is much more nuanced. For example, when Stormzy was duetting with Ed Sheeran at the Brits, signed on a label services deal to WMG’s ADA, was he a Warner artist or an independent artist? He was, of course, both. The evolution of the market will be defined by progressively more of this ambiguity, which will give streaming services equally more ability to not only play to these market dynamics but to stress-test the boundaries. The simple fact is that streaming services will become ever-agnostic with regards to artists’ commercial partnerships and in turn they will become a more important component of the value chain. Apple Music did the PNL deal because they had much more commercial flexibility dealing with an independent artist than dealing with a label artist. At some stage, labels will have to decide whether they want to revisit the exclusives model. Without doing so, they may not get a seat at the new table.

Free-to-Attend Event: Monetising Fandom

monetisingfandomspeakers2x2Join us on Wednesday 17thJuly in central London for MIDiA’s next free-to-attend event: Monetising Fandom in a Fragmented Content Landscape. Regular attendees of our events will know that they combine great new data and analysis with insightful panels and a mix of attendees not quite like at any other event, with representation from across multiple industries.

Next week is a big one. We will be showcasing a brand-new stream of data for MIDiA: audience fandom. With audiences fragmenting across so many different platforms, formats and content genres, the attention economy not only puts pressure on every form of content, it also necessitates a complete rethink of how we measure success. Pre-streaming, success was much easier to understand: album sales and TV ratings were nice, simple-to-measure metrics. Now though, audiences are spread across a host of different platforms, sometimes consuming, sometimes simply engaging with social or promotional content. It all contributes to the artists’ brand impact, and in the era of the attention economy, extended brand reach is more important than it has ever been.

In this event we are going to showcase our latest audience insight data on music artists and TV shows, and we will present our case for an entire new way of measuring and understanding success.

The event itself will include a keynote presentation from Mark Mulligan, followed by a panel discussion featuring representatives from TikTok, ATC, Kobalt and Spirit Media.

Follow this link to sign up (fully-refundable deposit required).

For those of you who are not in London, a live stream will be made available on our Facebook page at 18.30 BST.