The Artist Marketing Playbook Needs Rewriting

The whole essence of fandom is being turned upside down. An emerging crop of streaming-native artists is finding its audience in a much more targeted and efficient way than via the traditional music marketing. Instead of blowing a huge budget on carpet bombing TV, radio, print, online artists and their teams are finding their exact audiences, focusing on relevance and engagement rather than reach and scale.

The traditional model is great at creating household brands but so much of that brand impact is wasted on the households or household members that are not interested in the artist. Niche is the new mainstream. Targeted trumps reach. But too many label marketers fear that unless they use the mass media platforms, they will not be able to build national and global scale brands. They might be right, at least in part, but this is how the future will look and new marketing disciplines and objectives are required. Here’s some brand new data to show why.

midia index music fandom

Since Q4 2016 MIDiA has been tracking leading TV shows every quarter for awareness, fandom, viewing and streaming. Since the start of 2019 we have been doing the same for artists, with viewing swapped out for listening. These metrics provide a rounded picture of an artist’s full brand impact and consumption, while the ratios between these metrics give a unique view of just how individual artists are performing and of the impact of their respective marketing strategies. Later in the year we will be feeding this data into Index for Music,a unique new dashboard tool to combine with data from social platforms, streaming, searches, reviews and other metrics that create an end-to-end view of artist impact. We have already built our Index for Video tool which you can find out more about here.

In the above chart, using the consumer data component of Index, we have taken a contiguous sample of the five artists that represent the mid-point of each third of the rankings (i.e. top, middle and bottom) for two of these ratios:

  • Fandom-to-streaming, which we call Streaming Conversion
  • Awareness-to-fandom, which we call Brand Conversion

The results show some very clear artist clusters with clear implications for artist success and marketing strategy (remember, these are ratios not rankings of how well streamed or popular they are):

Streaming Conversion

  • Rising streaming stars: These artists have twice as many people streaming them as they do fans. These artists are largely younger, frontline artists that are building their careers first and foremost on streaming platforms. These are artists that have not yet built their fanbases but are being pushed hard by their labels on streaming and elsewhere. Their listening is being driven by promotional activity. Pusha-T is the exception, a much longer established artist.
  • Established artists: These artists are largely well-established artists whose streaming audience penetration correlates with their fanbases. Their listening is largely organic. Dua Lipa is the exception, still relatively early in her career but already with an established fanbase driving organic streaming.
  • Low-streamed superstars: These are artists that built their careers in the pre-streaming era and while are household names, have streaming audiences smaller than their fanbases, not having managed to migrate large shares of their audiences to streaming

 

Brand Conversion

  • Heritage superstars: The majority of people who know these big heritage acts like them. In some ways brand conversion is an easier task for such artists than frontline artists. As they have been around so long, it tends to be the very bests of their catalogue that people know. The fact Queen outranks the Beatles is testament to the way in which the biopic Bohemian Rhapsody has created new relevance for the band.
  • Big brand artists:This eclectic mix of artists are – Julia Michaels excepted – well established artists that have benefited from years of label marketing support, with about half of all people that know them liking them.
  • Over-extended brands: One of the most important changes wrought by streaming and social is that fanbases no longer need to be built via mass media. However, big artists, especially major label ones, still rely upon mass media to become global stars. The result is a lot of wasted marketing budget. In this group, which is dominated by Hip Hop artists, more than half of the people who have been made aware of the artists do not like them. The marketing dollars spent on reaching those people has not converted.

We will be diving much deeper into this data in a forthcoming MIDiA client report and also at our next free-to-attend (depose required) event in central London: Managing Fandom in a Fragmented Content Landscape. Join us at the event to get a sneak peak of MIDiA’s artist data and our Index tool. All attendees will get a free copy of the presentation. In addition to the data key note there is a panel featuring people from Kobalt, TikTok, ATC and more to be confirmed. Sign up now, only limited places remain!

See you there!

Big Machine (Inadvertently) Just Did a Promo Ad for Label Services Deals

Taylor-SwiftThe sales of Taylor Swift’s former label Big Machine Records to Scooter Braun has resulted in an ugly spat that has been played out very publicly. First Braun enthused about acquiring a ‘brilliant’ company and the global ‘opportunities’.Then Swift responded with an open letter saying that Braun had ‘stripped her of her life’s work,before Big Machine’s Scott Borchetta responded saying he had given her the ‘opportunity to own her masters’. The feud clearly has some distance to run but the issues of ‘who got what text message when’ are not the big deal here, the real deal is the big deal.

Whether she likes it or loathes it, Taylor Swift’s catalogue is Big Machine’s asset

Late last year Swift left Big Machine to sign a long-term deal with Universal Music that was most likely a label services deal. At the time she said it was ‘incredibly exciting’ to own her masters. But, however good her UMG deal might be, she is now in a position whereby her recordings are being sold to someone she’d much rather not have ownership of them. In her post she calls this a ‘worst case scenario’. From Big Machine’s perspective, it simply couldn’t sell the company without having either Taylor Swift or her recordings on its balance sheet. Without one of those, the company’s value would have been much lower. Swift may not like the feeling of being someone else’s asset but that is the very nature of what happens when an artist signs a traditional label deal.

Artists now have unprecedented commercial choice

Back in the early 2000s the Beatles wentto court to try to regain ownership of their master recordings because of a dispute with their label. Fast forward to now and we have another massive pop act angered at not having control of their own creation. At one level the world has not changed much, but on another it has done so, and dramatically so. The fact that Swift signed a label services type deal with UMG shows just how much more choice artists have with the type of deals they sign, whether that be label services, joint ventures, distribution deals or combinations of all three. Artists have never been so empowered and so educated. Nor have they ever had so many commercial options, from doing direct distribution with a CDbaby or Amuse, a label services deal with an AWAL or BMG or simply going direct to fans with platforms like Bandcamp.

Big Machine just highlighted the downside of traditional label deals

By allowing the dispute with Swift to become so public, Big Machine has just inadvertently done a promo campaign for label services deals. The more that the media is awash with stories like this, the more that artists will be considering their options. This does not however mean that all artists will be turning down traditional masters deals in favour of label services deal. A label services deal normally means trade-offs. A record label is going to get less, so in return it is going to give less back. Artists have to balance out factors such as smaller advances, lower royalty income, higher risk and bearing costs. For an artist that has spent years building to the point of signing a deal, a fat advance and guaranteed marketing spend will often be a more appealing prospect. Especially when you consider that successful artists will expect recording income to be just a minority of their total music income.

Artists increasingly use labels to build their own artist brands 

In this context, the record label becomes a marketing asset to the artist, a tool with which to become famous enough to ensure that all the other income streams (live, merch, publishing, brand partnerships etc.) kick in. In this era of empowered artists, more artists will be making an informed decision that matches their priorities. If they prioritise creative independence and control, then label services will make most sense. If they value building a large-scale audience fast, they may opt for a traditional label deal. Or they’ll take something in the middle. The bottom line is that there is no standard approach anymore. Any artist signing a deal now that finds themselves five years from now complaining about not having control of their masters will, to put it bluntly, only have themselves to blame. It will have been their choice.

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

Music Sync: A Market Ripe for Change

Florence and the Machine’s performance of Jenny of Oldstones, which appeared over the closing credits of the April 21st HBO’s Game Of Thrones episode, has registered the most Shazams in 24 hours ever.The placing of a song has always had the ability to transform its fortunes, and that has never been more the case than now. The music sync market is booming, with the number of syncs higher than ever and more platforms and productions seeking new music. It is also a market with a host of structural challenges, which is the focus of MIDiA’s latest major new report on the music sync market – Music Sync Market Assessment: A Market Ripe for Change. Clients can access here and non-clients can purchase here from our report store.

We interviewed senior sync market executives of labels, publishers, sync agencies, sync tech, TV, games etc. for the report to help create the definitive take on this important but problematic sector. Here are some brief highlights of the report.

midia music sync tech landscape

The music sync market has long been a source of high-margin income for rights holders as well as a means for helping break artists, with a well-placed, successful track having the ability to transform the career of an emerging artist. The growth of channels such as games, social video, and online video (like Netflix), and the corresponding renaissance in TV drama production, have combined to create an unprecedented volume of demand for the sync marketplace. A wave of tech start-ups has followed, each trying to fix parts of an otherwise very ad hoc and relationships-based industry.

Total sync revenues grew by 11% in 2017, but remain a minority component of music publisher revenue and have even less value for labels. Despite a boom in demand, much of the opportunity remains untapped. This is largely because the sync market is a complex, interconnected web of closely guarded personal relationships that operate on tradecraft, reputation and personal connections. It is a marketplace that technology has only brushed the edges of – but when it has, the results have been mixed. For example, streaming playlists have quickly become an established tool used by music supervisors, but on the other hand, many of the new start-ups addressing the space have failed to gain meaningful traction. In part this is because it is a sector that has modest appetite for change. Indeed, with personal reputations an industry currency, and lack of pricing transparency a well-used tool for securing price premiums, there is more internal incentive to remain in stasis than to embrace innovation.

A host of technology companies have come to market attempting to improve the music sync workflow, but many require pre-cleared rights. This is something that would undoubtedly accelerate the market but that rightsholders are typically unwilling to agree to because:

  1. They need individual creator approval
  2. They do not want to cede negotiating power

The music sync market has managed to remain strong by changing far less than most other parts of the music business. However, strategic shifts by newer, large-scale buyers such as Netflix, coupled with wider technology shifts, mean that the sync market will not be able to resist change for much longer.

Micro licensing (e.g. YouTube content) represents a major opportunity, especially if Facebook manages to execute on its thus-far underwhelming social music strategy. However, that requires a technology solution (e.g. Qwire, OCL) and simply cannot work on the same highly-manual and very slow mechanisms that mainstream sync operates with. Unless a tech solution is created, it will be royalty-free music providers like Epidemic Sound that will take most of the scale opportunity.

To read much more on the music sync market, check out the report here (Clients)   (Non-clients).

Companies and brands mentioned in the report:A+G Sync, Amazon, Beggars Group, Cue Songs, DISCO, Electronic Arts, Epidemic Sound, HBO, Jingle Punks, Jukedeck, Lickd, Musicbed, Music Gateway, MXX, Netflix, OCL, Proctor and Gamble, Qwire, Reverbnation, Songtradr, Sony/ATV, Soundvault, SyncFloor, Synchtank, Tunefind, Universal Music, Warner Chappell, YouTube

Creator Support: A New Take on User Centric Licensing

User-centric licensing (i.e. stream pay-outs based on sharing the royalty income of an individual user split across the music they listen to) has stimulated a lot of debate. I first explored the concept of user-centric licensing back in 2015and stirred up a hornet nest, with a lot of very mixed feedback. The big issue then, as now, was that it is a very complex concept to implement which may well only have modest impact on a macro level but may also have the unintended consequence of worsening income for smaller artists. Fans of smaller artists tend to be more engaged listeners who generate a larger number of streams spread across a larger number of artists. The net result could be lower average income for smaller indie artists, and higher income for mainstream pop acts who have listeners with lower average streams spread across a smaller number of artists. Since then, Deezer has actively explored the concept and it continues to generate industry discussion. It is unlikely there will ever be consensus on how user-centric licensing should work, but the underlying principle of helping artists earn from their fans remains a valid one. So, here is an alternative approach that is both pragmatic and far simpler to implement: creator support. A new way to solve an old problem.

Creator support is gaining traction across the digital content world

In the on-demand world, monthly streaming income for creators can be both modest and unpredictable. Amuse’s Fast Forward,YouTube’s channel memberships and Patreon are illustrations of how the market is developing solutions to give content creators (especially artists, podcast creators, YouTubers and Twitch streamers) an effective way to supplement income. But it is Epic Game’s ‘Support-A-Creator’ model that provides the best example of an alternative to user-centric licensing. Epic Games enables Fortnite players to choose a favourite creator to support (which typically means YouTube and Twitch Fortnite players). Epic Games then contributes the equivalent of around 5% of all in-app purchases that the gamer makes to that creator.

How creator support can work for music streaming

Using Spotify and a selection of artists as an illustration, here is how a creator support approach could work for streaming music:

  • All Spotify subscribers get given the option to ‘support’ up to two of their favourite artists
  • For each artist that a subscriber supports, 1% of the record label royalties derived from that subscriber’s subscription fee goes directly to the artist, regardless of how many streams that user generates
  • The label of each artist then pays 100% of this ‘support’ income

creator support midia streaming model

To illustrate how creator support can work, we created a model using Spotify and a selection of diverse artists. We assumed that 75% of Spotify subscribers support an average of 1.5 artists. In the above chart we took five contemporary frontline artists across major labels and label services, and we assumed that 10% of their monthly Spotify listeners support them. Factoring the different types of deals and royalty rates these artists have, as well as the ratios between average monthly streams and monthly listeners, there is an intriguing range of revenue impact that creator support delivers. For Taylor Swift (on a major deal, but one in which she held the negotiating whip hand), Lauv and Rex Orange Country (both on Kobalt label services deals) the creator support income is between 18% and 22% of their existing streaming royalties from Spotify. For Billie Eilish and Circa Waves, both on their first major label deals, creator support income would represent a much larger 78% and 65% of streaming royalties. The rate is higher for Billie Eilish as she has a higher streams-to-listeners ratio.

Artists get paid more with minimal impact on the wider royalty pot

Putting aside the irony that this approach would help put many major label artists more on par with what label services and independent artists earn from streaming, the clear takeaway is that creator support can be an effective way of fans ensuring that some of their streaming spending directly benefits their favourite artists. Because we have structured the model to be just 1% per artist (rather than Fortnite’s 5%) the net impact on the total label royalty pot is minimal. Applying the above assumptions to Spotify’s 2018 label payments, the royalty pot (and therefore per-stream rates) would reduce by just 1.13%, meaning that non-supported artists would feel negligible impact.

We think the creator-approach model enables labels and streaming services to deliver on the ambition of user-centric licensing without the complexities and unintended inequities. But perhaps most importantly, it helps put artists and fans closer together, bringing the pledging model to the mainstream.

Let us know what you think. Also, we’ve added the excel model to this post for you to download and test your own assumptions against it.

MIDiA Research Streaming Creator Support Model 4 – 19

10 Trends That Will Reshape the Music Industry

The IFPI has reported that global recorded music revenues have hit $19.1 billion, which means that MIDiA’s own estimates published in March were within 1.6% of the actual results. This revenue growth story is strong and sustained but the market itself is undergoing dramatic change. Here are 10 trends that will reshape the recorded music business over the coming years:

top 10 trends

  1. Streaming is eating radio: Younger audiences are abandoning radio for streaming. Just 39% of 16-19-year olds listen to music radio, while 56% use YouTube instead for music. Gen Z is unlikely to ever ‘grow into radio’; if you are trying to break an artist with a young audience, it is no longer your best friend. To make matters worse, podcasts are looking like a Netflix moment for radio and may start stealing older audiences. This is essentially a demographic pincer movement.
  2. Streaming deflation: Streaming music has allowed itself to be outpaced by inflation. A $9.99 subscription from 2009 is actually $13.36 when inflation is factored in. Contrast this with Netflix, for which theinflation-adjusted price is $10.34 but the actual 2019 price is $12.99. Netflix has stayed ahead of inflation; Spotify and co. have fallen behind. It is easier for Netflix to increase prices as it has exclusive content, but rights holders and streaming services need to figure out a way to bring prices closer to inflation. A market-wide increase to $10.99 would be a sound start, and the fact that so many Spotify subscribers are willing to pay $13 a month via iTunes shows there is pricing tolerance in the market.
  3. Catalogue pressure: Deep catalogue has been the investment fund of labels for years. But with most catalogue streams coming from music made in this century, catalogue values are being turned upside down (in the streaming era, the Spice Girls are worth more than the Beatles!). Labels can still extract high revenue from legacy artists with super premium editions like UMG did with the Beatles in 2018, but a new long-term approach is required for valuing catalogue. Matters are complicated further by the fact that labels are now doing so many label services deals, and therefore not building future catalogue value.
  4. Labels as a service (LAAS): Artists can now create their own virtual label from a vast selection of services such as 23 Capital, Amuse, Splice, Instrumental, and CDBaby. A logical next step is for a 3rdparty to aggregate a selection of these services into a single platform (an opening for Spotify?). Labels need to get ahead of this trend by better communicating the soft skills and assets they bring to the equation, e.g. dedicated personnel, mentoring, and artist and repertoire (A+R) support.
  5. Value chain disruption: LAAS is just part of a wider trend of value chain disruption with multiple stakeholders trying to expand their roles, from streaming services signing artists to labels launching streaming services. Things are only going to get messier, with virtually everyone becoming a frenemy of the other.
  6. Tech major bundling: Amazon set the ball rolling with its Prime bundle, and Apple will likely follow suit with its own take on the tech major bundle. Music is going to become just one part of content offerings from tech majors and it will need to fight for supremacy, especially in the ultra-competitive world of the attention economy.
  7. Global culture: Streaming – YouTube especially – propelled Latin music onto the global stage and soon we may see Spotify and T-Series combining to propel Indian music into a similar position. The standard response by Western labels has been to slap their artists onto collaborations with Latin artists. The bigger issue to understand, however, is that something that looks like a global trend may not be a global trend at all but is simply reflecting the size of a regional fanbase. The old music business saw English-speaking artists as the global superstars. The future will see global fandom fragmented with much more regional diversity. The rise of indigenous rap scenes in Germany, France and the Netherlands illustrates that streaming enables local cultural movements to steal local mainstream success away from global artist brands.
  8. Post-album creativity: Half a decade ago most new artists still wanted to make albums. Now, new streaming-era artists increasingly do not want to be constrained by the album format, but instead want to release steady streams of tracks in order to keep their fan bases engaged. The album is still important for established artists but will diminish in importance for the next generation of musicians.
  9. Post-album economics: Labels will have to accelerate their shift to post-album economics, figuring out how to drive margin with more fragmented revenue despite having to invest similar amounts of money into marketing and building artist profiles.
  10. The search for another format: In 1999 the recorded music business was booming, relying on a long established, successful format that did not have a successor. 20 years on, we are in a similar place with streaming. The days of true format shifts are gone due to the fact we don’t have dedicated format-specific music hardware anymore. However, the case for new commercial models and user experiences is clear. Outside of China, depressingly little has changed in terms of digital music experiences over the last decade. Even playlist innovation has stalled. One potential direction is social music. Streaming has monetized consumption; now we need to monetize fandom.

Preparing for the Post-Album Industry

This is a guest post by Keith Jopling, MIDiA’s Consulting Lead. It is a follow-up piece to What’s Next In Playlist Innovation?

Every week I’m still excited to check out the latest album releases. They are the gift that keeps on giving. But that gift feels different these days, more like receiving flowers or chocolate and less like anything you might say is a keepsake.

It’s becoming very rare these days for me to fall in love with an album the way I used to. I miss it, but there it is. Some of this is a conscious trade-off, since I enjoy compiling and curating playlists. But to some extent, it just feelslike I don’t have the time to give (i.e. invest in repeated listens) in the way albums – good ones – truly deserve.

Broader listening trends confirm that this applies to people in general. The penetration of adults that claim to listen to whole albums monthly, stands at just 16% (Q4 ‘18 data from MIDiA, a drop from 22% in the previous quarter), compared with say, 35% listening to music on the phone.

This is self-reported of course. Behavioural data on actual album listening is a patchwork of proxy measures, such as ‘listens (to individual album tracks) from the artist’s album page’ on Spotify. To be fair, we never ever really knew how consumers who bought albums actually listened to them. Survey data I saw a long time ago, before the streaming era kicked-in suggested that some purchased albums were played on average, just over once.

Competing in the attention economy

As the management consultants say, what can’t be measured won’t get done, and so in a world of real-time statistical feedback, why make an album if you cannot know who is listening and how? There is already a creative conversation in the industry about “skip-rate reduction” and one way to achieve this is to front load albums with the catchiest tracks, but where does that leave the art of album sequencing and story-telling?

The album’s competitive pressures go wider than music. In the attention economy, albums compete with Netflix, Fortnite, TikTok and Instagam. In music’s own attention economy, albums compete with singles, playlists, games, podcasts and box sets. And those latter two categories are literally stealing the show. This is unsurprising in the streaming world – a better way of coping with the content waterfall is a ‘consume-once-only’ approach. The idea of spending the same 45 minutes over & over to build up familiarity with a record seems taxing.

Albums are no longer water cooler moments

What seems particularly telling for music, is that ‘Netflix and shows’ is the water cooler conversation now. Pop culture talk is all about what you’ve watched, are watching or should watch, and any similar conversation about listening is conspicuous by its absence. The ‘event album’ seems to be over. Is it just me or do artists seem to want to drop albums with less fuss now anyway? Perhaps the element of surprise (Bowie’s legacy yet again) is smarter than facing the “aftermath of promotion”. But it’s also not without risk given the tonnage of new music flowing through. Coupled with this, some artists are either eschewing the format or at the very least questioning it. If we take the world’s biggest artist right now, Ariana Grande – what role did her album play in the scheme of things?

What choices does this leave labels and artists?

When the CD began to give way to streaming, it’s fair to say the labels embraced it. In some ways, the CDs decline was ushered in rather than managed out. Back around 2012 I was in the room when one label boss took hold of a CD and flung it across the room smashing it into shards. I was impressed if surprised. But are labels taking the same level of aggressive-progressive when it comes to succeeding the album?

I’ve already argued previously that the main format to succeed the album is the playlist, and that there is further innovation to go (also acknowledging Apple’s release regarding a more creative approach top playlist cover art). Meanwhile there is no doubt that the EP has made a comeback, and has become a useful vehicle for new artists to drop a collection of songs as a showcase of their repertoire.

But let’s take a look at some other options:

  • (Bring back) Album Exclusives:With some services so favouring the single track, could the labels divide & rule with full album licensing fenced off to other album focused services? Now I know we’ve been there before, and ‘nobody’ liked it much, but things are different now, and platform differentiation is a strategy both labels and platforms need when it comes to content. If some services stepped up in full support of the album, it stands a better chance longer term. A more radical option? Sell full albums exclusively on label-owned streaming services.
  • Physical Exclusives (through vinyl):Favouring both the true fan and the artist, perhaps vinyl should become the exclusive way to hear the whole collected work. With traditional vinyl at capacity one innovation I am keeping an eye on is Virylsteam-based manufacture. For artists looking to do something truly different, this is an option. Pre-order, custom versions, pre-sale and merch during tours, and pop-ups, as well as sell-through Amazon, Bandcamp and brick & mortar, the product sale potential is larger than it looks.
  • More visual outputs:Universal has doubled-down on video. Apple has doubled-down on video. Video remains huge, and continues to grow in short-form, and now long-form too. TV and theatrical productions are hunting very actively on music’s turf. It’s fascinating but by definition, not the same ubiquity potential of audio formats. Music films can do wonders for song catalogues however, Bohemian Rhapsdoy has proven that.
  • Experiment with entirely new formats:Easy to say, harder to do. New platforms such as voice and the car provide options without a doubt. Of course, an option for the producer sector is to do nothing much – simply wait for the technology sector to stumble on the next scaleable format. They are certainly trying, from Spotify’s Canvas moving images, to Pandora’s new Stories format, to Apple’s continued video format innovations such as Up Next. The platforms pitch these formats to artists as much as labels. One problem for labels is keeping up with the tail wagging the dog. Without knowing if the format will last, should they invest and convince artists to make stuff the platforms want? For example, should they make vertical videos just because Spotify wants vertical videos that month, or podcasts because it’s now all about podcasts, until it isn’t?
  • Expand into the live sector: Not easy. Wider representation of artists got a bad rap with the ‘360’ degree deals, but yet again, times have changed and a re-evaluation is due. With money coming in from streaming as well as outside investment, labels could buy smaller live promoters and venues.

What does this mean to the artist proposition and label economics?

Okay, so now we are down to the rub. The album is still the format that drives industry economics as a whole. The conversation around the artist proposition (and therefore the deal) has been changing for some years, but still essentially centres on the album as the economic unit. This must surely see more rapid change, to be replaced by agreed song numbers, or simply a time period covering numerous ‘artist projects’. We’ve already seen the first ‘lifetime’ deal between Elton John and Universal.

For the vast majority of artists, revenues are now following a pareto curve, with their ‘top songs’ (between five and ten say) making up a fraction of their catalogue but the large majority of their streaming income. When an established active artist releases a new album, the impact is often on those jewels in the crown more than the new collection, and if one or two songs make it into the crown, then bingo! The project pays off. The goal of any artist project is to get another jewel in the crown, but is an album the critical vessel to achieve that goal?

Perhaps the golden rule here is that the one size fits all model is becoming unfit for purpose. We’re already seeing some innovation, especially from Hip Hop artists like Migos, Drake and Kanye, but this trickle needs to turn into a flood. We’re getting to the time for ‘throw everything at the wall and see what sticks’.

The last days of All Killer No Filler?

I still use my primary source of the past 20 years to find new records, The Guardian G2 and Pitchfork. I can’t find any new albums via Spotify’s personalised feeds, because that’s mostly now just ‘for me’, or singles. Apple Music does a better job of presenting new release albums, and I guess both the streaming rivals are serving their own listener base appropriately.

Despite everything you read above, I feel the album will endure. The digital streaming age is a challenge to artists to make better albums, the ‘all killer no filler’ approach. The album as a canvas still feels relevant for some artists, but only some.

The album is already a niche in consumption terms, unmeasurable in streaming terms, but still the essential deliverable in the deal. That’s out of step, and those labels and artists with one eye on the mid-term future will already be planning for what the game looks like going forward. It’s what Reed Hastings calls “constantly worrying about what’s next” and it’s worked for him so far.

We don’t just write it. For a ‘post album world’ conversation with Keith & Mark contact us at MIDiA. We’ve already been helping labels, artists and managers rethink the album, drop us a line at info@midiaresearch.comto see how we could work with you.

 

Here’s How Spotify Can Fix Its Songwriter Woes (Hint: It’s All About Pricing)

Songwriter royalties have always been a pain point for streaming, especially in the US where statutory rates determine much of how songwriters get paid. The current debate over Spotify, Amazon, Pandora and Google challenging the Copyright Royalty Board’s proposed 44% increase illustrates just how deeply feelings run. The fact that the challenge is being portrayed as ‘Spotify suing songwriters’ epitomises the clash of worldviews. The issue is so complex because both sides are right: songwriters need to be paid more, and streaming services need to increase margin. Spotify has only ever once turned a profit, while virtually all other streaming services are loss making. The debate will certainly continue long after this latest ruling, but there is a way to mollify both sides: price increases.

spotify netflix pricing inflation

When Spotify launched in 2008, the industry music standard for subscription pricing was $9.99. So, when its premium tier was launched in May 2009, it was priced at $9.99. Incidentally, Spotify racked up an initial 30,000 subscribers that month – it has come a long way since. But now, nearly exactly ten years on, Spotify’s standard price is still $9.99. Its effective price is even lower due to family plans, trials, telco bundles etc., but we’ll leave the lid on that can of worms for now. Over the same period, global inflation has averaged 2.95% a year. Applying annual inflation to Spotify’s 2009 price point, we end up at $13.36 for 2019. Or to look at it a different way, Spotify’s $9.99 price point is actually the equivalent of $7.40 in today’s prices when inflation is considered. This means an effective real-term price reduction of 26%.

Compare this to Netflix. Since its launch, Netflix has made four major increases to its main tier product, lifting it from $7.99 in 2010 to $12.99 in 2019. Crucially, this 63% price increase is above and beyond inflation. An inflation-adjusted $7.99 would be just $10.34. Throughout that period, Netflix continued to grow subscribers and retain its global market leadership, proving that there is pricing elasticity for its product.

Spotify and other streaming services are locked in a prisoner’s dilemma

So why can’t Spotify do the same as Netflix? In short, it is because it has no meaningful content differentiation from its competitors, whereas Netflix has exclusive content and so has more flexibility to hike prices without fearing users will flock to Amazon. If they did, they’d have to give up their favourite Netflix shows. Moreover, Netflix has to increase prices to help fund its ever-growing roster of original content, creating somewhat circular logic, but that is another can of worms on which I will leave the lid firmly screwed.

If Spotify increases its prices, it fears its competitors will not. Likewise, they fear Spotify will hold its pricing firm if any of them were to increase. It is a classic prisoner’s dilemma.  Neither side dare act, even though they would both benefit. Who can break the impasse? Labels, publishers and the streaming services. If they could have enough collective confidence in the capability of subscriptions over free alternatives, then a market-level price increase could be introduced. Rightsholders are already eager to see pricing go up, while streaming services fear it would slow growth. Between them, there are enough carrots and sticks in the various components of their collective relationships to make this happen.

However – and here’s the crucial part – rightsholders would have to construct a framework where streaming services would get a slightly higher margin rate in the additional subscriber fee. Otherwise, we will find ourselves in exactly the same position we are now, with creators, rightsholders, and streaming services all needing more. When Netflix raises its prices it gets margin benefit, but under current terms, if Spotify raises prices it does not.

The arithmetic of today’s situation is clear: both sides cannot get more out of the same pot of cash. So, the pot has to become bigger, and distribution allocated in a way that not only gives both sides more income, but also allows more margin for streaming services.

Streaming music in 2019 is under-priced compared to 2009. Netflix shows us that it need not be this way. A price increase would benefit all parties but has to be a collective effort. Where there is a will, there is a way.

Kobalt is a Major Label Waiting to Happen

Disclaimer: Kobalt is a label, a publisher as well as a Performing Rights Organisation (PRO). This post focuses on its label business, but does not presume to overlook its other aspects.

Lauv Kobalt

News has emerged of Kobalt potentially looking to raise an additional $100 million of investment, following a 2017 round of $89 million and a 2015 $60-million round led by Google Ventures. Kobalt has been the poster child for the changing of the guard in the music business, helping set the industry agenda by pursuing a creators-first strategy while

building an impressive roster of songwriters and artists at a scale that would have most indies salivating. But it does not have its sights set on being the leading player of the indie sector, instead playing for the big game: Kobalt is the next major label waiting to happen.

So, what makes Kobalt so different? In some respects, nothing. Most of what Kobalt is doing has been done before, and there are others plotting a similar path right now (e.g. BMG, United Masters, Hitco). What matters is how it is executing, how well backed it is and the scale of its ambitions:

  • Moving beyond masters: In the old model, artists signed away their rights in perpetuity to record labels, with nine out of ten of them permanently in debt to the label not yet having paid off their advances. The new model (i.e. label services) pursued by the likes of Kobalt, reframes the artist-label relationship, turning it one more akin to that of agency-client. In this rebalanced model artists retain long-term ownership of their copyrights and in return share responsibility of costs with their label. This approach, coupled with transparent royalty reporting, lower admin costs and continual tech innovation has enabled Kobalt to build a next-generation label business.
  • Laser focus on frontline: In a label services business the entire focus is on frontline, as there isn’t any catalogue. An artist signed to such a label therefore knows that they have undivided attention. That’s the upside; the downside is that the label does not have the benefit of a highly-profitable bank of catalogue to act as the investment fund for frontline. This means that a label like Kobalt often cannot afford the same scale of marketing as a major one, which helps explain why Kobalt is looking for another $100 million. However, there is a crucial benefit of being compelled to spend carefully.
  • Superstar niches: In the old model, labels would (and often still do) carpet-bomb TV, radio, print and digital with massive campaigns designed to create global, superstar brands. Now, labels can target more precisely and be selective about what channels they use. Kobalt’s business is based around making its roster superstars within their respective niches, finding a tightly-defined audience and the artists they engage with. The traditional superstar model sees an artist like a Beyoncé, Ed Sheeran or a Taylor Swift being a mass media brand with recognition across geographies and demographics. The new superstar can fly under the radar while simultaneously being hugely successful. Take the example of Kobalt’s Lauv, an artist tailor-made for the ‘Spotify-core’ generation that hardly registers as a global brand, yet has two billion audio streams, half a billion YouTube views and 26 million monthly listeners on Spotify. By contrast, heavily-backed Stormzy has just three million monthly Spotify listeners.
  • Deep tech connections: The recent WMG / Spotify spat illustrates the tensions that can exist between labels and tech companies. Kobalt has long focused on building close relationships with tech companies, including but not limited to streaming services. This positioning comes easier to a company that arguably owes more to its technology roots than it does its music roots. The early backing of Google Ventures plays a role too, though with some negative connotations; some rights holders fear that this in fact reflects Google using Kobalt as a proxy for a broader ambition of disrupting the traditional copyright regime.
  • A highly structured organisation: One of the key differences between many independent labels and the majors is that the latter have a much more structured organizational set up, with large teams of deep specialisation. This is the benefit of having large-scale revenues, but it is also a manifestation of ideology. Most independents focus their teams around the creative end of the equation, putting the music first and business second. Major labels, while still having music at their core, are publicly-traded companies first, with corporate structures and a legal obligation on management to maximise shareholder value. Kobalt has undoubtedly created an organisational structure to rival that of the majors.

Earned fandom

Kobalt is a next-generation label and it is plotting a course to becoming a next generation-major. That success will not be reflected in having the rosters of household names that characterise the traditional major model, but instead an ever-changing portfolio of niche superstars. The question is whether the current majors can respond effectively; they have already made big changes, including label services, JV deals, higher royalty rates, etc.

Perhaps the most fundamental move they need to make, however, is to understand what a superstar artist looks like in the era of fragmented fandom. The way in which streaming services deliver music based on use behaviours and preferences inherently means that artists have narrower reach because they are not being pushed to audiences that are relevant. This shifts us from the era of macro hits to micro hits ie songs that feel like number one hits to the individual listener because they so closely match their tastes. This is what hits mean when delivered on an engagement basis rather than a reach basis. Quality over quantity.

Majors can still make their artists look huge on traditional platforms, which still command large, if rapidly aging audiences. But what matters most is engagement, not reach. It is a choice between bought fandom and earned fandom. In the old model you could build a career on bought fandom. Now if you do not earn your fandom, your career will burn bright but fast, and then be gone.

What the 2018 Success of the Beatles for UMG Tells Us About Where Streaming is Heading

Universal Music Group recorded an impressive €6 billion in revenue in 2018, bolstering a JP Morgan valuation of $50 billion. No doubt, UMG is enjoying a purple patch, riding and driving the wave of recorded music industry growth. But as with an any industry transition, progress is not linear and the past can have a lingering embrace. In UMG’s earnings report lies a small but crucial detail that point to the fact that the music industry’s path ahead may not be quite as straight as it first appears: the continued success of the Beatles.

The Beatles were UMG’s fourth best seller in 2018 

On page 13 of Vivendi’s year-end financial report, the Beatles’ ‘White Album’ is listed as UMG’s fourth best seller in 2018. It finished ahead of frontline artists including XXXTentacion, Migos and Ariane Grande. Above it were Drake’s ubiquitous ‘Scorpion’, Post Malone’s ‘Beerbongs & Bentleys’ and the soundtrack to ‘A Star is Born’. On the one hand this reflects the continued importance of the Beatles as a revenue driver for UMG. The Beatles, along with Abbey Road, were among the ‘crown jewels’ that UMG gained when it acquired EMI in 2012, so it is encouraging for UMG that the Beatles continue to deliver top tier revenue. However, Beatles revenue is not only a very different thing from Drake revenue, it also highlights the earnings divide between physical sales and streaming.

Streaming’s twin promise

The long-term promise of streaming is the combination of:

  1. Delivering larger audiences
  2. Replacing near-term, large volume revenue for a longer-term, annuity-like income model

Item number two happened very quickly; item number one is still in progress, but moving sufficiently enough to ensure many artists are now able to earn meaningful streaming income. However, we are not yet at our streaming destination, which is illustrated by the prominence of the Beatles in UMG’s 2018 sales. A ranking that owes little to streaming.

The Beatles are not a streaming powerhouse

According to the BPI, music from the 1960s accounted for just 3.6% of catalogue streams in the UK, which represents about 2% of all streams. Let’s assume the Beatles account for 40% of those streams – which is probably a generous assumption, this would mean the Beatles represented 0.8% of the $9.6 billion of streaming revenue in 2018, which translates as $79 million, which in turn equates to 2.7% of UMG’s 2018 streaming revenue. A meaningful amount for sure for a single artist, but not that significant in the greater streaming scheme of things. Therefore, the Beatles did not get to be UMG’s fourth biggest seller through streams. Instead, it did so through physical sales.

midia beatles umg

The main release in 2018 was the 50th Anniversary edition of the White Album. This premium physical release includes a $25 edition, right through to a $145 deluxe box set. With such high-unit prices, only small numbers need be sold to generate meaningful revenue.

To illustrate the point, let’s assume UMG collects around $15 of the $25 retail price and $100 of the $145 edition. To generate $7.5 million of label revenue, UMG would need to sell just half a million copies of the $25 edition and only 75,000 of the Boxsets. To generate the same $7.5 million from streaming UMG would need to have 62.5 million people each streaming 15 tracks from the album. $7.5 million is incidentally also roughly the amount a label would earn from selling a million copies of a standard priced album.

Streaming cannot yet match CD-era album revenue metrics

This gets to the heart of the matter of why streaming is creating, alongside a welcome growing body of middle-tier artists, a small handful of megastars. To replicate physical sales success, an artist must have exceptional streaming success. To replicate standout physical success requires as yet ungraspable streaming success.

For example, the number one album in the US in 2000 – NYSNC’s ‘No Strings Attached’ – sold over nine million copies, which would require 600 million people each streaming it all once — roughly 8.5 billion streams — to generate the same income. That is more streams than the entirety of Drake’s 2018 Spotify streams across the entire planet – Drake was Spotify’s most streamed artist. In short, streaming is currently large enough to make record labels grow, but not yet vast enough to create artist-level revenue on the same scale that that the CD peak once did.

Longer-term revenue may, or may not, add up.

The counter argument is that over a number of years the revenue will add up to the equal. But even with that assumption, an album would need to generate around a billion streams a year over eight years to replicate the success of NSYNC’s ‘No Strings Attached’. No easy task when you factor in the dynamics of streaming consumption i.e. playlists replacing albums, new music being pushed over catalogue etc.

None of this is to suggest that streaming is failing, nor that UMG’s revenues are in question. Both are doing well. Instead, it is evidence that we still have much distance to go with streaming before we can start seeing artist-level successes on a par with the peak of the industry. Though of course streaming-level success needs measuring differently than CD-era success, so these comparisons provide context rather than performance targets.

Will there ever be another Beatles’ greatest hits?

One intriguing post-script to all of this is that with download revenue falling by 15% in 2018, and physical by 7%, the days of large-scale album sales are long gone. When this is considered alongside the Beatles’ under-representation on streaming, the elephant in the room is whether UMG would ever risk releasing a Beatles greatest hits album for fear of underwhelming sales numbers damaging the Fab Four’s legacy. The last greatest hits was ‘1’ back in 2000 during the EMI years. Might it just be that UMG bought the Beatles too late ever to release their last ever greatest hits?