Global Recorded Music Revenues Grew By $1.4 Billion in 2017

2017 was a stellar year for the recorded music business. Global recorded music revenues reached $17.4 billion in 2017 in trade values, up from $16 billion in 2016, an annual growth rate of 8.5%. That $1.4 billion of growth puts the global total just below 2008 levels ($17.7 billion) meaning that the decline wrought through much of the last 10 years has been expunged. The recorded music business is locked firmly in growth mode, following nearly $1 billion growth in 2016.

Streaming has, unsurprisingly, been the driver of growth, growing revenues by 39% year-on-year, adding $2.1 billion to reach $7.4 billion, representing 43% of all revenues. The growth was comfortably larger than the $783 million / -10% that legacy formats (ie downloads and physical) collectively declined by.

Universal Music retained its market leadership position in 2017 with revenues of $5,162 million, representing 29.7% of all revenues, followed by Sony Music ($3,635 million / 22.1%) while Warner Music enjoyed the biggest revenue growth rate and market share shift, reaching $3,127 million / 18%. Meanwhile independents delivered $4,798 million representing 27.6%. However, much additional independent sector growth was absorbed by revenue that flowed through digital distribution companies owned by major record labels that were thus reported in major label accounts.

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But perhaps the biggest story of all is the growth of artists without labels. With 27.2% year-on-year growth this was the fastest growing segment in 2017. This comprises the revenue artists generate by distributing directly via platforms such as Believe Digital’s Tunecore, CD Baby and Bandcamp. All these companies performed strongly in 2017, collectively generating $472 million of revenue in 2017, up from $371 million the year before.  While these numbers neither represent the death of labels nor the return of the long tail, they do reflect the fact that there is a global marketplace for artists, which fall just outside of record label’s remits.

 

Up until now, this section of the market has been left out of measures of the global recorded music market. With nearly half a billion dollars of revenue in 2017 and growing far faster than the traditional companies, this sector is simply too large to ignore anymore. Artists direct are quite simply now an integral component of the recorded music market and their influence will only increase. In fact, independent labels and artists direct together represent 30.3% of global recorded music revenues in 2017.

A Growing and Diversified Market

The big take away from 2017 is that the market is becoming increasingly diversified, with artists direct far outgrowing the rest of the market. Although this does not mean that the labels are about to be usurped, it does signify – especially when major distributed independent label revenue and label services deals are considered – an increasingly diversified market. Add the possibility of streaming services signing artists themselves and doing direct deals with independent labels, and the picture becomes even more interesting.

The outlook for global recorded music business is one of both growth and change.

The report that this post is based upon is immediately available to MIDiA Research subscription clients herealong with a full excel with quarterly revenue from 2015 to 2017 segmented by format and by label. If you are not yet a MIDiA client and would like to learn more then email info@midiaresearch.com

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Facebook Might Just Have Done YouTube a Massive Favour

The word on the street is that the deals labels have struck with Facebook for its forthcoming music service have been done on a blanket license basis (i.e. a flat fee) with no reporting. This was reported by Music Business Worldwideand has been confirmed to me by various well-placed third parties:

“One controversial element of these agreements is, we hear, that these are ‘blind’ checks: effectively, advances that are not tied to any kind of usage reports from Facebook.”

Now to be clear, this has not been confirmed by either the labels concerned nor by Facebook but, if true, it has potentially dramatic implications, and not where you would necessarily think.

Facebook will bring something highly differentiated to streaming

Facebook is obviously in legislative cross hairs right now because it has proven unable to keep sufficient tabs on user data. The reason reportedly given for the lack of reporting is that Facebook does not yet have the reporting technology in place to track and report on music consumption. Now, there is no doubt that music rights reporting is no small undertaking; it requires expensively constructed systems to manage complex frameworks of rights. Given that Facebook is likely to launch something that more closely resembles Musical.ly and Flipagram (e.g. sound tracking, messaging, social interaction and photo albums) than it does Spotify, the odds are that this proposition will be particularly complex from a reporting perspective. But, and it is a crucial ‘but’, this challenge of tracking, enforcing and reporting on music-integrated user-generated content (UGC) is exactly the same challenge YouTube has been grappling with for years.

Facebook will become the new big player in UGC music

As we all know, YouTube’s relationship with music rights holders (labels in particular) has been fraught with conflict, tension and disagreement. The recorded music industry remains committed to rolling back much of the ‘fair use’ rules under which YouTube operates, to ensure that it can be licensed more like the standard music services. And it appears that genuine legislative progress has been made with big announcements mooted for later this year.

However, if I was part of YouTube’s lobbying team right now I’d be thinking I’ve just been given a free pass. The crux of the industry’s argument is that YouTube does not sufficiently protect copyright, enforce policing nor pay enough. Not paying enough is not directly a legislative issue, but instead a commercial factor. But the labels argue that the unique ‘fair use’ basis on which YouTube operates enables is to pay too little.

If the assumed basic premise of this deal is indeed correct, it transforms in an instant, YouTube from wild west desperado into the closest thing global scale UGC music has to a sheriff. YouTube’s Content ID system is more than 99% accurate at tracking and reporting on consumption. There is so much music on YouTube because in large part the labels need YouTube as a marketing platform. In fact, labels spend more on YouTube marketing than any other digital channel except social.

Fair use lobby efforts may be impacted

Meanwhile Facebook’s position on reporting, according to Music Business Worldwide, is:

“the social media service has committed to building a system which will be able to provide such usage reports – and therefore royalty reports – in the future.”

The deal as a whole could result in three potential legislative outcomes:

  1. Proposed regulations are rethought
  2. Proposed regulations are put on ice
  3. Proposed regulations are implemented but applied equally to Facebook too

The latter is a possibility, but the complication is that the labels – and again this is if the suggested deal structure is correct – have chosen to enable Facebook to behave in many of the exact ways which they do not want YouTube to operate.

Of course, there are good reasons this deal has happened, not least that Facebook will make a massive contribution to the digital music space in a truly different way. But perhaps more importantly in this context, Facebook will have paid enough to make the labels do a 180 degree turn on their approach to UGC. Therein lies the heart of the YouTube problem. Rights holders want to get paid more, and lobbying for legislative change is seen as the only way to make that happen. But some of the fundamentals that underpin that change are potentially put into question by the Facebook deals. So, there is a chance that in their efforts to get more revenue from Facebook, the labels might just have compromised their ability to get even more revenue in the long term from YouTube.

Spotify D(PO)-Day

downloadArguably the most anticipated day in the history of digital music is upon us. By the end of it we will have the first hint at whether Spotify is going to fall at the Snap Inc. or Facebook end of the spectrum of promising tech IPO, or DPO in the case of Spotify. Of course, we’ll need a few quarters’ worth of earnings in place before firmer conclusions can be drawn as to the strength of Spotify as a publicly traded company, but the first 24 hours will lay down some markers. However, it is the mid and long-term market factors that will give us the best sense of where Spotify can get to. Here are a few pieces of pertinent market context that can help us understand where Spotify is heading:

  • Streaming is just getting going: Downloads are yesterday’s legacy market, streaming is the future. But streaming has a long way yet to go. To date, downloads have generated around $35 billion in revenue for labels since the market started. That compares to around $15 billion for subscriptions. Apple accounted for around $23 billion of that download revenue, Spotify accounted for around $5 billion of that subscription revenue.
  • Spotify retains leadership: While the streaming market is competitive, Spotify has retained around 36% subscriber market share. However fast the market has grown, Spotify has either matched or beaten it. Apple is growing fast too but is adding fewer net new subscribers per quarter than Spotify is. Fast forward 12 months from now, Spotify will still be the number one player. Fast forward 24 months, it will probably still be.
  • Tech majors want the same thing: Of all the big streaming services, only Spotify is truly independent. Apple Music – Apple, Amazon Prime Music – Amazon, YouTube – Google, QQ Music – Tencent, Deezer – Access Industries, MelON – Kakao Corp, and now, Facebook) all have parent companies that have ulterior business objectives with music streaming. None of them have to seriously worry about streaming generating an operating profit. This means that there is little pressure in the marketplace to drive down label rights costs. All of this means that Spotify is the only main streaming service that is trying to make the model commercially sustainable.
  • Spotify can’t be Netflix yet: As much as the whole world appears to be saying Spotify needs to do a Netflix (and it probably does) it just can’t, not yet at least. In TV, rights are so fragmented that Netflix can have Disney and Fox pull their content and it still be a fast growing business. If UMG pulled its content from Spotify, the latter would be dead in the water. So, Spotify will take a subtler path to ‘doing a Netflix’, first by ‘doing a Soundcloud’ i.e. becoming a direct platform for artists and then switching on monetisation etc. In the near-term Spotify will happily have record labels sign artists that bubble up on the platform. But over time, expect Spotify to start competing for some signings.
  • Unpicking the distribution lock: The major record labels represent around 80% of recorded music revenues globally on a distribution basis, but just 61% on a copyright ownership basis. They get the extra market share through the distribution they provide indies, either directly or via divisions like Sony’s The Orchard or WMG’s ADA. The 80% share gives the majors the equivalent of a UN Security Council veto. Nothing gets through without their approval, which acts as a brake on Spotify’s ambitions. But, if Spotify was to persuade large numbers of those indies distributing through majors to deal direct, then some of that major power will be unpicked, which, combined with increased revenue, subscribers and market share, would strengthen Spotify’s hand.

Right now, Spotify has soft power (playlist curation, user-level data, subscriber relationships etc.). Spotify’s long-term future will depend on it building out its hard power and bringing it to bear in a way that brings positives both for it and for its industry partners. That will be a tightrope act of the highest order.

If you want the inside track on Spotify’s metrics, get access to MIDiA’s latest report:

Spotify by the Numbers: Trials, Churn and Margin which is available to purchase on MIDiA’s report store and to MIDiA clients via our subscription service.

The Spotify Numbers You Won’t Have Seen

One of the core values that we deliver to our clients at MIDiA Research is finding the ‘third number’— the data point that wasn’t reported by a company but that can be arrived at through a process of modelling and triangulation. Next week, we will publish a report that does just this for the numbers presented in Spotify’s F1 filing. The metrics we arrive at help create a more complete picture of Spotify’s performance for investors and rights holders, as well as the impact of core metrics upon other parts of Spotify’s business. In advance of its publication, here are just a few highlights.

spotify metrics

Spotify’s F1 filing paints a picture of a growing business that is improving metrics across the board, with the foundations for a solid couple of years ahead now well built. But there are also a number of challenges:

  • User growth: Spotify experienced strong growth between Q4 2015 and Q4 2017, increasing its subscriber base from 28 million to 71 million, its ad supported users from 64 million to 92 million and its total monthly active users (MAUs) from 91 million to 159 million. Set in the longer-term context, Spotify’s subscriber growth trajectory indicates it is well up the growth curve, with 2014 representing the earlier growth phase and Q1 2015 the point at which the inflection point occurred. Since Apple Music entered the market in mid 2015, Spotify has seen growth actually increase, and over the period added more net new subscribers by the end of 2017 (49 million) than Apple Music did (34 million).
  • Streams up, but inactive subscribers also: Engagement is growing, with subscribers playing an average of 630 streams a month in 2017 compared to 438 in 2015. Over the same period ad supported users increased average monthly streams from 119 to 222. The net result was 195.4 billion streams in 2017 compared to 59.6 billion in 2015. However, inactive subscribers (i.e. subscribers plus ad supported users minus MAU) grew from one million in Q1 2016 to four million in Q4 2017. Though this is a long way off the ‘zombie users’ problem that Deezer has historically suffered from due to inactive telco bundles, it is a metric Spotify will need to keep on top of.
  • Churn down…: Throughout 2016 and 2017 Spotify progressively reduced its churn rate from 6.9% for Q1 2016 to 5.7% in Q4 2017. This is despite churn being pushed up by the super trials and thus reflects a solid improvement of organic retention across Spotify’s paid user base. In a March investor presentation, CFO Barry McCarthy argued that as Spotify’s subscriber base matures, life time value (LTV) and gross profit will increase, with more subscribers sticking around for longer.
  • …but not out: Despite quarterly falls, churn remains a core issue while Spotify is in growth phase and is acquiring portions of subscribers who try out the service but realise it is not for them. On an annual basis churn 18% in 2017, down from 18.5% in 2016. These lost subscribers totalled 12.8 million in 2017, up from 8.9 million one year earlier. Spotify added 23 million subscribers to its year-end total in 2017 but, including churned out subscriber the total subscribers gained was 35.8 million. Thus, churned subscribers accounted for 36% of all subscribers gained. This process of getting more subscribers in than out is common to all premium subscription businesses and is particularly pronounced when a service is in growth phase, as is the case with Spotify. It is even more pronounced in contract-free subscriptions. Pay-TV and mobile companies have the benefit of long-term contracts to minimise churn. The fact that Spotify reports churn at all is creditable. McCarthy’s old company Netflix got so fed up with investors’ reactions to churn that it stopped reporting it all together.
  • Super trials: Spotify’s subscriber growth has not however been linear. Heavily discounted trials offering three-month subscriptions for $1 have been pivotal in driving strong user growth spikes each quarter in which they run. On average, Spotify’s global subscriber base grew by a net total of 2.8 million each quarter between Q4 2015 and Q4 2017 in the quarters that these ‘super trials’ were not running, but by 7.5 million in the quarters that they did.
  • Non-linear growth affects all regions: In 2016 and 2017, Spotify’s European and North American subscriber bases each grew at an average of one million subscribers in quarters without trials and three million and two million respectively in quarters with them. Thus, Spotify’s organic net monthly subscriber growth in each of these regions was around 330,000. A similar trend appeared in Latin America – where net subscriber growth doubled in each trial quarter from one to two million. The impact is more dramatic in rest of world, where rounded net subscriber growth was flat in all quarters without trials and more than one million in quarters with.

Despite the joint effects of subscriber bill shock and reduced margins, super trials are clearly net positive for Spotify’s business. When it later decides to fade them out in more mature markets – namely when it switches from user acquisition to user retention mode – Spotify will be able to quickly improve both margin and retention.

Barring calamity, Spotify looks set to have a strong 2018 in terms of growth across subscriptions, MAUs and revenue. If it continues its current operating strategy Spotify should reach 93 million subscribers by the end of 2018. By comparison, Apple Music is likely to have hit around 56 million subscribers by Q4 2018, with its rate of net new monthly subscribers having increased to 2 million in 2018.

If you are not yet a MIDiA subscription client and would like to find out how to get a copy of the forthcoming seven-slide report and accompanying dataset, email stephen@midiaresearch.com

The Narrative Of Spotify’s Filing Is That The Best Is Yet To Come

Spotify just filed its F1 for its DPO. The most anticipated business event in the recorded music industry since, well…as long as most can remember, is one big step closer. The filing is a treasure trove of data and metrics, and while there won’t be too many surprises to anyone who follows the company closely, there are none the less a lot of very interesting findings and themes. The full filing can be found here. Here are some of the key points of interest:

  • Most of the numbers are heading in the right direction: MAUs, subscribers, hours spent etc are all going up while churn and cost ratios are heading down. Premium ARPU was an exception, declining: 2015 – €7.06 / 2016 – €6.00 / 2017 €5.24, which reflects pricing promotions. But Spotify was never going to have fixed every aspect of its business in time for its listing, that was never the point. What Spotify needs to convince potential shareholders is that it is heading in the right direction. The narrative that emerges here is of a company that has helped create an entire marketplace, that has made great ground so far and that is poised for even bigger and better things. That narrative and the clear momentum should be enough to see Spotify through. As I’ve previously noted, investor demand currently exceeds supply. If you are a big institutional investor wanting to get into music, there are few options. Pandora aside, this is pretty much the only big music tech stock in town. As long as Spotify can keep these metrics heading in the right direction, it should have a much smoother first few quarters than Snap Inc did, even though a profit is unlikely to materialise in that time.
  • Spotify is baring its metrics soul: Spotify has put a lot of metrics on the line, setting the bar for future SEC filings. While competitor streaming services will be busy plugging the numbers into Excel so they can compare with their own, the rest of the marketplace now has a much clearer sense of what running a streaming service entails. One really encouraging development is Spotify’s introduction of Daily Active User (DAU) metrics. As we have long argued at MIDiA, monthly numbers are an anachronism in the digital era, a measure of reach not engagement. So, Spotify is to be applauded for being the first major streaming service to start showing true engagement metrics.
  • Users and engagement are lifting: Spotify had 159 million MAUs in 2017, with 71 million paid and 92 million ad supported. Europe was the biggest region (58 million total MAUs) followed by North America (52 million), Latin America (33 million) and Rest of Word (17 million). The latter two are the fastest growing regions. Meanwhile, 44% of MAUs are DAUs, up from 37% in Q1 2015, which shows that users are becoming more engaged, though the shape of the curve (see chart below) shows that when swathes of new users are on-boarded, engagement can be dented. Consumption is also growing (a sign of both user growth and increased engagement): quarterly content hours went from 17.4 billion in 2015 to 40.3 billion in 2017. There are some oddities too. For example, ad supported MAUs actually declined in Q2 2017 by 1 million on Q1 2017 and in Q4 2017 only increased by 1 million on the previous quarter to reach 92 million.
  • The future of radio: Spotify puts a big focus on spoken word content and podcasts in the filing, as it does on advertiser products. It also lists radio companies first and subscription companies second as its key competitors. Meanwhile ad supported flicked into generating a gross profit in 2017 (ad supported went from -12% gross margin in 2016 to 10% in 2017. Premium gross margin up from 16% to 22% over same period.) As MIDiA predicted last year, free is going to be a big focus of Spotify in 2018 and beyond. The first chapter of Spotify’s story was about becoming the future of retail. The next will be about becoming the future of radio. And the increased focus on spoken word is not only about stealing radio’s clothes, it is about creating higher margin content than music. None of this is to say that Spotify will necessarily execute well, but this is the strategy nonetheless.
  • Spotify is still losing money but is trending in the right direction: Spotify’s cost of revenue in 2017 was €3,241 million against revenue of €4,090 with an operating loss of €378 million. However, losses are not growing much (€336 in 2016) and financing its debt added a whopping €974 million in 2017, from €336 million in 2016. Part of the purpose of the DPO is to ensure debt holders, investors and of course founders and employees get to see a return of their respective investments in money and blood, sweat and tears. Once that is done, financing costs will normalize. Also, Spotify’s new label licensing deals are kicking in, with costs of revenue as a share of premium revenue falling from 84% in 2016 to 78% in 2017. Spotify is not yet profitable but it is getting its house in order.

All in all, there is enough in this filing to both convince potential investors to make the bet while also providing enough fodder for critics to throw doubt on the commercial sustainability of streaming. Spotify’s structural challenge is that none of the other big streaming services have to worry about turning a profit. In fact, it is in their collective interest to keep market costs high to make it harder for their number one competitor to prosper.

But in the realms of what Spotify can impact itself, the overriding trend in this filing is that Spotify is well and truly on the right track. For now, and the next 9 months or so, Spotify will likely remain the darling of the sector. But after that, investors will start wanting a lot more if they are going to keep holding the stock. Spotify is promising that the best days are yet to come. Now it needs to deliver.

spotify f1 a

spotify f1 b

Just What Is Tencent Up To With Streaming?

Tencent is building a global streaming empire. Back in December 2017 Tencent Music did a 10% equity swap deal with Spotify and now it has led a $115 million investment round for India-based streaming service Gaana. India may only be a small subscription market, with just 1.1 million paid subscribers at the end of 2016, but it one dominated by local players and has massive free streaming potential. Tencent now has major streaming stakes that give it reach across Asia, Europe and the Americas. The key missing parts are the Middle East and North Africa (Anghami is probably waiting for the phone to ring). Right now, Tencent has a streaming foothold in the world’s three largest countries:

  1. China: population 1.4 billion. 100% ownership of QQ Music, Kugou and Kuwo which together account for 70% of subscribers
  2. India: population 1.3 billion. Undisclosed ownership of top three streaming service Gaana
  3. US: 330 million. 10% ownership of leading subscription service

What Tencent is doing is building a global network of strategic positions in the streaming market that individually might not have global influence, but, collectively could be brought to bear to in an impactful way. Much like John Malone’s Liberty Media, Tencent is taking minority stakes in a strategically selected portfolio of companies. This provides it with the ability to exert some degree of influence and extract some benefit without the risk and resource required for a majority ownership. Minority stakes can also be used as beachheads for majority ownership further down the line.

In some respects, Tencent does not have a huge amount of choice in the matter. Last year the Chinese government placed restrictions on the amount Chinese companies could spend on overseas companies, in order to slow the outflow of capital from China. But, rather than let this be a hindrance Tencent is now using the policy to shape a bold internationalisation strategy. Coupled with other minority investments (12% in Snap Inc., 5% of Tesla) Tencent is positioning itself to be king maker in the future of digital media.

Radio Is Streaming’s Next Frontier

This week MIDiA held its latest quarterly research and networking event at Gibson Brands Showrooms in the heart of London’s West End. The event was heavily over-subscribed and was a great success (there are some photos at the bottom of this post).

The event combined a presentation from Pete Downton, deputy CEO of our event sponsor 7digital, a keynote from myself and a panel of leading industry experts. Here are a few highlights of my presentation.

radio blog slide

Streaming music has got where it has today largely by being the future of retail and replacing the download model, which in turn replaced the CD model (though vestiges of both remain). That premium model will continue to be the beating heart of streaming revenues for the foreseeable future but will not be enough on its own. The next big opportunity for streaming is to become the future of radio, which incidentally is around double the size of the recorded music market. In doing so, it will be a classic case of disruptive insurgents stealing market share from long-standing incumbents.

The opportunity for streaming is to build ad revenue around the younger audiences that are simply not engaging with traditional radio in the way that previous generations of young music fans once did. As the chart above shows, radio’s audience is aging and has an almost mirror opposite demographic profile to streaming. What is more, radio’s audience is declining by around one percentage point each quarter. It might not sound like much, but you normally do not measure change in terms of consistent quarterly trends. Instead there is normally quarterly fluctuation. So, this is nothing short of a major decline.

However, what is interesting is that free streaming is not growing by the same rate radio is declining. Instead, what is happening is that radio and streaming audiences are co-existing, with many that have spent a long time doing both eventually shifting all of their listening to streaming. Added to this, older consumers tend to embrace change more slowly than younger audiences. So, radio’s older listener base effectively acts as a disruption buffer.

What all this means is that radio is facing an existential threat like no other but it has some time to get its house in order, to identify how it can meld the best of the radio model with streaming experiences to start its fight back. And make no mistake, radio has so many unique assets that streaming does not (local content, talk, news, sports, weather, travel, brand personality etc.) and Apple’s underwhelming success with Beats 1 shows that hiring a bunch of radio people and launching a station does not guarantee success. Nonetheless, streaming services will get there. And Spotify’s recently launched Pandora-clone in Australia indicates just how serious the radio frontier is to streaming.

For more (a lot more!) data and analysis on how radio and streaming are facing up against each other, check out our new report Radio – Streaming’s Next Frontier: How Streaming Will Disrupt Radio Like It Did Retail which can be purchased directly from our report store here and is also available immediately to MIDiA clients as part of our research subscription service.

MIDiA Radio Event 1MIDiA Radio Event 2

Yonder And Streaming’s Less Travelled Path

Back in 2012, a music service that had raised $174 million in funding closed without yet having launched to consumers. That service was Beyond Oblivion, a company that intended to transform the music market with music bundled into handsets and phone packages at no extra cost to consumers. Five and half years later, Beyond Oblivion’s founder is finally seeing his latest iteration of the bundled music service model gain traction. Yonder, his new(ish) company, has started off 2018 with a million monthly active users (MAUs) under its belt, with the majority of that growth coming in the fourth quarter of 2017. Yet Yonder is not on many people’s radar, in large part because it is building its business in markets that are off streaming’s beaten track.

yonder graphic

Yonder’s main market is Bangladesh, which makes up just over half of its MAU base, followed by Indonesia and Sri Lanka. It even has tens of thousands of users in Nepal and the Maldives and plans to roll out to markets such as Myanmar, Cambodia, Iraq and Ghana in 2018. These are not markets famed as booming digital music markets, and they’re certainly not priority markets for any of the top streaming services. So, in many respects Yonder is competing around, rather than with the likes of Spotify.

Low ARPU markets

But there is more to it than just that. These are markets with mostly large populations and very low GDP per capita and mobile ARPU. In many of these territories mobile ARPU is significantly lower than the cost of a western streaming subscription. For example, total mobile ARPU in Bangladesh is around $4 a month. This makes fitting the economics of a streaming music bundle into a tariff challenging in the extreme. The standard wholesale tariffs record labels provide streaming services in these regions struggle to fit these wafer thin margins. So, making music bundles work needs a very specific and localized approach. The same principle applies to localization, with music programming requiring a much higher degree of local specialization than many other markets.

More than one way to skin a cat

2018 will likely see a slowdown in music subscriber growth in many western markets. In the meantime, majority of the 9.99 price points will be addressed. Ad supported and discounting will be key to sustaining growth in these markets, but the scale of opportunity for digital music lies in emerging markets. 2017 was the year we really started to see Latin American markets begin to make their mark, while China established itself as a major contributor to subscribers, if not revenue. Services like Yonder are important for the music business, not just because they address new markets but also because they represent another approach. The 9.99 AYCE model will remain the core opportunity, but sticking too tightly to it will limit the scope of the wider market.

Yonder’s model is not without challenges – not least the concept of making premium music feel like it’s free to its users – but it represents one of what should hopefully become a wider selection of alternative paths to making streaming pay.

Join Us At ‘Radio Is Streaming’s Next Frontier’

I’m very pleased to announce that MIDiA is hosting a special industry event on Wednesday 7th February at Gibson Brands in central London, in partnership with 7digital. The event ‘Radio Is Streaming’s Next Frontier’ is going to explore how in 2018, streaming music is going to start impacting radio just like it has spent the last few years replacing downloads. Streaming spent the first phase of its life being the future of retail, it will spend the next phase becoming the future of radio.

In this free-to-attend event we will present some of our latest research, including exclusive data, ranging from big picture trends through to tactical data, such as exactly how much each streaming service is affecting each radio station.

In addition to my research presentation there will be panel discussion from industry experts:

Is Streaming and Radio a Zero Sum Game?

Moderator: Zach Fuller

Panellists:

  • Jeff Smith: head of Music, Radio2 and Radio6
  • Pete Downton: deputy CEO, 7digital
  • Chris Baughen: VP Content and Formats, Deezer

After all this there will be drinks and networking. The event was publicised to MIDiA clients and newsletter subscribers first so there are only a few places left. So, RSVP your slot here now!

Hope to see you there, and watch out for a sneak peak of some of the research soon.

midiaresearch7digitalevent

Free Report: Lyrics Take Centre Stage In Streaming Music

We are pleased to announce the publication of a brand new, totally free, Streaming Music report. In this report, we present the findings of an exclusive consumer survey fielded in November 2017 to consumers in the US, UK and Germany, deep diving into streaming behaviours and the growing role that lyrics is taking. The report download link can be found at the bottom of this post.

The report includes data on:

  • Overall music consumption and streaming behaviours
  • Weekly Active User (WAU) penetration of all key streaming music apps
  • Tenure splits of streaming users by streaming service
  • Consumer attitudes towards lyrics
  • Lyric users by tenure length of individual streaming services
  • The relationship between lyrics users and streaming loyalty
  • Key drivers for using lyrics, with gender splits

Here is an overview of some of the findings of the report that we wrote on behalf of LyricFind.

INFOGRAPHIC V 1.1

Streaming music has put the audience in control, letting music fans choose what, when and where they listen. One of the most dramatic changes that streaming has enabled is the expansion of music from a lean-back, linear experience into something far more engaging and interactive. Now fans lean forward to choose the songs they want, build playlists, comment and share. Lyrics are centre stage in this shift, transforming from static-print-hidden-away-inside-album-sleeve notes, to a dynamic extension of the music itself. Lyrics permeate the streaming music ecosystem, from websites, through YouTube and Vevo to the streaming services themselves.

Whereas lyrics in the analogue era used to be domain of music aficionados, in the streaming era they are a mainstream behaviour for audiences as diverse as they are widespread. The motivations are similarly varied, with the most cited being to know the words (81%) followed by being able to sing along (72%). Among streaming services users who are music subscribers, penetration of lyrics usage rises to 88%. What is more, lyrics have a strong link with music subscriber loyalty among 91% of all music subscribers that have been using lyrics for more than three years.

However, many lyrics users want more out of their lyrics experiences, with 56% of subscribers wanting lyrics to be in time with songs. Younger users, in particular, are raising their expectations, with 16-24 year olds the most likely to want new lyrics features.

Streaming is transforming music consumption across the board

Music consumption is in the midst of a transition period, with streaming rapidly ascending to become the dominant format. As with any transition, the old world coexists with the new, due to old habits dying hard and older groups of consumers changing behaviours slower. Thus, we see radio (66%) and free streaming (43%) as the two dominant forms of music consumption. Crucially, a strong overlap exists between the two: 72% of streamers listen to radio and 47% of radio audiences stream music. This indicates: a) that the transition will pick up pace, as nearly half of radio listeners are already swapping out some of their radio listening time for streaming; and b) that there currently remains enough that is different between radio and streaming for the two to coexist. The biggest takeaway though, is that streaming has a massive amount of growth potential ahead of it.

Lyrics are an integral part of the streaming experience

Lyrics are at the centre of the streaming music experiences: 79% of all music streamers use lyrics, rising to a comprehensive 88% of music subscribers. Wanting to know the words to songs is the main driver, with 65% of music subscribers stating this as their reason for using lyrics. Next, 55% of subscribers and 51% of free streamers said they wanted to be able to sing along with their favourite song. More social activities like singing with friends and karaoke score relatively lowly, indicating that lyrics are a very personal and integral part of how music fans interact with music.

Lyrics have a clear correlation with music subscriber tenure and with churn. The longer that consumers have been music subscribers, the more likely they are to use lyrics, while consumers that have cancelled their subscriptions are much less likely to use lyrics. Across Deezer, Spotify and Google Play, an average of 98% of subscribers with three plus years tenure use lyrics. This contrasts with lyrics penetration among churned out subscribers, with an average of just 60% across the same three streaming services. The importance of lyrics features is further underscored by the fact that 55% of streaming lyrics users say they are more likely to pay for a streaming service that ‘has great lyrics features’. For music subscribers overall, the rate is 43%, rising to 48% of Deezer users and 52% of Tidal users.

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Lyrics Take Centre Stage In Streaming – LyricFind – Report