Amazon’s Ad Supported Strategy Goes Way Beyond Music

Amazon is reportedly close to launching an ad supported streaming music offering. Spotify’s stock price took an instant tumble. But the real story here is much bigger than the knee-jerk reactions of Spotify investors. What we are seeing here is Amazon upping the ante on a bold and ambitious ad revenue strategy that is helping to reformat the tech major landscape. The long-term implications of this may be that it is Facebook that should be worrying, not Spotify.

amazon ad strategy

In 2018 Amazon generated $10.1 billion in advertising revenue, which represented 4.3% of Amazon’s total revenue base. While this is still a minor revenue stream for Amazon, it is growing at a fast rate, more than doubling in 2018 while all other Amazon revenue collectively grew by just 29%. Amazon’s ad business is growing faster than the core revenue base, to the extent that advertising accounted for 10% of all of Amazon’s growth in 2018.

Amazon is creating new places to sell advertising

The majority of Amazon’s 2018 ad revenue came from selling inventory on its main platform. This entails having retailers advertise directly to consumers on Amazon, so that Amazon gets to charge its merchants for the privilege of finding consumers to sell to, the final transaction of which it then also takes a cut of. In short, Amazon gets a share of the upside (i.e. the transaction) and of the downside (i.e. ad money spent on consumers who do not buy). This compressed, redefined purchase funnel is part of a wider digital marketing trend and underlines one of MIDiA’s Four Marketing Principles.

But as smart a business segment as that might be to Amazon, it inherently skews towards the transactional end of marketing, and is less focused on big brand marketing, which is where the big ad dollar deals lie. TV and radio are two of the traditional homes of brand marketing and that is where Amazon has its sights set, or rather on digital successors for both:

  • Video: Amazon’s key video property Prime Video is ad free. However, it has been using sports as a vehicle for building out its ad sales capabilities and has so far sold ads against the NFL’s Thursday Night Football. It also appears to be poised to roll this out much further. However, Amazon’s key move was the January launch of an entire ad-supported video platform, IMDb Freedive. Amazon has full intentions to become a major player in the video ad business.
  • Music: Thus far, Amazon’s music business has been built around bundles (Prime Music) and subscriptions (Music Unlimited). Should it go the ad-supported route, Amazon will be replicating its video strategy to create a means for building new audiences and new revenue.

It’s all about the ad revenue

Right now, Amazon is a small player in the global digital ad business, with just 6% of all tech major ad revenue. However, it is growing fast and has Facebook in its sights. Facebook’s $50 billion of ad revenue in 2018 will feel like an eminently achievable target for a company that grew from $2.9 billion to $10.1 billion in just two years.

To get there, Amazon is committing to a bold, multi-platform audience building strategy. Whereas Spotify builds audiences to deliver them music (and then monetise), Amazon is now building audiences in order to sell advertising. That may feel like a subtle nuance, but it is a critical strategic difference. In Spotify’s and Netflix’s content-first models, content strategy rules and business models can flex to support the content and the ecosystems needed to support that content. In an ad-first model, the focus is firmly on the revenue model, with content a means to an end rather than the end. (Of course, Amazon is also pursuing the content-first approach with its premium products.)

Amazon is becoming the company to watch

So, while Spotify investors were right to get twitchy at the Amazon rumours, it is Facebook investors who should be paying the closest attention. Amazon’s intent is much bigger than competing with Spotify. It is to overtake Facebook as the second biggest global ad business. None of this means that Spotify won’t find some of its ad supported business becoming collateral damage in Amazon’s meta strategy – a meta strategy that is fast singling Amazon out as the boldest of the tech majors, while its peers either ape its approach (Apple) or consolidate around core competences (Google and Facebook). Amazon is fast becoming THE company to watch on global digital stage.

Spotify, the Decline of Playlists and the Rise of Podcasts

The following is a small excerpt from MIDiA’s forthcoming third edition of its ‘landmark State of the Streaming Nation’ report. For more information about this report email stephen@midiaresearch.com

Most things that Spotify does are scrutinised and cross-examined within an inch of their lives, with vested interests trying to second guess what may be the intended or unintended consequences for them. Most actions are viewed through the disruption lens i.e. how will this hurt or compete with Spotify’s rightsholder partners? The streaming market is of course so much more than just Spotify, but the company acts as a lightning rod for the wider market and most often sets the strategic agenda.

Spotify’s Two Phases of Growth

Two of Spotify’s most significant moves have been playlist curation and podcasts. Spotify is moving into the second major phase of its existence. Phase 1 was about establishing itself as a streaming music powerhouse, Phase 2 is about what it becomes next, extending beyond the streaming music beachhead. This is the typical trajectory of tech companies, establishing themselves in their core competencies and then expanding. This can either be a dramatic expansion – e.g. Amazon moving from eCommerce into video and music – or a more focused value-chain extension – e.g. Netflix moving from simply streaming other’s shows to making its own. For Spotify, playlists were a Phase 1strategy and podcasts are very much part of Phase 2.

midia playlists and podcasts

Podcasts may just have come in the nick of time for Spotify because curated playlists remain much more about potential than they do reality. Just 15% of streaming consumers listen to curated playlists. In fact, of all the key streaming feature activities, curated playlists come lowest. Curated playlists are clearly not to streaming music what binge watching is to streaming video. Instead streaming activity is fragmented across multiple features and just 10% of streaming consumers regularly do all four of the activities listed in the chart above.

‘But wait’ I hear you ask, ‘that doesn’t make sense, look at all these streams we’re getting from playlists’. The key factor here is the difference between the number of playlist users and the number of playlist streams. Playlists over index in terms of contribution to streams. With dozens of tracks per list, lean-back playlist listening can easily generate more streams per user than lean-forward listening. Thus, we have one of the great emerging paradoxes of streaming: passive audiences can generate more streams, and thus rightsholder pay outs, than engaged, aficionados. However, a word of caution, should casual playlist listening become large enough, then the net result will be a dilution of the royalty pool and thus diminishing per stream rates.

Perhaps not the holy grail of promotion

A few years ago, playlists looked like the future of artist marketing, now they are looking a bit like a busted flush. They may be great at generating streams but are not so great at building an artist’s story. The near-obsession with Spotify playlists in label marketing strategy reflects the fact that most record label executives use Spotify and thus often have a Spotify-centric (and therefore playlist-centric) worldview. But labels are now beginning to question the artist ROI of playlists. The growing adoption among casual listeners only compounds matters and means that a playlist ‘hit’ does not necessarily do much to help long-term artist brand building. To put it simply: a playlist is not a shortcut to cultural relevance.

Podcasts could be bigger than streaming

Enter stage left podcasts. With its acquisitions of Gimlet, Anchor and Parcast, Spotify is betting big on podcasts. Already, more streaming users (18%) listen to podcasts than curated playlists while overall consumer podcast penetration is 11%. In Sweden – the early adopter market that gives us a view of where other markets are heading – podcast penetration is 19%, rising to 28% among streamers. Podcasts are a Netflix moment for radio and may even have the potential to be bigger than streaming music (US radio ad revenues alone are $16 billion). Right now, the growth in overall podcast audiences is fairly slow, but engagement is accelerating as are content creation, monetisation and distribution. It is not entirely inconceivable to think that five years from now, podcasts could be a bigger business for Spotify than music. Certainly, creators could be making much more money, even now.

While it remains more likely that music will be the core of Spotify’s business half a decade from now, all the early indications are that Phase 2 will mean a degree of diversification of user experience, business model and revenue stream, with podcasts at the vanguard. Playlists are not dead, but nor are they the golden child anymore.

New MIDiA Latin American Streaming Report, in English, Spanish and Portuguese

MIDiA Latin America Streaming reportMIDiA has just published its latest report on the Latin American streaming music market, and we have versions available in English, Spanish and Portuguese.

MIDiA has been tracking the Latin American music market for over five years, including annual consumer data and market metrics.

Our latest report ‘Latin America Streaming Music Market: YouTube and Spotify Take Hold’is written by our long term Latin American music analyst Leo Morel and features data on Mexico, Brazil and the region as a whole.

 

 

The report includes analysis and data on:

  • Consumer adoption of YouTube, Spotify, Apple Music, Deezer and other streaming services
  • Playlist penetration
  • Wider consumer music behaviour eg downloads, CDs
  • Streaming revenues (subscriptions, ad supported music ad supported video)
  • Streaming users (subscriptions, ad supported music ad supported video)

Companies and brands mentioned in the report: Apple, Deezer, Google, iPhone, iTunes, Movistar, Spotify, TIM, Virgin Mobile, Vevo, Vivo, YouTube

The reports are immediately available to our clients, while you can purchase the individual reports here:

The reports each come with PDF, Slides, Excel and infographic.

For any questions please email info@midiaresearch.com

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.

Apple’s Subscription Pivot

On Tuesday Apple announced its arrival on the world stage as a media company, using the lion’s share of its product keynote as the platform for a succession of super star actors, directors and other personalities to tell the story of their respective Apple original TV shows. Breaking with a longstanding tradition of using these keynotes to announce new hardware, Apple used this one to showcase content and its creators. While services revenue is still but a small minority of Apple’s business (11% in Q4 2018), there is no doubt that Apple is placing a far greater priority on content – a strategic pivot made necessary by slowing device sales in a saturated global smartphone market. Apple has already made itself a power player in music, but has the potential to turn the entire digital content marketplace upside down should it so decide.

four phases of media formats midia

Apple’s ramping up of its content strategy is best understood by looking at its place in the four stages of media formats:

  1. Phase 1 – physical media formats:In the old world, consumer electronics companies came together to agree on standards and then competed in a gentlemanly fashion on execution. This approach underpinned the eras of the CD and DVD.
  2. Phase 2 – walled garden ecosystems: In the internet era companies competed fiercely, building proprietary formats into impenetrable walls that locked consumers in. This resulted in the rise of walled gardens such as iTunes and Xbox.
  3. Phase 3 – post-ecosystem: App stores became the chink in the armour for walled garden models, allowing a generation of specialist standalone apps such as Spotify and Netflix.
  4. Phase 4 – aggregation: Walled garden players had inadvertently created global platforms for specialist competitors, so are now figuring out how to avoid going the route of telcos and becoming dumb pipes. The likes of Xbox, Amazon and Apple have started to embrace some of their standalone competitors, adding curatorial layers on top via hardware and software. This is how we have Amazon channels, Fortnite’s marketplace within Xbox and, soon, Apple channels.

Apple just prepped its content portfolio for a subscription pivot

Apple built its modern-day business firmly on the back of content. The iPod was the foundation stone for its current device business and simply would not have existed without music. While its current device portfolio meets a much wider set of user needs, content remains the use case glue that holds its device strategy together. On Tuesday Apple announced new subscriptions for news (News+), games (Arcade) and video (TV+). Interestingly, in an entire keynote focused on media, Apple Music did not even get a mention, despite Zane Lowe’s Beats One show providing the background music prior to the presentations. Perhaps Apple felt Apple Music is so well established that it did not merit a mention, but the lack of an update felt like more than an oversight, intentional or otherwise.

That aside, Apple now has prepped its content proposition for a subscription pivot. Prior to these new announcements, Apple’s content offering (Apple Music excepted) was firmly rooted in the increasingly archaic world of downloads. Shifting from downloads to streaming is no easy task, and Apple will have to tread a cautious path so as not to risk alienating less adventurous download customers. It is the exact same shift that Amazon is navigating. But now Apple has the subscriptions toolset to start that journey in earnest. It has decided that subscriptions are ready for primetime.

This primetime strategy underpins Apple’s early follower strategy across its entire product and services portfolio. As its customer base has gotten older and more mainstream, it has had to progressively stretch out launches, to such an extent that at times it looks at risk of being too late. Apple Music looked too late when it launched, but still made it to a clear number two position. TV+ was even later to market, but don’t count against it plotting a similar path to Apple Music.

What Apple needs from content

Watch and TV could both be long-term contenders for Apple’s revenue growth until it launches a product category to drive new, iPhone-scale hardware growth, but the odds are not yet in their favour. Services look like the best midterm bet. But Apple has some tough decisions to make about what role it wants content to play in its business. This is because subscriptions pose two challenges for Apple:

  • Margin could be a real problem:Apple’s high profile spat with Spotify over its App Store levy hides a bigger commercial issue. With margins in streaming as low as they are, Apple most likely makes more margin on its Spotify App Store levy than it does selling its own Apple Music subscriptions. The amount of money it has invested in its lineup of TV+ originals is also unlikely to do its services margins any favours.
  • Subscriptions have to get really big: Standalone subscriptions will not only be low (perhaps negative) net margin contributors, but will not deliver enough revenue. It would take more than one billion Apple customers paying for two $9.99 subscriptions every month of the year to generate the same amount of revenue it currently makes from hardware. The App Store is Apple’s current services cash cow, and Apple’s new slate of subscriptions are preparing for a post-App Store world. Yet it would take a hundred million $9.99 subscriptions every month of the year to get Apple’s services revenue to where it is now. That number is eminently achievable but generates revenue stagnation, not growth.

Doing an Amazon

So how does Apple square the circle? Probably through a combination of standalone subscriptions, bundles and a single Apple bundle plan. And yes, once again, this is exactly what Amazon has been doing for years now. In fact, you could say Apple is doing an Amazon. The Prime-like bundle could be the most disruptive move of the lot. Imagine if Apple, alongside the full-fat subscriptions, deployed a lite version of Music, Games and TV+ available for a single annual fee and / or as part of a device price (like Amazon Music Unlimited vs Amazon Prime Music). This option would mean that Apple would be simultaneously doing free without ads and subscription with fees. The implications for pure subscription and ad supported businesses are clear.

Whatever options Apple pursues, the permutations will be felt by all in the digital content marketplace.

How YouTube’s 1bn+ Club is Changing the Face of Global Music Culture

Throughout 2018, while locked in a bitter war of words with rightsholders and creators over Article 13, YouTube quietly but dramatically expanded its role as the most powerful platform for creating global superstars. Nowhere is this better illustrated than with the YouTube music videos that have one billion streams or more. Not only did that number become bigger than ever in 2018, but the rate at which videos joined the 1bn+ club grew too. With music audiences fragmenting into algorithmically defined niches, YouTube continues to create truly global scale, mass market audiences.

As of Q1 2019, 139 music videos have joined the 1bn+ club, with a record 52 of those reaching one billion in 2018 alone. Not only are more YouTube videos joining the 1bn+ club, but they are getting there faster. On average, the 1bn+ videos released in 2018 got to that milestone ten times faster than those released at the start of the decade. But something very interesting is happening. Now that Latin America and US Hispanics are becoming a major constituency of the YouTube audience, Latin music videos are becoming the dominant part of the 1bn+ club. 63% of all 2018 videos that reached one billion streams were Latin music videos. YouTube is fast establishing itself as the consumption method of choice for Latin American audiences, and their listening behaviour is helping reshape the face of global music culture. In doing so, YouTube is helping to create a new generation of superstars – Latin superstars.

top 5 1b+ artists on YouTube midia

The artist with more 1bn+ videos than any other is Puerta Rican reggaetón and Latin trap artist Ozuna. He appears, either as the lead artist or as a featured artist, on eight, yes eight, videos with a billion streams or more, generating 10.1 billion streams to date. Although Anglo-centric artists fill three of the other top five spots, the tide is turning. In 2018 Latin 1bn+ videos generated three and a half times as many streams as Anglo-centric pop 1bn+ videos did.

There is another important, less obvious implication of the rise of Latin artists on YouTube. Latin America is now such a large part of the global streaming user base that it can generate hits that look global in scale, but in reality are only regional. India will start to do the same in 2019 and 2020. Record labels need to take a more nuanced approach to reading global-scale data trends. Just because a track breaks into Spotify’s Global 100 does not mean it is a global hit. In today’s world, global scale does not always mean global appeal.

Hip Hop, a tale of two streams

On audio streaming services Hip Hop is the ubiquitous genre, with its artists among the highest profile in the music industry. Spotify’s top three most streamed tracks of 2018 were all Hip Hop, while for Apple Music it made up the entire top seven. Among YouTube’s biggest tracks, however, Hip Hop is a minor player, with just 7% of 1bn+ videos. Demographics and geography play roles, but so do the respective relationships of the platforms with the major labels. The labels have more overall influence on Spotify and Apple Music’s programming, and additionally focus intense efforts on influencing their curated playlists (Spotify especially). Because Hip Hop is the priority genre for the major labels, all of whom have a strong US-centric worldview, Apple Music and Spotify end up with a strong Hip Hop skew. YouTube, however, is much less directly influenced by the record labels and relies on algorithms rather than programming to surface content for its users. YouTube’s genre mix thus more closely follows the tastes of its users, while Apple and Spotify’s more closely follow the priorities of the labels.

So, what does the rise of Latin artists and the under-performance of Hip Hop on YouTube say about today’s global music landscape? For me, it is this:

Anglo-centric artists have been the global superstars for decades because it took the marketing dollars of big, global record labels to make them. Now, large scale, regional audiences can have the same impact, by just listening.


This post highlights just some of the data and findings that are going to be revealed in our forthcoming report: 1bn+ Music Videos: Latin Takeover

 If you are a MIDiA client and would like to get early access to the data email enquiries@midiaresearch.com

 If you want to learn more about how to become a MIDiA client, email stephen@midiaresearch.com

MIDIA RESEARCH 2018–2026 STREAMING MUSIC FORECASTS

MIDiA has just published its global music forecasts, with revenue and user numbers projected out to 2026 (a list of data items and countries covered are listed at the bottom of this post).

2017 was the last year of strong streaming revenue growth. From 2018 onwards streaming growth will lessen each year, falling from 29% in 2018 to 7% in 2026. The slowdown in revenue growth reflects maturation of developed streaming markets such as the US, UK, Sweden, Netherlands and Australia. Longer term growth will be driven by emerging markets such as Brazil, Mexico and Indiaas well as later adopting major markets Germany and Japan.

midia music forecasts

Even with this slowing rate there is a lot of growth left in the market – so much so, in fact, that the market will grow from $19.6 billion in 2018 (in retail terms) to $45.3 billion in 2026. This means the market will more than double.We also have all of the market numbers in label trade revenue terms, but we are focusing on retail revenues for a crucial reason: the difference between trade revenues and retail revenues will widen between now and 2026. This reflects a number of factors that will see streaming services improve their margins and thus widen the gap on label revenues:

  1. Rising publishing related rates
  2. Increased share of royalty pot going to non-music content
  3. Increased share of royalty pot going to non-label music
  4. Potential long-term future label rate cuts (e.g. relief for price hikes)

The last item won’t happen in the current round of negotiations with rights holders, but at the next round more power will lie with streaming services. Right now, Spotify poses a lot of threat in rightsholder eyes, but its actual power is more limited. Streaming revenues accounted for 51% of label revenues in 2018 and with Spotify accounting for less than half of that, this means that Spotify accounts for less than a quarter of total label revenues. The labels, publishers and right bodies need to maximize their negotiating power now, while they can.

This will change, and when combined with the other three factors, the conclusion is clear: label trade revenues are becoming a progressively less useful way of measuring the future size of the streaming market.

In subscriber terms, at the end of 2018 there were 278 million paid subscribers. However, due to the impact of family plan accounts, unique subscriptions were only 242 million. The 2 biggest streaming markets in 2018 (US and UK) will remain the largest by 2026 while large markets such as Germany and France will also still be large, leading markets. Brazil, India, MENA and China will all be established as top 15 global markets by 2026, with the first four each more than doubling revenue compared to 2018.

MIDiA clients can access the report and full dataset right now here. Clients can also explore the forecastsin our forecasts viewer on our data portal Fuse here.

The report and data are also available for purchase on the MIDiA report store here.

List of data points and markets:

  • Subscription revenue (retail values)
  • Audio Ad supported revenue (retail values)
  • Video Ad supported revenue (retail values)
  • Total Ad supported streaming revenue (retail values)
  • Total streaming revenue (retail values)
  • Downloads revenue (retail values)
  • Total digital revenue (retail values)
  • Physical revenue (retail values)
  • Other revenue (retail values)
  • Total recorded music revenue (retail values)
  • Subscription revenue (label trade values)
  • Audio ad supported revenue (label trade values)
  • Video ad supported revenue (label trade values)
  • Total ad supported streaming revenue (label trade values)
  • Total streaming revenue (label trade values)
  • Downloads revenue (label trade values)
  • Total digital revenue (label trade values)
  • Physical revenue (label trade values)
  • Other revenue (label trade values)
  • Total recorded music (label trade values)
  • Subscribers
  • Subscriptions (unique accounts)
  • Ad supported audio users
  • Ad supported video users
  • Subscriber ARPU (USD) – Retail values
  • Ad supported audio ARPU (USD) – Gross revenues
  • Ad supported video ARPU (USD) – Gross revenues
  • Subscriber ARPU (USD) – Trade values
  • Ad supported audio ARPU (USD) – Trade revenues
  • Ad supported video ARPU (USD) – Trade revenues
  • Audio streams
  • Spotify subscribers
  • Apple Music subscribers

Countries covered

  • US
  • Canada
  • Austria
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Italy
  • Netherlands
  • Norway
  • Poland
  • Spain
  • Sweden
  • Switzerland
  • UK
  • Other Europe
  • Australia
  • China
  • India
  • Indonesia
  • Japan
  • Philippines
  • South Korea
  • Taiwan
  • Thailand
  • Other Asia
  • Argentina
  • Brazil
  • Colombia
  • Mexico
  • Other Latin America
  • Russia
  • Middle East and North Africa

 

  • North America
  • Europe
  • Asia Pacific
  • Latin America
  • Rest of World
  • Global Total

Datasheets included in the Excel document:

  • Global Summary – Retail Values
  • Retail Summary
  • Global Summary – Trade Values
  • Trade Summary
  • User Summary
  • Spotify + Apple
  • Country Summaries – Retail
  • Country Summaries – Trade
  • Top Streaming Markets – Retail Values
  • Subscriber Market Shares
  • Methodology

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.

What’s Next For Playlist Innovation?

This is a guest post from MIDiA Research’s Keith Jopling.

In this era of access to all music and everything about it, I do enjoy reading artist interviews, and pay attention to artists’ views on the modern music industry. What caught me recently were Mark Ronson’s remarks on songwriting in the age of the playlist in The Guardian:

“Everything has to be produced so it sounds competitively as loud as possible coming out of an iPhone or as loud as possible when it comes out of a Spotify hits playlist; you have to make sure the kick drum and the guitar have the same loudness and presence all the way through the whole fucking song or you don’t stand a chance. It’s kind of crazy how you have to think about music now.”

I have heard similar views from artists in recent years and they do have grounds, though you’ll be hard pressed to prove that streaming and playlists have truly altered music per se. After all how would that equate with the huge success of ‘slow music’ playlists, from Peaceful Piano to Esquenta Sertanejo to Your Favourite Coffeehouse?

There has certainly been an industry skew towards ‘streaming hits’ though. More artists are making “Spotify-core” (i.e. music that will do anything to avoid being skipped) and that’s a genre perhaps lacking in subtlety, But can it be accused of crowding out other, subtler types of music?

I would argue that playlists have changed the way we listen more than they have changed music itself. If the first port-of-call for music consumers is to hear songs on playlists, a lot of context around the music is lost. Already, research has shown that listeners are hard pushed to recall song titles, let alone the albums those songs are taken from. Speaking of albums, it strikes me as high time the industry now evaluate just what a ‘post-album’ world will look and sound like. So perhaps somewhere to start is to think about more innovation with the format that in essence, has replaced the album – playlists.  

Are playlists now set in stone as 30-50 tracks that are forever subject to optimisation tools and analytics? I very much doubt it. Despite playlists becoming valuable commercial music real estate in their current form (at least on Spotify) it seems to me that there is plenty of scope for further creative development of the format. We are far from ‘peak playlist’. A glance at the latest MIDiA global consumer data for Q4 2018 would back this up, with just 17% of music streamers claiming to listen to playlists regularly. though that number nearly doubles for Spotify subscribers to 31%. Critical mass for Spotify but hardly mass behaviour for the market overall.

That said, playlists do greatly reflect the way consumers interact with music: compiling or selecting, listening and sharing, sometimes adding context along the way. The opportunities these behaviours offer as a vehicle for promoting and monetizing artists are immense and perhaps still largely untapped, especially with regard to contextualization of new talent, as well as the creative resurfacing of songs from within music catalogues too.

A slowdown in playlist innovation

Spotify came to be the platform that really owns the playlist format, and it achieved this through a breakneck period of innovation between July 2015 and September 2016, with curated playlists brands like Rap Caviar and Today’s Top Hits augmented with the personalised “made for you” power triangle of Discovery Weekly, Release Radar and Daily Mix.

But since then, in over two years there has been little of that same calibre, other than somewhat lighter initiatives such as “Your Time Capsule”. More recently, Spotify has begun to fuse some curated playlists together with algorithmic suggestions (‘algotorial’). The strategy to personalise more playlists not only makes it harder for its competitors to copy, but introduces many more song slots for direct or independent artists to fill. The strategy is smart but perhaps lacks imagination.

Playlist Innovation Timeline: There has been a slowdown following 18 months of blistering innovation led by Spotify between July ‘15 and September ‘16.

Playlist-Timeline

Despite this, remarkably none of the major streaming competitors have made moves to innovate in the playlist space either, which seems a shame when streaming services are desperate for differentiation strategies. Instead, Amazon, Apple and Deezer seem to have largely played a game of follow the leader, with similar playlists themes, visual presentation and even ever blander names. In recent days Pandora has launched something called Stories, a mesh of podcast + playlist, which seems not only to lack imagination but to be muddled. Isn’t that just a tweak on radio?

Many artists and labels are concerned about the power that services have with regard to playlisting. While getting tracks on to the current raft of major playlist properties represents a challenge for A&R and marketers the music industry, the more accessible platform-hosted independent curated playlist have been around since Napster.

There are few, if any, limits to the potential reach of these playlists, and their value is determined in part by how creative they are, and in part how shareable they are. The recording industry’s earlier efforts to build playlists or influence playlists have fallen short though lack of imagination, global thinking, context and shareability, but that just means that the industry is free to work more creatively with the wider playlist community. It surprises me that Spotify, which plays host to independent curators still (and hopefully will continue to) doesn’t do more to tend to the community. But this perhaps creates room for others to do so.

Personally, I can see new exciting playlist platform tools like Soundsgood helping global playlist curators reach audiences more easily, providing many more opportunities for artists, labels and creators in the process. Other platforms like Stationhead and Lost are doing interesting things too with curators and tracks, but perhaps could get more traction if they switched focus to playlists?

Bringing back context

I like playlists as much as the next music fan, but like Mark Ronson and many other artists and music fans, I also feel they have commodified music somewhat. One thing I would like to see much more of for playlists is context. Why can’t we have sleeve notes for playlists about how they were put together (let alone by whom and why?). It looks to me like there is an opportunity to bring some context and personality back into playlisting. Mixtapes from the cassette age were lovingly compiled, often with handwritten notes and homemade cover art.

I’ve played with some of these ideas with my own playlist site the Song Sommelier. The Song Sommelier was created as a passion project to bring mixtape and vinyl values back to playlisting. Each playlist is accompanied by bespoke artwork by ‘resident’ artist Mick Clarke, and a reader or ‘digital sleeve notes’ by the playlist curator. For this project we chose to use the Soundsgood player to allow users of any streaming service access the playlists, doing away with those widgets that direct the music fan to either Spotify or Apple. It’s still more than a two horse race after all.

My hope is that with the artwork, sleeve notes and more original themes for the playlists, will make fans and listeners listen to playlists more like they used to with albums – paying more attention and hopefully connecting with the song collection on a deeper level. At least that might make Mark Ronson cheer up a bit (though his new “Club Heartbreak” playlist on Apple Music suggests it might be a while).

Perhaps a key question is how important is context to the music itself? It depends on your point of view, but context may be the thing that divides the passionate music fan from the casual one. Really, who wants to listen to a collection called “Get Home Happy” or “Prime Chill”, whether it’s curated or personalised? Except I guess some people do. Mostly, I would welcome some more creative thinking and innovation that can take playlists to another level.