MIDiA is fielding its annual music creator survey and if you are a music creator we would like you to take part. Whether you are a songwriter, artist, producer, engineer, vocalist, DJ, instrumentalist, soundtrack composer, or whatever you may be, we want to hear from you. This is an opportunity for you to have your voice heard on some of the most important issues facing music creators in today’s industry.
On top of that, all participants will receive full access to the results of the survey so you can benchmark yourself against your peers. You will be able to compare against the industry average for things like workflows, tools used, income mix, challenges faced, platforms used, etcetera. It is a great opportunity to get a sense of how you are doing and learning about how other creators are carving out their careers, too.
If you need any further persuasion, all respondents will be entered into a prize draw of five $100 prizes.
All responses will be treated as strictly confidential. We will never present or even analyse your individual responses. Instead, they will be aggregated into the survey totals along with hundreds of other respondents.
Apple’s long anticipated VR move finally saw daylight in the shape of Vision Pro. What is particularly interesting about the launch and its subsequent coverage is that the conversation is more about what Vision Pro enables rather than what it actually is. Apple has successfully engineered a hardware launch into a services and experiences narrative. All this, without too much at all in the way of actual new services. No mean feat. A sharp contrast with product launches for iPhone and Apple Watch, despite both devices operating within the same services ecosystem. Apple has been able to achieve this because it at least appears to have used Vision Pro to take today’s suite of services and experiences to a new level, much like iPod transformed music consumption and iPhone reinvented our wider digital lives. Claiming the legacy of those previous innovations, Vision Pro is staking its claim as a new way to experience today’s world, with the promise of facilitating an entirely new paradigm thereafter – again, just like those previous devices.
On the surface, the Vision Pro narrative might feel simply like a riff on Meta’s VR strategy, but the differences are foundational. Meta’s VR move is bold and uncompromising. It is founded on the metaverse: a promise of an entirely new world, so transformational that the company even renamed itself after it. It is an exciting, North Star vision, but it is also a future that is distant and far from front-of-mind for mainstream consumers. Apple ensured it dropped plenty of hints that it too wants in on that brave new world (as illustrated by the VR experience in Disney’s sizzle reel), but the metaverse was limited to a supporting role in the Vision Pro show. The star was today, not tomorrow.
Apple presented how Vision Pro enables consumers to experience today’s digital world in a new environment, whether that be apps, browsing the web, watching movies or playing games. Of course, Apple emphasised how all of those are enhanced by being experienced in an immersive virtual environment, but it was crucially a representation of the familiar in new surroundings. Why? Because Apple has its eyes on the mainstream adoption of a new(ish) product category. Apple’s M.O. is that of an early follower, innovating rather than inventing. Its history is defined by making moves only when a new product category is deemed ready for primetime, letting others bleed out on the bleeding edge of new tech.
XR (i.e., VR and AR) may not yet be at that primetime point. Currently only 4% of consumers own a VR headset, up just one percentage point from 3% in Q3 2021. But Apple has priced version one of Vision Pro so high ($3,449 – which reflects high component costs and no doubt will help recoup some of those vast R+D costs) that it will effectively constrain uptake to its early adopter elite. So, by the time the more affordable versions two and three come to market, primetime will have arrived. At least that is what Apple is likely planning on.
One element that may represent the linking piece between today and tomorrow was FaceTime. Although there was not a huge amount in terms new features (the slightly unsettling avatars aside), FaceTime has the potential to develop a new purpose and relevance in an XR environment, making the connections with other people more vital, more meaningful. This is, of course, the overlapping segment part of the Ven diagram of Apple’s and Meta’s VR strategies – and it is no coincidence that it is such a big bet for both companies. Communication and connection underpinned many of the modern world’s biggest technology shifts (the internet, smartphones, social media, video calls) and it will likely be the use case that ushers XR into the mainstream. If Apple manages to be at the centre of this, it may end up transforming FaceTime from a useful smartphone app into the foundational architecture of a metaverse-era social network. But it will get there by starting off with a newer version of today.
Last week I was the International Music Summit in Ibiza, the annual music industry business event. This year MIDiA compiled the annual IMS Music Business Report and I presented the findings at the opening of the event. The full report is available here for download and you can view a video of the presentation here. Here are some of the key findings of the report.
The dance music industry has long been among the first music genres to be shaped by emerging technologies, not least because technology plays such an integral role in the production and performance of dance music. This has helped ensure that dance music has ridden the waves of music industry change. But it has also always been a genre built around performance, DJing especially. So when the pandemic came, dance music felt the impact particularly keenly, with festivals, clubs and bars all being hard hit. 2020 and 2021 were thus fallow years for dance music revenues, years in which DJs struggled to perform and the global industry looked much more towards its other revenue streams. With the global opening up of 2022, the dance music industry not only grew, but ended up bigger than pre-pandemic, pointing to the growing cultural reach and impact that dance music has in today’s global music business.
All of the key elements of the dance music business were up in 2022:
Recorded music up 11% to $1.5 billion
Publishing up 22% to $0.4 billion
Music hardware, software, sounds and services up 4% to $2.8 billion
Live up 78% to $4.5 billion
The result was that the total revenue of the global dance music industry rose 34% in 2022 to hit $10.2 billion.
Hardware and software
Music hardware, software, sounds and services represents one of dance music’s super powers. Dance music producers have always relied on these tools, but now they are becoming the mainstay of the wider music creator economy. With music software used more across all genres, dance music sounds and techniques will influence all genres
Skills sharing and learning grew fastest, and it was worth $108 million in 2022. Plus, demand will increase still, due to fast evolving production techniques and new software
This will be a long-term growth area for dance music, with producers constantly seeking to upskill to the fast changing world of music production tech and techniques
Live
In live, Ibiza club ticketing revenue reached €124 million in 2022, up 55% from the €80 million registered in 2019. This was underpinned by increases in the number of events per venue, average ticket prices, and the total number of tickets sold going from 2 million in 2019 to 2.5 million in 2022
Globally, the top 100 DJs saw their 2022 bookings grow by around threefold on the pandemic hit 2021, though male DJs grew bookings more than half faster than their female counterparts. Female DJs represented 15% of all top 100 DJ bookings in 2022. Building popularity and getting bookings is a virtuous circle, but if female DJs are losing share of bookings to male counterparts, then the virtuous circle becomes a vicious circle.
A bright, diversified future
Finally, the dance music industry has shaken off the effects of the pandemic, coming out the other side, bigger, better, stronger and more relevant than ever. The pandemic shone a harsh light on the industry’s heavy-reliance on live. Now, that reliance is even higher because of live’s huge growth. There are two key differences from 2019: 1) a resurgent creator tools sector; and 2) a music publishing business that is finally beginning to find its share. The future is bright, with the rise of creator culture, bringing ever more people into dance music, both as fans and creators, with the creator-fan set to be at the centre of tomorrow’s dance music world.
MIDiA is fielding a survey exploring the changing role of music streaming services in today’s music business and we want to hear your opinions. Specifically, we want to hear the opinions of record label executives. Whether you run your own small label or are a strategy manager in a major, we want to hear your views.
MIDiA will treat responses with utmost confidence. They will only ever be viewed at the total respondent level, so no individual responses will ever be seen.
We appreciate time is a scarce commodity, especially in these challenging times. So by way of thanks for participating, all respondents will receive a free copy of MIDiA’s landmark report:The future of music: the rise of a counterculture industry. Retailing for £7,500, this report lays out a bold vision for the new music business that is beginning to take shape. One in which next-generation platforms carve out a new, creator-centric music business that runs in parallel to the traditional business but that also competes with labels and DSPs alike. It is a great report!
We are living in uncertain times. The cost-of-living crisis is hitting consumers’ pockets, driven by rising fuel and food prices. The effects of the pandemic are still present, the global economy may be entering a recession, and the geo-political landscape is being increasingly shaped by conflict. All of this will impact the entertainment industries, but unlike other market sectors, entertainment is already dealing with its own recession: the attention recession. The circumstances bear resemblance to the credit crunch in 2007 when the music industry was still dealing with its own piracy-catalysed recession. But this time, it is a market dynamic that affects all forms of entertainment.
The coming recession may also be unlike previous ones, in that there may be close to full employment – but spiralling inflation will likely mean surging wage poverty. It is the onset of the confluence of these unique market dynamics that inspired MIDiA to launch a brand new coverage area: Critical Developments, to help our client navigate these unchartered waters. We recently published the first report in this service (The attention recession: Post-peak behaviour). Here are some highlights from that report.
The attention economy has followed five key phases:
Growth (<2019): Up until 2019, the booming digital entertainment sector filled consumers’ down time. Gone were staring out of the window, being bored at a train station, doing nothing in a Starbucks’ queue, replaced by entertainment. Everything hit new heights in the race for attention.
Peak (<2019): By 2019 the slowdown had started. With just 9% of addressable consumer entertainment time remaining, many entertainment companies found it harder to maintain growth at previous rates. Growth began to become binary, with a minute gained being done so at another proposition’s expense.
Lockdown boom (2020-2021): Just before the effects of peak attention began to be felt, the global pandemic hit, opening up a new wave of attention growth. During the lockdown boom, media time went up by 12% and all forms of home entertainment boomed.
Post-lockdown dip (2021-2022/3): As people started to return to pre-pandemic behaviours, the first signs of contraction showed, but not all sectors were impacted evenly. Pandemic boom sectors, like audiobooks and podcasts, saw larger chunks of their newly-found consumption time disappear.
New peak (>2023/4): The good news for digital entertainment is that when this contraction period finally ends, and the lockdown deluge recedes, the high-water mark will be higher than pre-pandemic. This is because life patterns are changing, e.g., more working from home.
Attention inflation
Despite this new, higher water mark, entertainment companies across the board are feeling the effects of the post-lockdown slowdown, as evidenced by Netflix reporting the loss of a million subscribers in Q2.Nonetheless, activity is beginning to rise in some categories. Thus, while video weekly active users (WAUs) fell from Q1 2021 to Q1 2022, music, games and social were all up (social, in fact, was the only category to grow without pause from pre- to post-pandemic). But even where entertainment companies are not feeling the pinch, the hours of their audiences have become devalued because of the rise of multitasking: as consumers try to keep up as many of their lockdown consumption patterns as they can, with fewer hours to do so. This is what MIDiA terms attention inflation.
Economic inflation
It is economic inflation though that is most tangible for consumers, with an average of around a fifth of them stating they would cancel subscriptions across music, video, TV and games if they felt the impact of inflation. It will be the nightlife sectors that will be hit hardest though, with far larger shares of consumers stating they would eat out less and go out less. Even live consumers said they would go to fewer gigs.
The responses are similar to when we asked consumers how they would respond to a potential recession back in 2019, but with one major difference: back in 2019, consumers were generally more concerned then, than they are now. Whether that is misplaced optimism is another thing entirely.
Survive-to-thrive
All entertainment and leisure companies will feel the combined effect of the attention recession. It is a case of simple arithmetic: more time and more spend during the pandemic benefited all companies. Post-pandemic, both of those increases recede, which means that all entertainment companies have to fight hard to hold onto their newly found boosts to revenue and users, let alone grow. The shocks to the global economy and geo-politics will compound matters further. Rising inflation is going to hit all consumers’ pockets (with food and fuel prices being particularly hit), forcing many households to make trade-offs between essentials and luxuries.
In this coming attention recession, it will be the entertainment companies that are able to quickly and fluidly adapt their models, billing, pricing, programming, and user engagement strategies that will be best placed to retain, even win, audiences during the downturn.
For more information on MIDiA’s new Critical Developments coverage area, email jonathan@midiaresearch.com
Spotify just held an investor day in which it ran through its vision for growth. Spotify has long touted the concept of its total addressable market (TAM), its path to a billion users and the role of emerging markets as the surest path to this figure. Spotify’s presentation focused on monthly active users (MAUs), but, for the purpose of this blog, subscribers will be the key focus for two reasons: 1) MAUs are an inflated reach measure, while weekly (WAU) and daily (DAU) active users measure a far more tangible quantity of actual engagement. The tech giants, like Meta, focus on WAU and DAUs in their filings. In the saturated attention economy, monthly use can be one step away from total inactivity. 2) Ad revenue was just 12% of Spotify’s 2021 revenue, and while it is getting better at ad monetisation (due in large part to podcasts), it has a much weaker track record of ad monetisation than it does subscriptions. Subscriptions are where Spotify makes its money and are also where the music business makes its money. 73% of 2021 global label streaming revenue was from subscriptions (and that is based on a number inflated by non-DSP streaming).
Total addressable market (TAM): the total potential audience
Serviceable addressable market (SAM): how much of it is relevant to your product
Serviceable obtainable market (SOM): how much of it you think you can convert
Another way to think about it is: how many fish are there in the pond, how many fish you think you can catch, how many fish you think you will actually catch.
Why TAMs alone are not enough
MIDiA employs a TAM / SAM / SOM methodology in its forecasts, as follows:
TAM: those with smartphones and data plans
SAM: of this, those who are interested in paying for music
SOM: the SAM adjusted for urbanisation rates and music streaming affordability on a purchasing power parity (PPP) basis
The SOM stage is crucial for emerging markets. Broadly speaking, it is consumers in urban conglomerations who are most likely to be addressable by streaming subscriptions. A rice paddy worker in rural Bangladesh might have a phone, but they are likely to a) have very little disposable income, b) use their phone most as a utility, and c) have bigger worries than whether to pay for a music subscription. The TAM and SAM figures might be reassuringly larger figures, but, in truth, it is the wealthier, more tech-centred, urban elites in emerging markets who are most likely to convert.
Real terms affordability is crucial too. A subscription in India is around five times cheaper in dollar terms than in the US, but, on a PP basis (i.e., adjusted for local affordability), it is 12 times more expensive. Which further emphasises the role of urban elites in emerging markets for streaming subscriptions.
When we map MIDiA’s SOM alongside Spotify’s TAM, the market opportunity immediately looks bigger. And it is. But Spotify does not operate in isolation. It is one player in a competitive marketplace. In 2021, there were already 554 million paid subscribers globally, of which, 180 million were Spotify users. The global subscriber base represents 92% of Spotify’s TAM. The global subscriber figure is swelled by China’s nearly 100 million subscribers, a market in which Spotify does not operate due to its ‘poison pill’ equity swap relationship with Tencent. But even removing China from the equation, 76% of Spotify’s TAM was already addressed by itself and its competitors in 2021.
Does this mean Spotify’s growth ambitions are unrealistic? Not necessarily. There is a huge amount of growth left in the market, as MIDiA’s forthcoming music market forecasts will show (and from where the figures in the chart come). But the opportunity must be gauged in the context of where Spotify sits in the wider competitive marketplace, not in isolation.
It is no coincidence that Spotify is focusing here on free users rather than paid. Free users are the funnel for Spotify’s wider business (i.e., including podcasts and audiobooks, which it can best monetise via ads). But even the free streaming market is hyper competitive, with close to 1.5 billion free users already globally in 2021. Most importantly, though, the free user numbers are biggest in the most populous emerging markets, and it is local players that dominate. The future of music streaming in emerging market is going to (at the very least) be shaped as much by local emerging market players (e.g., Boomplay, JioSaavn, NetEase Cloud Music) as it is Western streaming services. In fact, there is an argument that Western streaming services looking at the emerging markets world as their target for colonising with streaming users is actually Western-tech imperialism.
NOTE: MIDiA’s annual music forecasts are close to complete and will contain historical and forecast data for streaming revenues and users, and much, much more, with revenues both in label terms and retail terms (i.e., inclusive of publishing and DSP shares). If you are not yet a MIDiA client and would like to learn more about MIDiA’s forthcoming forecast, email stephen@midiaresearch.com
Netflix and Meta were the canaries in the proverbial mine for the attention recession and it is looking increasingly likely that difficult times lie ahead. If the attention crunch was not enough on its own, it has been compounded by the perfect storm of headwinds: the cost of living crisis, rising interest rates, energy and global grain supply constraints, and the Russo-Ukrainian war. The question is not whether the entertainment sector is going to be impacted by these trends, but rather by how much and for how long? The good news is that MIDiA is going to help answer these questions in our upcoming free-to-attend webinar; The Attention Recession: How inflation and the pandemic are reshaping entertainment.
Here is an early overview of some of what we will be covering:
Back in late 2019 when it looked like the world might be entering a recession, MIDiA asked consumers about how they expected to change their entertainment behaviours and spending if they found themselves facing financial pressures. Now, more than two years later, as the world faces a cost of living crisis, we asked almost exactly the same questions once again. Even though the already-present cost of living crisis is far more tangible to most consumers than a potential financial recession, broadly speaking, consumers are less concerned now than they were in 2019. Whether that is misplaced optimism is another thing entirely…
However, what is consistent between the 2019 and 2022 responses is the tendency for consumers to prefer options to do less of something rather than stop entirely. So, going out and eating out less both get significantly higher response rates than cancelling subscriptions. This makes sense: going out less does not mean stopping going out entirely, but cancelling a music or games subscription is an all-or-nothing decision.
Video subscriptions are a bit different of course as the majority of subscribers have more than one video subscription. Cancelling one is similar to going out less: it is a do-less decision, not a do-nothing decision. Given the finite number of TV shows released each month that match an individual’s tastes, more consumers will likely become savvy switchers, dipping in and out of different video services to watch the shows they want, when they are available. While video services can try to counter this with annual subscriptions, these are a hard sell during a cost-of-living crisis. Far better to start thinking about user retention in a more fluid way, considering the share of a subscriber’s months you can retain during a calendar year rather than expecting all twelve of them.
This concept of what MIDiA terms dynamic retention is just one illustration of how the coming period of uncertainty is not just going to be about economic disruption, but a catalyst for business and technology innovation. Something that also applied to the pandemic, that accelerated the adoption of already emerging trends, such as remote working, video conferencing, and virtual concerts.
There is no doubt that life is going to get difficult for many consumers over the coming months, which in turn means that entertainment companies (as consumer centred businesses) are also going to feel the pinch. For some companies the focus will be to survive but for others it will be to thrive. One company’s challenge can be another’s opportunity. Recessions always leave scarring, with the process acting as something of a reset, clearing out the dead wood from the pre-recession economy and setting up the next gen companies that will define the post-recession economy.
In this coming attention recession, it will be the entertainment companies that are able to quickly and fluidly adapt their models, billing, pricing, programming, and user engagement strategies that will be best placed to retain, even win, audiences during the downturn. Truly effective monetisation may not come until later, but audience acquisition and retention start right now.
Join us on Thursday 26th of May at 4.30pm BST / 3.30pm CET / 11.30am EST / 8.30am PT to hear much more on these themes from MIDiA’s analysts. Sign up for free here.
Universal music’s Q1 2022 earnings showed continued growth but a noticeable slowdown in streaming growth, with streaming revenues up 12% year-on-year (YoY) in USD terms compared to a growth of 35% one year earlier.* As results trickle in from across the music business over the coming months, we will get a fuller sense of how much the wider business is slowing down after an exceptional 2021. Until then, it is worth looking at how leading companies across the wider music business fared across all of 2021. To that end, MIDiA has just published its inaugural ‘Music Industry Earnings’ report, tracking the revenues of 12 leading music companies across recordings, publishing, streaming and live**. MIDiA clients can download the full report and dataset here. Here are some of the findings.
The overall trajectory of travel for the music industry in the late 2010s and early 2020s was positive, but growth was not always spread evenly. Self-releasing artists direct consistently outpaced record labels, streaming revenues grew fast in some markets while others lagged, and Covid turned the live music business upside down – 2021 was different. Similarly, strong growth was present in most parts of the music industry, with most companies and geographies benefiting in broadly similar ways.
2021 was a year like no other in recent memory, with the music industry rebounding from the pandemic. In many respects, 2021 was a catch-up year for the wider economy, with additional business being done that had been put on hold during the worst of the pandemic. Although the music business is largely a consumer business, it does have a B2B component (advertising) and the uplift in wider economic activity filtered down to consumers as employees. The result was a blended 37.7% increase in revenues for leading companies across recordings, publishing, streaming and live.
This figure, though, was skewed upwards by the unusual dynamic of the live music industry recovering revenues after a pandemic-induced collapse. With live therefore excepted, organic growth was broadly similar across all other sectors, with labels (26.7%) and streaming digital services providers (DSPs) (27.0%) performing strongest. Music publishers were up 20.5%.
Live increased its share of total to 13%, up from 5% in 2020, but this was still far below its 29% 2019 share. It remains likely that live will not reclaim such a high share, even if it recovers fully, principally because music rights companies grew revenue by nearly two and half times faster in 2021 than in 2020. The net effect will be a net increase in organic market share once the live recovery process is complete.
Within labels, HYBE was the fastest growing (across its recorded music revenues), up by 70.4%, in publishing it was Warner Chappell (23.7%), while NetEase Cloud music led the way in subscriber growth, up by 81.1% (far ahead of Spotify’s 16.1% growth). However, Spotify grew its free userbase far faster than NetEase while Tencent Music Entertainment saw its free userbase decrease by 1.1%.
While Covid turned many industries upside down, live music was the only component of the music industry that did not continue to grow throughout the pandemic. For investors, the appeal is clear of an asset class that can flourish even in difficult times. The remainder of 2022, and potentially beyond – depending on what happens in the global economy and geo-political environment – will be a sterner test. Rocketing fuel bills and food costs will cut into consumer discretionary spending, but, as music subscriptions are relatively low cost products that tend to be held by consumers with meaningful disposable income, the risk exposure may be low. Though the fact that UMG grew its subscription revenues by just 10% in Q1 YoY, we may even be seeing a slow down there.
Whereas a few years ago, a subscription slowdown would have been as worrying for labels and publishers as it would have been for DSPs, the emergence of non-DSP revenue (Meta, TikTok, Peloton, Snap, Twitch, etc.) means that rightsholders now have an established plan B. A point illustrated by UMG’s 17% growth in ad supported streaming in Q1 2022 YoY. The economic headwinds during the remainder of 2022 will be challenging for sure, but the performance in 2020 and 2021 point to a robustness that will help it weather the storm in a way that other consumer-centric industries may not enjoy.
*All values in current currency terms, using the exchange rates published by Vivendi for each corresponding quarter.
**List of companies tracked in MIDiA’s 2021 Music Industry Earnings report:
Honestly, it has been a struggle to find the inspiration to write a blog post about the music industry, considering what is going on in the world at the moment. But along came this story, which is eye opening enough to put virtual pen to paper: Epic Games buys Bandcamp. Not only does a games company buying a music company make this an interesting story, but also the apparent cultural mismatch. Which means there is likely a series of really interesting strategic drivers underpinning the move. Most of all, though, this is a creator economy play, but one that puts the consumer at the centre of creation.
Fandom machines
Epic Games, Bandcamp, and TME, the music subsidiary of Tencent (40% owner of Epic Games), all have one thing in common: they are fandom machines. All of them enable their respective userbases to communicate their identities and tribes via fan products, from badges to Fortnite skins, through to t-shirts and vinyl. It is the art and science of fandom that underpins the Epic Games and Bandcamp alignment – but much more in the sense of what future they can build, rather than what they are now.
Epic Games is establishing the infrastructure for the company it wants to become, rather than for the company that it currently is. That vision, if successful, will be of a diversified business, with games as its engine – but notjust about games. It obviously needs to tread carefully and ensure that it does not get too distracted and ‘do a Rovio’ – the maker of Angry Birds had the biggest game on the planet for a while, but it pushed focus so far away from its core that it failed to make a follow-up smash-hit game, and has since dwindled in importance.
What Epic could do with Bandcamp
So, just what can Epic Games do with Bandcamp, and vice versa. Here are a few options:
A consumer creator tools play: play music games (Harmonix + Epic / Fortnite) and try selling what you make on Bandcamp, then have it pumped into Fortnite radio
Fandom: Epic Games has a proven ability to monetise gamers’ desire to express identity. Physical fandom products are an obvious growth area. Similarly, artists selling into games. This could mean scarce digital goods, which would mean NFTs without being NFTs
Metaverse play: (yes, we had to get the ‘M’ word out of the way). Artists sign up to Bandcamp and sell on a version of the Fortnite store (sound clips, emotes, skins, etc.)
Virtual artists:K/DA-type Fortnite band(s) that are exclusively available on Bandcamp and Fortnite, also utilising Bandcamp’s nascent streaming
Virtual events: Bandcamp and Fortnite together could create a range of hybrid livestream / gameplay formats that would help virtual events coexist with IRL concerts
A mix: Combining much of the above, Bandcamp could become the Beatport for virtual artists and gamer / creators
There are, thus, many directions Epic could go with this deal, but our bet is that the first item is the most important. Much has already been made of Epic building a creator tools ecosystem (cf the acquisitions of Sketchfab and of ArtStation), but Epic is most likely looking one move ahead of everyone else when it comes to the creator economy. The big focus (in music at least) has been on creators as the next music business, engaging a much bigger base of music makers than the current business. But Epic is thinking much bigger and, perhaps, even thinking of the creator economy gold rush as little more than an interim step. Epic has its eye on consumers themselves. Just as TikTok and Instagram turned consumers at scale into video creators, so Epic could make them music creators at scale. MIDiA first wrote about this creator culture opportunity last year, and Epic might be the one to make it happen.
“It’s going to be user driven. Users are going to build stuff…It’s all going to be about empowering the users to make this stuff happen on their own.”
Obviously, the rights situation for potentially billions of items of user-created music would be chaotic, and the current industry architecture would probably collapse under its weight. A self-contained music / games / creation ecosystem would enable Epic to bypass much of that complexity, though a content ID system and PROs would still both need to be part of the equation.
Within a couple of years, we will be watching Epic and TikTok fighting it out to be the future of the consumer music creator, with a bunch of usual suspects playing catch up. At the core of this creator culture revolution will be a reinvention of fandom. Up until now, fandom has largely been expressed through following stars. In more recent years, fandom has fragmented from a few massive stars to a bigger body of smaller stars. The natural end point of this evolution when everyone becomes fans of themselves and their friends. Creator tools have fostered this fandom of self, from selfies to Snapchat filters, through to Instagram posts and TikTok videos. Regardless of whether this is the zenith or nadir of fandom and creation, their increased connection is clear – and it might just be that Epic and TikTok are both be building the ultimate fandom platforms for the ‘me generation’.
Streaming continues to grow strongly, as evidenced by the 28% growth reported by the RIAA for H1 2021 in the US. Everything looks great for the build-up to the impeding Universal Music Group (UMG) IPO. But all is not well in the creator community, as many artists and songwriters continue to be unhappy with streaming income (seen most pertinently in the UK parliamentary DCMS inquiry). However, the origin of so much of their ills, even if they do not yet realise it, is the mechanics of streaming itself rather than any party (labels, publishers or streaming services) not passing on enough money. Could these entities transfer more to their creators? Yes, of course. But there is no increase that could transform the outlook for most of these creators without potentially breaking the entire streaming economy. The crucial, emerging dynamic is that most mid-tier creators are never going to be big enough to gain adequate streaming scale to use as a reliable income source. In fact, they need the opposite of scale – they need niche.
Streaming income is always going be different from sales income
One of Daniel Ek’s Spotify ambitions is to create and empower a new ‘middle class’ of artists, enabling a new wave of creators to build careers from their creativity. But the irony is that the ‘middle class’ (depending on how you define this amorphous group) is, perhaps, least well served by streaming. Here is why: in the old world, a ‘middle class’ five person band might sell 50,000 copies of an album in a year, for, say, $10 each – thus receiving $35,000 each*. In streaming, this group might generate 10 million streams in a year, which would result in $7,000 each. The old model delivers far fewer fans but far more income. In isolation, the streaming model is less beneficial, however, in a wider context, the streaming-era group is likely to generate more live performance, merch and branding income as a result of streaming’s bigger audience. This is why streaming received much more critical creator attention during the pandemic, as the halo effect across other income avenues was cut off at the knees.
The squeezed middle
This comparison is not intended to suggest the streaming model is broken, but for the middle tier of artists, the scale at which streaming delivers is not enough on its own, and instead it catalyses the wider mix of creator income streams. At the other ends of the creator spectrum, superstars get enough scale to earn a truly meaningful streaming income, and the emerging independent artists are able to reach global audiences in way they could never do pre-streaming. So, the ‘middle class’ of creators actually become the ‘squeezed middle’ of the creators’ streaming economy.
Monetise niches, not scale
Even doubling the creator royalty rates would still leave streaming income 2.5 times smaller than sales income, but it would break the streaming model in the process. Rather than break streaming, an alternative attempt at resolve would be to focus on finding an artist’s core fans – the ones who really care – and selling them products and experiences. With this approach, middle tier artists would be able to replicate the same sort of income flows as the old sales model. Clearly, that theoretical five person group would likely sell fewer than 50,000 copies of a product because much of their audience would already be getting all they need from streaming. But this is not about replacing streaming – this is about complementing it, by bridging the income gap. So, while some artists have opted to remove themselves from streaming and focus solely on platforms like Bandcamp, this approach is unnecessarily reductive and will actually hurt the artist’s earning income in the longer-term, as the funnel for acquiring new fans has been massively narrowed.
Fame and fandom
The concepts in this post are not particularly new and I have, in fact, discussed a few of them before. But they are crucially pertinent, nonetheless. ‘Middle class’ artists need to start thinking about streaming more like radio, i.e., a tool for growing fanbases which they can then monetise elsewhere. Streaming delivers the fame, while niche delivers the fandom. And it is fandom where an artist and a fan get the most value, in all possible permutations of the word ‘value’. As long as, of course, the artist does not get lazy and simply try to fleece their super fans!
*These calculations are simplified, do not include cost deductions (other than retailer margin), assume group members each have an equal share of recording and publishing rights, and assume that rights splits are the same across both.
Music Industry Blog 