The IFPI Confirms 2019 was the Independents’ Year for Streaming

UPDATE: this post has been updated to correct an erroneous data point. Previously it stated that independent market share was 41%. It has been corrected to 29%

Recently I wrote about how a little-known Spotify statistic revealed that independents (labels and artists) outperformed the majors on its platform in 2019. The IFPI’s latest global revenue estimates provide further evidence of 2019 being a stellar streaming year for independents. As we have two sets of fixed reported figures (major label reports, and the artists direct sector reported by MIDiA) we can simply deduct these figures from the IFPI’s streaming figures to reveal what the IFPI estimates independent label revenues to be. The tl;dr: Independents grew by 39% while majors grew by 22%, which means that the independents’ global share of streaming revenue increased by two whole points from 27% to 29%.

ifpi midia 2020 streaming

The IFPI reported global streaming revenues of $11.2 billion, however these figures include YouTube but not Pandora ad supported revenues. So, to match up the IFPI’s definition with how the record labels report the revenue we need to add in Pandora ad revenue which takes us to $11.9 billion which is almost exactly what MIDiA reported two months ago.

Although independent labels and artists grew fastest in relative terms in 2019, the majors grew most in absolute terms, adding nearly twice as much net new revenue ($1.5 billion compared to $0.8 billion). The majors remain the powerhouse of the streaming economy but independents are rapidly making this space their own. If they were to add another four or five points of share across 2020 and in 2021, then independents would be represent a third of the entire streaming market. But a crucial consideration is that these figures are on a distribution basis, so the major revenue includes independents they distribute. According to the last WIN study, the independent market share went up another c12%. On that basis, by 2021, the independent label share of streaming could be approaching 50%. That would be a genuine paradigm shift, the clear announcement of a newly aligned music business.

Soon we’ll be writing on how the majors can turn this around. Watch this space.

Spotify Q1 2020: Choppy Waters Ahead

Spotify’s first quarter earnings were a mixed bag, with a largely positive picture for Q1 but some warning signs for the remainder of the year:

  • Subscribers: Spotify’s Q1 earnings may not have matched Netflix’s for over-performance but subscriptions did show over performance, reaching 130 million, one million above MIDiA’s pre-COVID forecasts. This represented six million net new subscribers in the quarter. Netflix expected seven million and reached 15.8 million. COVID-19 has been more of a boon for video than music, largely because key music listening slots (commute, the gym) have been wiped out by lockdown. Whereas video has seen the opening up of new viewing slots.
  • Active users: With audio streams down across the board in early-to-mid March, active usage was always going to be at risk. Although monthly active users (MAUs) held up, daily active users (DAUs) were down in early lockdown markets Spain and Italy. MAU is in effect a reach measure rather than an engagement metric. Checking an app once a month is not active usage. So DAU and WAUs are where scrutiny needs applying. As Spotify does not regularly report these figures we have to interpret its narrative: “the ratio of daily active users relative to monthly active users was strong in the quarter. We did see a bit of a decline over the last few weeks of March…[and] higher than in Q1 of 2019.” Strong does not mean up, and the fact it was reported as higher than 12 months ago but no reference to last quarter, suggests ‘strong’ may not be that useful an adjective here. Also, the dip in the latter weeks of March is concerning as by this stage lockdown behaviours were normalising and streams as a whole were picking up. So, Spotify should have been seeing an uplift in the MAU/DAU ratio, not a dip. Something to keep an eye on for Q2.
  • Advertising: A global recession is now more an inevitability rather than a possibility. Advertising spend is an early indicator and this is reflected in Spotify’s earnings. Ad revenue has been Spotify’s Achilles’ heel in recent quarters, with targets often missed and tech rollouts dragging. Spotify says it was on course to beat its targets for Q1 but then missed them, falling 20% below target in the latter months of March. So, the COVID-19 drop off was quick and dramatic. Do not expect this to recover anytime soon. Weakening digital ad spend is going to be a secular trend. Even Alphabet reported slowing Google ad revenue in Q1.
  • Revenues: Premium ARPU continued to slip, down €0.23 from Q4 2019 to €4,42. This was the single biggest quarterly decline since Q1 2018. Meanwhile in revenue terms, premium was higher than expected (due to the subscriber over performance) so even with the under-performance of advertising, total revenues (€1,848 million) were in line with expectations. Nonetheless, Spotify has downgraded its annual revenue forecast by 5.5% from an average of €8.48 billion to €8.05 billion, with the top end of its revised guidance now lower than the bottom end of its previous guidance. This largely reflects the weak outlook for digital advertising but if the coming recession persists for long then growing subscriber churn is a real risk. A fifth of consumers state that they would consider cancelling their music subscriptions if faced with having to reduce their entertainment spend in a recession.
  • Podcasts: Whereas most media experienced a COVID-bounce, podcasts did not. Google searches for podcasts declined throughout the lockdown period, though there was a small uplift mid-April. Spotify stated that “the current environment has shifted listening patterns temporarily” which is likely code for consumption is down. Although Spotify added that “nothing we have seen changes our long-term view of the potential”. What is particularly interesting about the podcast impact at a market level is that COVID-19 hit mid-way through the format transition process. Radio has enjoyed a resurgence during lockdown, reversing, if even only temporarily, the format transition.

The Self-Isolation Entertainment Boom

MIDiA Research - The Self-Isolation Entertainment BoomMIDiA has just published the latest report in its COVID-19 report series: “The Self-Isolation Entertainment Boom. This post explores some of the key findings and data. The full report is immediately available to clients here and follow this link for details on how to sign up to MIDiA’s special research package for the duration of the COVID-19 outbreak.

This report follows on from our COVID-19 Recessionary Impacts and Consumer Behaviours report which you can get a free version of here. In this latest report we went big on data, combining a survey of media executives, brand new consumer survey data and a major COVID-19 update to MIDiA’s Attention Economy model. This enabled up to triple-source and triangulate the near-term changes to media consumption during the lockdown period.

With much of the world’s population under some form of restriction of movement following the spread of COVID-19, media consumption habits have undergone dramatic change, creating an isolation boom for many aspects of entertainment. We will be diving further into the impact of COVID-19 on entertainment demand and consumer behaviours in a webinar on Wednesday 15th April at 4pm BST. You can register here. Our speakers will be sharing the tools and strategies to help you respond proactively to market shifts and emerging trends.

Although much of this behaviour will normalise even before lock down measures are eased, there will be some changes that will have long-term impact, with the residual high-water mark of some activities left higher than before the consumption deluge.

Streaming lull

Across record labels, streaming volumes were almost universally down across all regions. In most cases consumption was only down modestly and generally speaking the impact was more modest in regions of the world where COVID-19 had so far had less impact. Most labels though pointed to a strong rise in YouTube and Vevo streams, indicating that when stationary at home, many consumers prefer a visual music experience. The initial dip in audio streaming volumes may persist for some time but will be fundamentally temporary in nature. Streaming volumes will grow as a) consumers develop normalised behaviour patterns in their new, abnormal life situations, and b) in the longer term when consumers return to normal work and life. Subscriptions will only be at risk if the recessionary effects of COVID-19 become severe and persistent.

Traditional media boom

Traditional media has been one of the main beneficiaries of the isolation boom with TV, news and radio all up. In Italy, where lockdown measures have been in place for longer than most markets, 72% of consumers are watching more TV. The boom in radio is particularly interesting as broadcasters – both commercial and public service – are reporting particularly strong growth in streaming app usage. Over recent years radio lost swathes of its audience to streaming. Now, many of those lost listeners have returned, looking for that human connection during isolation and have found that the stations they used to listen to on a radio set they can now consume in just the same way they listen to Spotify etc. This is a unique window of opportunity for radio companies to convert some of these temporary win backs into permanent returns, showing streaming users how to ‘re’ fit radio into their daily lives.

Games up, and filling a sporting gap?

Total time spent playing games was up 22% in the US and 20% in the UK, with many core gamers using the time previously spent commuting to game. For the large share of music subscribers that are gaming aficionados, this often meant swapping a chunk of music consumption time for gaming. In stark contrast to gaming, sports is in fierce decline following the cessation of sporting activity. COVID-19 dislocation is forcing sports fans to take a break,  leaving a hole for all other media activities to fill. For those who were teetering on the edge of cancelling their subscriptions this could be the churn catalyst.

How COVID-19 Will Affect the Media Industries

The spread of COVID-19, and the responses of industry and governments alike, is unprecedented. It is, however, the restrictions on movement of people along with the response of consumers and investors that is causing the biggest disruption and will have the most impact on entertainment businesses. MIDiA has produced a report that explores the potential near- and mid-term impact of COVID-19 on entertainment businesses, from production through commercial to audience consumption. The full report is immediately available to MIDiA clients but we have also created a version of this report that we are making available to everyone free of charge to help them navigate their way through these uncertain times. Below is a high-level overview of the report’s key findings, as well as details of how to get the free report.

23.03.2020_How COVID_graphic

There are five phases of COVID-19 impact on leisure and entertainment: business as usual; leisure collapse; cocooning; revival; and finally, recurrence. Medical opinion is split on whether COVID-19 will return once infection rates initially diminish. However, the prospect of a return – possibly seasonal recurrences – remains a strong possibility. Audiences and investors alike may well manifest alarm and concern, albeit at lower rates. Either way, governments, along with entertainment and leisure businesses, will have to plan for dips in demand – possibly for years to come. 

Production

Although entertainment – live performances excepted – is easily consumed away from public places, the production process of most content still often includes significant human contact and is therefore at risk from COVID-19. Not all media industries are equally affected, however. Restrictions and guidelines concerning groups of people and home-based working have already started to hit the filming of TV shows and movies, with many projects put on hold. Meanwhile, staples of linear TV such as soap operas (many of which have older, at-risk cast members), quiz shows, game shows and reality TV are all likely candidates to halt filming. In music, recording studios are closing down, creating a similar supply chain challenge. If the pandemic persists long enough to keep the population home-bound for months, both music and TV companies are going to start running out of new content to deliver to their audiences. Games, however, is a very different story, with many games publishers able to continue the development of games with work-from-home (WFH) workers. This is a distinct market advantage. Podcast creators and social talent are similarly well placed. In fact, independent content production as a whole is well positioned to weather this storm

Live entertainment

Consumption of entertainment in venues (encompassing sports, cinema, music, theatre, clubs) is significantly more impacted in the short term by COVID-19. However, recovery should transpire in the mid- to long-term. Sports has been particularly hard hit and was one of the first sectors to respond, initially playing games behind closed doors and then stopping leagues and events entirely. The consumption hole that sports has created (for both live and televised sports) is an opportunity for other forms of entertainment to fill. TV rights deals face the risk of re-evaluation if the shutdowns persist. Live music is another high-profile victim, as testified to by the share price tribulations of Live Nation. Live streaming of concerts is still nascent and COVID-19 may have come a little too early for the sector to truly capitalise. Nevertheless, there is already a groundswell of activity that will grow – though promoters may find themselves cut out of this new value chain. Once the pandemic is over however, live music will return to strength as the unique experience of being at a live music cannot be fully replicated digitally.

Consumption

Although the leisure industry may be facing a near-term Armageddon, entertainment is set for a boom. During the last recession consumers cocooned, allocating more time in with entertainment at home rather than spending to go out. When MIDiA asked consumers in Q4 2019 (i.e. before COVID-19 became a global pandemic) they stated they would do the same in the face of another recession, with 49% saying they would go out less. That will increase with movement restrictions. The additional time will add around another 5% to available time for entertainment, while the removal of the daily commute will add another 10% for workers. So even without considering extra time from potential unemployment and under-employment, the average working consumer has another 15% of their waking hours addressable by entertainment.

Outlook

While there are plenty of evidence-based models to predict the likely impact of a global recession, modern-day evidence for the impact of a global pandemic is scant and largely theoretical. The economic impact of the COVID-19 crisis is unchartered territory. It is however likely that those companies that have the confidence and ability to invest in growing through and beyond the pandemic will be best placed once the crisis abates.

One of the unintended consequences of the COVID-19 crisis may be a creative renaissance. In the history of artistic output, adversity often results in the most powerful creativity. Creatives from script writers, through song writers to special effects designers may find themselves inspired to craft some of the most poignant and impactful work they have ever created. We may be on the verge of golden era of song writing by established artists combining the raw emotion they felt in their youth with the learned creative professionalism that comes from being a professional artist or song writer. Indeed, the media industries as a whole may come out of the COVID-19 crisis with the most powerful creative ideas they have ever had.

However, in no way does this suggest this is a good thing for the economic plight of creators, nor does it diminish the duty of care that content companies have for their creative talent during this incredibly difficult period. Many creators will face economic hardship unlike any other that they have experienced, and there is a responsibility right across the value chain for helping struggling creatives throughout the COVID-19 pandemic. Some may even find themselves forced out of creativity all together. 

To download the free MIDiA report, COVID-19 | Recessionary Impacts and Consumer Behaviour, follow this link.

Stay well and healthy.

MIDiA Research Free COVID-19 Report

The Song Economy

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

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

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

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

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

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

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

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

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

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

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

The Meta Trends that Will Shape the 2020s

MIDiA Predictions 2020CES, the big annual consumer tech show, is underway in Las Vegas. Unlike in most previous years, there has been little in the way of big new announcements. This is in large part because we are reaching a degree of maturity in the consumer landscape, with big new developments being replaced by smaller, sustaining innovations. Nowhere is this better seen than in smartphones, where manufacturers try to convince consumers that tweaks to the camera represent genuine paradigm shifts worthy of buying a new handset. The same applies to streaming music, where the leading Western services have seen little in the way of substantive change. Yet a slowdown in consumer tech innovation often paves the way for an acceleration in business and cultural change, as the companies and creators begin to grasp and respond to the real potential of the technology at their fingertips. At the start of the millennium’s third decade, this is where the digital content marketplaces stand. Here are MIDiA’s predictions for the meta trends that will shape content and media in the 2020s:

  • Attention saturation: MIDiA’s big call over the last few years has been that the attention economy will peak. This has now happened. As we enter the third decade of the 21st century, this unintended consequence of the digital content economy is entering its next phase. We are now in the era of attention saturation, where every new consumption minute gained comes at the cost of consumption time elsewhere. Mobile games were hit first, and audio will be next, with radio already losing audience share in the audio arena. Attention saturation was always going to be an inevitability. The important question is not why this is happening, but what will come next and what the right strategies are for surviving and thriving in this post-peak world. Measuring sentiment – rather than purely time and money spent – will emerge as the methodology for measuring success in the era of attention saturation.
  • Vertical integration: As we announced in our 2019 predictions report, the tech majors are doubling down on services, e.g. Apple (a whole suite of subscriptions), Google (YouTube Music, YouTube Premium), Amazon (IMDb TV, ad-supported music and Amazon Music HD). Part of this trend in the longer term will be big tech companies acquiring media assets. We saw this start in 2019 with Tencent’s stake in Universal Music, as well as music publishing companies expanding their stacks (e.g. Downtown Music Holdings acquiring CD Baby parent AVL). Watch for record labels, sports leagues, TV networks and games publishers getting snapped up for true vertical integration.
  • Social video will eat the world: Four years ago, MIDiA argued that video was eating the world. Now social video is eating the world. Video is becoming the omnipotent format through which we communicate, consume and share. Captioning looked like it was heralding a new era of silent cinema, but it was in fact a trojan horse – a means of enabling us to fit extra video consumption into our wider consumption patterns. Over time, though, sound has become more important and with the increased tolerance of video we are now far more willing to unmute. Nowhere is this better seen than Instagram and TikTok. Audio is the victim in that equation.
  • User-modified content: Back in 2009 DJ Spooky claimed that the 21st century was going to be ‘the era of mass cus­tomisa­tion’. Ten years on this is starting to come to pass. Progressively more of what we consume has reached us after being adapted by someone else, whether that be personal recommendations, likes or comments. Additionally, more of the content we view has been modified, such as memes, captioned photos, Instagram photos, and TikToks. 2020 will be see the rise of user-modified content (UMC) with more audiences leaning forward and taking ownership of the content they view. The lean-forward shift will accelerate in 2020.
  • Engagement clusters: The first phase of the consumer web was shaped by internet portals such as AOL and Yahoo – these were windows onto the digital world. Today, Facebook, Twitter and TikTok perform a similar role for slices of the digital world – the 21st century portals. Audiences are now fragmented across multiple apps and destinations. Smart – and typically big – companies are therefore building engagement clusters. Sometimes these are ecosystems (e.g. Apple, Amazon), but in other instances they are collections of content experiences, e.g. Disney+, Hulu, ESPN+. More clusters will emerge in 2020. An early move could be Apple adding Arcade to its Apple Music / Apple TV+ student bundle.
  • The abundance paradox and the discovery crisis: Content companies have responded to the attention boom by over-supplying content, resulting in a growing tyranny of choice. We spend so much time trying to find content through the clutter that we either do not find enough new content or have less time to consume. Additionally, we simply experience a lot of new content, flying past us in content feeds and curated playlists, rather than actually discovering it. The emerging abundance overload is the entertainment equivalent of feeling nauseous from eating or drinking too much. 2020 will see this trend accelerate, with slowing and even declining user numbers for incumbents in mature markets.

This analysis is taken from MIDiA’s report 20/20 Vision | MIDiA Research Predictions 2020.

The report includes predictions across music, video, games and sports. Why should you read it? Well, we had an 83% success rate for our 2019 predictions report, including:

  • Apple makes privacy a product; music catalogue acquisitions will accelerate; one more really big merger and acquisition (Sprint / T-Mobile); virtual collective experience (Marshmello / Fortnite); Netflix will lose market share; DAZN will dominate US boxing; tech majors will disrupt gaming (Aracde and Stadia); Spotify will launch a major news podcast (El Primer Café).

If you are not already a MIDiA client and would like to learn more about how to get access to MIDiA’s research, data and analysis, then email stephen@midiaresearch.com

How an Economic Downturn Could Reshape Digital Media

Ten years on from the credit crunch, the global economy could be poised to enter another recession. Many of the underlying causes of the credit crunch remain in place, due to governments lacking appetite for structural reform of the faults in the global financial system that catalysed the slowdown. Many of those unchecked factors remain, and with growing volatility in geopolitics a perfect storm could be brewing. A succession of potential unintended consequences could reshape a digital economy that has grown rapidly in an era of abundance and easy access to capital.

During a recession, consumers reduce their spending on non-essentials. Media falls squarely into that category, but digital media is particularly vulnerable for three key reasons:

  • Streaming, easy to leave: The great promise of streaming subscriptions was built on convenience and value for money. These are the subscriptions that digital consumers are most likely to want to retain in a recession. However, they are also vulnerable to cancelling because a) they are contract-free and b) free alternatives are so good. Cost-conscious music fans would find the various inconveniences of downgrading to free (YouTube especially) as a dull pain compared to the cost savings – especially if they use the readily-available stream rippers and ad blockers. Similarly, video subscribers with pay-TV may want to finally cut the cord, only to find that there are early cancellation fees so end up having to cut Netflix instead. This is compounded by the fact that they can simply pop back in for the odd month to binge watch the latest series of their favourite Netflix Originals ­– but will never have an impetus to stay.
  • Millennials hit hard: Recessions typically hit the lower echelons of workforces hardest and earliest. Millennials have been the fuel in the digital media engine, but these young professionals could be the ones who have greatest job insecurity, especially those in the (tech-enabled) gig economy. Conversely, older consumers still in the workforce will inherently increase in value, while those retired will experience little direct impact on their spending power. So, in relative terms, older consumers will become more valuable in a recession.
  • Innovation slowdown: Research and development budgets will be the early victims of belt tightening at many digital media companies, but there will be another factor slowing innovation: ownership shifts. Struggling digital media companies may see investors taking full or partial ownership of the companies in order to protect their investments. This will particularly apply to companies that have used debt financing tools like convertible notes, which can result in investors converting debt into equity if targets are not met. Investors looking to protect their investments will be inherently more conservative in their strategic outlook, resulting in a slowing of costly innovation and product development.

Market outlook: fortune favours the brave

Previous economic downturns and market adjustments have seen winners and losers. Often this has as much to do with financial backing and strategic nous as with the quality of the product sets of the companies. Content budgets will likely contract to match the realities of the market, but those companies brave enough to make long-term bets could be the long-term winners. The labels still willing to invest strongly in new artists and artist marketing campaigns will likely have more impact in a less cluttered market suffering from under-investment. Similarly, TV, movie and games studios that are willing to continue to invest strongly in commissioning will see their content stand out from the rest. More than that, given the long production cycles of content, they will have the strongest rosters of content going into market when consumer spending power recovers. More conservative competitors will be playing catch up, waiting a year or more for their new investments to make it to market.

These findings are taken from the first report in MIDiA’s Recession Impact research series:

Recession Impact: How an Economic Downturn Could Reshape Digital Media

For a strictly limited period you can download this report for free on the MIDiA report store here. This offer ends on Friday 20th December, at which point the report will revert to its original price.

Take Five (the big five stories and data you need to know) November 11th 2019

take5 11 11 19BTS, fandom 3.0: The management of BTS’s distributor was trying to work out who had greenlitan un authorized billboard campaign for the South Korean boy band. When it turned out that the fans had paid,it pulled back the veil on a whole new fandom paradigm. (We’ll be publishing a Fandom 3.0 report soon).

Video overkill? Not to be outdone by the likes of Apple, Warner and Disney, Discovery has announced that it too may be launching a video subscription service in the US.On the one hand, the competition represents great consumer choice;on the other,it creates wallet share pressure. Netflix, Disney+, Amazon, HBO Max, Amazon and Hulu (basic) together cost $53.22. Feels a lot like the cable streaming is meant to be reducing.

The great Apple bundlingprocess begins: Apple needs subscriptions not for margin or even revenue, but to prop up device sales average revenue per user (ARPU). Within three years Apple will have full subscription bundles retailed with devices. It is testing the waters with Apple TV+. The latest development is being bundled with the Apple Music student plan.Don’t bet against Arcade also being in there soon.

Recycled bottles = smart speakers:This is a little old but we only just saw it and we value any opportunity to shine a light on the climate crisis and efforts to address it – however modest. Google’s Nest Mini smartspeaker is to be made, in part, from recycled plastic bottles. Compare and contrast with the environmental footprint of Apple’s AirPods.

Fourday week: Microsoft has been trialing four-day weeks in Japan. Productivity was up 40% and electricity consumption down 23%. The contrast with Alibaba’s 996 (i.e.9:00-9:00six days a week)is stark. So far, we have hurtled into the era of tech-enabled consumption and production without taking stock.

Five Trends Changing Music Marketing

This is a guest post from MIDiA Research analyst Keith Jopling

Marketing music has never been straightforward. That’s why back in the day, label executives would use the single as the shortcut to finding an audience on which to propel the artist, and even more importantly, their latest album. Meanwhile, radio stations were largely in lockstep, since they would rather play the ‘catchiest’ hits as well as help build familiarity for those hits (those that got through dreaded call-out research). Still, neither side really knew which songs audiences would take to their hearts. The signal was foggy, at least until the record reached the shops. Even then, it was hard to know whether people liked the music, or just didn’t know about it. Hence the market was a constant flow of ‘push and pray’.

The single biggest change brought by streaming is the clarity of the signal. It has improved. It is clearer now which songs people really like. The art of marketing is to seed the song into the right places and wait to see what pops where. The challenge for label marketers isn’t so much to grasp this new world – they do. Their challenge is to have enough direct levers they can pull to make the new world order tip in their artists’ favour. The cause of many a migraine for marketers, however, is that they have very few direct levers and are at the mercy of gatekeepers, influencers and other layers that sit between their songs and the audience.

The problems for music marketers are manifold. We’ve listed just some of them here, each with a kernel of a solution. Whether music marketers have it in their power to fashion the solutions into actionable marketing tactics is a different story. But, given that global marketing is one of the core competencies of a modern record label (and a modern artist manager), the broader solution is for marketers to push their agenda higher up the chain, and for more corporate-level innovation and investment to get the marketing engines changed up and fit for purpose. We argue as well that to succeed in doing this, marketers should change behaviours and start marketing for the environment now, not yesterday.

In this short report (download for free on the MIDiA webpages), Consulting Director Keith Jopling examines five problematical trends changing the way music is marketed, and points to potential solutions.

Problem (and solution) 1: Managing linear decline

The steady decline of linear radio and TV audiences is eroding these platforms’ contribution to music marketing effectiveness. The industry seems to live in hope that this will find a self-cure. A label’s power to get an artist’s song on the radio is seen by the artist as second fiddle to streaming, so the solution is obvious – either work with radio to improve its relevance or -get better at playlist pitching and see radio as a bi-product or bonus, not an essential. With playlist pitching getting harder, perhaps the former option is actually the better one.

Currently, radio is the only large-scale media that labels have for reaching national audiences at a shared time and place. But radio’s rolling playlist slots are too low in volume. One simple change would be for labels/publishers/managers to convince radio brands to expand their playlists to accommodate many more slots for new music (preferably with much better analytics to measure this, as audiences continue to migrate from broadcast to on-demand). For one thing, it would help radio’s issues in competing with streaming platforms if they could increase their capacity for song discovery by trading off new songs with catalogue plays or heavy rotation hits – ‘track of the hour’ rather than ‘track of the day’. Radio could argue that it is a better discovery platform than streaming, given it can add powerful context (daypart, presenters, artist stories) that streaming currently does not. Radio provides a sense of community. Streaming platforms are frozen wastelands in comparison. Radio can only make this argument however, if it can go further to compete with streaming on volume.

The plethora of branded radio apps now on the market is hardly a joined-up force to take on streaming, but if the market continues to evolve this way, then radio providers must use their brand equity and identity to serve super-niches, and serve them better – be it genre, demographic, a particular scene, theme or location. The most successful will begin to stem the loss in audience reach, but also fill the gaps left by streaming services to hold onto those audiences in terms of engagement and emotional attachment. For all the rhetoric of streaming platforms, one of those gaps is music discovery.

Download our free report to read the following further problems & solutions:

  • Managing streaming economics and higher song volumes
  • Managing post-album creativity
  • Managing global-local culture
  • Managing music value

Fan upsell is the money left on the table

In the mainstream pop world, the upsell potential to super-fans remains a gaping hole in the potential growth for the industry. Labels have acquired merchandise companies for incremental revenue but have so far stayed clear of the one sector in which the artists’ ‘product’ remains a scarce premium – live performance. Yet, real estate and demand can be created outside of the main live sector dominated by Live Nation and AEG. Companies like Dice and Sofar Sounds and even City Winery in the USA have proved this.

Some horizontal thinking is required on the subject of music’s value problem – whether it be that previous ‘promotional’ channels be abandoned unless there is directly attributable consumption as a result, or that labels can create more live real estate (through monetising showcases or converting tour support funding into direct ticketed appearances). Artists remain super-valuable brands. Average revenue per artist must go one way – up. Artists must use this as the benchmark for choosing their preferred means of representation, not just the size of their streaming numbers.

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

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

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

Independent artists open up new opportunities for streaming services

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

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

Ambiguity will be the shape of things

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