With 2020 now comfortably behind us and public companies in their earnings cycle, a clear picture is starting to emerge of how the global recorded music market performed. MIDiA is midway through fielding the global independent label survey that will help create the definitive view of how the independent sector fared in 2020 and its contribution to the global market.
We are fielding the survey now in order to create global market figures over the coming weeks. Getting this done now is important as it is the period when the global view of the market is shaped, particularly among the investor community.
We have had a great response so far and have already collected data accounting for billions of dollars of revenue. All labels that take part in the survey will get the full results and a copy of the final report when it is published, for free.
In addition to the detailed country level market sizing report that will come later in the year, we will be feeding the results into our global market shares report that will be published in the coming weeks. All independent labels that take part in the survey will get a copy of this report for free also.
“The immersive web is characterised by environments in which we do not simply conduct extensions of in-real-life activity (e-commerce, video calls) but ones that create behaviours and relationships that only, and can only, exist within these environments. Apps and platforms like Roblox, TikTok and Discord are early iterations of the immersive web, but merely hint at what will come.”
Our analyst team has been developing this theme and thinking about how its impact will shape digital entertainment in 2021 and beyond. These are our three identified disruptive themes that will flow from the Immersive Web:
Lean in: One of the dominant discussions concerning on-demand entertainment is the balance between lean forward and lean back experiences, i.e. the degree to which audiences actively choose what they are engaging with versus what they sit back and consume. But that framework does not capture the emerging shift towards audience participation, of consumers actively engaging with and modifying the content. We term this behavioural paradigm as lean in. Whether that be a teen creating a TikTok video, a consumer creating a meme or a gamer making music on Splash in Roblox, digital audiences increasingly expect to be a part of the content itself. We think audio will be the next frontier for lean in. MIDiA’s Cultural Insights analyst Hanna Kahlert will be developing this theme.
The insurgent opportunity: The competitive marketplace of digital entertainment companies is becoming static. Though there is still lots of growth and in many cases – e.g. podcasts, video – accelerating investment, innovations in user experience have slowed. The likes of Apple, Warner Media and ViacomCBS are shaking up the video subscriptions marketplace, yet they are differentiating around content, not features. Incumbent Netflix has done relatively little to innovate its user experience. The same story plays out in music (with the exception of layering podcasts into the mix, which is of course not innovating the music experience but instead the wider audio experience). Across all of digital entertainment, big incumbent players (Facebook, Google, Apple, Amazon, Netflix, Spotify etc.) are becoming so mainstream they are having to slow their innovation so as not to alienate their newer, mainstream audiences. This is exactly what happened to Apple once the iPod and iPhone thrust it into the mainstream. This creates a huge opportunity for disruptive insurgents who do not have to cater for older, mainstream audiences and can focus on disruptive innovation rather than sustaining innovation. Asian-origin apps like TikTok and Weverse are beginning to chip away at incumbent stasis. This trend will aggressively accelerate, driving the next major chapter in digital entertainment.
Entertainment internets: A number of the biggest platforms on the planet have become so dominant and so exhaustive that they are effectively creating mini-internets. YouTube is the internet of video, Amazon the internet of commerce, Facebook the internet of social. Each has succeeded in this all-encompassing impact by delivering so much to diverse audience segments and use cases. They have then used this audience to pull the majority of the partner and creator value chain into their orbit because those parties simply cannot afford not to be there. The internet itself has continued to prove largely immune from wholesale regulation, but these entertainment internets may prove easier targets for regulators as they are owned by single corporate parents and thus risk falling foul of anti-competitive behaviour oversight. Other than regulation, in the near to mid-term, these entertainment internets will face relatively little disruptive threat other than their own hubris. The rise of insurgents will hit the incumbent pure plays harder and first, though over time even the entertainment internets will also find themselves under fire.
Even taking into account the impact of the pandemic, it has never been a better time for independent creators in the music business. The various 2020 lockdowns may have prevented artists from earning vital touring income and disrupted release and promotion cycles, but for many it also pushed new creativity, with nearly 70% of independent artists choosing to use the time to write or make new music.
Yet, with access to the industry easier than ever, a glaring discrepancy remains: why are there still so few women, and so many men? What is stopping female creators – artists, songwriters, producers and DJs from picking up an instrument or learning the software, and releasing music into the market? Despite women occupying leadership positions and topping the charts, women overall remain starkly in the minority and remain massively unrepresented in the music industry. Why?
2020 has been a year of change, some of it very much positive, including months of protests within the Black Live Matter movement, driving global conversations and pushing for diversity, equity, and ‘minority’ recognition. The demand to recognise that more is needed from governments, businesses, and institutions, for a universal recognition of discrepancy in opportunity and lived experience, has forced changes in practise and behaviours – and hopefully attitudes too. While many want to forget 2020, it was the year that moved the global mindset forward unilaterally.
The challenges women and others face in the music industry (and beyond) are deep, varied and unrelenting – some obvious and now exposed (in part through #metoo), but many either subtle or deniable enough to have escaped accountability for decades, if not centuries. #metoo shone the spotlight on harassment and assault, often by men in positions of power. Yet discrimination and bias can also be as simple as girls experiencing discouragement from participating in “male” activities in schools, like technology, or from playing ‘male’ instruments likes drums and guitar.
It’s well known that women creators in the music industry (and other sectors too) must work harder to achieve the same approval or reward as their male counterparts. They are sometimes treated with an air of dismissal, or are not as initially respected, or suffer expectations of childcare/parenthood as a burden or skill proclivity based on gender.
Much has been done over the past few years to address a myriad of these issues in music by the likes of Women In Live Music (WILM), Women In CTRL, Pass the Aux and more. The F-List female creator database has removed the excuse that there simply “aren’t enough women in music to hire”. Female-centric projects like Rhythm Sister, She Is the Music and SheShreds are working to develop, provide resources for and spotlight female artists that both inspire and empower the journeys of more women and other minorities into music. The Annenberg Study highlighted shocking statistics, finding that only one-in-five of artists are female, but worse: only 12.3% of songwriters and 2.1% of producers are(2012-2018). While men and women of colour have climbed ladders, and female representation in the ‘big leagues’ is rising, behind the scenes it remains to be seen how much has really changed.
No in-depth work has recently consulted the global community of female creators. This, too, is changing. MIDiA has long focused on the path of the independent artist, and in conjunction with Tunecore and Believe Digital we are now conducting a comprehensive global study asking creators themselves about their challenges, inspirations and experiences.
Through this we can discover the main issues they face, what is helping them along their journeys – or holding them back. We can point to solutions that can bring the industry forward. Let’s find out what we need from those working in the weeds of the industry today and those looking to carve out a living from music – whether independent, signed, solo or part of a band.
Due to the very issue of representation, we welcome people of all genders to take part, but it is imperative to hear as many female/femme experiences as possible. The more respondents, the better a picture we can uncover. These findings will be published in full, in a free report in March – International Women’s month.
Sony Music has bought AWAL (and Kobalt Neighbouring Rights) from Kobalt for $430 million. By adding AWAL to its already-booming Orchard division (as well as other distribution companies), it now has leading brands for independent artists as well as independent labels. Sony Music just became one of, if not the, leading global companies for independent music. With a major now being one of the biggest indies, the obvious question is: what does being independent even mean anymore?
Kobalt has been one of the music industry’s most important change agents with its publishing and label assets helping reframe some of the fundamentals of the business. Since its acquisition of AWAL, Kobalt has nurtured it into a brand that was synonymous with the age of the empowered independent artist and was seen by much of the independent artist community as their natural home.
Now that AWAL is becoming assimilated into the Sony Music corporate structure, the independent artist community will be wondering whether Sony can keep AWAL’s independent spirit alive. The answer is most likely a qualified ‘yes’. Years after being fully incorporated into Sony, the Orchard continues to be a key force for independent labels. Sony has proven adept at striking a balance between corporate integration and divisional independence. Also, Kobalt had always structured AWAL in a way that more closely resembled a major label than it did an independent. This was reflected in its structure, leadership, strategic thinking, tech and marketing capabilities, and even in many of its more successful artists like Lauv and Rex Orange County (who Sony eventually poached). You could even make the case that what was really independent about AWAL was that it was not part of a major label…
Nevertheless there was, and is, a crucial, company-defining, independent principle: artist ownership of rights. This remains what makes the average AWAL artist different from the average Sony Music artist. But, of course, all of the majors have been betting big on label services too. Which brings us back to the original question: what does being independent actually mean? Is it about not being part of a big corporate structure? Does it mean an artist retaining ownership of their rights? Is it commercial and creative freedom for artists? Is it an ideology of music first, business second? In truth it is probably a mixture of some and all of those things, depending on the individual artist. What is however also true, is that nowadays an artist can be independent with a major label. A dynamic that AWAL just made even more true.
The UK Parliament’s inquiry on the economics of streaming appears to be building a case for equitable remuneration (ER). There are many iterations of what ER can mean, but a simplified description of what is in play here is: a share of streaming revenue being paid directly by the DSPs to an entity which then distributes directly to artists, thus bypassing the whole ‘do labels pay artists enough’ debate. Though there are some examples of ER in place – such as in Spain – if the UK went down this route it would, in many respects, be setting a global streaming precedent. What is more, it is a solution that would likely have more income impact on artists than alternatives such as user-centric licensing. ER has the potential to transform artist income, but quite probably not the way you think.
Superstar skews even apply to streaming’s superstars
To illustrate the point, we can slice this 43,000 a few ways thanks to a number of industry figures. In his DCMS presentation, WMG’s Tony Harlow stated that the label had eight artists globally that had a billion streams. Assuming that is a ‘lifetime’ rather than annual figure and applying market share assumptions, that gives us around seven artists across all labels generating a billion streams a year. Additionally, the BPI recently reported that 200 artists generated more than 100 million streams each in the UK in 2020. Taking these figures into account, applying assumptions to account for global figures and Spotify market shares and then factoring in per-stream rates and the total number of releasing artists globally, we end up with the following:
98% of Spotify’s 43K club earn a more modest $29,046 a year (after label deductions). Which isn’t bad when you consider that Spotify is just one part of much bigger streaming economy. Against that, though, those artists are just 0.76% of all artists globally – this is very nearly as good as it gets to be as an artist. Only 1,007 do better.
The remaining 99% earn an average of just $26 a year, and that figure includes not just the around five million artists direct, but also independent artists and even major label artists. Also, just as within the superstar segment, distribution is not linear, but the point is hopefully clear.
The added complication in all of this is that not all of the royalties that Spotify pay for the streams of its 43K club actually end up with artists, as many will not be recouped. WMG’s Harlow suggested that a typical major label artist might need to generate a billion streams to be recouped, and there were just seven of those made in 2020 (indeed an artist on a 15% deal would need 1,010,101,010 streams to pay off a $500,000 advance, assuming a headline per-stream rate of $0.0033 for the label). As artists recoup over multiple years, the recouped figure will be far north of seven and may be closer to the 1,000 that generated between 100 million and one billion streams. So, a majority of Spotify’s 43K club may not be earning any royalties at all.
Hence, there is a double case for ER:
To ensure all artists earn more
To ensure artists who are not recouped earn at least some royalty income
And so, onto ER…
Again, using Spotify to illustrate, a 5% ER levy on Spotify would be equivalent to around $400 million for 2020, and around $1.1 billion at an industry level (excluding YouTube from the calculations). Not considering recoupment rates and assuming a single artist share of 32.5% (the average of major and indie royalty splits) this would equate to a 28% increase of income for all artists. Certainly, a welcome shift. But, just in the same way that user centric can have the unintended consequence of benefiting bigger artists, it is the superstars who do best, by dint of simple arithmetic.
There is an implied misconception with ER that ‘equitable’ implies some sort of quasi-socialist redistribution of wealth. It does not. Instead, it allocates income with the same distribution skews that make streaming the superstar economy that it is.
The one billion-plus-streams artists would earn an extra $125,400 a year from Spotify (around $350,000 across all services), but further down the ladder the pickings are more meagre. The 98% of Spotify’s 43K club that currently earn $29,046 would get an extra $8,125 (around $21,000 across all services). A meaningful amount, but unless you are a solo act probably not enough to transform streaming into a liveable income source. And don’t forget, we are still talking about the very top echelon of artists here; for the remaining 99% of artists the average additional income from ER would be $7 a year (though again, the distribution would not be linear, so some will earn in the hundreds and some in the low thousands).
An intriguing unintended consequence is that the average major label artist would likely see a higher percentage increase than independent artists. The reason is very simple: around 80% of major label artists are not recouped so they are currently earning zero streaming royalties, which means ER would be a 100% increase. A far smaller share of independent artists have advances so will be in the 28% bracket.
There is no silver bullet solution to artist income
The key takeaway from this exercise is that just as with user centric, ER is not a silver bullet that is going to fix all of the ails of streaming for creators, mainly because there is no silver bullet. The fractional economics of streaming need scale to deliver benefits, which means that rightsholders (i.e. those with large scale catalogues) benefit far more than the majority of artists (i.e. those with small scale catalogues).
None of this is to say efforts like ER should not be pursued – they should. But expectations should be managed for the majority of artists. As Will Page puts it, there are simply too many mouths to feed (i.e. too many artists fighting for ever smaller slices of a finite royalty pot).
And did you miss the glaring omission from this analysis? Songwriters. In fact, if Spotify and co. are compelled to pay 5% ‘off the top’ to artists, then they are going to need to make up that revenue somewhere else, which probably means a combination of royalty dilution through podcasts and audiobooks, reduced rates paid to labels, more direct deals with artist etc. Crucially, with DSP margins pulverised, good luck with publishers squeezing any further increases in rates in the future. Artist ER could inadvertently put a stop to songwriter royalty increases. Such are the ways of unintended consequences.
The attention economy defines and shapes today’s digital world. However, we have long since reached peak in the attention economy with all available free time now addressed. What this means is that previously, when digital entertainment propositions grew, they were often using up users’ free time. Now though, every minute gained is at someone else’s expense. The battle for attention is now both fierce and intense. What is more, it will get worse when much of the population finally returns to commuting and going out, as 2020 was defined by entertainment filling the extra 15% of free time people found in their weekly lives. But there is an ever bigger dynamic at play, one which gets to the very heart of entertainment: the attention economy is becoming a malign force for culture. Consumption is holding culture hostage.
The increasingly fierce competition for consumers’ attention is becoming corrosive, with clickbait, autoplay and content farms degrading both content and culture. What matters is acquiring audience and their time, the type of content and tactics that captures them is secondary. It is not just bottom feeder content farms that play this game, instead the wider digital entertainment landscape has allowed itself to become infected by their strategic worldview.
The attention dependency goes way beyond media
Do not for a minute think this is a media-only problem. The corrosive impact of the attention economy can be seen right across digital entertainment, from hastily churned out scripted dramas, through to music. Artists and labels are locked in a race to increase the volume and velocity of music they put out, spurred on by Spotify’s Daniel Ek clarion call to up the ante even further. In this volume and velocity game, algorithm-friendly A&R and playlist hits win out. Clickbait music comes out on top. And because music attention spans are shortening, no sooner has the listener’s attention been grabbed, then it is lost again due to the next new track. In the attention economy’s volume and velocity game, the streaming platform is a hungry beast that is perpetually hungry. Each new song is just another bit of calorific input to sate its appetite.
In this world, ‘streamability’ trumps musicality, but it is not just culture that suffers. Cutting through the clutter of 50,000 new songs every day also delivers diminishing returns for marketing spend. Labels have to spend more to get weaker results.
Music subscriptions accentuate the worst parts of the attention economy
Perhaps most importantly of all though, music subscriptions are the worst possible ecosystem in which to monetise the attention economy. In online media, more clicks means more ads, which means more ad revenue. In music subscriptions it is a fight to the death for a slice of a finite royalty pot. A royalty pot that is also impacted by slowing streaming growth and declining ARPU. The music industry has developed an attention dependency in the least healthy environment possible.
This is not one of those market dynamics that will eventually find a natural course correction. Instead, the music industry has to decide it wants to break its attention dependency and start doing things differently. Until then, consumption and content will continue to push culture to the side lines.
It is time to take hold of the wheel
Some years ago, Andrew Llyod Webber said this: “The fine wines of France are not merely content for the glass manufacturing business”. Although those words are of someone from the old world grappling with the new, the underlying premise remains. None of this is to suggest that streaming consumption is not the future. Nor is it to even suggest that all of the changes to the culture of music that streaming has brought about are negative. In fact, it may be that streaming-era music culture is simply what the future of music is going to be. But what is crucial is that artists, labels, songwriters and publishers take an active role in steering the ship to the future rather than simply getting pulled along by the streaming tide.
The global pandemic thrust the live music sector into chaos, with global revenues falling by 75% in 2020 compared to one year previously. The music industry was rocked by first-order impacts (no concerts, no fan engagement) and second-order impacts (many artists realising that streaming did not add up without live income alongside it). Necessity, though, is the mother of invention and an unprecedented period of innovation and experimentation followed, creating a whole new virtual concert ecosystem. One that presents great opportunity, but that also reflects the flaws of a hastily constructed industry – flaws that must be fixed for the sector to realise its ambition. Rather than the future of live, virtual concerts represent an entire new video format.
MIDiA’s new report ‘Virtual concerts: A new video format’ provides a comprehensive overview of the market with revenues, forecasts, demographics, vendor mapping and industry metrics. The report is immediately available to MIDiA clients. Here are some of the key findings.
Live streaming of concerts is not new, but the combination of a complex rights landscape and resistance from the traditional live sector stymied the sector’s growth. The fact that technology itself was not the problem is well illustrated by the dynamic growth in live streaming in other content verticals, gaming especially. Since the pandemic’s first impact, there has been a rapid rollout of new live music streaming solutions and companies, enjoying varied success both commercially and creatively. Nonetheless, artists now have a vast array of options at their disposal and the rapid shift is well illustrated by the Foo Fighters’ Dave Grohl joking during his band’s December 2020 high quality, ticketed live streamed concert that the sector had come a long way from artists playing piano in their living rooms earlier in the year.
One of the most important changes was the strong shift in the latter part of the year from free streams to more professionally produced, ticketed events. From June to November 2020, the share of live-streamed concert listings on Bandsintown grew from 1.9% to 40.7%, while the total ticketed revenue in December was up 292% from June. The shift to paid is crucial, especially considering the #brokenrecord debate (arguably the most important second-order impact of the cessation of live music). Traditional live is a scarce, premium product that generates many artists the bulk of their income. Yet the start of the live streaming boom was all about free, an uncanny rerun of when music first went on the internet. With the current wave of COVID-19 worse in many countries than the first, 2021 is set to be another highly disrupted year for the live sector. It is crucial that live streaming can pick up some of the slack as a meaningful revenue driver for artists.
Overall, ticketed live-streamed concerts generated $0.6 billion in 2020 with a flurry of ticketed events in the last two months of the year, including end-of-year spectaculars from heavyweights as diverse as Justin Bieber and Kiss.
Live streaming though has a long way to go, illustrated by the fact that penetration is just 9% and audiences have an early adopter, younger male skew. In many respects live streaming was not ready for primetime when COVID-19 hit. Unlike sectors such as video conferencing and home fitness tech, which had become well established before, music live streaming was a bit of an industry backwater. A whole host of new entrants swept in to tap the new opportunity, while pre-existing ones that had been limping along pre-COVID, gave themselves a new lick of paint.
The vendor landscape is complex and increasingly fragmented. But most importantly, it is characterised by companies wanting to own as much of the value chain as possible and trying to achieve as much as they can before the giants of the traditional live sector get back on their feet.
Live streaming has vast potential – not in some binary live music replacement equation, but instead as a new video format. In fact, live streaming could be to live music what pay-TV is to sports, creating in the long run a market that is even bigger than the core business. But between now and then there is a lot of hard work to be done.
As we approach the end of 2020 it is time to look forward to what 2021 may bring. MIDiA has published the fifth edition of our Annual Predictions report which clients can read here. There are 27 predictions in the report, but I am sharing a few of them here. MIDiA has a pretty good track record with its predictions; 79% of our predictions for 2020 were correct.
These are the seven meta and cultural trends that we believe will shape 2021:
The immersive web
The great reaggregation
The return of synchronous experiences
Social consumption and micro communities
Video streaming as a cultural catalyst
The end of influencers
The immersive web
Web 1.0 was an information dump; web 2.0 added multimedia and social. Now we are entering the third phase, which MIDiA terms the immersive web. As is usually the case with big epoch shifts, this will not be a clear and sudden change but instead a steady change – a change that is, in fact, already happening. The immersive web is characterised by environments in which we do not simply conduct extensions of IRL activity (e-commerce, video calls) but ones that create behaviours and relationships that only, and can only, exist within these environments. Apps and platforms like Roblox, TikTok and Discord are early iterations of the immersive web, but merely hint at what will come. The trend will be driven by Gen Z, who have grown up with social apps from the playground onwards. Gen Z relies more than any previous generation on such apps for social interaction and expression, forming muscle memory for digital-first relationships. The COVID-19 lockdown measures have accentuated this shift, further solidifying Gen Z’s receptivity to future immersive web experiences.
Here is a short version of some of the trends we expect to shape music in 2021:
The start of an artist economy: Streaming is a song economy of which the scale benefits rights holders far more than creators. The industry needs to work towards a collection of models that work for artists. Components could be micro-communities (see below), sounds platforms, ticketed live streams, skills marketplaces, and virtual merch.
The rise of micro-communities: Niche is the new mainstream. The next phase of this market dynamic is the emergence of micro-communities; small audiences of dedicated fans who almost consider it an honour-bound duty to support their artists.
The creator tools revolution: Creator tools, particularly music production and collaboration, will be one of the most important market shifts in 2021. Companies like Splice, LANDR and Output will continue to build scale in 2021, changing both the culture and business of music.
Live streaming professionalises: With live unlikely to be anything close to full capacity until the latter part of 2021, live streaming will be used by a growing body of artists as a genuine revenue driver, rather than the audience engagement role it played in much of 2020, driven by increased professionalisation, better distribution and more sophisticated monetisation.
Music continues to deliver as an asset class: Although the pandemic dented music publishing’s long-term growth story, music catalogues retain strong appeal as an asset class, not least because they are performing better in relation to many asset classes that have been hit hard by the pandemic and that look vulnerable to the coming recession. The imbalance between supply and demand remains, so expect prices paid to continue to accelerate.
UGC continues to accelerate: User-generated content (UGC) music revenues reached $4 billion in 2020 and will push up to $4.9 billion in 2021. The crucial difference between UGC music now compared to five years ago, is that the focus is on genuine user creativity rather than users simply uploading others’ music.
2020 was a year like no other in modern times, with the impact on digital entertainment both pronounced and creating the foundations for accelerated innovation in 2021. Whatever may happen to the global economic and health outlook, digital entertainment will go through further dramatic change in 2021.
MIDiA Research is conducting a major study of independent label revenue in order to create a definitive review of the independent sector’s contribution to the global music market. MIDiA conducted this work for a number of years on behalf of the Worldwide Independent Network and is now independently creating a dataset for 2020. The last WINTel study can be found here. We are calling for all independent labels, of whatever size and geography, to complete our survey which can be found here.
Why this survey is so important
The most common method used to determine the global market share of independents is to take total recorded music revenues from MIDiA or the IFPI and then deduct the revenues of the major labels. This is how the independent sector has been measured for years. However, it under-represents the value of independents because many independent labels are either distributed directly via majors or via one of their wholly owned distribution arms such as the Orchard. This means that independent label revenue appears within major label revenue. Although MIDiA’s figure is higher than the IFPI’s to reflect the latter’s under-reporting of independents, the method still under-represents independents whichever total market figure is used.
The purpose of this survey is to pick up where WINTel left off, to separate out the revenue that is distributed by majors and allocate that directly to the independents, thus revealing the larger, actual independent market share based on ownership of copyright rather than by the company that distributes the revenue.
What is needed from independent labels
The survey asks a number of questions about each record label’s revenue, growth and the distributors it works with. We appreciate that this information is highly sensitive which is why we treat the data with utmost care and confidentiality, just as we did when we fielded the survey on behalf of WINTel.
As with all our previous surveys, all responses will be treated as strictly confidential. No individual responses will ever be shared. Instead, all responses will only ever be aggregated into national and international numbers. The respondent-level data will be stored securely, encrypted in an offline location and will never be shared with any third party whatsoever.
What is in it for independent labels
MIDiA will provide a full summary of the final, aggregated results to all independent labels and distributors that participate in this survey. The final data will present independent label market share data globally and at country level.
In addition, the survey asks respondents about issues such as how the global pandemic has affected their business and how confident they feel about 2021. We will also be providing this data to all respondents, enabling them to benchmark themselves against their peers.
We are fielding this survey throughout December and the start of 2021. Once the survey fielding is complete MIDiA will build its market share model using the results of the survey and other inputs such as reported company financials and input from direct conversations with a number of larger independent labels.
As a reminder, at no stage will any label-level data be seen by anyone else other than the MIDiA analysts working on the project and they will not share any of this information with anyone else.
For most of 2020, MIDiA has been working on a major piece of work around the fast-growing creator tools space. The themes we had already started working on became rocket propelled with the onset of the pandemic, with an unprecedented volume of artists starting to engage with music production tools, services and hardware. Even before COVID-19, the creator tools space was set to transform the entire music business; now that future has become the present. This landmark report ‘Creator Tools – The Music Industry’s New Top of Funnel’ is immediately available to MIDiA Research clients here (more details of the report can be found at the bottom of this post).
Music production used to be a siloed segment of the music industry that revolved around studios, hardware and packaged software – at best a cost centre for labels. Now that is all changing. A new wave of creator tools companies are meeting the needs of a new generation of artists with innovative and intuitive music production solutions. Adding to an already vibrant marketplace, this new breed of production tools and services, often subscription-based, are reinventing the creative process and will reshape the long-term view of what a music company is.
This is set to be the most dramatic product strategy shift the music industry has experienced in decades catalysed by the COVID-19 pandemic. 68% of independent artists reported making more music and 36% doing more online collaborations during lockdowns.
There are 14.6 million digital music creators globally, of which 4.7 million are self-releasing ‘artists direct’, up 31% from 3.6 million in 2019.
The emergence of a subscription economy
In the same year, music software, sounds and services generated $884 million, with plugins and VSTs the largest single segment at 43%. Building on this ‘COVID bounce’ total revenues will reach $1.86 billion by 2027. Though music software is the most widely-adopted creator tools category among independent artists, sounds and services will be the two largest drivers of future growth.
Subscriptions models will also be key, with new models, more self-sufficient tools and the rise of SAAS services making the market majority subscription by 2026, with subscription services reaching $870 million by 2027, up 477% from $151 million in 2019. The shift from software sales to SAAS models means these companies are collecting crucial creator data before they even get to the distribution or release stage, giving these companies the ability to identify the likely hits before they even get into streaming services. This is the music industry’s new top of funnel. Meanwhile at the other end of the funnel, Apple (Garage Band, Logic) and Spotify (SoundBetter, Soundtrap) are well placed to push up the funnel, with the foundations of what tomorrow’s record label will be. Sony Music’s move to invest in creation app Tully is the start of what will rapidly become a creator tools arms race. Expect Splice and LANDR to become sought after by both labels and streaming services.
Creative feedback loops
The new breed of creator tools is also fostering creative feedback loops between other creators and in some cases with audiences—a dynamic MIDiA expects to become a mainstay of the future production landscape as digitally-native Gen Z and younger millennials mature in their production capabilities. The creator tools that build around such creative feedback loops will be those that resonate most with the young generation who will be the creators and fans of tomorrow’s music business.
Just as samplers and DAWs transformed music making, so this new approach to production will change the future of how music is made and in turn, how it sounds. Music production product strategy is at a pivot point, where a new breed of user experience-led propositions will rise to prominence. The smart services that have already empowered their users to go from zero to 100 more quickly than ever before, will grow their offerings in line with their user base’s growing capabilities. The business of music has always shaped the culture of music, but perhaps never more so than how the creator tools revolution will reshape the future of what it means to be a fan, an artist and a music company.
If you are not yet a MIDiA client and would like to learn more about how to get access to the ‘Creator Tools – The Music Industry’s New Top of Funnel’ then email firstname.lastname@example.org