AI will transform music; the question is how?

Every new technology goes through a period of being overhyped before the dust settles, and that technology either fades or builds steadily thereafter. Think 3D printing, VR, NFTs. In my 20+ years as a media and tech analyst, only three technologies have had a level of hype that felt like it was going to live up to expectations: 1) the internet (which was already in full swing by the time I started out – I’m not that old); 2) smartphones / apps; and 3) AI. Those technologies have one big thing in common: what they could become is ungovernable by its originators. But while it was human-power that unlocked that potential of the first two, it is the technology itself that is the accelerant for AI. Of course, people will amplify it as well, but AI itself is already creating many of the new pathways. The business, societal and even humanity implications are so vast that the implications for music are small in comparison. This, however, does not mean that they will not be equally transformational and disruptive within the confines of the music business. Which brings us nicely onto ‘heart on my sleeve’.

For those of you that have been on Mars for the last few days, this AI-generated track mimics the musical style and voices of Drake and The Weeknd. As Trapital’s Dan Runcie observed “[It] isn’t that good, but it’s an improvement from 2020’s TravisBott and other generative music attempts in recent years”. UMG’s response was to encourage DSPs not to host generative-AI tracks, and Drake himself was not happy with the last time a ‘fake Drake’ track did the rounds. Drake will probably be even less happy with this latest AI addition to the Fake Drake roster, which raises the question: will Fake Drake Break Drake?! While there are valid concerns from both parties, there is a real risk of this becoming an old world versus new world conflict, and in such scenarios, the new most often comes out on top.

AI is going to change the future of music. That genie is well and truly out of its bottle. Should more have been done by the traditional music industry to work with music AI companies earlier on? Of course, but we are where we are. So the focus now should be on trying to work out how to influence and shape what the future might be, through collaboration as much as (perhaps more than) enforcement:

We have been here before: The music industry was vehemently against P2P piracy (and I am old enough to remember that). After more than a decade of trying to fight it, the music business finally built an entirely new business around piracy’s successor technology – streaming. P2P infringed copyright, it took control out of the hands of the traditional business, and it created previously impossible use cases. AI is doing the same. What is different now is that the very ecosystem that streaming created (along with social platforms) puts AI into the hands (and ears) of billions of people, whereas P2P reached just tens of millions. Consumers will experience AI at scale before the industry can shape it. And in the digital world, consumers tend to get what they want.

Guitar or tape machine?: These two old technologies both reshaped music. One was about creating, and one was about copying. AI is a mix of both, which is what makes the response so difficult. Assistive and generative AI is already a mainstay of music creation, such as iZotope’s Neutron 4 and Splice’s CoSo. AI music is a continuum, from tweaking mixes through to composition, with virtually everything else in between. There is not one single, simple answer for ‘what to do with AI?’

Enforcement will be difficult: With the best will in the world, copyright law was not designed for AI. Music rightsholders will do their best to apply existing law, but they will face challenges in doing so. Meanwhile, there will simply be too much output to effectively pursue plagiarism cases, which take time and ultimately depend on the personal interpretation of non-expert judges and juries. If you think 100,000 tracks being uploaded per day to streaming now is a problem, when generative AI goes mainstream among consumers (which it most likely will), the number of new ‘songs’ created daily could easily be a hundred times that – perhaps even a thousand. 

Focus on the input not the output: So, the most scalable solution for music rightsholders will be to fix the problem at the top, by ensuring that generative AI tools only learn from what they have permission to learn from. ‘heart on my sleeve’ can only sound like Drake and The Weeknd because the tech learned from theirmusic. A number of generative-AI companies already only learn from selective, pre-authorised datasets. If this becomes the norm then an entire new licensing opportunity emerges for music rightsholders. Artists and songwriters will likely need to consent first, similar to how sync works. The alternative (trying to license and / or collect royalties on the millions, billions or trillions of songs that will be created) would be a fool’s errand.

The reason why AI feels so frightening to much of the music business is not just because of what it is, but also because it is a catalyst for pre-existing market shifts. The last half decade was characterised by the rise of non-traditional music, in the shape of ‘fake artists’, mood music, and independent artists. All of which have eaten into the market share of traditional music companies and creators. 

Streaming’s finite royalty pot makes revenue a zero sum game. Whatever may be done to try to ‘formalise’ AI music, it is almost certainly going to accelerate the fragmentation paradigm shift, by putting music creation in the hands of consumers. Radiohead once sang that “anyone can play guitar”. In practice, most people cannot, and do not. But literally anyone can ‘play’ AI.

There is growing concern among investors that this will mean market share erosion for the majors (and it probably will), but there is still a play for traditional labels and publishers, by licensing AI at the top. In doing so, they can benefit from the shift, just in the same way that major labels benefit from the rise of independent labels and artists through owning distribution platforms. That opportunity, though, requires the right approach and for it to be taken fast. The time is now.

I will leave the final words to President Biden, whose comments on AI as a whole apply just as neatly to AI in music:

“Look what’s happening with artificial intelligence right now. It poses enormous promise and enormous concern. Our world stands at an inflection point. The choices we make today are literally going to determine the future of this world.”

Ellie Goulding and Billie Eilish Are Streaming’s New Normal

Less than a week into the new decade and we already have the first indications that the streaming rulebook continues to be rewritten faster than the ink can dry on its last entry. Three separate articles, on the surface unrelated, when stitched together create the outline of a new streaming narrative that while firmly rooted in recent developments represents an entirely new chapter for the music industry:

1. Ellie Goulding’s ‘River’ was the UK Christmas number one despite being an Amazon exclusive
2. Jimmy Iovine claims Drake and Billie Eilish each have more streams than the entirety of the 1980s
3. UK streaming revenue growth slowed, adding £191 million in 2019 compared to £210 million in 2019

Fusing consumption and retail

Streaming’s impact is both commercial and cultural, in large part because it fuses what used to be retail and radio. Like some kind of musical nuclear fusion, it smashes discovery and consumption together to create a chain reaction with explosive implications. In the old world, repeated radio spins drove awareness and then sales. In streaming environments, lean-back streams are simultaneously radio-like listens and sales. The distinction does not matter for streaming services – they are focused on user acquisition, engagement and retention, but for labels it challenges the very premise of what marketing campaigns are meant to achieve. It is in this environment that today’s streaming stars are made.

‘More of more’

With streaming services lacking any meaningful way to differentiate, they are forced to compete on who can deliver their users’ the most new music to drive the most listening. This strategic imperative of ‘more of more’ is at direct odds with the objective of any label campaign, which is inherently about ‘more of less’, i.e. listen to this song more instead of more songs. The net result is vast amounts of streams spread widely, but also an environment in which hits become megahits. The songs that get traction experience a domino effect of successive algorithmic decisions, rapidly pushing songs with buzz to a progressively wider number of playlists and users. In the old world this would have been radio airplay success; now it is just volume of streams.

Catalogue Darwinism

Because of the focus on new, streaming-era artists end up with far bigger streaming volumes than older artists that were ‘bigger’ in their respective eras, but an afterthought in the streaming era. Hence, Drake and Billie Eilish being bigger than the entirety of the 1980s. Back in mid-2018 MIDiA published a report predicting that music catalogue was going to decline. We faced a lot of opposition then but now we are beginning to see that catalogue is indeed undergoing a fundamental change. For deep, legacy catalogue, streaming dynamics are stripping out the long tail and boiling down entire decades to a handful of tracks. Think of it this way: if 10% of the artists released in the 1980s were ‘successful’ at the time, and 10% of those were successful enough for their music to still be listened to now, and that the songs that are still listened to are 10% of these artists’ entire 1980s output, then you end up with 0.1% of the music from the 1980s being streamed at any meaningful scale now. Added to that, new music gets pushed to more lean-back playlists so is listened to more times. The multiplier effect for new music acts as a divider for older music. As an illustration, 40 music videos on YouTube have more than one billion views but in October 2019 Guns ‘n Roses ‘Sweet Child o’ Mine’ was the only one from the 1980s that had a billion views.

If you own the rights to those catalogue gems then the value of that asset is arguably higher now than ever before, because it has won the Darwinian game of catalogue evolution. But the rest fall by the wayside.

Ellie Goulding: niche mainstream

So, the current dynamics of streaming programming favour new versus old. It may not always be so, but this is where we are right now. These same dynamics can then be used to create hits – demand creation, if you like. This is where Ellie Goulding comes in. Goulding’s Joni Mitchell cover ‘River’ was an Amazon exclusive yet became the overall UK number one in large part because Amazon ensured it was on just about every holiday-themed playlist. Every time someone asked Alexa to play Christmas music, ‘River’ soon found its way there. Because Echo listening skews so heavily lean-back, ‘River’ simply became part of the sonic festive wallpaper, much in the same way ‘All I Want for Christmas’ did on radio. Just like with radio, lean-back listeners are unlikely to stop whatever else they are doing in order to change the track. Because streaming economics do not differentiate with lean-back and lean-forward listening, passive listening is just as valuable as active listening. Radio has become as valuable as retail but is much easier to manipulate.

The other crucial aspect of this is that Amazon has shown that you only need to find and activate a small slice of the mainstream to have a mainstream hit. As MIDiA first said last year, niche is the new mainstream.

At the start of this post I stated that streaming’s effects are both cultural and commercial. The commercial backdrop to all of these consumption and programming shifts is that the rate of revenue growth is beginning to slow (not just in percentage terms – that is a natural effect of markets getting bigger) but also in absolute terms. Early last year we predicted that streaming growth would start to slow towards the end of 2019 in developed markets and the ERA figures for the UK are the first evidence of this shift. Globally, growth will be sustained by emerging and mid-tier markets, but in markets like the UK and US, growth is peaking. The significance is that the conflation of radio and retail does not matter so much when everything is growing. When growth slows, however, quirks of the market can become business challenges. The ROI of throwing money at campaigns to cut through the audio clutter becomes problematic when the promise of the pie getting ever bigger begins to wane.

All of these things are of course simply part of a maturing and changing market. Nevertheless, the marketing strategies currently employed have been developed in an environment of growth abundance. The challenge for streaming’s next chapter is finding the new rules that are more ROI focused but can still play to streaming’s consumption strengths. Delineating different rates for lean-forward and lean-back streams feels like a logical place to start, but more evolution will need to follow – each iteration of which will trigger its own waves of unintended consequences. Exciting times.

Songwriters Aren’t Getting Paid Enough and Here’s Why

Music Business Worldwide recently ran a story on how Apple has proposed a standard streaming rate for songwriters, with Google and Spotify apparently resistant. Of course, Apple can afford to run Apple Music at a loss and has a strategic imperative for making it more difficult for Spotify to be profitable, so do not assume that Apple’s intentions here are wholly altruistic. Nonetheless, it shines a light on what is becoming an open wound for streaming: songwriter discontent. In the earlier days of streaming artists were widely sceptical, but over the years have become much more positive towards the distributive medium. The same has not happened for songwriters for one fundamental reason: they still are not paid enough. This is not simply a case of making streaming services pay out more; rather, this is a complex problem with many moving parts.

Songwriters don’t sell t-shirts

Streaming fundamentally changes how creators earn royalties, shifting from larger, front-loaded payments to something more closely resembling an annuity. In theory, creators should earn just as much money, but over a longer period of time. If you are a larger rightsholder then this is often wholly manageable. If you are a smaller songwriter or artist, then the resulting cash flow shortage can hit hard. Many artists, especially newer ones, have made it work because a) streaming typically only represents a minority of their total income, and b) the increased exposure streaming brings usually boosts their other income streams such as live performances and merchandise. Professional songwriters however – i.e. those that are not also performers – do not sell t-shirts. Royalty income is pretty much it. There is a greater need to fix songwriter streaming income than there was for artists.

The four factors shaping songwriter income

There are four key factors impacting how much songwriters earn from streaming, and most of them can be fixed. To be clear, though, just fixing any single one of them will not move the dial in a meaningful-enough way:

1. Streaming service royalties: Songwriter-related royalties are typically around 15% of streaming revenues, which represent around 21% of all royalties paid by streaming services – around 3.6 times less than master recordings-related royalties. This is better than it used to be, when the ratio was 4.8. However, there is clearly still a large gap between the two sets of rights. Labels argue that they are the ones who take the risk on artists, invest in them and market them. Therefore, they should have the lion’s share of income. Publishers, on the other hand, argue that they are increasingly taking risks with songwriters too (paying advances) and working hard to make their music a success, e.g. with sync streams. They also argue that everything is about the song itself. Both arguments have credence, but the fact that streaming services have historically negotiated with labels first helps explain why there isn’t much left of the royalty pot when they get to publishers. There is clearly scope for some increase for songwriters, but if there is not an accompanying reduction in label rates – not exactly a strong possibility – then the net result will be reduced margins for streaming services. Given that Spotify has only just started generating a net profit, the likely outcome would be to weaken Spotify’s position and skew the market towards those companies who do not need to see streaming pay – i.e. the tech majors. If the market becomes wholly dependent on companies that thrive on squeezing suppliers… well, good luck with that.
2. CMOs: Many songwriter royalties are collected by collective management organizations (CMOs). These (normally) not-for-profit organisations administer rights, take their deductions and then either pay to songwriters directly or to publishers who then pay songwriters (after taking their own deductions). It gets more complicated than that, however. If a songwriter is played overseas, the local CMO collects, deducts and then sends the remainder to the CMO where the songwriter is based (however there are a good number of exceptions to this with a number of CMOs not deducting for overseas collections). That CMO takes its deduction and then distributes. It gets more complicated still – some CMOs apply an additional ‘cultural deduction’ on top of their main fee before distributing. So, if a US hip-hop artist gets played in Europe, the local CMO will take its cut, and an administration fee. Then it goes to his local CMO which takes its fee before sending it to the publisher which then takes its own cut (typically just 25%) which however is much better than label shares.
3. The industrialisation of song writing: With more music being released than ever, songs have to immediately grab the listener. To help ensure every part of the song is a hook and to try to de-risk their artists, bigger labels commission songwriter teams and hold song writing camps, where many song writers get together and write the tracks for albums. This means that the royalties for every song are thus split into small shares across multiple songwriters. Drake’s ‘Nice for What’ has 20 songwriters credited. That means the already small royalties are split 20 ways.
4. The unbundling of the album: When music was all about selling physical albums, songwriters used to get paid the same mechanical royalty for every song on the album, regardless of whether it was the hit single or filler. Now that listeners and playlists dissect albums, skipping filler for killer, a weak song simply pays less. Tough luck if you only wrote the filler songs on the album. On the one hand, this is free market competition. If you didn’t write a song well, then don’t expect it to pay well. Some songwriters argue that it should go the other way too, though – if they wrote the song that made the artist a hit, then shouldn’t they be paid a larger share? 

Here’s another way of looking at it. With the above analysis, this is how many streams the songwriter needs to earn income based assuming the songwriter is equally sharing income four ways with three additional songwriters:

It is incumbent on all of the stakeholders in the streaming music business to collectively work towards making earning truly meaningful income from streaming a realistic objective for songwriters. No single tactic will move the dial. Increasing the streaming service pay-out from 15% to 20%, for example, would still see the above-illustrated songwriter only earn 25% of that. All levers need pulling. Until they are, songwriters will feel short-changed and will remain the open wound that prevents streaming from fulfilling its creator potential. Ball in your court, music industry.

Note – since originally publishing this post I have had useful feedback from a number of rights associations and publishers. My assumptions actually translated (unintentionally) into a worst case scenario that was not representative of usual practise. The post has been updated to show a more typical revenue flow. The underlying arguments of the piece remain unchanged.

Do Not Assume We Have Arrived At Our Destination

Forbes has released its annual Celebrity 100, its list of the top earning media stars. The healthy share of music artists hints at the continued ability to build highly successful music careers. The presence of younger, streaming era artists like Drake and the Weeknd goes further, hinting at how streaming can now be the foundation for superstar commercial success. However, although the superstars are clearly making very good money from streaming in its own right, the dominant school of thought is that streaming is a conduit for success, helping drive artists’ other income streams, live in particular. The ‘don’t worry about sales, make your money from touring’ argument is an old one, but it is as riddled with risk now as when it first surfaced, perhaps more so.

Here are 2 key quotes from Forbes that encapsulate the way in which many artists are now viewing streaming:

“We live in a world where artists don’t really make the money off the music like we did in the Golden Age…It’s not really coming in until you hit the stage.” The Weeknd

“The reason the Weeknds of the world and the Drakes of the world are exploding is a combination of a global audience that’s consuming them freely at a young age [and that] they just keep dropping music…They’re delivering an ongoing, engaged dialogue with their fan base.” Live Nation CEO Michael Rapino

Both quotes imply that live is the place you’re going to make your money. They also argue that streaming can be used intelligently to engage fans because it is not constrained by old world limits such as shelf space and physical distribution considerations. In the old model, artists could go years between album releases, leaving fans hanging, while touring would often be a loss-leading effort to help sell the album. The roles are now reversed.

The rise of live music revenue in 2000s mirrored the decline of recorded music, replacing each lost dollar and adding another one on top. In 2000, recorded music represented 53% of the global music industry, that share is now just 38% while live went from 33% to 43%, though recorded music revenue is now growing again, winning back market share. On this basis, the ‘stream to gig’ argument makes a lot of sense. But things are never as simple as they first appear: 

• Not all live music revenue is created equally: On average, around just 29% of live music revenue makes it back to the artist (after agents, costs etc are factored in) while many artists don’t make any money on live until they’ve reached a certain level of scale. And that’s before considering that the top 1% of live artists (many of whom are aging heritage acts) account for 68% of all live revenue.
• Streaming has fewer middlemen: With streaming there can be relatively few middlemen (e.g. just TuneCore and the streaming service, though in practice many labels use 3^rd party distributors etc). Meanwhile in live there is a multitude of middlemen, many of whom are highly protective of their roles. In streaming, artists have a wealth of data and insights such as Spotify’s artist dashboard and Pandora’s Artist Marketing Programme (AMP). All of which means that artists have to share revenue with more parties in live and they also have less transparency than they do with streaming.
• Resselling is causing friction: All of this is without even considering the corrosive impact on live of ticket resellers such as ViaGoGo and GetMeIn. These business models are incredibly smart from a VC perspective, meeting huge market demand for a comparatively scarce product. But that doesn’t make them good for fans, the live business nor for artists. Most often, though not always, artists do not see a penny of resell revenue. It is money that is taken from music fans and sucked straight out of the industry. Artists lose out, fans lose out. Ticketing companies gain. All that hard work invested in building fan relationships goes out of the window.

The Tide Is Turning

More than all this though, the tide is turning. The 2016 results of Live Nation (parent company of Ticketmaster and one of the largest live companies) point to an industry that, while it is still growing, has cracks appearing. Revenue grew by 15% from $7.3bn to $8.6bn (more than the entire GDP of Haiti) but increased ticket prices drove much of the growth. Ticket prices were up 5% overall and by 10% in stadiums and other big venues. Revenue growth was also driven by in-venue merch spending (up 9%) and sponsorship and advertising (up 13%). Live Nation’s number of ‘fans’ was up 4% in the US but was flat internationally. To be clear, these are strong results for Live Nation but they also reflect a highly mature industry that is squeezing out every last drop of growth through price increases and additional revenue streams. And it is nothing new: Pollstar reports that average ticket prices increased by 22% between 2006 and 2015. Total live revenues grew by 37% over the same period which means that nearly half of all live revenue growth came from ticket price inflation.

Streaming Is Today, Not Tomorrow, Start Treating It That Way

All this comes with streaming revenue growing by $2.5m in 2016 (in retail terms) and overall recorded revenues growing by nearly a billion. The live music business has strong growth left in it, but that revenue is not evenly distributed, will likely slow in the near-ish future and has an underlying core spending trend that is largely flat. Streaming, on the other hand, is booming and will break the $10bn mark this year.

So why are superstar artists still looking to live to pay the bills. Firstly, it’s easier to make really good live money if you’re a superstar, and secondly, streaming still isn’t big enough yet for really strong streaming revenue. The Weekend’s 5.5bn cumulative streams (including YouTube) will have generated the artist around $4 million while if he’d instead sold 5 million copies of Starboy he’d have netted around $10 million.

Streaming simply needs more monetized users in the pot, especially paid subscribers. That will come but rather than just wait, more needs to be done now to help artists get more income from streaming, such as:

• Better rates for artists (many only earn 15% of the label share, which is around 70% of the $0.008 blended rate for freemium services)
• More ways for artists to monetize on streaming services (e.g. artist subscriptions, pay per view live streams and gigs)
• More artist-centric experiences

Add together all the pieces and you start to create an environment in which artists can see a more immediate direct return from streaming. That is how we get to stop artists simply viewing streaming services as a way to market their wares. It is great that streaming can play that marketing role but sooner or later, labels and artists need to focus more on streaming being the destination not just the journey. With so much market momentum, it is tempting to think of streaming as ‘mission accomplished’. In reality we’re just getting going. To move streaming to that next stage, much more work needs to be done and the time to do that is now, not when the market starts to mature (which will happen some time in 2019). It is not in the interest of streaming services to simply be seen as a tool for getting more bums on seats. Nor is it in the interest of labels as they only participate in a small share of live revenue. Is streaming going to become a bigger revenue stream than live for big artists? No, but it can be a much bigger source than it is right now, but only if the model evolves. If streaming cannot break out from its beachhead of being the discovery journey then it will never reach its destination.

 

Why Drake’s More Life Is The New Normal In Streaming

This is a guest post from MIDiA’s Zach Fuller

Released over the weekend after much delay, Drake’s More Life project is setting records across the board on streaming platforms. The Canadian artist described More Life as ‘a body of work bridging the gap between major releases’ and positioned the release as neither a mixtape nor an album, but rather ‘a playlist’. This, however, did not stop the release claiming Ed Sheeran broke the record for the best one day streams for any artist: 76,355,041, compared with Sheeran’s total of 68,695,172 following the release of Divide.

It would be interesting to know just what Drake defines as a ‘gap’. He has released no less than four singles a year as well as four albums and three mixtapes since his breakthrough in 2009. Two of these mixtapes were in 2015 alone, followed in 2016 by his latest album, Views. The traditional album release cycle does not  seem to exist in Drake’s universe. In the era of the always-on fan who can access an artist at any time – his endless releases consistently keep him in the public consciousness.

Drake is many things in More Life. He is simultaneously the artist, the producer and the curator. He does not appear on all the release’s tracks, and More Life’s contents are a 20-song sprawl of genres encompassing Hip-Hop, Trap, R&B, Grime, Gospel, Dancehall, Tropical House and Afrobeat. The work can, therefore, exist under the Drake name –arguably the most powerful globally on streaming services – whilst promoting the work of other artists.

More Life is another part of the process in which streaming is rewriting the rules:

• The rise of the playlist: One theory why Drake has positioned the More Life as a playlist, is that the release acts as an acknowledgement of where mainstream music consumption patterns are heading. MIDiA Research surveys indicate that 54% of music consumers agreed with the statement that ‘playlists are replacing albums for me’. Additionally, 40% have said they are using curated playlists through Spotify and Apple Music more than they did six months ago. By working around these patterns, Drake is not fighting the tide but simply considering what it means to release music in this context. In the modern streaming context, the album not only exists as a playlist in itself but also emerges within the playlists of aficionados of these disparate genres.

• Recorded music products have emerged because of their surroundings: The 3-minute pop-song was created because it best fit with the emerging radio formats, and long songs would therefore often gain less exposure through this promotional channel. The album originally was conceived as a way of bundling singles into a more expensive product for music fans, before artists in the 60s began to use the format as a canvas for wider artistic expression. How artists best make use of streaming is an open question and releases such as More Life continue to challenge these notions of what a music product can be.

• Compilation: More Life could fit under a crew album, given the features of friends (Skepta, Giggs) and his label’s (OVO Sound) artists. This has a long history in Hip-Hop. Kanye West (Cruel Summer), Jay-Z (The Dynasty: Roc la Familia) and Eminem (Eminem presents: The Re-Up) have all released similar albums. However, More Life’s genre-hopping premise feels like a different beast to this lineage.

• Playlist as a A/B Testing: Drake’s decision not to window the project in the same way he did with Views for Apple Music (alongside Frank Ocean and Chance the Rapper) is interesting. No doubt, services would have been keen on having the project as an exclusive. That streams can be viewed as higher paying radio plays opposed to cheaper sales could means More Life is profitable. In a sales era, More Life could potentially have been maligned as a rush-release, yet in the streaming context – such a project makes far more sense.

More Life will therefore deliver data to Drake’s team on:

• What tracks are most popular
• Where these tracks are popular
• Which tracks are most often adopted into fan’s playlists
• How and when these tracks are listened to

Given the eclectic mix of genres, More Life could therefore act as a testing ground for future artistic directions Drake might take on his next more conventional release.

More Life is, therefore, many things. On one hand, it is a streaming era marketing tool, filling the release schedule gap for the always-on fan. A parallel could be therefore drawn to the latest Star Wars series, with More Life acting as the Rogue One to View’s Force Awakens. On the other hand, whilst much of the content itself is not a radical departure from Drake’s previous work and will no doubt keep Drake fans happy, the format is an experimental statement from one of music’s biggest players. It elaborates on Kanye West’s The Life of Pablo in its amorphous concept as a unique music product. Given Drake’s influence on music and judging from the project’s immediate success on streaming services, we could be witnessing the first of the new ‘normal’ in music releases.

Welcome To The Post-DIY Era

I recently took part in the True Music Forum in Madrid, an event organized by Boiler Room. I was on a panel that explored whether DIY is now coming of age with a host of high profile artists, most of them urban artists, bypassing or twisting the traditional label model and still achieving stand-out success. On the surface, these look like golden years for DIY, and in many ways they are, but much of what is happening at the top end of the scale has little to do with DIY. Streaming is transforming how artists view recorded music income and is making it possible for artists to pick and choose what label capabilities they want. But more often than not, it is a variation of the label model that succeeds rather than a replacement of it. This is the start of the post-DIY movement.

The First Wave Of DIY

Firstly, to be clear, DIY is alive and well, better than it has ever been in fact. With labels increasingly only signing artists once they have seen them build up following and ‘a story’, it is becoming increasingly common for artists to spend the formative stages of their careers ‘DIY’, releasing their own music, managing their social campaigns, making their own videos, booking their own tours etc. Added to that, the combination of streaming, direct-to-fan platforms and social apps have combined to make it possible to build niche audiences on a global scale. So it is now possible for a new tier of artists to exist, a tier of artists that may never dent the charts (for whatever they may be worth these days) but that can build solid, sustainable careers by engaging their fans directly. Stalwarts like Bandcamp and CD Baby have never had it so good, while a whole crop of new entrants, such as the much hyped BandLab is emerging to drive the market forward. And of course, Soundcloud, for all its financial challenges, provides artists with a platform to engage massive audiences globally without need for any middleman whatsoever.

DIY Versus Empowered Superstars

That is the DIY movement that will go down in history as one of the most culturally significant legacies of the Napster market shock. An organic, grass roots musicians’ revolution. Now though, we are seeing the emergence of a more commercially minded take on DIY, one that draws on the practices of its predecessor but that combines them with the big label model to take full advantage of the best of both worlds. This new breed of superstar DIY artist enjoys the benefit of fiercely held independence with world class distribution and marketing. They are taking the tools of DIY but not all of the ethos. The superstar DIY artist typically builds a strong brand and buzz (and often, but not always, a big live following) and then uses that as a platform to strike a deal with a major label (or a major label subsidiary company) to get the benefits of major label scale without giving up control (nor masters). This can take various forms, such as:

• Using a major label’s distribution company (e.g. Stormzy’s ‘Gang Signs & Prayer’ is distributed via Warner’s ADA)
• Setting up a label within a major label (e.g. Drake’s Ovo Sounds is part of Warner Music Group)
• Creating a tactical joint venture with a label for a specific release

In each scenario the artist retains large amounts of control (or at least more than in a traditional label deal) but gets the support of world class, global infrastructure and marketing. The artists picks the services s/he wants, like an advertiser does with a full- service ad agency. The label services and standalone distributor models have been around for some time, but now they are being used by business savvy, super ambitious superstars in-the-making. And the artist gets to retain an aura of authenticity and independence.

For those artists that want to push the needle even further, streaming services are emerging as an additional weapon in the armoury. Chance the Rapper revealed that Apple paid him $500,000 to become the exclusive streaming partner for ‘Coloring Book’, following hot on the heels of Frank Ocean’s Apple Music exclusive for ‘Blonde’. Apple is setting itself up as a modern day equivalent of the Medici – the medieval Italian family that was a driving force in the Renaissance through its patronage of artists such as Rafael, Leonardo Da Vinci and Michelangelo. Some time or another, Spotify will follow Apple’s lead. The superstar artist fits this streaming-service-as-label model best because an artist with big potential is going to deliver much better ROI for streaming services that are eager to drive market share and differentiation via original content.

Hip Hop Is Setting The Innovation Bar

Urban music, and hip hop in particular, has become a hotbed of artist-led business innovation. Although hip hop has always had stronger commercial sensibilities than other genres, streaming has brought the business innovation to the fore, ranging from the original hip hop superstar businessman Jay Z and his Tidal service, through Frank Ocean’s Apple Music released ‘Blonde’ to Stormzy’s streaming record breaking streaming success.  And the innovation is happening at the grass roots of hip hop too. As the brilliant Kieran Yates noted on the Boiler Room DIY panel, many UK Grime artists are now signing publishing deals before label deals as a) this can often mean bigger advances in today’s indie music market, and b) there is a perception that this means giving up less control, which in turn empowers the artist to strike a better deal with a label, or label-owned company. This also opens up a world of opportunity for independent music marketing agencies etc who can become part of new, agile teams.

Streaming has been continually rewriting the rule book for many years now, but we are entering a period of even faster change, with many of the more fundamental effects being the indirect consequences, such as the rise of post-DIY. It would be wrong, however, to think of this as a ‘death of the label’ narrative. Because the labels (majors and indies) are being smart enough to be as flexible and agile as artists need them to be. Artists are changing and labels are changing just as fast to meet their new needs and terms of reference. Perhaps, the best way to capture the approach of the new era of post-DIY artist is to go back to Jay Z’s classic ‘Diamonds From Sierra Leone’ lyric: I’m not a businessman; I’m a business, man!

 

How Apple Music And Tidal Transformed Streaming (And Why Apple May Be Buying Tidal)

 

It is 15 months since the launch of Tidal (which was 2 months after Jay-Z’s Project Panther Bidco bought Aspiro) and it is 12 months since the launch of Apple Music (which was a year after Apple bought Beats Music). The streaming world has changed a lot in that time and both those companies have had a disproportionately large amount on influence on the market’s direction of travel. Their arrivals defined Spotify’s role as incumbent while simultaneously casting Apple and Beats as challengers. They have performed their roles of disruptive entrants well, reshaping the competitive marketplace with a strong focus on brand and artist exclusives. Now reports emerge that Apple is in talks to buy Tidal. First victory in the exclusives war or overspending for market share?

When Is An Exclusive And Exclusive?

In the streaming video world an exclusive means exactly that. If you want to watch ‘House Of Cards’ you need Netflix, if you want to watch ‘Man In The High Castle’ you need Amazon Prime. But in music the rules are far more flexible.

Looking at the flagpole exclusives across Apple Music, Tidal and Spotify, most of these are available on other platforms as downloads, while many are available to stream. For example, Beyoncé’s ‘Lemonade’ is only available to stream via Tidal but was available to download on iTunes within 24 hours of release. Understandably, the exclusive albums of each company’s respective godfather are genuinely exclusive. But Rihanna’s ‘Anti’ was given away by Samsung while Spotify’s rock legends exclusives are streaming only.

Apple is beginning to push the envelope though, pitching creative solutions to labels and artists, resulting in output like videos for The Weekend and Drake. At the same time it is beginning to look suspiciously like a record label with the release of Chance The Rapper’s ‘Colouring Book’ mixtape. The net result of all this clamouring to be seen as the ‘home’ of an artist is resounding confusion and frustration for music fans. An avid TV fan may well accept the need to have both a Netflix and Amazon subscription because no video service claims to have all the TV shows and movies on the planet. However, the central proposition of streaming music services is exactly that…or at least it was until Tidal and Apple Music upset the the apple cart (ahem). The irony is that in scoring a quick win against Spotify, Tidal and Apple may have fundamentally undermined the long term positioning of the entire streaming music product.

Exclusives Cannot Recreate The 1990s

Apple Music’s head of original content Larry Jackson has said he wants to make Apple Music to emulate the success of MTV in the 80’s and the 90’s, creating the sense that artists ‘live there’. It is an admirable goal but the music world of the 2010’s is a dramatically different one. In those days there was scarcity (you had to buy music to listen on demand) and there was a finite amount of radio and TV. It was possible to control both the message and the audience. Now we are in the Era of Distributed Audiences where people are simultaneously in multiple digital places, with artists and labels racing after them in all those places. No amount of exclusive windowing is going to change that. The genie is well and truly out of the bottle.

The Economics Of Exclusives

Where the streaming video and streaming music markets match up is that content budgets are currently being used to drive user acquisition. While streaming services have a long way to go before they reach Netflix’s $6 billion annual content budget, both types of streaming service will overspend to get market share and will reel budgets back in later. So it should be no surprise that the amounts being spent on artists don’t really add up.

For example, Apple is reported to have spent $19 million on Drake and was rumoured to have bid up to $25 million for Harry Styles. If Styles had signed, even if he had racked up the same number of streams as Drake on Spotify in 2015 (1.8 billion, the highest number of any artist) he would still only have generated gross revenue of $18 million and net revenue of revenue of around $14 million, leaving something like an $8 million loss for Apple when Apple Music’s additional retailer margin is factored in. Apple would however have been able to make up the remainder on album sales, but Styles would have needed to have shifted a good number of albums. (Adele’s ‘25’, the biggest selling download album in the US in 2015 drove around $15 million in label revenue.) So for now, it takes selling albums to make the economics of streaming exclusives add up.

Jay-Z paid $56 million for Aspiro’s 512,000 subscribers, $110 per subscriber. Assuming he’d want a similar per subscriber price, that would put Tidal’s price tag at around $440 million. That’s no small amount of money for around 5% of the global subscriber market. Or to put it another way, Apple could another 23 Drake exclusives for that money which most likely would have a bigger impact on subscriber growth. Indeed, on all growth measures Apple Music has outperformed Tidal over the last 12 months, adding 12.5 million new subscribers to Tidal’s 3.1 million, growing by an average of 1.4 million subscribers a month compared to 0.3 million for Tidal. Apple even has the edge in % growth terms (352% compared to 328%).

So why is Apple in the market for Tidal (albeit reportedly)? Probably more than anything it is about taking an irritatingly threatening competitor out of the market. Tidal has been stealing Beat’s core customer base from right under its nose. It’s no coincidence that Apple Music’s exclusives strategy has had a strong urban bias. Apple wants its Beats customers back, just like it wants its iTunes customers back from Spotify.

Even if Apple does buy Tidal, don’t expect the exclusives wars to go away. Indeed, Spotify just acquired its own exclusives supremo in the shape of Troy Carter, and Apple clearly has its mind set on continuing to spend heavily. So the next few years of streaming will be  defined by streaming services getting closer to artists (with Connect becoming much more important for Apple) which in turn will see the distinctions between what constitutes a streaming service and a record label blur all the more.

As science fiction write William Gibson wrote: the future is already here, it’s just not evenly distributed yet…