Why Rishi Sunak is both wrong and right

Earlier this week the UK Chancellor of the Exchequer Rishi Sunak suggested that creatives such as musicians who had seen income dry up during COVID-19 should consider retraining for the new ‘opportunities’ the lockdown economy is generating. 

The principle makes sense from an economic perspective, but it is just that – an economist’s solution to a cultural problem. A guitarist becoming an Amazon van driver or a Just Eat courier will certainly have the desired economic output (i.e. more economic productivity), but the cultural damage is potentially irreparable. Perhaps more importantly, however, it is throwing in the towel after the first round of the fight. 

A quick lesson from history

Culture is one of the most important outputs of society and the more developed a society is, the more it normally invests in that culture. A brief overview of history illustrates the point. The Roman Empire, one of the first great civilisations, was focused on warfare and expansion. It spawned some famous philosophers and orators, as well as great art (sculpture and mosaics especially). Yet warfare was the defining trait of the empire, and so the majority of the great figures we remember are the military generals and emperors. Fast forward to the Middle Ages in the same Italian peninsula and we had the Renaissance, ironically rediscovering the lost art techniques of the ancients. Although Italy in this period was dominated by warfare, and although there are no shortage of generals and petty princes to fill the history books, it is the art and culture that the period is best known for. Artists like Leonardo da Vinci, Michelangelo and Raphael are the great names of this era. There was no structured art marketplace, however; instead, rich benefactors (bankers, princes, generals) patronised them, subsidising their art. They did so often in the hope of immortalising their own names, but instead immortalised the artists. Art does not always pay for itself. Sometimes it needs a helping hand.

Small venues create national economic output; virtual ones may not

Now to be clear, I am not advocating that music should become state subsidised. Nor am I comparing the musical output of a bedroom musician with that of a renaissance master (though Kanye does think that he is ‘unquestionably’ an even better artist than even those Italian greats). The lesson to learn from history here is that in tough times, society benefits from supporting culture. If small music venues continue to fall like flies,smaller and emerging artists will be bereft of real-world places to perform and to build audiences. The music market will stagnate with new talent having one more hurdle to success put in its way. Live streaming will pick up some of the slack and may even become a valuable alternative for many artists. For the UK government, however, that will mean swapping the economic output of UK venues for that of predominately American technology platforms. That economic output will leave the UK economy – and at a time of trade uncertainty leading up to Brexit, to lose music, arguably the UK’s most culturally renowned global export over the last century, would be a weighty hit.

Artists need to experiment and innovate now more than ever before

This is bigger than national economic protectionism, and it is certainly bigger than the UK. To use that horrible management consultant phrase: change is difficult. We are cursed and blessed to live in interesting times. Technology has changed the recorded music business beyond recognition; now, because of the pandemic, technology is going to accelerate change in the live business as well. This process may be difficult, and it may be long, but it will result in a differently shaped music business in the mid-term future. Artists have an opportunity, even a responsibility, to innovate and experiment. Before COVID-19, live, merch, recording and publishing were – in varying degrees – the majority of the revenue mix for most artists. Live is unlikely to return to anything resembling normality until 2022. From this moment on, then, artists need to experiment with new models, new ways to engage with audiences and to generate income – whether that be writing for other artists on Soundbetter, making sound packs on Splice or Landr or selling digital collectibles via Fanaply. Artist income is more varied and sophisticated now than it was 10 years ago. The reality is that this trend is going to accentuate both in the lockdown economy and post-pandemic. 

However, new models take time to become viable. In this interim stage, if there is a role for state support, it is to provide artists and songwriters with the financial support and technical and business training to enable them to be winners in this new creative paradigm. Rishi Sunak was wrong to suggest that artists should retrain out of music. But he was right that they should retrain. They should retrain from being artists of the 2010s to artists of the 2020s, and that is where he should be providing support.

The Future of Live

The almost total cessation of live music has sent shockwaves throughout the wider music industry. Though live companies are clearly at the epicentre, labels and streaming services are the in the blast radius too as the gaping hole left in most artists’ income is causing them to question their other income sources, streaming especially – with both labels and DSPs in the sights.

Finding both near- and mid-term fixes for live are therefore crucial for the wider music industry and artist community. There is a big opportunity here that goes far beyond lockdown era. This is more than the future of games and music, it is in fact an alternative future for live music. It is the ultimate lockdown legacy.

future live events midia researchMIDiA’s latest subscriber report ‘Recovery Economics: Music, Games, Live Streams and the Future of Concerts’ has just been published and subscribers can read it here. In this blog post I am going to highlight some of the key themes.

Live streaming’s teething pains

From a value chain perspective, Lockdown came too early for live streaming; it is under-developed, under-monetised, under-licensed, under-professionalised. Unfortunately, the live-streaming surge is showing all the signs of a goldrush with a lack of clear structure and the first signs of artist backlash, with some artists feeling that some platforms are relying on them to build their audiences while performing for free.

Furthermore, quality is patchy and artists are becoming concerned with the impact on their brand image. Saturation is another Achilles heel: with traditional performances saturation is negated by artists moving from one city to another. Live streaming has no geographical constraints so the effect of multiple performances is analogous to playing repeated concerts in the same small town.

Virtual concerts, not live-streamed concerts

Arguably the biggest single mistake the music industry made with music streaming was to think of it as a format rather than a paradigm. As a consequence, the (western) streaming services lack differentiation and true feature innovation. We must think of the live opportunity as something that goes beyond live streams. Live streams are just one part of the mix. The true opportunity is virtual experiences, that can range from 100 attendee super-premium intimate sessions, through mass scale ad-supported YouTube streams, to avatars performing in games.

If we start this journey thinking narrowly, the scale of opportunity will be constrained. And right now, the industry needs to get as many virtual event innovations going as it can, because it will have to continue to carry the baton for live for some time yet.

In a best case scenario COVID-19 recedes later this year and we have a small number of limited capacity concerts happening before year end. Alternatively, we may see recurring waves of COVID-19 denting consumer confidence with fewer people wanting to go to concerts even if they could. Either way, artists are not going to get most of their live revenue this year.

future of live midia

It is this post-lockdown opportunity that virtual events need to meet. But there is a lot of work yet to be done. The biggest problem to fix is monetisation.

Fans pay around 80 times more per minute for a real-world live performance than they do for listening to music on paid streaming services. The value exists in the shared moment. The problem with live streaming in its current manifestation is that it is abundant and is delivered in a ubiquitous format that is implicitly low value. If this sector is to become a serious income stream for artists then we have to stop giving it all away for free. What is needed is a sophisticated freemium monetisation model that can cater both to large free audiences and better monetise fans.

A set of principles for virtual events

There is also a lot more that can be fixed. Here are some meta principles that virtual events should adhere to:

  • Scarcity (fewer gigs, geo-restricted – Laura Marlin has just announced geo-restricted live streams – let’s make that the trailblazer not an isolated initiative)
  • Better production qualities
  • More sophisticated monetisation (freemium, pay-to-stay, super premium / VIP etc)
  • More sophisticated segmentation of types of shows (not all live streams are the same, but we currently only have a one-size-fits all product
  • Better platform segmentation (e.g. big tech platforms can play the role of stadiums and arenas while off-portal destinations like artist apps can host smaller, scarcer, super-premium events)
  • Better discovery (the equivalent of the TV EPG needs creating for virtual concerts, Bandsintown has made a decent start but much more needs to be done)
  • Better alignment between what artists want and what the platforms want

The birth of a new industry

COVID-19 will likely be a mid- to long-term part of life, so the traditional live sector will face a ‘cost of confidence’ as portions of artists and fans alike will initially stay away. Virtual concerts (live streaming and generative virtual performances) can become an important component of the live music sector as it builds out of lockdown. But it will not get there without concerted efforts to fix the problems that currently define this nascent sector.

A new virtual concert value chain is starting to emerge that traditional live companies are not – yet – well embedded in. The future market will be one defined by both incumbents and insurgents. The big live companies will bet big on virtual but we’ll also see new types of companies like virtual booking agents and avatar agencies. The whole concepts of what a concert is and what a venue is, can be turned on their heads. Fortnite’s Party Royale island is now hosting regular live streamed concerts. With 350 million users, Fortnite can lay claim to being arguably the biggest capacity venue on the planet. This may be the birth of an entire new ecosystem.

Recovery economics

The lockdown lag will create a whole new set of economics across all industries. Driving a recovery during this transition period will require innovation and a willingness to downplay old ways of doing things. For music it will be about exploring new income streams to recast a new music business. The first step is for live streaming to have a product refit that delivers a genuine value exchange for fans if it is to ever get out of its free / charity / tip cul-de-sac and become a genuine income stream of scale.

If you are not yet a MIDiA client and would like to learn how to get access to this report then email stephen@midiaresearch.com

If you are a client and would like to talk to us about the themes covered in the report then schedule an enquiry via enquiries@midiaresearch.com

The Future of Music: A Vision of Post-Format

Formats have shaped and dictated the evolution of recorded music. The constraints that formats set have, in turn, become the creative frameworks within which music has operated. Now, in the internet era, formats are becoming a thing of the past – and yet the way in which music is made and distributed still conforms to the old physical world. It is time for a change in how we think about music, right from the creation process through to what a song actually sounds like. Here is a vision for what the future of music could be.

Bringing dead sounds back to life

When Edison invented the phonograph, a denigrator called it a machine ‘that brings dead sounds back to life’. Conditioned by the recorded era, it is hard for us to conceptualise a time when music only existed in the moment and was never heard exactly the same way twice. Nevertheless, this is a historical anomaly – a legacy of physical media. Songs became fixed, static and permanent because that was the only way we could squeeze music into little discs – mummified echoes of live performances.

Over time, as recording techniques and technology improved, the recorded song developed into its own art form, with multitrack recording, effects, synthesis and programming enabling the creation of sounds that could never be truly replicated live. Now, with physical media accounting for an ever-smaller share of music consumption, there is no need to adhere to its constraints. We have 14 track albums because CDs were designed to fit Beethoven’s 9thSymphony; we have static recordings to serve legacy distribution models; we have three minute songs to fit radio schedules. All three straightjackets can be discarded. Here is how:=

  • Write and produce for the medium: We are already locked into a process of music being designed for Spotify success, through so-called Spotify Core and with the industrialisation of song writing seeing songs stitching together the best hooks from multiple songwriters. Much of this can be reductive, dumbing down to the lowest common denominator.However, it is the execution and intent that requires attention, not the strategy. In fact, it needs pushing further – much further. TikTok, YouTube, Instagram, Snapchat and Spotify are all dramatically different propositions with equally diverse use cases. So why would we expect a song to perform equally across each one? What video producer would create a meme for Netflix, or a two-hour movie for Snapchat? It is time to follow video’s lead and write for where the song is going to be listed to most. Lil Nas X when writing Hometown Road was focused on making something viral, something that would blow up on TikTok. The idea that songs should have fixed lengths, choruses, verses – all of this can now be played with in the mainstream in the way that it has been on the experimental fringe of music for many years. This time, it is to give listeners what they want rather than for avant-garde expression.
  • Ditch / evolve the album: Just 16% of consumers listen to traditional albums and an even smaller 10% listen to full albums on streaming. 59% of consumers say they are listening to albums less because of streaming playlists. The album is not dead, but its addressable audience is far smaller. Now a new generation of artists is coming through who grew up with playlists, not albums, so do not even think in album terms. Of course, many artists, especially older ones, still want to write albums and they absolutely should do so. They should not, however, expect the majority of their audiences to listen to them in full. There will always be exceptions (Ed Sheeran, Adele etc.) but the direction of travel is clear. Artists and labels need to rethink what the album should be. We’re beginning to see artist contracts that stipulate numbers of tracks rather than albums. This is hugely positive and will enable far more creative freedom. Artists need to start pushing the boundaries, pulling every lever available (e.g. more tracks, fewer tracks, all tracks at once, over time, mixing in spoken word, images and video, EPs etc.). The only rule should be that there are no rules.
  • Fill the space between recorded and live: Despite its ‘dead sounds’ origins, the recorded song is an established entity with established consumption patterns that is not going to disappear in any meaningful timeframe. But that does not mean that it has to be the only entity. Technologies such as live streaming, real time tipping, comment streams, virtual gifts and collaboration tools can be used to create music experiences that are neither live nor recorded, but something in between. Imagine an artist doing a pay-to-view live stream in the studio, with a set of beats in a shared folder that the audience can drop in and out but that only changes what they each individually hear. Then the guitarist starts cycling through a few riffs, and the viewers upvote their favourite one in the comment stream. Then as the keyboard player starts, listeners change the synth patch, but again just for their own stream. Think of this not as a blueprint for what the format could be, but an illustration of how to think about it. To create something that is unique, that exists in the moment and creates an indelible bond between artist and fan. 

This was not a definitive list of what post-format innovation needs to do but instead three principle areas of focus and illustrations of how to structure thought. Now it is time for creative artists, writers, labels and tech companies to pick up the baton and run with it. Standing still is of course an option, but in the increasingly competitive attention economy, if music does not up its game there can be no complaints if it loses share to video, games and social.

Why Stormzy as a Glastonbury Headliner Makes Sense Post-Streaming

This is a guest post from MIDiA music analyst Zach Fuller.

glastonbury2-1On the eve of Stormzy becoming the first Grime artist to headline Glastonbury, it is worth considering what this represents in terms of the link between the new streaming economy and live music.

The South Londoner’s slot is notable less for the now-obligatory controversy that greets any Worthy Farm headliner that isn’t an established rock band (as per Jay-Z and Kanye West’s turns at the festival), but rather should be viewed as a pivot in what the wider live audience ought to expect from the next wave of headliners. Those complaining that Stormzy is not headline material (although a number one album and single could easily suggest otherwise) seem to be missing the point in the transformation being undergone by the live industry – the headliners of yesteryear arrived in a completely different paradigm to the music industry of the present. Additionally, if people expect the live industry as it exists now to reflect modern music consumption, then they are sorely mistaken:

  • Streaming and live genres are inverted: 20% of the top 25 Spotify artists (February 2019) are hip hop artists, compared to 12% of the top global touring acts. Meanwhile, rock represents just 12% of the top 25 Spotify artists but 28% of the top live artists. This disconnect between what people are streaming and what they are paying to see live is a potential fault line between two sides of the global music business. Live has always been a lagging indicator of taste, with artists’ live careers peaking later than their recorded careers. It is small surprise that the average age of the top 25 Spotify artists is 34, while for live it is 55.
  • The festival boom points to the future: Listeners are less likely to invest in individual artists for an extended period of time, a trend caused by the increased choice among consumers that both downloads and streaming have facilitated. While festivals serve this audience better than individual shows, it could be argued that in the coming years, extended sets by a particular artist make less sense to someone who only streams a few songs by an individual act. The festival-goer’s desire for shorter sets may conflict with the artist’s desire for a longer show given the fee they are being paid. The current live show format of long performance sets looks divorced from consumers’ listening habits. Live venues are already preparing for this post-concert future, which bears greater resemblance to the variety act format so popular in Britain up until the early 60’s when the advent of rock gave rise to the traditional concert format.

The takeaway is that the live industry effectively must play catch-up with streaming if it is to have these types of headliners at all in the future. Even if Stormzy’s streaming numbers do not yet match those in the existing headline bracket, festivals NEED new artists to come through at that level if they are to keep the format together. Either festivals will break apart into niches (a trend already in process when reflecting on the British summertime festival calendar), or streaming acts will see themselves pushed into the big leagues early than anticipated

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.

music industry total revenue midia

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 3rd 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.

 

Amazon Prime Live Events, More Than Just Gigs For Olds

Blondie-General Image 2-Alexander Thompson

Amazon today announced ‘Amazon Prime Live Events’, a series of smaller capacity gigs by largely heritage acts made available exclusively to Amazon Prime members in the UK. The first wave of artists include Blondie, Alison Moyet and Texas. Putting aside for a moment the obvious ‘it’s iTunes Festival for old people’ jibe, there is some sound strategic thinking underpinning the initiative.

The overlap between streaming and live has long been clear to streaming services (45% of live music fans are also streaming music users – check out MIDiA’s latest live entertainment report for more). It also presents a great opportunity to transform loss-leading streaming business into profit generators by monetizing the high value fans through ticket sales. However, no one has yet managed to realize the logical opportunity. Pandora’s full stack play with TicketFly, and Access Industry’s Deezer / Songkick play both represent potential at this stage, while other streaming services have made interesting announcements that soon disappeared from view.

Amazon might just be the one to make it work. It has quietly been building up its ticketing business for some time and because it sits on the same user dataset (and billing relationships) as Prime and Amazon’s 2 music services, it has an unrivalled ability to target and monetize.

Amazon Prime Live Events’ line up might not exactly be the cutting edge of edgy, exciting new music (Katie Melua rounds off the line up) but that is sort of the point. Amazon’s streaming music strategy is so interesting because it isn’t playing by the same rules as everyone else. Amazon is not competing for the same small group of 20/30 something music aficionados that the other streaming services are tearing chunks out of each other over. Instead it has its sights set on older, more mainstream music fans for whom the smartphone-centric music service offering has limited appeal.

This line up of gigs isn’t the end game, but instead the first step of what will likely be an increasingly joined up music strategy across Amazon’s various assets. The fact that 28% of UK live music fans are also Amazon Prime subscribers hints at where Amazon can go with this (overall UK Amazon Prime penetration is 19%). The fact that the gigs will be made available on Amazon Prime Video internationally further points to Amazon’s ability to join the dots across its increasingly diverse assets.

Throughout the first half of the 2010s Amazon was very much in the shadows of Apple and Google in terms of content strategy. Now not only is it giving them a run for the money in that arena, it is also making them pay close attention in terms of hardware and the home. What makes Amazon potentially the most interesting of the GAAF (Google, Amazon, Apple, Facebook) is the way in which it combines customer data, billing relationships, content and services, infrastructure and consumer hardware. The 2000s was Apple’s decade. The 2010s are shaping up to be Amazon’s.

Ed Sheeran’s Ticketing Fiasco Shines A Harsh Light On A Broken Industry  

Ed Sheeran has hit the news, bemoaning the inflated prices that tickets for his forthcoming tour are being sold at on ticket reseller websites. Some tickets have sold for as much as £999, compared to the original face value of £77. As the chart below shows, even the standard resold tickets are selling for up 5 times the original price.

ed-sheeran-ticket-prices

Sheeran is in the fortunate position of being one of the most in demand artists of the moment, but the broken nature of the ticketing market is locking his core fans out of his gigs. It is just the latest example of an industry in dire need of change:

  • Ticketing companies are playing double agent: Over the course of the last decade the live music market has grown almost dollar-for-dollar at the same rate the recorded business has declined. In 2000 live was around 30% of the global music business, now it is around 2 thirds. The live boom has long been seen as the good news for the music business, held up as evidence of value simply shifting from one part of the business to another, and the new way in which artists can build vibrant careers. The problem is that a) much of that growth has come in ticket price inflation, and b) most of the money does not make it back to artists. In fact, on average, artists only earn 14% of ticket sales revenue. Ticket resellers are a major contributory factor. Hiking up the prices and only distributing a small fraction back to artists, often in many cases (eg ticket marketplaces) nothing at all. The big ticketing companies are not merely passive observers, they are actively driving the reseller market, essentially acting as double agents and often cross promoting  reseller destinations they own. For example, Ticketmaster is also the parent company of Seatwave and GetMeIn. Though Ticketmaster’s reseller destinations do not bulk buy tickets, some independent resellers have teams of people that do exactly that.
  • Resold tickets put gigs out of reach of core fans: Resellers argue that there is a market for high priced tickets. There is, but it is a different market than that of core fans. Many sports leagues have seen a ‘gentrification’ of crowds, with older, more affluent fans being the only ones that can afford inflated ticket prices. The result is more subdued crowds and less vibrant atmospheres. The same thing is happening to live music, with young fans being forced out in favour of older audiences. It might be good for the ticket resellers and venues and booking agents, but it is bad news for bands and fans. The presence of ticket reselling marketplaces actively encourages nefarious behaviour, with a whole segment of professional resellers that use technology such as bots to bulk buy tickets before real fans get their hands on the tickets. There is an opportunity, nay a moral obligation, for more connected action to be taken to eradicate this sort of behaviour.
  • It is a problem that can be fixed, but it requires coordinated effort: Ed Sheeran’s camp has told fans not to buy from resellers at inflated prices. But Sheeran’s camp have to shoulder some of the blame.  The solution is as simple as it is complex. The simplicity is not to allow tickets to go to resell and to only admit fans whose names are on the tickets (which cuts out the ticketing marketplaces like Seatwave). But the complexity is that vested interests apply pressure to ensure this doesn’t happen. Nonetheless, action can be taken. Adele and her manager Jonathan Dickins took a bold stance last year, only allowing named ticket holders to attend some of her gigs. They even went as far as cancelling some resold tickets for other gigs. Mumford and Sons went one step further and booked Wembley directly, cutting out all the middle men.

But isolated action is not enough. Unless artists, managers and labels act together, to take a bold stance, change will not happen. And the losers then will be the fans.

The Music Industry’s 6:1 Ratio

One of the many things that the digital revolution has done to the music industry is to create and accentuate a number of imbalances. Imbalances that will either change, become the foundations of the next era of the music business, or both. In fact there are three key areas where, coincidentally, the lesser party is 6 times smaller than the other: 6 to 1

  • Digital music revenue share: A common refrain from songwriters and the bodies that represent them (music publishers, collection societies etc.) is that everything starts with the song. And of course it does. However it is the recorded version of the song that most people interact with most of the time, whether that be on the radio, on a CD, a download, a stream or a music video. This has helped ensure that record labels – usually the owners of the recorded work – hold the whip hand in licensing negotiations with digital music services. Labels have consequently ended up with an average of 68% of total on-demand streaming revenue and publishers / collection societies just 12%. The labels’ share is 6 times bigger. Publishers are now actively trying to rebalance the equation, often referred to as ‘seeking out a fair share’. For semi-interactive radio services like Pandora the ratio is roughly 10:1.
  • Artist income: While music sales declined over the last 10 yeas, live boomed. And although there are signs the live boom may be slowing, a successful artist can now typically expect to earn as little as 9% of their total income from recorded music, compared to 57% from live. Again, a factor of 6:1. There are many complexities to the revenue split, such as the respective deals an artist is on, fixed costs etc. but these splits tend to recur. Ironically just as everything starts with the song for digital music, everything starts with the recorded work (and the song) for the live artist. The majority of an artist’s fan base will spend most of their time interacting with the recorded work of the artist rather than live. The recorded work has become the advert for live. In fact the average concert ticket of a successful frontline artist costs on average 8 times more than buying their entire back catalogue. Thus for fans the ratio is even more pronounced at 8:1.
  • Free music users: The freemium wars are dominating the contemporary music industry debate. Spotify and other services that have on demand free tiers are under intense scrutiny over how these tiers may be cannibalising music sales. However YouTube’s regular free music user base is about 350 million compared to approximately 60 million free freemium service users across all freemium services. Again a ratio of 6:1. Whatever the impact freemium users may be having, it is 6 times less than YouTube.

The music industry has never been a meritocracy nor will it ever be one. So it would be fatuous to suggest equality is suddenly going to break out. However there will be something of a righting process in some areas, especially in the digital music revenue share equation. Most significantly though, these ratios are becoming the foundational dynamics of the new music industry. These are the reference points that artists, rights holders, and all other music industry stakeholders need in order to understand what their future will look like and how they can help shape it.

NOTE: This post was updated to reflect that the songwriter ratio is actually 10:1 for semi-interactive radio.  The 2:1 ratio applies to label revenue versus collection society revenue, which includes revenue for performers who are often but not always also the songwriter.

Five Long Term Music Industry Predictions (And How Disney Will Rule The World)

The new year is typically a time for predictions for the year. But at the midway point of the decade, rather than do some short term predictions I think this is a good time to take a look at the longer term outlook for the music industry. Here are five long term music industry predictions:

1 – Disney will become the world’s biggest music company

Consumers are buying less music and there are more ways to easily get free music than ever before, both of which make selling music harder than ever. Major labels have addressed this by doubling down on pop acts (Rihanna, Katy Perry, Rita Ora, Ariana Grande etc.) which have a more predictable route to market. Video (YouTube) and very young audiences (also YouTube) underpin the success of these artists. While the majors have been pivoting around this very specific slice of mainstream, Disney has quietly been building an entire entertainment empire for this generation of pop focused youth. Unlike the majors, Disney has TV shows and channels targeted at each key kids and youth age group and uses them to bring artists through. They start them out kids TV shows such as The Wizards of Waverly Place (Selena Gomez), Hannah Montana (Miley Cyrus) and Sonny With A Chance (Demi Lovato). Disney then very carefully matures these fledgling stars as their audiences age so that by the time they and their audiences are fully fledged teens, they are fully-fledged pop stars. At which point they have shaken off most of their bubble gum imagery and have conveniently acquired a little edge, a specific positioning and a personality. It is a highly effective process. Each of those three Disney stars are only in their early 20’s but already have multiple albums under their belt. Disney will not only continue to excel at this model, they will most likely become the biggest pop label on the planet. Which given where music sales are heading (pop accounted for 44% of the top 10 US album sales in 2014) could well mean Disney even overtakes Universal to become the biggest music company of all.

2 – The western pop music industry will increasingly resemble Bollywood

2014 was the first year film soundtracks accounted for 2 of the top 10 selling US albums (‘Frozen’ and ‘Guardians Of The Galaxy’), generating 4.4 million sales and 30% of the top 10 overall. And both albums were Disney. In India music plays a supporting role to film in revenue terms but is culturally centre stage, the beating heart of Bollywood film. The music and film require depend on each other for context and relevance. We are set for this model to become increasingly pervasive in western markets. Just as video underpins the success of pop stars, it creates an audience bond to music in film and TV, turning the music into the soundtrack of memorable, fun and moving moments. Triggering the same emotional chemistry music does in real life. With music sales still tumbling but movie sales holding up, expect movie soundtracks to become an ever bigger part of music sales, and for the dividing line between film star and pop star to blur entirely. Expect Disney to, again, be the key force.

3 – Live music will lose ground to other live entertainment

Live has been the music industry’s ‘get out of jail free’ card, holding up total revenues while sales revenue declined. The balance of power has shifted with sales revenue now just a third of the total revenue mix, down from 60% at the start of the century. But cracks are already appearing with price increases underpinning much of the live revenue growth in recent years and the big revenue polarised between ageing rockers and pop divas of the moment. There are only weak signs of a next generation of stadium filling rock bands. The big live venues are already looking for alternative ways of getting bums on seats, with TV show spin offs in particular proving successful. Venues and promoters love TV show tie-ups because they bring big TV cross promotion which helps ensure commercial success.   TV comedy shows are now doing 10 to 12 night sell outs in 10,000 capacity venues. You don’t see many artists doing that. Shows like Disney On Ice (yes, Disney again) fill out the biggest venues with ease. And it is not just the top end that is moving away from music. Comedians like the UK’s John Bishop play tours that happily play a small club one night and an arena the next. Expect the live market to shift more towards a broader range of entertainment, especially TV tie ins, squeezing out many music acts in the process.

4 – Old world copyright establishments will lose relevance 

The fragmented nature of global music rights, especially on the publishing side, has long been a thorn in the side of digital music.   The system of multiple national rights bodies and commercial rights owners administering different parts of music rights across the globe hinders the ability of the digital music industry to be truly global. A handful of rights bodies are pushing the innovation needle, others are not. The distinctions between recording, performance, mechanical etc. served well in the analogue era when there was a clear distinction between a sale and a performance. But in the streaming dominated landscape they are less useful. Additionally the entire range of audio visual elements that an artist comprises in the digital era can be prohibitively difficult to put into a single product. This is because the rights are usually held by so many different stakeholders, each with different priorities and appetites for risk. Expect music companies, artists and their managers to increasingly collect as many rights as possible into one place so they can create multimedia experiences without having to navigate a licensing minefield. In doing so, more and more monetization will happen outside of the traditional licensing frameworks. Whether that be because all of the revenue occurs in a single platform (e.g. YouTube) or because new licensing /collection bodies are used such as Audiam or Global Rights Management administer the rights. Creative Commons might play a bigger role but the real focus is going to be on being able to license more easily AND monetize more effectively.

5– Labels will become agencies

Finally we have agencies or what you might call labels, but I’m going to call them agencies, because that is what they need to become. The label model is already going under dramatic transformation with the advent of label services companies like Cooking Vinyl’s Essential and Kobalt’s AWAL, and of fan funding platforms like Pledge and Kick Starter. All of these are parts of the story of the 21st century label, where the relationship between label and artist is progressively transformed from contracted employee to that of an agency-client model.   Labels that follow this model will be the success stories. And these labels will also have to stop thinking within the old world constraints of what constitutes the work of a label versus a publisher versus a creative agency versus a dev company. In the multimedia digital era a 21st century labels needs to do all of this and be able to work in partnership with the creator to exploit all those rights by having them together under one roof.

Streaming is changing the music world right here, right now, and there is an understandable amount of focus on it. But it is just one part of a rapidly changing music industry. This decade has already wrought more fundamental change than any previous one and the rate of change is going to continue to accelerate for the next five years. All of the rules are being rewritten, all of the reference points redefined. This is nothing short of the birth of a new music industry. The blessing of a generation is to be born into interesting times, and these times are most certainly that.