IFPI Reports $17.3 Billion for Recorded Music in 2017  

Today the IFPI released its estimates for global recorded music revenues in 2017. That figure was $17.3 billion representing an 8.9% growth on the $15.7 billion it reported last year. The numbers are bang in line with the numbers MIDiA reported last week ($17.4 billion / 8.5% growth – see here for more) and reflect a year of fantastic growth. The headlines are:

  • Streaming is the fuel in the engine: Streaming revenues were up 37% to hit $6. Billion (this however underrepresents the value of the market as the IFPI groups Pandora under ‘mobile personalization and other’ wiping out the best part of a billion dollars of streaming revenue). MIDiA’s broader definition of streaming puts 2017 revenues at $7.4 billion. Whichever definition you go with, the narrative is clear: streaming is dragging the entire recorded music industry back into growth (all other sales formats are in decline). The recorded music industry is on track to become a streaming industry in all but name.
  • Legacy format decline is slowing:Physical and download sales fell at a slower rate in 2017 than they did in 2016. This, in turn enabled streaming growth to have a bigger impact on overall revenue growth. The legacy formats will decline steadily now until the channel stops stocking them. The first big step will be when Apple turns off the iTunes Music Store. This is something we predicted back in 2015, forecasting that it would happen by 2020. That bet is still looking good.
  • UMG still leads the pack: As major label revenues are a matter of public record via company reports we can calculate 2017 market shares against IFPI 2017 total. UMG comes in at 29.8%, Sony 22.2%, WMG 18.0%, Indies 27.7% and artists direct 2.7%. These numbers are all within a 10thof a percentage point of the results MIDiA published last week. As we reported then, the key takeaways are that UMG still leads the pack, WMG has grown faster than the other majors while artists direct were the single biggest growth driver in 2017. (Note it appears that artists direct now appear in the IFPI numbers though the $100 million difference between IFPI’s and MIDiA’s numbers mean that has come off either the artist direct or indie numbers)

All in all, a stellar year for recorded music revenues, with plenty of growth yet to come, especially as emerging markets start to deliver at scale.

Join Us At ‘Radio Is Streaming’s Next Frontier’

I’m very pleased to announce that MIDiA is hosting a special industry event on Wednesday 7th February at Gibson Brands in central London, in partnership with 7digital. The event ‘Radio Is Streaming’s Next Frontier’ is going to explore how in 2018, streaming music is going to start impacting radio just like it has spent the last few years replacing downloads. Streaming spent the first phase of its life being the future of retail, it will spend the next phase becoming the future of radio.

In this free-to-attend event we will present some of our latest research, including exclusive data, ranging from big picture trends through to tactical data, such as exactly how much each streaming service is affecting each radio station.

In addition to my research presentation there will be panel discussion from industry experts:

Is Streaming and Radio a Zero Sum Game?

Moderator: Zach Fuller

Panellists:

  • Jeff Smith: head of Music, Radio2 and Radio6
  • Pete Downton: deputy CEO, 7digital
  • Chris Baughen: VP Content and Formats, Deezer

After all this there will be drinks and networking. The event was publicised to MIDiA clients and newsletter subscribers first so there are only a few places left. So, RSVP your slot here now!

Hope to see you there, and watch out for a sneak peak of some of the research soon.

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Introducing MIDiA Fuse

FUSE TriangleOn October 16th MIDiA Research will officially launch Fuse, MIDiA’s new data dashboard. Ahead of that we will be having a free launch party in our London offices at 6pm on the 12th October (and there’s free beer!). If you want to join us then sign up here: https://www.eventbrite.co.uk/e/midia-presents-fuse-drinks-and-networking-tickets-38291113752

Here’s a little more on what Fuse is….

Fuse is a next generation data tool, which will revolutionise how research and insights teams access and utilize their data sources. In a world awash with big data, Fuse is about smart data. Combining proprietary industry trackers, market forecasts and consumer surveys with quarterly company financial data, Fuse is real time dashboard for the digital economy. For the first time, insights and strategy teams across the Video, Music, Media and Games sectors will be able to create their own bespoke charts and data drawing from over half a million data points, – with more being added on a weekly basis.

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The graphic above is an example of a bespoke chart created using Fuse. It maps the subscription growth of three major music streaming services against three specific music streaming markets of India, China and the US. Using Fuse’s technology, this chart and MIDiA’s proprietary market data can be exported both as an image file and as an excel data file. All MIDiA Research tracking and forecast data can also be mapped against quarterly financial data ranging from the market level down to specific companies.

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Alongside the market sizing and the financial data, Fuse users have access to MIDiA Research’s multiple territory consumer surveys covering Europe, North America, Latin America and the Asia Pacific region. Users are able to segment the survey results based upon specific countries, demographic cohorts (distribution and penetration), and user segmentation (Music, Video, Games, Mobile, Adblocker segment etc.). Survey results can also be searched through keywords.

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Fuse data is handily curated on the browse section covering the following research areas:

Adblocking, Console Games, Gamer Attitudes and Behaviour, Games Publishers, Gaming, Live Music, Media Companies, Messaging Apps, Mobile Ad Tech, Mobile Apps, Mobile Games, Music Attitudes and Behaviours, Music Rights, OEM, Payments, PC Games, Piracy, Publishers, Radio, Record Labels, Social Media, Sports, Streaming, TV Companies, Value Chains, Video Attitudes and Behaviours and Virtual Reality.

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Every month additional curated data articles will be published on the tool in the curated data section. It will provide users with expert insight on a monthly basis on the core coverage areas of Media, Streaming Music, Video, Games and Consumer Technology.

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The company overviews section allows  users to deep dive into the companies covered on the tool along with a curated section of relevant data to provide a comprehensive overview of the most significant companies across MIDiA Research’s 4 core coverage areas (Video, Music, Games, Media.)

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Finally, the Fuse value chain feature allows users to map out the vendor relationships between companies in the following coverage areas: Augmented Reality, Games, Mobile, Music, Online Video, Advertising, Financial, Media, Mobile Content, OEM and Social Network. Searches can be further refined by keywords, whether the company is active or inactive, geographies, key markets and country of origin.

To find out more about how Fuse can supercharge your organisation’s insights and strategy teams please email Stephen at Stephen@midiaresearch.com .

Streaming Music Pricing: Inelastic Stretching

Pricing has long been an issue for streaming music subscriptions, with the $/€/£ 9.99 price point above what most people spend on music each month. Streaming services have navigated around the issue with a combination of tactics such as telco bundles and aggressive price discounts (e.g. $1 for 3 months). However, these tactics place long term pressure on the 9.99 price point as they create a consumer perception that streaming music should be cheaper than it is. There is no doubt that discounts are doing a great job of converting users and of easing otherwise reluctant consumers into the 9.99 pricing, but the next phase of the streaming market requires a more sustainable approach to pricing strategy, coupled with some serious product innovation.

To explore this issue in detail, MIDiA has published its latest music report: Streaming Music Pricing: Inelastic StretchingIn it we use proprietary MIDiA data to assess how much of the 9.99 opportunity has been tapped, how much further opportunity exists and what level of demand exists for different price points.

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These are some of the key takeaways from the report:

  • 2017 will be a stellar streaming year: A combination of enough growth being left in the market and the continued success of pricing discounts should see subscriber numbers grow at a slightly faster rate in 2017 than they did in 2016, hitting 146.6 million. This is up 44.3 million from the 106.3 million hit in 2016. (That 2016 figure is 5.9 million more than our provisional estimate published back in the start of January, as the result of receiving a couple of slightly stronger than expected numbers. However, the increase is not due to the very high subscriber numbers reported elsewhere for some Chinese services. We consider these numbers to be high and we place our estimate closer to half of those.) By 2018, subscriber growth will begin to lessen and by 2019 we’ll be in market maturation phase. Around 2/3 of the readily addressable opportunity for 9.99 has already been tapped and this remainder is what will drive the 2017 growth. New tactics will be required for the rest of the cycle.
  • Beyond 9.99: Emerging markets, new partnerships and discounts will all be important growth tactics, but pricing will also be key. Many readers will be familiar with my longstanding enthusiasm for mid tier streaming pricing. Unfortunately, mid-tier pricing by stealth (e.g. price discounts, student offers) coupled with an overly resplendent free marketplace (YouTube, Vevo, Spotify free, etc.) have combined to suck most of the oxygen out of the mid tier sector. Nonetheless, there is a major need for something to cater for the lower end of the market. One of the key sections in the report reveals that streaming pricing is inelastic and the change in demand is smaller than the change in pricing. Even dropping the main price to $6.99 would only result in reducing the size of the streaming market.
  • Unbundling: So how do we square the circle? By using super low prices (e.g. 2.99; 3.99) to launch laser focused niche apps aimed at specific demographics and genres. This can be done both by standalone specialists (e.g. the Overflow, FreqsTV) and by the big incumbents taking a leaf out of Facebook’s app strategy and creating standalone, unbundled apps. In order for them to work, they cannot simply look like a thin slice of Spotify or Apple Music. They have to be as different from their parent apps as Instagram and Whatsapp are from Facebook. That means new user experiences, new functionality, different approaches to programming/ curation and standalone branding. To work, mid tier products have to look like something unique, not a compromised, watered down version of the full fat product. Mid tier services risk looking like low-fat, gluten-free, sugar-free, organic, diet, hand knitted soya milk. While there is a market for it, it shouldn’t come as a surprise that the market is in fact tiny.

So, a good 2017 looks on the cards for streaming, one which will confirm the maturity of the streaming sector as a whole. But the next stage of the market will require product and pricing innovation, at both the high end and the low end. Now is the time to start putting the pieces in place for 2018 and beyond.

The report from which this insight is taken (Streaming Music Pricing: Inelastic Stretching) is immediately available to MIDiA report subscribers. To find out how to become a MIDiA subscriber email info@midiaresearch.com.  If you just want to buy the report and the supporting data then visit our report store here.

Quick Take: A Big Deal Benefits Both Sprint And Tidal

News just emerged that SoftBank owned Sprint has acquired a 30% stake in Tidal, reportedly for $200 million against a valuation of $600 million. The valuation seems on the high side, but a big ticket investment works well for both parties.

According to MIDiA’s latest survey data from December 2016, just 2.7% of consumers in the US, UK, Australia and Canada use Tidal weekly (and that’s probably over reporting). Subscriber wise Tidal had 1 million subscribers at the end of 2016, just 1% of the global subscription market. (Although Tidal has published numbers suggesting it is closer to 4 million, those numbers are not commercially active subscribers but instead ‘users’ and trialists). Tidal is a small player in the global streaming subscription market. So why would Sprint / SoftBank a) want to invest in a small player and b) pay so much?

Making A Small Partnership Bigger

As we discussed in our December MIDiA Research report Next Steps For Telco Music: The Revenue Or User Dilemma telco music bundles are at a turning point. Telco music bundles were highly important in the early stages of streaming subscriptions, helping kick start the market. But their share of total music subscribers has fallen from a high of 32% in 2013 to just 14% in 2016. The original thinking behind telco bundles was differentiation, but when every telco has got a music bundle there’s no differentiation anymore. Additionally, if you are a top tier telco and you haven’t got Apple or Spotify, then partnering with one of the rest risks brand damage by appearing to be stuck with an also-ran. By making a high profile investment in Tidal, Sprint has thus transformed its forthcoming bundle from this scenario into something it can build real differentiation around. Also Tidal has built its proposition around exclusivity and that is being put front and centre of this partnership.

Buy Big To Look Big

Meanwhile, SoftBank has the benefit of a high priced acquisition. Such deals are typically viewed more favourably by investors than smaller ones as it is a statement of intent. Often companies can quickly make their investment back in increased market capitalization because of an uplift to the share price. This is the strategy that kept Yahoo afloat for the last 15 years.

Tidal has struggled to make a dent in the streaming market and has seen more clear water opening up between it and the market leaders. It also has shallower pockets than Spotify, Apple or Amazon. This deal gives Tidal access to Sprint’s customer base, free marketing (well free to Tidal at least) and a war chest to take on the streaming incumbents. Tidal is not about to suddenly become the global streaming leader but it can now, with a fair wind, become a serious player in the US.

 

Why Netflix Can Turn A Profit But Spotify Cannot (Yet)

Having just celebrated its 10th (streaming) birthday, Netflix followed up with a strong earnings release, announcing 5.8 million net new paid subscribers in Q4, sending its share price up by 9%. This wraps up a stellar year for Netflix, one in which it doubled down on original programming and delivered acclaimed hits such as Stranger Things and The OA, shows that don’t fit the traditional TV mould. In fact, Stranger Things was turned down by 15 TV networks before finding a home at Netflix and The OA’s oscillating episode lengths (from 1 hour 11 mins to 31 mins) would have played havoc with a linear TV schedule (not even considering its mind bending plot).

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Netflix closed 2016 with 89.1 million subscribers and the temptation to benchmark against Spotify’s equally strong year is too strong to resist. Spotify (which celebrated its decade in June 2016) closed the year with around 43 million subscribers, 48% the size of Netflix. But a closer look at the numbers tells another growth story.

Read the full post on the MIDiA blog by clicking here.

Announcing MIDiA’s New Research Practice: Paid Content

We are proud to announce the launch of MIDiA’s latest research practice: Paid Content. We’ve been working on this service for the past 9 months and it is headed up by our Paid Content analyst Zach Fuller.

The Paid Content service is the definitive source of analysis, data and research on the digital content marketplace, the trends that are shaping it, the technologies that are disrupting it and the companies and the consumers that are driving innovation.

It enables clients to get smart fast on the latest new technologies and start ups that are looking to change the marketplace. It shows them best practices in user acquisition, monetization and retention. Clients can benchmark themselves against competitors and against other industries, as well as getting the inside track on where tomorrow’s audiences are heading.

Some of the reports we have already published include:

  • Facebook The Media Company: If It Looks Like A Duck
  • How Consumers Adopt Technology: Why The S-Curve Rules
  • VR Vendor Landscape: Virtual Reality’s Path to Mainstream Entertainment
  • The Death of the Monthly Active User: Redefining User Metrics For The App Era
  • Paid Content Consumer Deep Dive: The Emergence Of A Sophisticated Audience
  • Instagram User Profile: Edging Towards Mainstream
  • SoundCloud User Profile: Male Dominated Music Sophisticates
  • Netflix User Profile: Mass Market Streaming Video Users

The topics we cover in the service include:

  • Full Stack media companies
  • Content strategy for virtual reality
  • Making digital audience measurement work
  • Media Consumption, cannibalization and wallet share
  • Freemium strategy and conversion
  • Blockchain and the payments landscape
  • How consumers adopt technology
  • Emerging market paid content trends and adoption
  • Paid content user profiles by individual app
  • How to utilize messenger app audiences

Who should subscribe?

Streaming media companies, mobile app companies, TV and online video companies, music companies, telcos, consumer electronics companies, investors

If you’d like to learn more about how to get access to Paid Content email us at info@midiaresearch.com

MIDiA’s 2016 Predictions – Here’s How We Did

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Part of our job at MIDiA Research is to help our clients ‘look round the corner’ and see what disruptions and innovations are likely to impact their businesses. In short, our job is to help understand what the future holds. This is why in 2015 we published our ‘2016 Predictions’ report in which we made a number of big calls on the coming year in digital content. Here’s how we did:

Macro Trends

  1. Mobile messaging apps will surpass 6 billion. VERDICT: Correct. (There are now more than 6.5 billion)
  2. Video will eat the world. Whatever media business you are in, in 2016 you will be a video company too. VERDICT: Correct. (2016 was the year video took centre stage)
  3. Some or all of Amazon, Apple, Facebook and Google will start to aggregate TV channel apps and SVOD apps to join the digital TV dots. VERDICT: Correct. (Amazon and Apple both made their first TV app aggregation moves in 2016)

Music

  1. Digital will finally be more than 50% of revenue. VERDICT: Correct. (Q2 major label results showed digital as 54% of recorded music revenue)
  2. Streaming holdouts will trickle not flood. VERDICT: Correct. (Indeed, remarkably few artists held back albums. Exclusives became the new black instead)
  3. Spotify will still be the leading subscription service. VERDICT: Correct. (At the end of September Spotify had 40 million subscribers compared to just under 18 million for Apple Music)

Mobile

  1. Android app revenue will surpass iOS. VERDICT: Wrong. (Apple’s App Store still has almost twice the revenue of Play Store. In our defence on this one this was as a result of Android under performing and Apple over performing. Android increased OS market share but still did not overtake app store revenue which means that Play ARPU reduced while Apple App Store ARPU increased.)
  2. Adblocker disruption will accelerate for publishers. VERDICT: Correct. (Adblock plus now grew big enough to open it’s own adexchange, and publishers can do little but get on board)
  3. Big freemium games will lose steam. VERDICT: Correct. (Fewer apps in the top free and top grossing app charts now compared to January)

Video

  1. More unbundled SVOD services will launch. VERDICT: Correct. (2016 saw a succession of new video services)
  2. Mobile video will blur at the edges. VERDICT: Correct. (Messaging apps have made video central to the user experience with the Snapchat illustrative stories feature now being replicated on Instagram)
  3. Interactive ads will gain traction on TV channel apps. VERDICT: Wrong. (Although still be tested on selected Fox Networks authenticated channel apps, they have not moved into the mainstream…yet )

We’ll be publishing our 2017 Predictions report in the next few weeks. To learn how to get a copy of the report and of our 2017 Predictions report and also our 2016 Predictions report email us at info AT midiaresearch DOT COM.

Streaming Music Health Check Deep Dive: Trial Hopping

At MIDiA we have just published our latest streaming report: ‘Streaming Music Health Check: Streaming’s Watershed Moment’. In it we combine the latest streaming revenue data, subscriber numbers and consumer data to create the definitive assessment of where the streaming music market is now at. The report and accompanying dataset is available to MIDiA Research clients here. For more on how to become a MIDiA client to get access to this report email us at info AT midiaresearch DOT COM

The full details of the report and key findings are listed below, but here’s a small excerpt from the report exploring the issue of trial hopping.

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Free trials are a crucial means of converting streaming users to paid subscriptions, especially when deployed with auto opt-in billing. Although often close to half of these opted in users cancel after their first payment (ie immediately after they realize they have been billed), trials are a proven conversion tactic. That is, until users game the system by hopping from one free trial to another by simply signing up with multiple different email accounts. In the case of Apple Music (which has a 3-month free trial), this means that a user can get a full year’s worth of music by simply changing email address (and iTunes account) three times.

Although this phenomenon is fairly niche across the total population, more than a quarter of respondents that identify themselves as music subscribers do this according to MIDiA’s latest consumer survey data (fielded in September). This means that in a worst-case scenario, between a fifth and a quarter of music subscribers are in fact freeloading trialists hopping from one trial to another.

Nearly a fifth of subscribers also use free trials to get access to exclusive albums. Combine this with email hopping, and Apple and Tidal may find their exclusives strategies are less effective at winning over Spotify subscribers than they had hoped.

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Key Findings (data points have been removed from this preview but are included in the full report):

  • By September 2016, Spotify had X million subscribers while Apple had X million
  • Competition is hotting up with announcements from Amazon, Pandora and Vevo
  • Each of the three major labels experienced strong streaming year-on-year revenue growth in Q2 2016: Sony (X%), Universal (X%) and Warner (X%)
  • In Q2 2016, major label download revenue fell by $X million quarter-on-quarter
  • Subscribers rose from X million in Q2 2015 to X million in Q2 2016 with Spotify and Apple driving the growth
  • X% of all streams were mobile, rising to X% for Napster
  • X% of all streams come from playlists, however, just X% come from push playlists
  • X% of UK subscribers say that playlists are replacing albums, while X% are using curated playlists more than 6 months ago
  • Just X% of Swedes spend more than $10 on music, reflecting that subscriptions have capped spending of super fans
  • X% of subscribers have changed subscription service, falling to just X% in Sweden thanks to Spotify loyalists
  • X% of UK subscribers sign up to multiple streaming trials with different email addresses, while X% use free trials to get access to exclusive albums

Companies mentioned in this report: Alphabet, Amazon, Anghami, Apple, Beatport, Deezer, Google, iHeart, KKBox, Last.FM, MelOn, MP3.com, Napster, Orange, Pandora, QQ Music, Rdio, Sony Music, SoundCloud, Spotify, Tidal, Universal Music, Vevo, Warner Music, YouTube

Report Details

Pages: 16
Words: 3,985
Figures: 8

For more on how to become a MIDiA client to get access to this report email us at info AT midiaresearch DOT COM

Quick Take: Amazon Music Unlimited Comes To The UK

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Amazon announced the anticipated launch of Amazon Music Unlimited in the UK today. For my full take on Amazon Music Unlimited see my previous post here.

Make no mistake, Amazon are taking this launch seriously, with a coordinated PR campaign and press release quotes not only from Amazon’s head of streaming music Steve Boom but also from Jeff Bezos himself. So why the big deal? Music is a low revenue, low margin business for Amazon, just as it is for Google and Apple. But that’s not the point. Music always plays a special role for tech companies, sometimes because the CEO is passionate about music, but normally because it is the service off which other things can be hung. Amazon, like Apple, is starting the transition towards becoming a services company. While Amazon has made much more progress on video than Apple has, it has made much less progress than Netflix has. Music is the wide appeal proposition that can be used to get people onto the first rung of the services ladder. Just like the CD got people onto the first rung of Amazon’s ladder back in the 90’s.

TO READ THIS POST IN FULL VISIT THE MIDIA BLOG