Are rights holders missing the point with Twitch?

Twitch has apologised to its users for the growing volume of rights holder takedown notices for music used in Twitch videos. Twitch is in an awkward transitionary phase with music rights holders, not dissimilar to where YouTube was when it was acquired by Google. 14 years on from that acquisition, YouTube’s relationship with rights holders is in a better place but short of where it should be. Article 17, weaving its way between the competing lobbying efforts of rights holders and tech platforms, is just the latest mile marker on a long and winding rocky road. Twitch, like YouTube, does not fit the licensing norms of most streaming services, resulting in repeated stand offs. But just like the music industry still hasn’t grasped the full potential of YouTube, it may be making a similar mistake with Twitch.

Firstly, for sake of clarity, MIDiA firmly believes that copyrighted work should be used correctly and remunerated. We are not, in any way, suggesting that a platform should be able to use music without permission. However, the current licensing structures are:

  1. Not flexible and agile enough to truly capitalise on user-generated content (UGC) music (a market which will be worth $4 billion by year end – download our major new FREE report on UGC music here)
  2. YouTube and Twitch represent an opportunity to create new growth drivers, especially for artists, that can help fix the ‘broken record’

A lack of sync in sync

Let’s address the first point, well, first. Platform-native creators on YouTube, Twitch and TikTok create content so frequently they make the music industry’s volume and velocity problem look like child’s play. Usually, creators who want music in their videos have a choice: 1) get sync licenses, 2) get library music, 3) use music without permission and get taken down or demonetised. 

The problem with option one is that sync clearance is a lengthy process that can take weeks and cost a lot. Not a great fit for creators who create and upload videos the same day. Companies like Lickd are trying to fix this with catalogues of pre-cleared music, but the industry as a whole is moving too slowly. For the record, MIDiA’s preferred solution is for platforms securing large ‘sandboxes’ of pre-cleared tracks for creators and developers to work with. An early example of this is the NFL making all of its soundtracks available for creators on a Synchtank powered site.Unless music rights holders want to cede the growth in the music UGC space (which will be worth $5.9 billion by end 2022) to library music companies, they need to put alternative approaches at the core of their licensing strategy, not simply pursue them as interesting ‘edge’ experiments.

Going beyond the stream

However, the biggest music industry opportunity is not licensing music. It is monetising fandom. The #brokenrecord debate has shone a light on how streaming’s scale benefits do not trickle down at a sufficient rate to creators. Artists compete for tiny bits of highly valuable ‘real estate’ – playlists, artist profiles etc – but most often do not get enough to earn a living. While efforts like user-centric licensing and better songwriter rates will help, they will not change the underlying fundamentals of streaming economics. The counter argument is that scale will change everything, but:

  • Average revenue per user (ARPU) is falling. Spotify’s premium ARPU fell 34% between Q1 2016 and Q3 2020, a 34% decline
  • Streaming growth is slowing in developed markets
  • Consumption is slowing – last quarter Spotify reported an increase in consumption hours to pre-COVID levels but as there were 49 million new monthly active users (MAUs) compared to pre-COVID this implies a reduction in hours per user
  • Emerging markets are growing but a) ARPU is lower and b) domestic repertoire will drive most of the long-term consumption – so this means only a small uplift for Western creators

Before live stopped, streaming existed in a mutually beneficial ecosystem, giving artists more fans for concerts and merch. Now that live is out of the equation, streaming isn’t enough. 

This is where platforms like YouTube and Twitch can come in. They enable creators to build loyal fanbases of which they can monetise the loyal core to build sustainable careers. The idea of ‘1,000 True Fans’ was first put forward years ago by Kevin Kelly but now the dynamics of social platforms have made this a realistic possibility for any creator. Nevertheless, music artists are still way off the pace. 

Micro-communities

Twitch and YouTube enable creators to build (often small) loyal fanbases that can generate them income that far exceeds what artists get from streaming. MIDiA terms this dynamic ‘micro-communities’ and we think it will be one of the trends that will shape the music business in 2021 and beyond. As part of our creator tools research we will be exploring how platforms like Splice and Landr will be able to build their own artist-fan communities that can be as valuable to artists as Bandcamp is to many already. 

Streaming created a superstar economy where even within the non-superstars, superstars exist. For example, Tunecore states it has ‘thousands’ of artists that make more than $100,000 a year. A simple bit of arithmetic shows that this means the remainder make less than $100.

Micro-communities represent an opportunity for artists to fill the income gap that streaming leaves without live in the mix. This probably does not reflect a direct revenue opportunity for rights holders – indeed, that would be missing the point. Instead, they can ensure those platforms are supported to empower artist monetisation without speed bumps. Why? Quite simply, rights holders have a model that works for them (streaming), so now they need to support a model that works for their creators so that they can in turn continue to support the streaming model that works for rights holders. 

If the industry does not support this new virtuous circle ecosystem, then it could bring the streaming model crashing down due to creator discontent. 

Music Streaming Needs a New Future

While doing some research on the Chinese streaming market I came across this fantastic UX tear down of Xiami Music. I recommend you read it in full. The day before I found this – also must-read –article on Beyoncé’s streaming strategy, which explains how she uses different platforms to segment her fanbase (Tidal – super fans, Spotify engaged fans, Netlix, passive fans). These two articles may seem entirely unrelated, but they are in fact two sides of the same coin: fandom.

Regular readers of MIDiA’s output will know that we have made fandom one of our central research themes, most recently identifying it as one of the next five growth drivers for the music business. We have also discussed at length how Chinese streaming services have built businesses around monetising fandom while Western streaming services instead simply monetise consumption.

Now I am going to take this thinking one step further by proposing a new way to consider how to segment the music consumption journey and how Western companies can become part of this new vision.

the three srtags of the music journey

Consider music consumption as three key steps:

  1. The song
  2. The (artist) story
  3. The fan

Streaming services now own the song. Social is doing an okay, but far from perfect job of owning the artist story. But no one – digitally – is owning the fandom. Music fans have to hop from one place to another to join the dots. This of course contrasts sharply with Chinese streaming services which own all three steps in the music journey. Let’s take a look at Xiami Music to illustrate the point.

XiamiI have written a lot in the past about Tencent Music’s portfolio of apps. Alibaba’s Xiami Music is one of the smaller players and its end-to-end value proposition is all the more impressive for that: this sort of functionality is table stakes for competing for audience attention in the Chinese market.

Delivering the music is almost just the starting point for Xiami Music, wrapping the music with endless additional context and features including (but by no means limited to): music videos, lyrics, commentaries, reviews, news, comment streams, virtual tipping, badges, trophies, lyrics poster, you can even grow your own Tamagotchi. As Siew writes in his UX tear down:

“Every piece of music has its own entourage — live versions, videos (the official one and the live ones), behind-the-scene footage, outtakes, remakes or covers, reviews etc.

Xiami has taken a leaf out of WeChat’s playbook. Everything you need about a song, an album, or an artiste/band, you can get it on Xiami. No need for you to google for lyrics, head to YouTube for a video, or launch Twitter/Weibo for news.”

Time to stop leaning back

Another insightful observation that Siew makes is that Xiami Music – as with other Chinese streaming apps – has a white background to make it easier to read and interact with lots of content. Whereas Western streaming apps have dark backgrounds as they behave as largely passive vehicles for delivering music: find your playlist, press play, close screen.

There is a fundamentally different UX ethos:

  • Western apps: lean back, listen with minimal friction
  • Chinese apps: lean forward, dive in, interact

Years ago (11 to be precise) I laid out a vision for lean forward music experiences, where interactive context and social features were built around the music. Now is the time for Western streaming services to push themselves out of their UX comfort zones and start to own stages two and three of the music journey.

Lead, don’t follow

It is important that they do not all follow the same path. Differentiation – or the abject lack of it – is the Achilles heel of Western streaming services. The hope here is that they each pursue their own path and use this blank canvass to develop their own unique identities. Which will make it easier for record labels and artists to follow Beyoncé’s approach of segmenting their audiences across different platforms.

Of course this will take time. It may even take another 11 years (though hopefully not). In the meantime radio companies should be seeing this as a great opportunity to carve out a role for themselves in step two (artist story telling). Most have realised by now that they cannot compete with streaming but instead should compete around it. Get it right and radio could become the home of artist storytelling, a genuine complement to streaming consumption. Meanwhile, TikTok may well be best placed to act fast to own step three (fandom) before the Western streaming services can get their respective acts in gear.

There is nothing quite like some fierce competition to focus the mind.

Free-to-Attend Event: Monetising Fandom

monetisingfandomspeakers2x2Join us on Wednesday 17thJuly in central London for MIDiA’s next free-to-attend event: Monetising Fandom in a Fragmented Content Landscape. Regular attendees of our events will know that they combine great new data and analysis with insightful panels and a mix of attendees not quite like at any other event, with representation from across multiple industries.

Next week is a big one. We will be showcasing a brand-new stream of data for MIDiA: audience fandom. With audiences fragmenting across so many different platforms, formats and content genres, the attention economy not only puts pressure on every form of content, it also necessitates a complete rethink of how we measure success. Pre-streaming, success was much easier to understand: album sales and TV ratings were nice, simple-to-measure metrics. Now though, audiences are spread across a host of different platforms, sometimes consuming, sometimes simply engaging with social or promotional content. It all contributes to the artists’ brand impact, and in the era of the attention economy, extended brand reach is more important than it has ever been.

In this event we are going to showcase our latest audience insight data on music artists and TV shows, and we will present our case for an entire new way of measuring and understanding success.

The event itself will include a keynote presentation from Mark Mulligan, followed by a panel discussion featuring representatives from TikTok, ATC, Kobalt and Spirit Media.

Follow this link to sign up (fully-refundable deposit required).

For those of you who are not in London, a live stream will be made available on our Facebook page at 18.30 BST.

The Artist Marketing Playbook Needs Rewriting

The whole essence of fandom is being turned upside down. An emerging crop of streaming-native artists is finding its audience in a much more targeted and efficient way than via the traditional music marketing. Instead of blowing a huge budget on carpet bombing TV, radio, print, online artists and their teams are finding their exact audiences, focusing on relevance and engagement rather than reach and scale.

The traditional model is great at creating household brands but so much of that brand impact is wasted on the households or household members that are not interested in the artist. Niche is the new mainstream. Targeted trumps reach. But too many label marketers fear that unless they use the mass media platforms, they will not be able to build national and global scale brands. They might be right, at least in part, but this is how the future will look and new marketing disciplines and objectives are required. Here’s some brand new data to show why.

midia index music fandom

Since Q4 2016 MIDiA has been tracking leading TV shows every quarter for awareness, fandom, viewing and streaming. Since the start of 2019 we have been doing the same for artists, with viewing swapped out for listening. These metrics provide a rounded picture of an artist’s full brand impact and consumption, while the ratios between these metrics give a unique view of just how individual artists are performing and of the impact of their respective marketing strategies. Later in the year we will be feeding this data into Index for Music,a unique new dashboard tool to combine with data from social platforms, streaming, searches, reviews and other metrics that create an end-to-end view of artist impact. We have already built our Index for Video tool which you can find out more about here.

In the above chart, using the consumer data component of Index, we have taken a contiguous sample of the five artists that represent the mid-point of each third of the rankings (i.e. top, middle and bottom) for two of these ratios:

  • Fandom-to-streaming, which we call Streaming Conversion
  • Awareness-to-fandom, which we call Brand Conversion

The results show some very clear artist clusters with clear implications for artist success and marketing strategy (remember, these are ratios not rankings of how well streamed or popular they are):

Streaming Conversion

  • Rising streaming stars: These artists have twice as many people streaming them as they do fans. These artists are largely younger, frontline artists that are building their careers first and foremost on streaming platforms. These are artists that have not yet built their fanbases but are being pushed hard by their labels on streaming and elsewhere. Their listening is being driven by promotional activity. Pusha-T is the exception, a much longer established artist.
  • Established artists: These artists are largely well-established artists whose streaming audience penetration correlates with their fanbases. Their listening is largely organic. Dua Lipa is the exception, still relatively early in her career but already with an established fanbase driving organic streaming.
  • Low-streamed superstars: These are artists that built their careers in the pre-streaming era and while are household names, have streaming audiences smaller than their fanbases, not having managed to migrate large shares of their audiences to streaming

 

Brand Conversion

  • Heritage superstars: The majority of people who know these big heritage acts like them. In some ways brand conversion is an easier task for such artists than frontline artists. As they have been around so long, it tends to be the very bests of their catalogue that people know. The fact Queen outranks the Beatles is testament to the way in which the biopic Bohemian Rhapsody has created new relevance for the band.
  • Big brand artists:This eclectic mix of artists are – Julia Michaels excepted – well established artists that have benefited from years of label marketing support, with about half of all people that know them liking them.
  • Over-extended brands: One of the most important changes wrought by streaming and social is that fanbases no longer need to be built via mass media. However, big artists, especially major label ones, still rely upon mass media to become global stars. The result is a lot of wasted marketing budget. In this group, which is dominated by Hip Hop artists, more than half of the people who have been made aware of the artists do not like them. The marketing dollars spent on reaching those people has not converted.

We will be diving much deeper into this data in a forthcoming MIDiA client report and also at our next free-to-attend (depose required) event in central London: Managing Fandom in a Fragmented Content Landscape. Join us at the event to get a sneak peak of MIDiA’s artist data and our Index tool. All attendees will get a free copy of the presentation. In addition to the data key note there is a panel featuring people from Kobalt, TikTok, ATC and more to be confirmed. Sign up now, only limited places remain!

See you there!