Time to jump off the algorithm highway

Life is perpetual change, so it is perhaps overdoing it to suggest that the music business is at a cultural pivot point. Yet, what comes next has the potential to be looked at, years from now, as a dividing line between before and after. For more than half a decade, the music business has been hurtling down the algorithm highway, repurposing artist development, marketing, fan engagement, and even the structure of the song itself in order to stay the path. Everything is splintering, from attention to remuneration, with creators and rightsholders alike finding themselves feeding a beast whose hunger is never sated. Much like an addict who wants to quit but cannot, the music business understands the problem and the costs it incurs them, yet they dare not jump off the algorithm highway for fear of being left behind by those who do not. And yet, jumping is exactly what is needed, to halt the perpetual commodification of both music and creators. It is a leap of faith, but onto a welcoming crash mat: scenes.

At Future Music Forum this week, myself and fellow MIDiA analysts Tatiana Cirisano and Kriss Thakrar talked a lot about MIDiA’s new research into scenes and identity (MIDiA clients can read our latest report on the topic here). Regular readers will be familiar with our work on fragmented fandom and how the splintering of consumption has created a parallel splintering of culture, with new hits becoming smaller and more short-lived. In this song economy environment, it is the song, not the artist, that is the central currency, thus making nurturing smaller fandoms mission critical. But fandom itself is the symptom, the cause is identity, and this, along with the scenes in which it manifests, is where the future of music marketing lies.

Algorithms have assumed a central role in the success of artists in today’s music business, with marketers forever trying to improve their understanding of their inner workings in order to gain advantage for their artist. It is, in many respects, a fool’s errand, as it is in the platforms’ interest to continually evolve the algorithms in order to ensure it is themselves that determine success, not third parties. Nonetheless, there are ways to succeed in the song economy: you may not be able to beat the algorithm, but you can join it. This means thinking and behaving like an algorithm, to hold virality by the hand. Just like an algorithm, this means real-time multivariate testing within target segments, and progressively expanding only to next-level associated segment, resisting the ability to go big as soon as something fires. But using the algorithm as a marketing discipline truly effectively entails a degree of ruthlessness that many artists and labels would find unpalatable. Algorithms find success by casting out failure instantly, instead only amplifying that which resonates within target segments. So a label pursuing this approach would need to be willing to ditch a campaign incredibly early if it does not, however much the label might believe in the release or however big a priority the artist might be. Artist rosters would become a production line of bets, as quickly discarded as signed. Failing fast is as important as succeeding fast in the song economy. 

This ruthlessness does not sit well with the traditional model of building an artist but, as dystopian a vision as it might be, is the exact path that labels already find themselves on. Scenes represent an alternative way forward.

Scenes and identity

Scenes have always existed, but now there is a growing proliferation of online scenes that allow a degree of specificity that was simply not possible previously. As Tatiana puts it:

“Not only can people find people across the globe with the exact same interests and values, algorithms actually push those people closer together”.

Though scenes can be transitory and ephemeral, subject to fast-shifting cultural trends, the really valuable ones are those that are rooted in identity, that speak to who people are about. The eBoy scene, with Young Blud as an icon, is a case in point, reflecting the values of a tribe that does not identify with the Instagram-perfect archetype of appearance. 

These scenes sometimes revolve around music, but most often, music is simply the soundtrack, with a number of artists emerging as icons, not because they have cynically targeted them but because they come from those communities and reflect their values. Fandom is an output of this shaping of identity. It is simultaneously a way of showing how much identity matters to you and of reinforcing that identity. In fact, fandom is identity’s virtuous circle of influence, with people’s fandom reinforcing their identity and communicating it to their scene community, thus reinforcing their bonds within it.

Identity is fandom’s ground zero. Music marketers that are able to identify and nurture it (rather than simply attempt to harvest it) have an opportunity to forge a depth of artist-fan relationship that will endure far beyond the whim of any algorithm, survive both hit and miss singles, and will not disappear into the black hole of lean-back consumption. 

Streaming put fandom on hiatus. Scenes represent an opportunity to reforge fandom for the modern era, an incubator for artist careers. In short, an antidote to the song economy.

WMG is moving beyond superstars – and that is a good thing

Warner Music Group’s (WMG’s) Steve Cooper recently stated that the major is no longer financially dependent on superstars – which is, of course, quite a different thing from not being culturally dependent on them, but we’ll get to that. For a major’s CEO (exiting or not) to make such a claim is both bold and a reflection of the reality on the ground. In fact, it is a natural milestone in a trend MIDiA identified years ago: fragmented fandom. As streaming audiences and consumption fragment, so does the impact of superstars. As with any transition, the shift is not linear and there will continue to be more Olivia Rodrigos and Billie Eilishes, but they will be fewer and farther between, and crucially, they will be smaller than their pre-fragmentation peers.

Superstars getting smaller is music to the ears of independent labels and artists alike, but it is far from the death knell for big labels. Instead, it simply reflects the new environment in which they will operate. Indeed, Cooper said WMG is pursuing a “portfolio” strategy “across a bigger number of artists” to reduce financial “dependency on superstars”. This comes after BMG’s CEO, Hartwig Masuch, said of their latest results: “The extraordinary thing about our first half result is that we grew revenue 25% with virtually no hits”. Having no superstars does not mean having no hits, instead it means more, smaller hits.

In 2019, MIDiA wrote that “Niche is the new mainstream”, that the water cooler moments of the linear era were being replaced by cultural moments. Audiences are in different places at different times, with algorithms delivering them different personalised content. Concepts, such as ‘song of the summer’, are becoming different for everyone. Each listener has their own song of the summer. In the era of fragmented fandom, water cooler moments across the masses, where everyone heard the song on the radio at the same time, are replaced by smaller groups of people finding pockets of likeminded fans across the world.

The consequence for artist marketing is a progressive shift from ‘carpet bombing’ mass media in order to build artist brand reach, to campaigns that, instead, reach real fans with laser-focused targeting. In the old model, a superstar artist was a household name, with mum and dad just as likely to know them as their kids. But what was the value of mum and dad knowing the artist if they were not the target audience? It might play to the artists’ egos, but it was an inefficient spend of marketing budget. Now, targeted marketing reaches the consumers who care. The result is smaller, but more passionate, fanbases. This is marketing to build fans rather than audiences. It is just a shame that western DSPs are built for passive audiences rather than fandoms. That will need to change. DSPs paradoxically triggered the fragmentation, but they do not provide the mechanisms for artists and labels to benefit. A cynic might argue that that is by design.

Indeed, the fragmentation of listening that streaming is pushing consumption towards the middle, away from the superstars, as Music Business Worldwide’s Luminate chart for streams of the US top-10 tracks shows.

For the superstars who are used to mega-fame from the pre-fragmentation days, a new release’s performance can look like diminishing success when measured by traditional metrics – just ask Beyonce. But, because fragmentation means it is truer fans that engage with the music, the cultural relevance of these smaller hits can actually be bigger – again just ask Beyonce.

There are, however, extra complications. As we are currently in a transition phase, pre-fragmentation hangovers are muddying the streaming waters. Pre-fragmentation hits stick around for longer on streaming because they had the pre-fragmentation brand reach. Since they benefited from the old-world mainstream media exposure, their hits cut through on streaming in a way that newer ones often struggle to. These pre-fragmentation hangovers have the effect of fragmenting new hits even further as they take up so much of streaming’s consumption. The result is that streaming is not so much a level playing field as a field of all levels.This transition phase will play out, and while it does, there is a world of opportunity for artists and labels that can harness the deeply held fandom that fragmentation creates.

The rise of scenes

The most exciting knock-on effect of fragmentation is the rise of scenes and micro scenes. In the old world, consumers had a limited range of things with which they could identify themselves, as everyone was watching the same TV, reading the same magazines, listening to the same radio, and shopping in the same shops. Now, consumers can build their own identity from an ever more diverse set of attributes, across fashion, music, TV / film, games, politics, etc. 

As my colleague Tatiana Cirisano put it:

“The result is that scenes are becoming more complex and splintered. Consider the seemingly endless range of subcultures on TikTok, from #cottagecore to #EGirl, or the Instagram account @starterpacksofnyc, which has garnered more than 64,500 followers by crystallising super-specific, yet eerily-familiar, personality types.”

This rise of scenes is what will shape the future of marketing, with scenes becoming the new territories, transcending borders and cultures. Superstars will get smaller, but they will get better at monetising their superfans (this is why Taylor Swift’s Universal Music Group deal includes a broader range of rights than just recordings, as her sales were only going to go in one direction). Superstars are not dead, they are changing, become smaller and less, well, super. It is an inevitable second-order consequence of streaming splintering listening and the smart labels will harness the trend rather than try to fight it.

C.R.E.A.T.E. An entertainment manifesto

When we first formed MIDiA eight years ago, we saw the new entertainment world was going to require a new joined up approach for entertainment businesses. With the start of the ascent of the smartphone we made an intellectual bet that everything was going to become more interconnected, inter-dependent and inter-competitive. Our vision then, was to build analysis and data that cut across siloes, to help previously unrelated industries understand they were becoming connected. The ‘connecting the dots’ tagline that we launched with in 2014 was right for the time, but now the world has moved on. The dots are now connected. That job is done. Now it is time to decide what to do with those connections.

In more recent years we identified new drivers of the entertainment economy, such as:

• Fragmented Fandom
• The Attention Economy
• The Attention Recession
• Creator independence
• Rise of creator tools
• Reaggregation

When we introduced those concepts they took some time to land, but now are increasingly widely accepted as industry currency. Even other research companies have started following our lead, with webinars and research on the attention economy, the attention recession and fandom fragmentation.

But although those trends will continue to play crucial roles, it is an entirely new set of market dynamics that will shape the future as the world enters a period of uncertainty and disruption unprecedented in modern times:

• Attention inflation: As consumers return to pre-pandemic behaviours, they are trying to squeeze all their new-found entertainment behaviours into less available time. Multitasking is rocketing which means each entertainment minute is less valuable as it is increasingly being done alongside something else. Many more consumption hours than actual hours results in attention inflation.
• The splintering of culture: Water cooler moments may not yet be dead but they are fading. Hits are getting smaller (just ask Beyonce) and audiences are fragmenting. But cultural relevance can actually increase within these fragmented fanbases (again, just ask Beyonce). Culture is splintering but may end up more vibrant as a result.
• Scenes and identity: Underpinning and resulting from culture splintering is the rise of scenes, especially micro scenes which populate platforms like Twitter. Scenes are more than just groups of fans, they a cultural movements that that people look to for identity and belonging. Fandom is merely a subcomponent.
• Lean through: Consumers used to just, well, consume. Now though, every more of them want to participate. The line between creation and consumption is blurring. Leaning forward is no longer enough, now audiences want to lean in and create.
• The creator economy: Perhaps the single biggest shift in entertainment in recent years is the rise and rise of the creator economy, straddling virtually every entertainment format. The creator economy is so much more than vloggers and influencers. It represents a reshaping of culture, remuneration and audiences. As such it will reshape entertainment forever. 
• Post-peak growth: With inflation soaring and a recession looming, consumers will have less money to spend on entertainment and leisure. Some sectors will suffer, some will sustain but others will grow. Whether it is to survive or to thrive, entertainment companies will need to reshape both their strategies and purpose.
• Rediscovery is the future of discovery: The first phase of streaming was all about discovery. Now, with a surplus of supply and demand constrained by the attention recession, what consumers want as much as what is new, is to re-find what they already know and love.

Business as usual is gone. The next chapter of the business of entertainment will require a completely new approach. This is MIDiA’s C.R.E.A.T.E. Entertainment Manifesto for what is required of entertainment companies in this brave new world.

• Cultivate every moment: Multitasking means consumption minutes are losing value. Every moment needs to be made as valuable and as entertaining as it possibly can be. Entertainment companies need their audiences notice what they consume.
• Reward the creator economy: Streaming and social platforms are increasingly dependent on the long tail. The scale economics work for platforms by summing up a multiplicity of niches but they do not work for long tail creators. Platforms and rightsholders need to nurture not just harvest the creator economy.
• Empower the consumer as a creator: Lean through consumers are also super fans. More platforms and services need to give consumers the sort of participation tools that TikTok built is success upon. Not just because it is what audiences want but because it also builds fandom and amplifies entertainment brands.
• Add value and escapism: As consumers’ wallets tighten, subscriptions and ad spend are both at risk. But this need not be an entertainment Armageddon. Instead, entertainment companies should offer consumers what they want: 1) value for money, 2) escape from the harsh realities of daily life.
• Target the middle: While it is tempting to always chase the big hit, the reality is that hits are getting smaller. Success in these coming years will be most easily found by cultivating a collection of mid-sized hits rather than placing all bets on mega hits.
• Embrace scenes and identity: Scenes and identity are the undervalued super power of entertainment. Music, games, sports, creators, books, movies, TV shows – they all move people and they all help define who we are. Truly understanding and harnessing identity will be the difference between survive and thrive. 

We hope that the C.R.E.A.T.E. framework and our new Critical Developments coverage help companies and creators plot their paths through the troubled waters ahead. But even more important, is to develop a sense of purpose, a definition of why you do what you do, and to communicate that to your audiences and partners. The entertainment industries have