Music Business

Question 1

As independent creators grow their presence and expertise, they build up their own niches of superfans. Many of these superfans may well know who the big stars are, but still care for their near-and-dear niche creator far more personally. As consumers are faced with an ever-growing body of content now competing for their time, attention and sentiment, they increasingly choose based on personal values, sentimental affinities, and individual tastes rather than the rule of the increasingly-complicated masses.

The ‘superstar’ may still have some time left. The big record labels and incumbent film production studios with their substantive marketing budgets will continue to shape the market, greatly assisted by older audiences less keen on discovery and UGC. However, the era of the savvy-switcher, armchair creator is now also dawning, as Gen Z rises to market prominence – and they will bring with them a new dynamic of what it truly means to be a superstar.

Answer 1

Source: MIDiA
https://midiaresearch.com/blog/the-reign-of-the-superstar-is-over

Question 2

Fame no longer seems out of reach, so those who are the subjects of it no longer seem so far away. Icons of the younger generations like Billie Eilish, Lil Nas X, and even Harry Styles make a point of staying out of the limelight unless they are using their platforms to further important messages; this is a standard expectation of ‘platform’.

Answer 2

Source: MIDiA
https://midiaresearch.com/blog/the-reign-of-the-superstar-is-over

Question 3

There were 100 million new music subscribers in 2020, taking the total to 467 million. (In 2019 there were just 83 million net new subscribers). A further 19.5 million new subscribers in Q1 2021 pushed the number up to 487 million.

While the failure of subscription revenues to keep up with the pace resulted in ARPU falling by 9% in 2020, this lens detracts from the huge momentum in paid user adoption. Subscription revenue might not be increasing as fast as some would like, but the global music subscriber base is not just growing – it is growing faster than ever.

Spotify continues its global dominance, adding 27 million net subscribers between Q1 2020 and Q1 2021, more than any other single service. However, it lost two points of market share over the period because its percentage growth rate trailed that of its leading competitors. Google was the fastest-growing music streaming service in 2020, growing by 60%, with Tencent second on 40%. Amazon continued its steady trajectory, up 27%, while Apple grew by just 12%.

Google’s YouTube Music has been the standout story of the music subscriber market for the last couple of years, resonating both in many emerging markets and with younger audiences across the globe. The early signs are that YouTube Music is becoming to Gen Z what Spotify was to Millennials half a decade ago.

Answer 3

Source: MIDiA
https://midiaresearch.com/blog/global-music-subscriber-market-shares-q1-2021

Question 4

Emerging markets are now central to the music subscriber market, with Latin America, Asia Pacific and Rest of World accounting for 60% of all 2020 subscriber growth. This is of course, also a key reason why global ARPU declined. Nonetheless, a number of emerging markets services now boast large subscriber bases. Beyond Tencent’s 61 million, China’s NetEase hit 18 million subscribers in Q1 2020 and Russia’s Yandex hit 8 million.

Answer 4

Source: MIDiA
https://midiaresearch.com/blog/global-music-subscriber-market-shares-q1-2021

Question 5

Emerging Markets:

The traditional recorded music business was all about selling units, which naturally meant that the most important markets were not the most populous but the wealthiest. Throughout the late 20th century this created a ‘global’ market that was dominated by North America, Europe and a few others. This is why (among other political reasons) Japan became the biggest Asian music market, rather than China.

Today’s music business is different. Streaming (particularly via ad-supported and bundles) can monetise large-scale audiences in lower per-capita GDP markets. Suddenly population size matters, and emerging markets become the world’s largest addressable music audience.

The steady rise of Anglo repertoire up to the early 2000s has been replaced by a rise in local and regional music. Globalism is becoming replaced by internationalism, homogeneity with diversity. All of which means that global Anglo superstars will feel the pinch. The superstar business was already facing the headwinds of fragmenting fandom, so emerging markets are an accelerant to a pre-existing trend, along with multipliers such as the growth in the number of artists, releases and personalised recommendations.

However, the western majors should not assume they will be able to out-perform local and regional labels. In Japan and South Korea, the western majors are minority players, having been unable to unseat the dominant local ‘majors’. Interestingly, both countries are long-term exceptions to Anglo repertoire dominance. Both are high per-capita markets with large economies that can sustain thriving domestic music businesses. Also, Anglo repertoire does not import as well to these markets (despite endless western acts trying to ‘break’ Japan), with international repertoire stuck at around a quarter of sales in both markets at the turn of the millennium. Now in the third decade of the millennium, it is South Korea that is exporting music to the world, from ’Gangnam Style’ through to Black Pink and BTS. This shows that global superstars will still be a long term-feature of the music business – though fewer will be Anglo artists.

The outlook will thus be defined by:

· Fewer Anglo global superstars

· A rise in non-Anglo superstars

· The rise of regional superstars

· The rise of local scenes and domestic artists

It is an exciting time for music culture across the globe and we are most likely entering what will be the most culturally diverse era the global recorded music business has ever known.

Answer 5

Source: MIDiA
https://midiaresearch.com/blog/emerging-markets-may-be-about-to-change-the-superstar-business

Question 6

There are more ways of consuming music than just listening passively on a linear basis to recordings via a traditional distributor. Opportunities abound. There are now more opportunities and channels than ever for artists to make a living beyond music streaming. No channel is building and monetizing fandom better than live streaming, and the tools that facilitate this are changing what it means to be both a creator and a fan.

The focus on live streaming and monetising fandom is driven partly by the struggle to monetise consumption on streaming. While this may not be a problem for the biggest labels in developed markets, it is a situation many artists are all too familiar with. Creators have found live streaming to be a profitable endeavour that presents a more sustainable business opportunity than streaming.

Twitch users spend an average of 15.8 hours a week on the platform, more than double any other platform, and create monetization opportunities through subscriptions and donations.

However, developed music markets are still slow to embrace these opportunities when compared to China, the indisputable hub of live streaming.

Answer 6

Source: MIDiA
https://midiaresearch.com/blog/from-creator-tools-to-commercial-tools

Also:
https://guitar.com/news/industry-news/matt-heafy-twitch-earnings-comparable-trivium-music-streaming-sales-services-spotify-apple-music/

Question 7

The Music Publishing Economy

“Music publisher royalties are more than three times smaller than record label royalties.”

“Of total royalties paid by streaming services to rights holders, between a fifth and a quarter is paid for publishing rights to the song.”

Record labels are reshaping songwriting by pulling together teams of songwriters to create “machine tooled” hits — finely crafted songs that are “optimized for streaming”. More songwriters are being enlisted per “streaming-optimized” song than before, which means fractionalizing royalties even further.

Fewer creators have the repeat success necessary to ensure that they see anything other than small crumbs from the streaming cake. Fewer songwriters will be around long enough to develop their songwriting skills, and will be more reliant on professional songwriters.

Answer 7

Source: MIDiA
https://www.midiaresearch.com/reports/rebalancing-the-song-economy

Question 8

Over 66% of all music listening in the US is now of catalog records, rather than new releases (whereby ‘catalog’ reflects anything released over 18 months before a consumer made a purchase and/or pressed play).

Conversely, the percentage of total album consumption claimed by ‘current’ music – that’s music released within the prior 18 months of a consumer making a purchase and/or pressing play – keeps on falling. In the first half of 2021, according to MRC Data’s report, ‘current’ music claimed just 33.6% of total consumption, down from 36.1% in H1 2020.

Answer 8

Source: Music Business Worldwide
https://www.musicbusinessworldwide.com/over-66-of-all-music-listening-in-the-us-is-now-of-catalog-records-rather-than-new-releases/

Question 9

There were 555.3 billion streams of music on audio and video platforms in the United States in the first six months of 2021 – up by 54.3 billion year-on-year.

Answer 9

Source: Music Business Worldwide
https://www.musicbusinessworldwide.com/over-66-of-all-music-listening-in-the-us-is-now-of-catalog-records-rather-than-new-releases/

Question 10

HOW WOULD YOU LIKE TO SEE THE STREAMING MODEL IMPROVE?

There has to be the goal to share revenue appropriately and artists should have a higher portion. The costs for publishers and record labels have come down from what they used to be. There are no returns, inventory, warehouses or manufacturing costs. There’s no breakage of CDs and there are no tracking expenses.

Then I started to put it out into the universe that I really wanted to be trusted by artists to negotiate with them, advocate for them and make sure they have the right revenue and rights. Suddenly, I became surrounded by artists and the opportunity came to me to move on to the artist side.

To my younger self I would say, “Don’t hide under a bushel what you really want to be”. Put it out there, start talking to people, start networking early and it all just starts coming together.

Answer 10

Source: Interview with Sarah Scott (LaPolt Law)
https://www.musicbusinessworldwide.com/partnership-deals-are-the-future-of-the-music-business/

Question 11

“Everyone has blind spots, but these blind spots can come back and bite you in the ass. If you’re looking backward you’re going to be disrupted. If you’re living in the present you’re going to be disrupted. You must always scour the landscape, taking the temperature of the future, because there’s someone somewhere who wants to change your business. It’s your job to recognize it. And we’ve learned in the last twenty years you never try to kill it, you try to co-opt it, buy it, improve it, supersede it.” —Bob Lefsetz

Answer 11

Source: Bob Lefsetz

Question 12

Without collective identity surrounding singular big artists, and with the thousands of songs being released onto streaming platforms every day, the argument runs that streaming has commodified music and relegated it to the background, rather than holding the cultural prominence it once did.

More than a third of consumers stream music in the background while doing something else, while less than a quarter stream music as a primary activity.

Answer 12

Source: https://midiaresearch.com/blog/why-music-underpins-the-culture-of-our-new-normal

Question 13

Spotify’s latest Culture Next report — 72% of millennial UK respondents see audio as a mental health resource, and that 64% of UK Gen Z respondents felt “more centred and generally happier” when listening to their favourite music on a daily basis.

Answer 13

Source: https://culturenext.byspotify.com/en-GB

Question 14

The pandemic changed media consumption. Consumers acquired an extra 12% of entertainment time and though everything was up, some categories grew much faster than others. One of the biggest gainers was spoken word audio, with podcasts and audiobooks seeing dramatic rises and while music hours grew too, the increase was below 12%, which means that music lost share. In the current entertainment environment of plenty this may be an academic concern, but when life returns to some form of normality (commutes, going out, gyms etc.) some or all of that extra 12% of entertainment time will go, which means that growing by less than the market average could translate into decline.

Answer 14

Source: https://midiaresearch.com/blog/music-and-podcasts-are-competing-for-the-same-time

Question 15

In developed markets, growth for music streaming is slowing in both consumption and audience. Music is just one lane in the audio market and its fortunes ever more intertwined with podcasts and audiobooks.

Spotify’s total consumption is relatively flat on a per user basis, with podcast growing fast, which means the average Spotify user is listening to less music. As Spotify is both the leading music streaming platform globally and the most widely visited podcast platform, what happens on Spotify has a big impact on the wider market.

Answer 15

Source: https://midiaresearch.com/blog/music-and-podcasts-are-competing-for-the-same-time

Question 16

Streaming is where musicians build and find their audiences; streaming metrics are the success currency that drives or helps shape most of everything else that happens in their careers. Yet the economics for most middle class and independent artists do not add up. Even the ability to get bigger live audiences thanks to streaming does not help pay the bills for most emerging artists as they are still in the stage of their careers where they lose money touring.

Answer 16

Source: https://midiaresearch.com/blog/how-bandcamp-could-really-fix-the-music-business

Question 17

The culture of creativity is being defined by platforms and the audiences on them. Platforms are reaping the rewards of modern consumption and driving the growth of the global industry. Global audiences theoretically give any artist a shot at putting their music in front of millions. However, as the UK Government’s DCMS enquiry put it, the talent behind this growth is losing out. Funds for creators seems the be the strategy of the hour, examples being:

● Facebook’s $1 billion creator fund

● YouTube’s $100 million YouTube shorts creator fund

● TikTok’s $200 million creator fund

● Snapchat $1 million per day pay-out to creators

● Spotify Greenroom creator fund

Answer 17

Source: https://midiaresearch.com/blog/what-is-an-artist-in-the-age-of-creators

Question 18

Many could argue that there is less artistic merit in the processes that modern tools facilitate. The reality is that now anyone can be a creator, but being an artist is becoming much more than just music. Of course, it has always been so to some degree, but the balance of the equation is shifting. Modern day artists succeed with their talent to simultaneously market themselves, build audiences and create fandom.

KSI has not spent the past decade being an artist. Despite this, he has been building fandom for his artistic endeavours. This has grown into a large audience and a platform to capitalise on their attention, which is driving his growing success as an artist. He is not the first influencer to take on the music industry, and won’t be the last. Ultimately, in the age of creators, successful artists build fandom – a much scarcer resource than great music in today’s music industry.

Buliding a great brand is important.

Answer 18

Source: https://midiaresearch.com/blog/what-is-an-artist-in-the-age-of-creators

Question 19

Record labels often like to compare themselves to venture capital (VC), taking risks, investing in talent and sharing in the upside of success. While that comparison is flawed, its relevance is going to increase, but not in the way many labels will like.

Firstly, where the comparison breaks down: VCs invest money early in a company’s life and then earn back if / when a company has a liquidity event (e.g., it sells, it IPOs, a new investor buys out earlier investors). But record labels invest and then take money immediately. As soon as the artist is generating royalties, the label is earning a return, it does not have to wait until some distant time in the future. What is more, even after the label no longer has an active relationship with the artist, it continues to earn. So a record label basically has a perpetual liquidity event. Which means its risk exposure is lower than a VC. Even if the artist flops, it will have recouped at least some of its outlay. VCs can be left with nothing if a start-up fails.

Labels as VCs

But where the label / VC analogy works best is when looking at how the role of labels will evolve. VCs are typically earlier-stage investments so start-ups use VCs as launchpads for future success, a means to an end. Labels will likely have to start getting used to the same dynamic. Ever more artists are going their own way, launching their own apps, labels, using D2C sites. But the reason why record labels are around (despite artists being able to create their own virtual label from a vast choice of services - see chart) is that artists still need someone to build their audience (at least in most instances). The investment and A&R support help too, though those services can also be tapped into ad hoc from standalone companies.

This value chain dependency is what has helped labels to stay relevant despite dramatic industry shifts. But the next stage of this evolution will see a cohort of artists viewing labels as accelerators rather than long-term partners. They will use labels to establish their fan bases and then engage with them on their own terms, sometimes with labels, sometimes not. This is of course already beginning to happen, but it will become an established and increasingly standard career path.

Major labels like to think of themselves in the business of creating superstars. But as the very nature of what a superstar is dilutes, more artists will simply see labels as a launch pad. Start-up Platoon positioned itself as an artist accelerator and was bought by Apple. In many respects it was ahead of its time, pioneering a model that labels will increasingly find themselves filling, even if it is not their preferred role.

Labels as artist accelerators

The repercussions will be massive. Labels, especially majors, will often over invest early to establish an artist. The business model depends on recouping the investment on future earnings. But with ever more artists looking to retain their rights, the labels only have a finite window in which they can monetise those rights, unless they negotiate term extensions. What this means is that labels are becoming a utility for many artists, a stepping stone while their brands are built for them. Like it or loathe it, savvy, empowered artists will increasingly see labels as the launchpad for future independence, and in this respect, labels are becoming more like VCs than ever.

As disruptive as this paradigm shift will be, record labels will find a way to adapt, just as they have to streaming, TikTok, label services, distribution etc. The difference here though is that this may represent a complete recalibration of the role that record labels play in the music industry value chain. This will mean a riskier, more limited role for labels, which in turn will make them more like VCs than they may be comfortable with. Turns out that modelling yourself on VCs can be a risky business in itself.

Answer 19

Source: https://midiaresearch.com/blog/labels-are-going-to-become-more-like-vcs-than-they-probably-want-to-be

Question 20

Be very careful to only purchase ISRC codes from official ISRC Managers. ISRC Managers appointed by the US ISRC Agency, the Recording Industry Association of America (RIAA), are the only companies approved to assign ISRCs on behalf of the owner of a recording. These companies have guaranteed that they will abide by the Procedures for Assignment of ISRCs by ISRC Managers.

Other companies claiming to assign ISRCs on behalf of their clients are not authorized to do so and the ISRC’s they generate are invalid and risk collisions with codes issued by authorized registrants and ISRC Managers. This happens when fake ISRCs are issued or legitimate ISRCs are re-used. This results in erroneous metadata being disseminated across the digital music ecosystem, which can result in missing or misallocated royalties and disputes.

TuneRegistry is an all-in-one music rights and metadata management platform that’s also an approved ISRC Manager offering free and discounted ISRC codes included in its subscription plans. You can quickly and easily obtain ISRCs for each of your versions/mixes inside your account and immediately use the ISRC with any digital distributor to get your cover song distributed. You can view a complete list of approved ISRC Managers at http://www.usisrc.org/managers/index.html.

Answer 20

https://www.tuneregistry.com/blog/how-to-legally-record-and-sell-a-cover-song-in-3-steps