Category Archives for "Music Industry News"
The annual IFPI revue of the music business confirms what all the other studies have shown – that music is truly on the comeback trail. After years of doom and gloom, the industry has seen its first double-digit rise in revenues in nearly 20 years, all thanks to streaming. The skeptics said it would never happen, but the numbers don’t lie, as a billion dollar increase in income shows that the format replacement cycle has finally has finally taken hold.
The IFPI found that there were 112 million paying streaming subscribers, which is a little higher than most other studies have found. The predictions were that once the industry got to 100 million subscribers then the pain from the death of the CD would be lifted, and the prediction proved to be true. The fact of the matter is that this 112 million figure should be just the tip of the iceberg, as there’s still plenty of room for improvement.
One of the things that industry analyst Mark Mulligan cited was the growth of streaming in South America. When the CD was king, most of the consumer’s money went into purchasing a player, then the user bought mostly inexpensive bootlegs CDs, which meant no money returning to the artist, label, songwriter and publisher. Streaming changes the whole equation though, since most people already own a smartphone, so subscribing to a free or paid tier is more affordable. The same is happening in other parts of the world as well. Chalk that up as a win for increased revenue and royalties. It also shows why that 112 million figure is just a drop in the bucket.
Just to put this all in perspective though, streaming numbers will have to increase in a big way, as the CD revenue is about to collapse in the both Germany and Japan. Of course, it’s still a big business in the U.S. at a little less than a billion dollars a year, but expect that number to fall off a cliff soon too, maybe even in 2017.
There are still a lot of inequities when it comes to streaming royalties, beginning with the way they’re currently calculated by the streaming services like Spotify and Apple Music to the minimal payments from YouTube, but strides are being made in both areas that can change the dynamic soon. Word is that 2017 has started off a little flat on the revenue side of things, but barring some unforeseen catastrophe, 2017 will end up being another good year for both streaming and the music industry.
To say that Neil Young’s Pono download service and dedicated audio player was a failure is an understatement. The service was very late to be introduced, and by the time it became available, downloads had been swept aside by streaming. Young also underestimated the consumer market’s attraction to high-resolution, especially when the prices are much higher than what’s commonly available. As a result, the project was essentially stillborn.
You have to give it to old Neil though, as he’s trying it again, this time with a hi-res streaming service called Xstream. The problem is that the same market forces still exist, which makes the likelihood of the the service being a success a long shot at best.
There are a number of factors that make Xstream an uphill climb.
1. Most people can’t hear enough of enough of a difference between normal resolution and high-resolution material to make them want to pay the difference in price. Tidal found this out with its $20 a month streaming tier. You never hear about its number of subscribers because they’d be embarrassing. Audiophiles have no problem with paying the extra 10 bucks a month, but there just isn’t enough of them to make a significant contribution to the bottom line of a dedicated service at the moment.
2. You can’t go up against the extremely deep pockets of Apple, Google and Amazon (and even first-mover Spotify) unless you have the same deep pockets. Young himself admits that it’s been difficult finding investors to get the venture off the ground and that’s no surprise. Most seasoned venture capitalists are aware of what they’d be up against. It’s not only paying for the infrastructure of the service, but mostly for the marketing that’s daunting when in the shadow of Apple or Amazon.
3. Any of the major streaming services can launch its own hi-res tier at any time. Apple especially has been collecting hi-res masters for about 4 years now and could launch a new tier or even just raise the quality bar on its existing service, which would kill Xstream and Tidal in their tracks. VC’s are acutely aware of this, so you won’t be seeing much dough coming from Sand Hill Road (the home of Silicon Valley venture firms) to get a new streaming service online, especially one who’s only unique feature is high quality tracks.
4. There’s probably going to be some problems with the name, as there are other companies using the same name already.
But Neil Young is a music legend and he’s able to get a lot of publicity for a project almost at will, as is happening now. I have my doubts if Xtream will ever see the light of day though. In the end, you still have to have demand for a product. So far, it hurts me to say that high-resolution currently has none.
While radio airplay used to be the lifeblood of a hit (and in some cases still is), today it’s the playlist that really sets the tone for listener discovery. If a track is added to a popular list, its streams will spike and listeners will add it to their personal playlists, which sometimes adds a viral element that spreads to playlists on other networks as well. What’s more, hot playlists are now watched by radio programmers to see both what’s trending and what’s not.
Not surprisingly, pay-to-play has come to the digital age as a new form of payola now attempts to influence what consumers listen to. Playlist promotion, or “playola,” has become a big part of the promotional campaigns for many managers and labels. In fact, prices for playlist promotion can be as little as $100 to a small blogger with a modest following, to as much as $10,000 for a six-week campaign for a major playlist owner. A quick Google search will find dozens of promotion companies that specialize in getting your songs on playlists just about anywhere.
Just like in the old days of radio promotion, competition is now fierce for these playlist spots, so don’t be surprised if the prices continue to rise.
While the playlist culture has been great for music discovery for the listener, it turns out it hasn’t been that great for artist development. Where before listeners were getting to know the artist’s music via multiple songs on an album, that’s all changed as streaming has made the business more song-driven instead of artist-driven. As a result, songs tend to come and go faster, as do artists. The good news is that means there are are always spots open on a playlist for new songs. The bad news is that it’s more difficult for an artist to get long-term traction as a result. Check out this post to improve your chances of getting placed on a popular playlist.
We keep reading about Spotify having more paid subscribers than just about any other service at 51 or so million, but it looks like Apple Music is not only catching up, but surpassing the service in many areas. A new survey from the media measurement company Verto Analytics actually puts Apple Music at the top of the list for monthly unique users in March, with Spotify coming in third behind Pandora. The study looked at adults over 18 only in the United States.
Apple Music is now reported to have 32 million subscribers, which is a huge jump up from the 20 million that was reported only at the beginning of the year. What’s more, it boasts almost 41 million unique monthly users in the US in March, which topped all other streaming services. What was interesting is that the top stickiness (the time spent on a listening session) went to Spotify at 25%, while it also topped out the monthly sessions per user at 51. Amazon Music came in at a strong 22% stickiness for second place, followed by Pandora at 21% and Apple Music at 19%.
Interestingly enough, Tidal was nowhere to be found among the leaders of this chart, despite having more publicity than just about any company not named Spotify.
What this shows is that while Spotify may have the worldwide lead in subscriptions, Apple is catching up fast, and Amazon Music may be even faster (with a reported 65 million subscribers thanks to its Prime service and Echo speakers). The disadvantage for Spotify is that its up against some deep pockets in Apple, Amazon and even Google (which came in at #9 on the chart below). These companies aren’t that concerned with making money from music as it’s not their core business, which makes them very difficult to compete against over the long haul.
The prediction here is that by the end of the year Apple Music and Spotify will be about equal in paid subscribers, but look for Apple to take the lead next year after Spotify goes public and its investors cash out.
It could be a sign that digital music aggregation has either grown up or is adopting a label model, but regardless of the reason, TuneCore has launched a program called TuneCore Direct Advance that offers automated advances to artists signed to distribution or publishing deals. This is certainly a first for this arm of the industry, and adds a major missing factor to the DIY aspect of digitally distributing music.
A press release from the company states, “From recording new material to purchasing new equipment to funding a tour, TuneCore Direct Advance provides a simple way for artists to access advances at their convenience, 24/7 and on their own terms. In addition, this new advance model does not require artists to pledge ownership of their music, which is often the case with many competing services. With TuneCore Direct Advance, independent artists can have full control of their finances while still maintaining total creative control of their music.”
“This is a one-of-a-kind integrated offering that gives artists a hassle-free, reliable way to access their future earnings quickly and easily, eliminating the difficulty often associated with obtaining advances,” says Scott Ackerman, CEO at TuneCore.
“We are deeply invested in the careers of our artists and are committed to ensuring they have the tools and resources needed to succeed.”
The advances from TuneCore is made available via a partnership with Lyric Financial, and is available only to members in the US, and like most advances, are repaid from future sales where they’re automatically deducted from streaming and download earnings
Members can request a cash advance directly from their TuneCore Balance Page, which is based on current and forecasted earnings. There’s a one-time fee involved, but reportedly a qualified member can quickly receive the advance either through through PayPal or direct transfer to his bank account.
There are still a lot of unknowns about this program, like how much is the one-time fee and what it takes to qualify, but this is definitely a step in the right direction. Many artists prefer to see their money in a lump sum rather than small monthly payouts, so TuneCore Direct Advance is certainly a step in the right direction.
The recorded music business is rejoicing at the fact that after more than a decade, it finally has some strong revenue growth. The best part is that the growth looks like it will continue, as paying for streaming has finally gone mass market and listeners have seem the light of the benefit of paying at least a little every month to enjoy their favorite songs. That said, all this growth comes with little help from YouTube, which still pays artists at a lower rate than every other streaming service.
According to the RIAA and just about everyone else who’s done a survey, YouTube pays around $1 per thousand plays, while Spotify may pay as much as $7 for the same number. That’s a huge disparity and it’s something that all record labels have been wrestling with for some time. YouTube hasn’t been terribly cooperative in these discussions, giving a “This is all we have. Take it or leave it,” response in just about any licensing negotiation.
How does it get away with it when other streaming networks can’t? The key here is that YouTube is primarily a user generated service. If a label was to refuse a license to to the company, its songs would still appear thanks to user uploads. The label can ask for a take down, but as soon as that happens, another one, or 10, pop up. This puts YouTube in a strong position to low-ball on any licensing agreement.
Of course every other streaming service plays by different rules. Their lifeblood are the songs that they’re only able to play thanks to the licensing agreements with the labels. No license, no songs to play. Users can’t upload their own content (legal or otherwise), so the user generated nature of the way YouTube works just doesn’t exist elsewhere.
All this means that YouTube probably won’t be paying much more than it already is in the future, much to the dismay of labels and artists alike. The only good thing in all of this is that there’s some evidence that we’re reached “peak YouTube” and more and more people now prefer to get their music on a dedicated service. That probably won’t have much of an impact on your bottom line if you’re an artist though. It’s still way too little, with no sign of getting better.
Almost from the beginning of the industry, recording artists have complained about not being compensated for radio airplay. Sure, songwriters get paid, but artists and labels never receive a dime. This is a phenomena unique to the United States, since in most other countries artist compensation has long been settled. While legislation to pay artists has been put forward from time to time over the years, the powerful NAB has managed to squash it every time. However, a new bill that thinks outside the box on the subject may finally bring the broadcasters to the table.
Last week a bipartisan bill called the PROMOTE Act (Performance Royalty Owners of Music Opportunity To Earn Act) was reintroduced to Congress with an interesting twist that could make radio broadcast very interesting for a while. The bill gives a label the right to pull its music a radio station if it chose to do so. Of course, the reason that it would do that is so that the broadcaster would ultimately pay for the privilege of airing it.
This could be interesting if a label pulled its big hits off a station, but imagine if it pulled its entire catalog? On the other hand, do artists feel secure enough knowing that a large group of potential fans might never be exposed to their music?
Broadcasters have always maintained that although artists and labels don’t get paid from radio airplay, what they do receive is substantial promotion in return which could make or break a career. This has been true through the decades, and is even true today as radio is still the number one place that people discover new music. That said, with streaming music having more and more influence on the typical listener, that perspective might be changing (Ed Sheeran and Drake haven’t seemed to need it lately).
If a major radio station suddenly wouldn’t have the latest Maroon 5, Taylor Swift or Katy Perry single, would that force listeners away and into streaming’s waiting arms? If it were your career, would you be willing to risk eliminating a huge potential audience as part of the battle to force broadcasters to pay?
These are some of the deep questions for all involved, but should the bill pass (and there’s no guarantee that it will), it will make radio a lot more interesting than it is today.
As I’ve written in other posts, Spotify wants to do a public offering this year but won’t be able to do that until it signs new licensing agreements with each of the major labels. It looks like the first of those agreements has come to pass with the reported signing of Universal Music.
The fact is that Spotify was not in a particular position of power here, so had to make some concessions that under other circumstances (like not having an impending IPO to think about) it would probably not agree to. One of the biggest is that it has agreed to make new album releases available only on its paid tier, something that the company has stated it would never acquiesce to in the past. This “windowing” is for two weeks and begins today. New singles will still be available across both the free and paid tiers.
One of the more interesting reported terms is that Spotify is said to have set subscriber growth targets in return for a reduced royalty payment. No one is saying exactly what those subscriber milestones are, but the company must feel very comfortable with them in order to place it in the agreement. It’s presumed that the payments will increase if Spotify doesn’t meet those goals, but there could also be a penalty involved or maybe even an increased staked in the company.
This is only the first of the agreements that Spotify has to have in place prior to its IPO. There’s still Sony and Warners as well as Merlin for indie content. That said, one would think that the other agreements would be similar to the one with Universal Music, as most labels require a “favored nations” clause that requires everyone to get the same terms.
If Spotify can’t get these agreements in order, it could shoot down its IPO, as there would be too much future financial uncertainty for investors or underwriters to sign on. This is a good first step.
In record label executive offices across the U.S. there’s rejoicing as the latest RIAA numbers show a double digit increase in revenue for the first time in almost 20 years. The latest figures show that the recorded music market in 2016 brought in $7.7 billion, up a bit more 11% over the previous year. And guess what? Despite what the many naysayers had predicted, the growth is all because of streaming.
Streaming contributed $3.9 billion to the total revenue in 2016, which was up 69% from the year before. And get this – it now makes up 51% of the recorded music business, which is the first time it’s crossed that mark in the U.S. There’s even more good news though. There were 431.74 billion (with a B) streams counted by Nielsen Music (which includes video and audio on-demand streams), and the average per-stream rate went up to $0.0072. To put that number in perspective, that number last year was $0.00517, and in 2014 it was $0.00666.
One of the downsides of the streaming numbers is that fact that YouTube no longer reports all of its streams to Nielsen Music. Last year it began to report streaming data on artists whose music has over 1,000 views a day. That means that a lot of the streaming data is going unreported, something that’s bound to bring about some gnashing of teeth in label board rooms.
As you would expect, CD sales are now rapidly declining to the point where just 99.4 million full-length CDs were sold in the United States. Although that was worth $1.2 billion, which is nothing to sneeze at, it still marked the first time since 1986 that fewer than 100 million were sold. Top that off with the fact that downloads were down 22% last year to $1.8 billion, and you can see that it’s a good thing that streaming has picked up the slack.
The numbers show that the vinyl fad looks like it has peaked though, as sales revenue grew just 3.5% to around $430 million, based on a 1.8% growth of unit sales to 17.2 million. To put that into perspective, vinyl growth averaged 38 percent a year from 2012 through 2015, according to Nielsen Music numbers.
So overall, the music business is now picking up steam in the right direction. Hopefully the growth trend will continue.
As mentioned here before, Spotify’s licensing deals with the major labels is currently out of contract. This is a big deal since the company wants to go public this year, and that could be put in jeopardy if it doesn’t have its licensing house in order. But the labels are driving a hard bargain, not only financially but how their new music will be served up to users, and that could make Spotify tiers look different soon.
One of the things that’s already happening is that some of the hottest new releases will only be available on the paid tier (why did it take them so long to think of this?). Of course that’s an incentive for more people to upgrade from the free tier, but there may be something else coming soon that amplifies that strategy.
It’s been reported that the labels are pushing for the free tier to be for singles only that are past their release “window” (the amount of time after it’s been exclusive on the paid tier), and the rest of the album will only be available on the paid tier. Again, this makes total sense in that it’s another incentive to get users to pay.
Of course, should Spotify adopt that strategy, then you can be sure that the other streaming networks wouldn’t be too far behind.
It’s also been reported that the majors are pushing to up their stakes in Spotify in exchange for the new licensing agreements (yes, the majors all own a piece of Spotify), which could make them quite a bit of money when the company IPOs.
All this means that there’s a lot going on behind the scenes at Spotify and negotiations will get more intense in the coming days and weeks. The sooner this is all worked out, the sooner the company can IPO, something that the investors are pushing heavily for. This might not be the best thing for music consumers, but reconfigured Spotify tiers will be better for artists, labels and publishers in the long run.