There are so many unknowns in the world brought about by COVID-19, and unsurprisingly, how the recorded music industry will come out the other side is one of them. Luckily we live in a world of data these days, but sometimes it’s not easy to tell what we’re looking at until we gain some distance from situation and it appears we have a ways to go before that happens. That said, it’s somewhat certain that the recorded music side of the music business will undergo some big changes and will probably look different by the end of the year. Let’s examine what we know today, and how that might influence how things could play out.
The World Of Streaming Music
One of the surprises of our imposed isolation so far is that music streaming hasn’t taken off off the way everyone anticipated. In fact, streaming in the U.S. is actually down by 9.9% during the first four weeks of quarantine compared to the first 10 weeks of the year. In the meantime video streaming, YouTube and television viewing has gone through the roof.
What this means is that auto commute time listening has more of an effect on streaming usage than anyone expected, and when given the choice, consumers will always turn to content based around picture rather than audio only.
The car is and always has been the perfect place for music consumption as it’s an audio-only environment. Take people out of their cars though, and they prefer their content with picture. The same goes for work, where music consumption is rather passive. With more people staying at home, many find there’s actually less time for music listening as there are already many new distractions so music takes a back seat again.
While it’s true that in a recent survey 24% of participants added another subscription while in isolation (38% of those are music), it was also found that most of these were in households with children. That means that the new subscription was a way of keeping the little ones occupied. When the isolation ends and the kids are back at school, will those subscriptions continue?
The Major Record Labels Take A Hit
With the majority of revenue of the major labels coming from streaming, you’d think they’d be somewhat insulated even with the slight usage downturn. That might be true if there were no other income streams, but a label sees income from physical sales, downloads, and music licensing (which has taken an especially big hit), not to mention a miscellaneous category that encompasses everything from sponsorship, fan clubs, artist websites, merchandising, touring, concert promotion, ticketing, and artist and brand management, with all those showing big revenue decreases as well. Definitely not good for the bottom line.
Then there’s the fact the labels and streaming services have a symbiotic relationship that revolves around new releases. Streaming services primarily act as discovery platforms for users to find new songs, but the COVID-19 crisis has turned that use on its ear.
During isolation labels have been holding back new releases while streaming music users have increased listening to older music. That poses a potential problem in that if the economy gets much worse, streaming users might start to eliminate what they feel is an unneeded expense, given that they can get pretty much the same thing on a free tier or maybe even on a bundled service that they’re already paying for.
Holding back releases now also means that there will be a glut of new music later when things return closer to normal. People only have so much time in a day to listen, so that means their time will be spread out across many releases instead of concentrated on just a few. Is that better or worse? Depends on your point of view.
Here Comes 2021
All that leads to a giant reset in 2021. Fewer people will be commuting as more people continue to work from home. That means less regular music consumption, at least until the new norm has been reached. Many of the mom and pop record stores won’t survive, which means a downturn in physical sales even greater than expected (vinyl was already facing new challenges, thanks to the Apollo Masters fire). Many advertisers won’t be returning to TV, which means sync income will continue to slide. Radio will change substantially (it’s happening already) as the largest station groups are hurting so much it could find both iHeart and Cumulus in bankruptcy. That will mean they’ll be shedding radio stations (hopefully this will be a boon to local radio). Radio promotion, which is still important, will have to be approached differently by the record labels.
If this sounds like gloom and doom, keep in mind that the crisis is just accelerating things that probably would have happened anyway. The recorded music business is actually in way better shape than the live music business, which will take much longer to recover and most likely won’t approach its past peak for a long time.
But that was a look at the major labels. Expect the indie labels to be much more resilient. They’re always working on a shoestring anyway, are nimble and know how to adapt. Many with revenue that revolves around physical product do much of their business direct to consumer, so record store and distributor closings might hurt, but probably won’t be a fatal blow.
And speaking of resilient, that’s always described the recorded music business as a whole. Whenever a label, retail store or artist falls, there’s always another right there to take its place. The business has an undeniable draw for those who are passionate about music that goes beyond what’s expected from other industries. Those that are new to the business have nothing to compare it with and go full speed ahead. Those who have endured its slings and arrows can never give it up.