12 years in, how has the streaming economy developed so far?
Recorded music today is close to its pre-piracy peak for the first time in a long time, a testament to the growing adoption of streaming services by both labels and consumers. It accounts for 50% of the global music industry revenues and combines earnings from streaming, digital downloads, physical sales, sync revenues, licensing, and such.
- Global revenue growth is at an 8.2% growth year over year;
- 2019 is the fifth consecutive year of growth following the 2014 bottom;
- Streaming share of revenue is 56.1% of the total revenue of recorded music;
- 42% of the streaming revenues derive from the paid subscribers and about 14.1% comes from ad-supported revenue in the free tier;
- There was a 24.1% growth in paid streaming revenues this year, accounting for 341 million paid subscribers (
Pretty substantial, but still some space, says Josh);
- There was a 22% growth in overall streaming revenues, and paid streaming subscriptions have increased by ⅓.
To give a wider context, Josh notes that physical sales have declined and live music, which accounts for the other 50% of the global music revenues and derives from sales of tickets and live performances, is the main source of income for the average artist. To make sense of this complex scenario in this panel, we invited András Bodrogi, YouTube consultant and specialist at The state51 Conspiracy, Robin Vincent, A&R at The Orchard and former Deezer, and Terry Tyldesley, director of Kitmonsters and board member of Resonate co-op.
THE MAIN DRIVERS OF THIS GROWTH
What is driving the growth of streaming revenues? The participants follow three different paths to answer this question: for Robin, it’s the young subscribers (15-25 years old), both with paid and free subscriptions, the generation that is been listening to urban music the most. Terry focuses on geographical areas, mentioning that these increases are located primarily in Latin America and Asia, noting that there is a lot of potential in the blank spaces of the map. On the other hand, András believes that the fact that artists are becoming more aware of the potential monetization of these platforms, they are providing them with much more content, which can also drive this ecosystem’s growth.
IS THERE A SLOWDOWN IN STREAMING REVENUE?
There’s an ongoing debate about whether streaming overall revenue is slowing down or not. What’s the verdict? András notes that this depends on the markets, being that emerging markets are experiencing different kinds of consumptions and behaviours. Though there was a decline in revenue due to the pandemic, the YouTube consultant hasn’t experienced any radical decreases in ad-revenues. Robin acknowledges that the number of new subscribers is a bit lower in markets like the US, UK or Scandinavia, but the number of people subscribing hasn’t slowed down and keeps growing, believing that this tendency is not likely to change in the future. Like András, he also notes that there are many emerging markets in the streaming industry which will boost these numbers, such as Africa and the Middle East, although in these markets the music consumption mainly comes from the free tier of music streaming.
WINS AND LOSSES IN STREAMING
If the streaming revenue is growing, does this mean that every part involved in this ecosystem is benefiting from it? Not quite. Emerging artists are one of the biggest losers in this equation, particularly in the context of COVID-19. Terry mentions a research from Featured Artists Coalition in the UK that notes that 90% of these artists’ key revenue comes from live, followed by merch, then, at the bottom of the list, streaming and royalties. But this is a problem affecting bigger artists as well: it is known that Björn Ulvaeus from ABBA, who is also the president of CISAC, has actively criticised streaming’s current model, advocating for user-centric payments.
The three intervenients instinctively answer: It’s really complicated. For one, Terry says that there’s a lack of transparency in the system, so
it’s the special analysts who are the ones able to calculate it based on their insights market knowledge. From what is able to know, the rate varies, with Amazon and Tidal at the top, YouTube towards the end and Spotify in the middle. The rate also depends on the number of subscribers, the number of streams on each platform, or the deals between each label and platform, as Robin and András explain.
Now, if we want to be more specific: for an artist starting today, just distributing their first album, what percentage of the revenue can they expect from streaming? Again: it varies because of the specific deals with producers, labels and distributors, but also because of other factors such as the dimension of the artist’s fanbase. In other words, it’s all about the food chain, says András, and how many intermediaries there is between the artists and the streaming services. He estimates that an emerging artist will generate around 50% to 60% revenues from digital, being that a huge portion of it will come from YouTube instead of Spotify, given there is more options to connect with fans on the first service than on the second, who has just released a Spotify for Artists feature.
IS THERE ROOM FOR CHANGE?
A lot of streaming platforms have been struggling with profitability due to their unsustainable models, as Terry and András state. So, where does this leave the artists? Is there a way to increase their payments? Robin insists on the potential new subscribers, but also on the need to develop new algorithms and improve some marketing aspects. Likewise, given the fact that these platforms are now distributing different formats of content, such as podcasts or videos, András believes that, if the contents are well monetised, artists will diversify their streams of revenue.
Terry has a different point of view: decentralisation instead of consolidation. If we consolidate the existing model,
the one pattern we are seeing with the streaming is that in quite lot of organisations you’re getting a real sort of blandification, because it’s encouraging very casual listening, which endangers music that isn’t profitable or algorithm-friendly.
And who has the biggest negotiating power at the table to enable change? Artists and fans, Terry believes. Records companies have the potential to change deals and percentages, but artists have the power to take their fans somewhere else if they want or if they have access to their fan data. Moreover, artists are increasingly organising and
collaboration between artists is, potentially, a huge powerful thing. András backs up Terry assertion, although he thinks the biggest power comes from
collecting societies, author and composition related right holders and their agencies, without ignoring there is a massive amount of interests of the majors difficulting further changes.
In order to stabilize the economy, should there be a greater mobility of artists moving towards independent distribution?
Going DIY is a massive challenge for artists today, says András. In order to optimally manage the rights and maximize revenues, artists must spend a lot of time trying to understand how these platforms work. So, András thinks that, in the long term, artists need some kind of help, being it from a distributor or a consultant.
Having that said, the possibility of being independent and work with bigger distributors is something that might enable artists. Picking up from The Orchard’s experience, which offers an alternative model to traditional distributors, Robin says that, today, artists can benefit from the expertise of such companies without losing ownership of their work, so they are becoming keener to this work dynamic. But while giving more flexibility to artists is good, there is a fundamental problem of artists not getting their fair shares, Terry remembers, so it’s.fundamental that artists also own the technology they use.
LET’S TALK CORONA: WHAT HAS CHANGED WITH THE PANDEMIC?
Coming from the side of music-related digital and online content, András affirms that
the last two months were actually the golden era of digital-related music content for me, because there were so many creative ideas being developed with limited resources, livestream included, which challenged the services to rethink their monetisation models or lack of them. A counterpoint to this is the fact that people aren’t used to pay for livestreams, as Terry alludes. For Robin, while there was a decline in streaming consumption at the beginning, it was equivalent to the way people listened to music in the weekend before, so it’s not a drastic change. However, he finds that it’s great to see the rising support of local artists, something that The Orchard is also working on.
But, as Terry insists, it has been a “very rocky road”, and that artists have seen their income totally dry up during this period. Nonetheless, there has been a great reexamination at the moment of values not just in streaming but also in aspects of our economic and personal lives, so, for Terry,
that is where maybe a lot of changes are to be seen. One good example of this is the campaign Broken Record, set up by songwriting academy The Ivors and by the musician’s union to fix streaming, that’s been getting a lot of extra traction with the pandemic.
WILL 2020’s IFPI REPORT SUGGEST A DECREASE IN RECORD MUSIC REVENUE?
Time to predict the future: that
what will the global stats say about this year’s revenues? Robin firmly believes that revenues will increase in all digital aspects, as opposed to live music revenues, so the cessation of live music activities will affect global music revenue. András, on his side, says that it will probably be a decrease in revenues related to this couple of months which, hopefully, will catch up again this year. Although it’s hard to predict what is going to happen, for Terry, the landscape will be totally different next year because of the economic trouble we are heading into on a global scale.
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