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Top 5 Music Industry Developments of 2020

1. Particular areas of the industry impacted by COVID-19

2. The live sector shift to focus on talent and technology during recovery period

3. Development of the streaming market

4. Music marketing and the importance of content and algorithms

5. The COVID shutdown and increased direct-to-fan opportunities



I recently took part in CMU’s webinar on the developments within the music industry throughout arguably one of the most chaotic years of the century. Here’s an insight and development on what I learnt:


1. Particular areas of the industry affected by COVID-19


The Live Sector


The impact of COVID varies greatly between the different strands of the industry but it is no secret that the pandemic has been catastrophic for the live sector. COVID restrictions on public gatherings and international travel mean much of the sector have been in total shutdown since March. Some socially distanced events and performances have just about managed to keep their heads above water but profits amounted to increased happiness of fans as opposed to increased income. Organisers were faced with significant losses if they weren’t lucky enough to break even.


Live Nation reported their Q2 revenues were down 98%, a dreary statistic to say the least, which is not getting much happier with Goldman Sachs’ prediction that live sector revenues for 2020 will be down 75% on its original estimates. In their October report, LIVE (association for live music, venues and entertainment) estimates that UK live sector revenues for 2020 are down 81% with almost zero income for many live music businesses since March and 170,000 UK live music jobs are at risk.



The Music Rights Sector

The music rights sector has been more immune thanks to digital streaming platforms. The subscription streaming model is virtually untouched by the pandemic, even if listening decreases this does not affect subscription revenue. If anything, more people are listening to music at home and more likely to upgrade to premium subscriptions.


Some music rights revenues are impacted, such as those generated from live music, broadcasting/public performance, synchronisation and physical products. Live revenues have obviously seen reductions and we have observed some decreases in broadcasting and public performance. In terms of synch, there may be less encouragement to invest in advertising and film leading to fewer opportunities for publishing, nonetheless there has still been friction. The record industry will feel the overall impact less than the music publishing sector with the continuation of growth in streaming and online sales (note the success of Record Store Day). Undeniably, digital income from the music rights sector has seen significant increases as the population hopped on the TikTok band wagon to dance and sing along to thousands of tracks - all in need of licenses.


If we look at all the money the record industry made in 2019 figures below, immediately we see that the majority of income is coming from digital platforms, which as mentioned earlier is also the only sector to see benefits from COVID. When looking at the figures on the song side we can truly understand where COVID has hit the music rights sector. The money collected from live performance, broadcasting in pubs, bars and clubs as well as synch is vastly more significant. This is the area in which we are seeing the negative impact of COVID on music rights revenues.



Music Rights Revenues: Percentage of Overall Revenues

(Global recorded music revenues - IFPI 2019 report)



Music Rights Revenues: Percentage of Society Collections

(Global song right society collections - CISAC 2019 global collections report)


To summarise, the record industry saw revenue growth slump in Q2 as a result of the original COVID lockdown but growth has escalated again thanks to the streaming boom more than compensating for those revenues impacted by COVID. Meanwhile CISAC says song rights societies will see collections slump from 20-35% in 2020 due to the hit on the live music and broadcasting sectors.



The Music Rights Sector: An Artist’s Perspective


By convention, as far as record deals are concerned, the label commonly keeps the majority of revenues but with publishing deals and concert bookings (deeply affected by the pandemic), the writer or headliner receives the bulk of profits. Unfortunately, the revenues most immune to the perils of COVID are those which give minute shares back to the artist. At least this spotlights industry conventions and how it should be growing and developing to place the artist at the center in order to fully reap the benefits of the revenue which although with the help from labels, at the end of the day, originates from their own talent.



2. The live sector shift to focus on talent and technology during recovery period


How long will COVID continue to infect the live sector? Truly we don’t know. Optimists are already planning for gigs to restart in March, hoping that a regulated festival season will resume in the summer, predicting normality by Q4 2021. Alternatively, pessimists are welcoming 2021 as another total write-off with recovery to begin in 2022. Obviously this will differ around the world with respect to deviating restrictions and improvements.


The extent of the long-term damage to the live sector, in terms of lost talent and infrastructure, depends on the level of government support and delayed recovery timings. Middle-level companies and freelancers, especially behind-the-scenes service providers are the most likely to cease trading for a significant period.



Live Sector Recovery: Loss of Talent


The live industry is a crucial platform for emerging artists to showcase their talent and COVID has affected the talent pool, however artists can exploit digital avenues to employ other fanbase building tools. The more significant loss of talent applies to behind-the-scenes. The industry will have to be incredibly focused on recruiting, restoring, supporting and training talent in terms of production of live music, booking and managing of tours etc. due to the losses incurred.



Live Sector Recovery: Loss of Companies


Ultimately, major players with the funds to weather the storm (government funding or access to loans and investment) could benefit with less competition in the middle of the market after the pandemic. The likelihood of further consolidation around the larger venues, promoters and ticketing firms is high. Although, interestingly when we turn to the booking agents and talent agencies we are likely to see the opposite. Many of the talent agencies who have previously bought out smaller agencies have been forced to make vast redundancies, particularly in the US. Due to the function of this particular market - artist’s mostly signing to individual agents as opposed to companies - once recovery begins, individual agents are in a strong position to launch their independent businesses.



Live Sector Recovery: Technology


The recovery period expects to see venues and promoters employ more technology around crowd control and audience communications.


For example, last week Ticketmaster announced the development of SmartEvent, a brand new selection of digital tools to aid the safe return of fans to live events. Created with adaptability at the fore, SmartEvent allows event organisers to modify protocols to meet the evolving needs of capacity, distancing and other logistics throughout the reopening of concerts. The technological launch has the capacity to deliver long-term implementation, establishing and developing a modern fan experience. This progression will not only become part of the live experience but also the long term music industry business model, introducing another large source of fan data.




Live Sector Recovery: Streaming


Live streaming has come of age during the pandemic. In the short term this provides an albeit modest stop gap revenue stream. For certain artists, particularly those of higher status, live streaming that has become monetised in more recent months is an excellent source of income, particularly as the costs for delivering a live stream show can be considerably less than a significant tour. For the industry at large though - venues, promoters and those involved in production - it is a modest stop gap revenue stream, generating small revenues.


However, the consensus is that there is now an appetite for live streaming that will outlive the pandemic, with live streams completing live shows. Live streaming is interesting as it cuts across the music industry, it is an intellectual property revenue stream due to content creation, it is a live revenue stream due to its format as a live show and finally, it is a fan relationship revenue stream because tickets are being sold directly to a connected fan base. This creates some challenges due to the questions surrounding which business partners are to get involved with live streams - label, publisher, agent, promoter, direct-to-fan platform? Which of these add value but also who controls the rights that are being exploited?


Live streaming exploits copyright, in the very least the copyright of the songs that are being streamed just as in a live show. It is generally being agreed that a true live stream where an artist is filmed performing onstage which is web-casted live, exploits the copyright of the song being performed. Collecting societies eg. PRS have methods implemented to collect these royalties, however, problems are encountered with global licences and live streams generally tend to be global. But extra complications arise when a show is pre-recorded which is fed to the live stream or when the live stream is made accessible post the live show on demand. In these instances, the label has rights over this content in addition to the exploitation of the mechanical rights of the song copyright which signals the additional involvement of publishers.



3. Development of the streaming market



Organising the Digital Platforms


The digital revolution of the last five years which has been significant enough to spur the entire record industry back into growth has been driven predominantly by subscription streaming, in particular, Spotify, Apple Music and Amazon. These three digital giants have been generating a compelling proportion of the streaming income that returned the industry to growth. However, certain emerging markets where local rather than global services dominate eg. QQ and NetEase in China, Yandex and VK in Russia, JioSavvn and Gaana in India, Boomplay in certain Sub-Saharan regions - these markets are becoming increasingly important, here it is not the ‘big three’ (Spotify, Apple Music, Amazon) that dominate, it is the local services.


To conclude, the global streaming market is spearheaded by the ‘big three’ and other major players such as SoundCloud and YouTube generating the vast proportion of income, but the regional services are seeking prominence in their respective emerging markets.


This is not the only diversification being witnessed, the other development is the increased importance of user sharing apps and data sharing platforms where users create videos using music which the industry in turn gathers earnings from this usage of recordings and songs. This is not a new advancement. YouTube have been doing this since the mid-2000s, they’ve had these particular licensed since the late-2000s, however this side of the platforms has picked up significantly as platforms like Facebook, Instagram, TikTok and Triller are welcoming serious licensing deals. We are starting to see these video sharing platforms as an ever-increasingly important part of the digital music industry. Over the next five years, the streaming income that is entering the music industry, to labels and artists on the recording side, to publishers and songwriters on the song side, will generate a continued high income. This is an interesting theory as these services do not compete with Spotify, Apple Music and Amazon, they complement them as extra revenue so monitoring their development is extremely important.



Evolvement of Music Marketing


As those services progress they introduce two interesting thoughts for the music rights industry. Firstly, the impact on music marketing, as generating income from YouTube, Instagram and TiKTok becomes more important, music marketeers must alter strategy to keep up evolving user preferences and tendancies.



Challenges to Right Management


There is also a rights management challenge. Once we are looking at content sharing platforms, it is harder to track the music being used and to pay the royalties that are generated. There needs to be an efficient method of distributing this money so that it is not all spent on the rights administration.



4. Music marketing and the importance of content and algorithms


Influencing the Algorithms


Over the last five years, pitching to the curators of playlists at the streaming services both in-house and third party has become incredibly significant to music marketing strategy. A placement on a popular playlist on Spotify/Apple/Amazon can result in an immediate spike in income.


When looking directly at the DSPs, algorithm based streaming is rising to the fore. It has always been in the mix, services such as Pandora have been entirely built on algorithm curation from launching. The algorithm that recommends music, whether through data driven playlists, auto-play functionality or radio functionality, is becoming more important and the services are prioritizing the algorithm. Ultimately, this digital tool is more cost effective than human curators in every market. Additionally, DSPs would argue that the user experience is better when playlists are personalized to the individual, with the additional shift to voice control and interaction (shift to Amazon Alexa) over screen tapping and clicking, the algorithm is becoming more important.


This poses an interesting question for music marketeers. Playlist pitching to date has been about finding the individuals who curate the playlists and convincing the incorporation of their clients’ tracks. But how do you influence the algorithm? Third party playlists created by media, DJs, brands and influencers are rebounding as plays resulting from song additions are capable of influencing the algorithm. Artists, labels and distributors having their own playlists can also shape the algorithms as well as encouraging fans to save new music into their personal libraries before the record is released. Fan activity has the largest impact on the algorithm, what can we do with our fan communications to encourage people to be saving and playing tracks within those platforms that will result in activity and algorithm change.


Can the music industry formally inform and influence the algorithm on a service like Spotify?


Last week Spotify announced the introduction of a new service (initially in the US) which will allow artists and labels to influence the algorithm that identifies which songs are played when users engage the DSP’s auto-play or personalised radio function. But this comes at a controversial cost. There is no upfront payment for this service but a lower recording royalty rate will then be paid on any subsequent streams that the algorithm generates, this controversy is an interesting debate in itself. Controversies aside, Spotify’s new service poses an interesting development for the music market, allowing artists and labels to influence the algorithm could potentially be a positive digital innovation.





Marketing Content


Creating a plethora of visual marketing content is now a key part of any marketing campaign. We are not looking at a single photo, piece of artwork or video for each release, there is now a demand for a profusion of content and labels are invested heavily in this with content teams solely designating to content creation. But it is not just about creating content from the label to light up digital platforms. Finding ways to encourage people on social networks to use the music in their individual videos is integral to initiate a viral response. How labels and digital strategy companies channel towards this marketing procedure is a very interesting trend, to what extent can these be achieved organically? Marketing no longer revolves solely around content creation but is extending to content seeding to encourage external individuals to create content using and building on an artist's music and the story around it.



5. The COVID shutdown and increased direct-to-fan opportunities


The influence on the direct-to-fan relationship is the greatest impact of COVID on the music industry that often is not talked about as often as streaming and user-generated content etc. Traditionally, artists relied on business partners and infrastructure to get their songs heard by the fanbase. Two levels of infrastructure were required, labels and promoters didn’t have direct relationships with the fanbase, they relied on media, retail and ticket agents. Whereas in the digital age we have social media, user-generated content platforms, the artist website, email list and other digital channels that allow the artist to have a significantly direct and personal relationship with the core fanbase.



The Direct-to-Fan Opportunities


The opportunities from these channels have existed for quite some time now. Certain artists have capitalized on this, having built solid businesses within their wider artist business but the industry at large has yet to take advantage of this opportunity. The COVID shutdown has resulted in many artists engaging with direct-to-fan space in interesting ways, partly out of necessity but also due to increased demand amongst the core fanbase for this type of activity. This is yet another evolution of the industry that will likely outlive the pandemic - the direct-to-fan will continue to grow over the next year and strategy will evolve to be more in tune with the fan relationship to promote the artist and their story.



The Direct-to-Fan Challenges


While the D2F opportunities are increasing, trends in the digital market are arguably making it more difficult to connect to fans. Streaming services’ algorithms and video sharing gimmicks tend to skew towards and benefit single tracks rather than the artist who made that track. There are also logistical challenges, for example, in terms of this D2F activity how do we monetise this and develop the artist story through the fanbase? Which business partners get involved and take the lead?


Having said this, there is monumental opportunity here and we will start to see more artists, often post-partnership with management, possibly supported by a label, looking for ways to build on these emerging D2F opportunities. This is an area where the music industry could learn from newer content businesses, from the YouTube creators, the podcasters and online gamers who have proactively focused on the direct-to-fan relationship from the very start.


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