Nov 16, 2017 Allen Bargfrede
“Alexa, play some Tom Waits.”
That’s how my children will grow up interacting with music. Streaming has changed the game, forever, and in a good way.
In my earlier post for Slush, I discussed the return to growth for the music industry, attributed primarily to the significant increase in streaming revenue. According to IFPI’s Global Music Report, streaming now makes up the majority (roughly 60%) of digital revenue and for the first time, digital revenues make up 50% of the share of total recorded music industry revenues.
Rough estimates show that if 10% of the global population eventually subscribes to a music streaming service, the music industry’s worldwide recorded music revenues will far exceed its best year ever in 1999. In fact, a recent Goldman Sachs report predicted that streaming will hit $34bn in revenue in 2030, as part of a healthy $41bn industry.
Now, with voice interactive control and robust data analytics, streaming services are showing they are not sitting idly by in a continuously evolving technological world. Sonos recently released their own platform for voice-activated music. Streaming services are making a major effort to provide data and analytics to artists to help them make decisions about how to market and promote their careers. Some are going even further: Spotify recently launched its RISE program, which will provide “on-platform, out-of-home, digital and social promotion” for developing artists.
Beyond programs like RISE, as the market evolves, we may see Spotify and Apple take a Netflix approach and start pushing out exclusive in-house content on their streaming services. There is both fear, and hope, they’ll become their own record labels, investing in acclaimed creative content – the next step beyond some of the recent “exclusives” on each service.
In fact, this is a key challenge for services to sustain themselves – they must find a way to differentiate.
Beyond exclusive content, curation engines and desktop and phone interfaces are key places where users can see large differences between the offerings. Audio quality could become a factor in tiered premiums as technology develops and the amount of audiophiles grows. (TIDAL already offers a hi-fi version, at double the monthly cost and to which I subscribe, but many dispute whether listeners even care about audio quality in today’s market.) We’ve also already seen a big push to include streaming music in home cable/internet packages, or programs like Amazon Prime. With Apple and Spotify at the front of the game, these are all options for any service that wants to grow into a major brand, or merely develop a niche.
Finally, no discussion about creating a sustainable streaming economy would be complete without a mention of the many disputes about payments. Concerns continue to exist about how artists can be paid from streaming service. Some artists are making a fortune from Spotify streams (Drake is said to have made an estimated $33,840,000), but Pharrell Williams is unhappy making very little off from “Happy” on Pandora ($2,700).
Average streaming royalties paid currently range from $0.005 to $0.009 USD per interactive stream, depending upon the tier. Non-interactive pays much less, at as low as $0.0017 per stream. Services without a free tier (Napster and TIDAL) have the highest average payouts, since their numbers are not brought down by advertising-based revenue. One thing is true: transparency between streaming services and labels and publishers and then onward to artists and writers must increase, and the industry seems to be acknowledging this.
Blockchain may be a catalyst to solve some of the rights and payment transparency issues and a fair sensible payment/information distribution method. Further, converting more users from free to premium tiers will increase the total amount of revenue to be divided.
With music industry total revenue growing for its second consecutive year within the last 20, I am hopeful (and confident) that this growth will continue, and exponentially. YouTube will likely become the penultimate freemium service with by far the most users, reaching users in countries that do not yet offer subscription services or where uptake has not yet occurred. Regardless, streaming is what excites me most about the potential for tomorrow’s music industry. The market has finally reached a critical mass, and will continue to grow at a healthy pace over the next 5-10 years, and that means very good times ahead for the recorded music industry.
Slush talks a lot about the different phases of founding a startup. We talk about building, scaling, growing, recruiting, funding and everything in between. All of these things are essential, but to understand the relevance of everything we do, we should also look into the very DNA of what a startup is and where they […]
Helsinki-based Yousician, the world’s leading music education company, has been on an almost decade long journey of learning about gamifying, community building, and of course, learning new instruments. CEO and co-founder Chris Thür has been leading the charge towards the company’s goal of making musicality as common as literacy, and overseen lots of change in […]
Last week, a new era for Slush Global Impact Accelerator kicked off. Slush hosted a workshop for startup hub managers – coming from five different countries – in Botswana. For the past three years, the GIA team has been running the program all the way from Finland. However, now we’ve decided to take off from […]
Day 2 at Slush Tokyo 2018 started with a bang, as IDEO Partner Tom Kelley walked into the Dome to have a Fireside Chat with Slush Tokyo CEO Antti Sonninen. The two discussed Slush and design thinking, and Tom took further questions from the audience during his Q&A session at the Slush Cafe. IDEO Partner […]
Among all the Swedish startup success stories, the story of Truecaller definitely stands out. Their app has turned the traditional phonebook into a practical call screening app, and their founder and CEO Alan Mamedi started it all at 25 years old. Being a smart man, he has taken the opportunity to learn. He now wants to share […]
After Al Gore’s phenomenal Opening Keynote Speech, Founder Stage was taken over by some of the leading names of European tech. Niklas Zennström, Brent Hoberman, David Thevenon and Sophie Bendz came together to talk about the European entrepreneurial ecosystem and the importance of daring to address the biggest problems in the world. What do the […]
The second day of Slush Music has passed bringing the entire event closer to its end – only the party remains. During this second day, we’ve had the chance to focus more on data and blockchain, future visions for the music industry and artists. Wednesday morning began with a great talk by Scott Cohen on […]
Who’s in charge here? That question has been asked all over Slush Music this year. Who’s in charge of rights? Who’s in charge of data? Who’s in charge of the industry? While these conversations are going on, it’s been reiterated constantly that the Nordics are known for community and to dismantle the traditional hierarchical structure. […]
Scott Cohen, Founder of The Orchard, says he has people come up to him all the time, saying the same thing: “The music industry is broken, but I know how to fix it.” We’ve all heard this, at least the first part. Many people seem displeased with the state of the industry today. Cohen, on […]