BUSINESS
New allies assure a strong future for music industry T
HE RECORDED music industry’s struggles in the early years of this century are well documented, with global revenues falling from $23.6bn in 2001 to a nadir of $14m in 2014 — a loss of nearly 41% of the market’s value. However, as streaming’s impact finally began to outweigh the decline in physical and download sales, the industry returned to growth, with even COVID-hit 2020 seeing annual growth of 7.4% growth, taking the market back to $21.6bn. Streaming may be the driver of this comeback, but the wider context is the music industry’s willingness to embrace new technologies, new business models, and an ever-widening array of platforms and startups with which to collaborate. For the industry’s largest companies, the major labels, a trio of new monetisation frontiers stand out in particular: social, fitness and gaming. Social is a category that includes the most established social networks and apps like Facebook (now Meta), Instagram and Snapchat, as well as emerging platforms like Twitch and TikTok. As these companies have signed licensing deals, so they have started to generate meaningful revenue for the music industry from user-generated content, with fans able to use music clips in their posts. In Universal Music Group’s first earnings call after going public, in October, its executive vice-president of digital strategy, Michael Nash, says that video and social platforms “represent about two thirds of total ad supported business for Universal Music, and they’re both growing really fast”. Nash says that while the music industry has traditionally thought of ad-supported music as simply “a customer-acquisition tool, a lower-value substitute for subscription” in the audio streaming world, now it is emerging as an exciting growth area in its own right. “With the evolution of social and video, music is now endemically tied to the growth of large global platforms. We’re very excited about that and we think there’s inherent growth potential there.” Twitch is an example of a new platform that is establishing itself as a new revenue model for music, where streamers broadcast for free, supported by ads, but also make money from viewers paying for channel subscriptions and for “bits and cheers” — Twitch’s tipping economy. In April, Twitch commissioned a study from former Spotify chief economist Will Page on how its “rockonomics” work. “It’s live, everything else is on-demand. It’s long [form], everything else is short. It’s first-party and user-created content, not user-generated content. UCC not UGC,” Page says. “Twitch is like driving a taxi. If you’re not driving the cab, the meter doesn’t move. On Spotify you can make money while you’re asleep [because people are streaming your music] but Twitch is
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Streaming, new tech and new business models have conspired finally to take the music industry out of a slump that set in a couple of decades ago. Back then the industry seemed to be in terminal decline but, as Stuart Dredge reports, you can’t stop the music MIDEM DIGITAL EDITION NEWS
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NOVEMBER 2021
