MONETISING MUSIC - 1

New allies assure a strong future for music industry

Roblox’ avatar lineup

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

THE 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

Universal Music Group’s Michael Nash Warner Music Group’s Oana Ruxandra

Will Page : “On Spotify you can make money while you’re asleep, but Twitch is very different to that”

very different to that. If you don’t grind away on your livestreaming channel, you don’t make money. Live [concerts] work that way as well.” Fitness is the second new frontier that is exciting labels in 2021, buoyed by the growth of Peloton (worth more than $27bn at the start of November), the emergence of Apple Fitness+ and a thriving ecosystem of fitness-tech startups — all of which use music as a crucial element in their services. Peloton in particular has doubled down on music partnerships, including expanding its deal with Beyoncé in October 2021 to create a new series of workout classes featuring her music. Meanwhile, one of the first moves made by Facebook after its recent corporate rebranding as Meta was to acquire startup Within, developer of music-driven virtual reality fitness service Supernatural. That was already one of the first VR fitness apps to license music from major labels. Its founders said the acquisition will bring “even more music, more creative ways to work out, more features and more social experiences for VR”. This is an example of the win-win scenario that the music industry is hoping for: where new opportunities like fitness tech bring new revenue to rightsholders, but where that music also creates value for the tech sectors — whether that be through acquisitions, public company valuations or simply growth in their users and revenues. Gaming is the third sector riding high in the industry’s priorities, from partnerships to hold virtual concerts in Fortnite and Roblox to licensing deals for the full range of console and mobile games, building on the long-established sync business. Oana Ruxandra is chief digital officer and executive vice-president, business development, at Warner Music Group, which has been particularly keen to strike partnerships and investments in the gaming space — including a flagship deal with Roblox. “We have to as a music industry be open and nuanced and flexible in our approach… we’re building out the right ways to license and provide real revenue opportunity, as we’re also building out these spaces,” Ruxandra says. “We really do think these spaces, these metaverses are going to create opportunity. They’re going to be where people exist. They’re going to be where our artists and fans exist and so today, right now, we’re really focused on experimenting and building the capabilities, building the know-how.” Ruxandra will be speaking at Midem Digital Edition 2021 to offer more insight into WMG’s strategy. Social, gaming and fitness may be the three flagship new monetisation opportunities for music in tech, but the industry is exploring a host of other paths too. Labels and streaming services alike are expanding rapidly into high-potential markets like China, India and Africa, while artists and managers are exploring the growth of livestreaming and its potential to form a new hybrid live music market alongside physical concerts. Meanwhile, there is burgeoning growth of subscription-based superfan communities through established crowdfunding platforms like Patreon, as well as newer startups like Fanbase and Fave — the latter of which has already enlisted the famously-enthusiastic fandoms of Taylor Swift and BTS. Plus there is 2021’s biggest tech buzzword, NFTs, and the potential they bring for artists, labels and music brands alike. Midem Digital Edition 2021’s focus on embracing new monetisation frontiers comes at the perfect time: there is a lot of embracing to be done, and willing arms within the industry. n

Peloton has doubled down on music partnerships