Music Moguls Making More Money

With Kevin Jenkins

I love how some PR person has come up with the notion of Xennials – the people in the cracks between the X Generation and Millennials – because I reckon I’m a Xoomer. Although it sounds like someone employed by a Silicon Valley unicorn, I’m putting it forward to describe those of us born in the cracks between the Baby Boomers and the X Generation. My big brother listened to the Rolling Stones and Beatles, not me. I grew up with the Velvet Underground, The Chills, Burning Spear, Funkadelic and Congolese Soukous.

I still have lots of records and CDs, but to be honest, they’re a pain. They take up lots of space, and what do you do when the big rubber band on your turntable gets stretched (my current solution is to stare at the turntable wistfully)? My ears are so shot from going to too many bands over too long a time, that compression isn’t a biggie for me. In fact – despite owning a half-decent stereo – I mostly listen via a UE Boom.

Besides, I’m constantly listening to new stuff, and most of that – the hipster LP revival aside – is easiest found on streaming sites or digital download.

Pandora is my favourite streaming site, and I’m distressed to learn that they are closing down their New Zealand service on 30 July. I have wide tastes and can basically listen to whatever I’m in the mood for instantly on Pandora. Best of all though, I’ve discovered loads of new bands and music. The second Tame Impala album was great, but Melody’s Echo Chamber – the same guy but with a female French singer – is just as good.

Maybe if I’d actually paid something Pandora may have stayed in Aotearoa.

Music has long been the ‘canary in the mine’ for creative endeavours. Recorded music let people hear a wider range of music at home, changing social habits. We’ve moved from wax cylinders through various types of spinning discs to digital downloads. Each has disrupted what came before, and of course, mostly recently, digital downloads also led to a collapse in music label revenues.

Source: Wikipedia

The music industry finally seems to be finding a way to make money again. Ben Sisariomarch wrote in the New York Times in March that “For the last year or so, the music industry has been buzzing with optimism that its fortunes have finally begun to turn around after more than a decade of digital disruption and plunging sales. Now it has proof”.

John Gapper recently wrote in the Financial Times that audio streaming just overtook CDs, downloads and piracy for sales (Drake’s album More Life was streamed 385m times in the US alone in its first week, and his music was streamed an incredible 4.7b times on Spotify alone last year). He noted that music sales in the US – at US$7.7b – are half what they once were, but have started to grow again because of paid streaming, which is now more than half the total. Paid subscriptions are growing fast, in the developed world at least, more than doubling to US$2.5b in the US alone last year. Over 100m users now pay rather than rely on the basic, ad-funded service.

John MacFarlane, co-founder of home sound system company Sonos, argued on hypebot.com that the “sea change from ownership to access is comparable only to the invention of recorded music itself. We believe that by 2021, one billion people worldwide will be paying for streaming music”. He also argues that “what matters most is the simplicity of the listening experience”.

Gapper claims that big labels – which have consolidated from six to three – have learnt to focus on what they are good at. This means finding and developing artists, and marketing. Their scale also adds weight to their arm when negotiating with the distributors, as well as offering deep catalogues.

The real story though might be how the opposite of focusing on what you’re good at is collaborating with others on what they’re good at. For music, that has meant working with the disruptors rather than trying to compete with them.

In sum, Gapper reckons the industry is growing again because the labels returned to their knitting, put on some muscle, and collaborated with the smart new kids.

Another Financial Times article gives some numbers. It cites Goldman Sachs research that projects streaming will double revenues to US$104b by 2030. It argues that streaming is actually a high-margin business (no factories, trucks or warehouses), with about 30% of revenues going to the platform, 60% to the owners of the recording, and only 10% to the songwriters and publishers.

With good margins and growing revenues, it’s no surprise there is lots of competition. One phenomena that escaped notice for a while was how successful YouTube was, with more listeners than Spotify and Apple combined. Most listening is on its free, ad-supported tier, and royalties are lower for artists.

Source: Flickr

The Music Industry Blog asked the question “Guess Who Gen Z Prefers For Music: Spotify or YouTube?” in a blog on 29 June. A few weeks back, I talked to some friends in their 20s about how YouTube had become the channel of choice for young people, including for music. They scoffed at that, but I think I have the last laugh, well, for a wee while anyway. The Blog argued – back to the game of splitting PR definitions of generations – that Millennials are now two distinct generations.

So what’s going on? Well, 12-15 and 16-19 year olds (the “true Millennials”) have different habits to those in their 20s. YouTube – owned by Google – is the world’s most widely-used music app. 94% of UK 16-19 year olds use YouTube monthly. By the time Gen Z reaches their late teens, music becomes the dominant content on YouTube.

But YouTube is not alone. Spotify is running roughly neck and neck in the UK.

Here’s the kicker: the Blog argues that, whilst Spotify has never been a youth brand per se – instead, doing well in the 25-34 year bracket – it has become aspirational for Gen Z. As they get older and can afford its subscription service, it is on track to become the dominant platform. A March survey in the UK revealed that 71% of 16-19 year olds used Spotify weekly, but YouTube only rose slightly to 52% weekly. Not all are subscribing of course, but the trend is clear. The Blog reckons Spotify has the ‘foundations for truly sizeable growth”.Meanwhile, Pandora is not the only service that’s struggling. SoundCloud recently laid off about 40% of its workforce. Thomas Euler lays out how to rescue it in his blogpost “Fixing SoundCloud” at attentioneconom.me.

He reckons SoundCloud lost its way when it sought to include the catalogues of major labels, and hence competed head on with the major streaming services. It proved it could break new artists, but once they became popular, they looked elsewhere to monetise their fame.  He suggests instead that SoundCloud “concentrate on independent artists and become the best available service catering to their needs”. 

John MacFarlane goes even further in advocating that there is space for “specialized offerings – regional services like Saavn, specialists like SoundCloud or 22Tracks that capture otherwise inaccessible content, experience layers like Pause, and niche offerings like Mixcloud…”. Personally, I’m not so sure: it all seems like hard work to have to switch between lots of channels, the opposite of a simple listening experience.

James Medd asked an even more interesting question in the New Statesman: “Music technology has changed – but do we actually listen to songs differently?” First, he disses music critic Ben Ratliff’s assertion that the recommendation software of streaming services atrophies “the desire to seek out new songs”, preferring music writer Jeffrey Roessner’s perspective that “despite the vast libraries of iTunes and Spotify, we set iPods  and phones to shuffle: ‘we still seem to crave the spontaneity and surprise’”. That’s certainly my experience with Pandora. It’s reversed my old habit of reading about new music, then searching for it. Now I hear new music and search for articles and reviews to learn more.

Medd makes two other sharp observations. Given how closely the streaming services analyse each of our individual listening habits and use their algorithms to feed us more of what we might like, he quotes music writer John Seabrook’s question “Are you playing the music, or is the music playing you?”.

More prosaically, Medd wonders if we over-read the impact of digital disruption in the industry, concluding “Largely, however, the digital revolution has merely made things musicians could already do easier and quicker. Perhaps, when we look beyond the question of money or technology, that’s all it has done for listeners too”.

Things really do move fast in the music industry. Over the years I’ve watched friends laboriously transfer records onto CDs and then sigh as cloud storage arrived, I’ve had recommendations to use Limewire only for that to be injuncted, and so on. Currently, I use the free tier of Pandora where there is wifi, YouTube to play older full albums, and pay to download albums and sometimes songs so I can listen to them on Air NZ.

So is it Spotify for me now that Pandora is closing down in Aotearoa? And hey, how come a streaming service is geographical anyway?

Meanwhile, in the physical world, over the last few years I’ve loved seeing The Chills, The Bats, Snapper, St Rupertsberg, Orchestra of Spheres, Ornette Coleman, Tito Puente, The Pixies, the New Pornographers, Wooden Shjips, The Brian Jonestown Massacre, Yo La Tengo…