Recorded-music revenues may be on the up again, but how do labels need to evolve to ensure that translates into a rosy future? It was one of the main topics on the agenda at the NY:LON Connect conference we organised with the Music Business Association in London this week.
Our track on the future for rightsholders began with Bill Wilson, VP of digital strategy and business development at the Music Business Association, setting the scene with his thoughts on labels, publishers and managers.
He talked about the changing world where Taylor Swift releases a tour documentary with Apple; where Beyoncé releases a visual album; where the Foo Fighters work with HBO on a TV series tied in with their album. All big artists, he admitted, but a pointer towards the future.
Wilson talked about trends in how video is being consumed on mobile devices: “Short-form video is really the sweet spot,” he said. “Everybody’s watching TV on the devices in their pocket, and in other markets besides our bubble, it’s happening even more… In the war for short-form video, which seems to be the king here, we have an enemy. And the enemy that we have is kittens! Cat videos cost about 30 cents to make, and they can garner a large share [of viewing time].”
Wilson’s point: music is a media business, and when it tries to take advantage of changing consumption habits around mobile devices and video, it’s up against lots of other content.
Wilson provided a blueprint for artists: work on projects not albums, A&R has to mean more than just writing and performing: “You actually need as an A&R person or a person who’s discovering talent, to see who’s going to be able to create content and create a relationship using their personality, or figure out ways around that for an artist who does not have a personality! We are now in the personality business.”
He added that there’s also a shift from a unit-based economy to an attention-based economy – “that perpetual war for attention, it’s no longer a five or six month lead-up to a street date… that world is dead. We’re now in the world of eyeballs and attention” – and called on labels to optimise their visual assets: liner notes, photos, videos and partner content all have important roles to play.
Wilson also called for labels and artists to invest in low-cost filmmaking staff. “This war is done with an iPhone, and kids with an eye who can see content for what it’s worth, who are active users of this content in their generation, and understand what fans are looking for,” he said. “Establishing and understanding the role of the guerilla filmmaker, that social-media person, the person who’s on the street filming, is a critical part of music transforming into a full-blown media business.”
Wilson’s speech was followed by a pair of quickfire presentations by industry figures. Merlin CEO Charles Caldas went first.
Streaming is “fundamentally shifting the shape and the construction of the market” he said, suggesting that the era where the major labels dominated the industry is transitioning into something else. “There’s more opposing forces and more tensions at play… this obsession with per-stream rates and replacing the value of the album are things we’re learning to measure better as the paradigm shifts,” he said. “We need to rethink all of those preconceptions about where power, control and value sits in the business.”
Caldas talked about Merlin labels’ income from video streaming compared to audio, to pour a bit of cold water on the excitement around short-form audio-visual content.
“YouTube proudly proclaims they have a billion viewers. Spotify just announced that they have reached 100 million users. When we bank that cheque every month, the cheque from YouTube is less than a tenth of the cheque that we bank from Spotify, regardless of that disparity in user numbers,” he said.
Caldas talked more about trends. “Independents in the streaming world perform far far better on a pure market-share basis than they ever did in the physical world, or even in the download world,” he said, noting that indies’ market share also increases between free streaming services and subscription tiers. “We’re in a world where the more people are paying for music, the more broadly and deeply they’re consuming the kind of music that we represent,” he said.
“Despite this turmoil and change and this very fast shift away from the traditional market to this new market, more than two thirds of our members two years in a row have said that their overall business is growing… And one of the other reasons it’s doing that: we now have a truly global audience.”
40% of Merlin’s members now make more money outside their home territory than inside it, compared to around 16% in the days when the business was a purely-physical one.
To show the impact of this, Caldas added that even without a big repertoire of Brazilian music: “This year we’re going to make the same amount of audio-visual streaming revenues from Brazil as in France, and more than in Spain. And Mexico is not very far behind that… Your accessibility to fans is no longer limited to marketing within your immediate environment.”
How does this matter to the future of rightsholders and the business more generally? “This upturning of these preconceived notions of where commercially-significant repertoire comes from, where money comes from, whether you can have a global hit without a global infrastructure behind you… this is being upturned,” he said.
But as well as indies being able to have global hits in the streaming world, Caldas pushed back against concerns in the music industry about the power of playlists curated by streaming services, and questions about whether the lean-back listening they create will make it tough for artists to truly connect with fans.
“This notion that we’re going to spoon-feed people amorphous blobs of music under the titles of ‘My Favourite Breakfast Cereal’ is not going to create long-term value in the marketplace. My kids are not going to have posters on the wall saying ‘Spotify’s New Music Friday is my hero’. That’s not the market we’re moving towards.”
Caldas was followed by Midia Research CEO Mark Mulligan, who provided an analyst’s-eye view of the future for labels.
“Audiences have changed,” he noted. “Millennials and digital natives aren’t one group of people any more. It’s two generations. If you think of the people born after 2000, they’ve got nothing to do with older millennials… Younger kids on Musical.ly, their idea of music is a 15-second clip that they’re lip-syncing to!”
Consumption has also changed. “We’ve got an incredibly visually-led world,” said Mulligan. “What Musical.ly does, what Dubsmash does, is they make visual experiences tailor-made for the devices we carry in our pockets.” By contrast, he noted that the established music-streaming services don’t use the visual aspects of a smartphone: they just sit in your pocket playing through headphones. “People now expect lean-forward, interactive music experiences,” he suggested.
Mulligan talked about a “multi-platform, multi-channel world where the audience needs to be gone to, rather than just expecting to build it and they will come”.
“The percentage of people who are going to pay for stuff is always going to be a minority,” he added, predicting that while there could be 200 million paying music subscribers by 2021, that will still mean the vast majority of the global population not paying for music, even though many will be listening to and watching it.
Mulligan moved on to how consumption patterns are changing: noting that 60% of music subscribers say they are using curated playlists more now than six months ago, while 68% say that playlists are replacing album listening for them, and warning of that shift in curation from artists and labels (putting albums out) to streaming services like Spotify (compiling the playlists).
Mulligan also talked about the way the traditional three-minute music video may be caught in no-man’s land between the 15-second experiences on Musical.ly and the 15-minute videos being uploaded to YouTube by vloggers and gamers. “Maybe an album needs to be shorter. Maybe it’s unrealistic to try to compete for 35-40 minutes of people’s time,” he said.
Finally, Mulligan talked about Facebook, suggesting that it is far more likely to go after the revenues in the games industry than in music, before suggesting that Spotify could move into label services, music publishing, data and payments, A&R / discovery and other functions currently provided by music companies.
“This may sound fantastical, but this is what Netflix has already done for video,” he said.
The NY:LON Connect conference was co-organised by Music Ally and the Music Business Association, in association with Armonia.