Music Ally’s second conference session at the by:Larm festival this morning saw IFPI Norway boss Marte Thorsby joined by ReedSmith partner Gregor Pryor and PIAS director of streaming strategy Justin Barker.
In a panel moderated by Music Ally’s Stuart Dredge, the trio talked about some of the big music-industry trends of 2017, including the ‘value gap’ and Spotify’s future prospects.
Thorsby gave her assessment of the situation with YouTube and safe-harbour legislation. “We are not competing against YouTube. YouTube is not doing anything wrong – but the legislation is wrong,” she said.
Her point underscoring this is that copyright owners believe YouTube is abusing the safe harbour rules that were meant for passive, automatic and neutral players – not huge on-demand services such as YouTube which play an active role in optimising content.
The IFPI, alongside other industry bodies, has been lobbying heavily on both sides of the Atlantic for safe-harbour rules to be modernised, with YouTube and tech-industry bodies lobbying just as heavily for the status quo.
“If the service plays an active role in promoting the music, they should not be covered by the safe harbour rules,” said Thorsby, before sounding a note of optimism that they will find a balance. “I think we will see a change.”
For her, the legal system is balanced against other players and that needs to change. “In Norway, YouTube is by far the biggest competitor to Spotify and it is not fair market-wise that the two biggest competitors live in totally different legal sets of rules,” she said.
However, Thorsby struck an optimistic note about the market for legal music compared to another foe: piracy.
“We don’t have piracy any more in Norway,” she said, asking why anyone in 2017 would want to download pirated music when it is available to stream on-demand on multiple platforms. “Piracy has literally gone.”
Thorsby also talked about the effect that the transition from ownership to access (or sales to streams) has had in Norway specifically.
“In the early 2000s, when it was mainly a physical market, it was 50% local share,” she explained, referring to the percentage of sales accounted for by Norwegian artists.
“When streaming services came into the market around 2009, what we saw was that the local share dropped dramatically. For the first few years of streaming, we had around 10% local share. But then the industry started to adjust. Norwegian labels were among the first to adjust to streaming.”
Thorsby did praise local labels for being able to adapt to this disruption and change marketing and promotional strategies to the point where local market share quickly started to grow again and is currently around 25%: still lower than the glory days of physical, but proof, she said, of them adapting to the new reality.
Thorsby added that the other benefit here is that Scandinavian acts are breaking internationally more than they ever have. “Access to the international market has become easier,” she said.
For their part, Pryor and Barker talked about the impact of streaming more globally.
“I think we are about to enter into a golden age for the music industry,” said Pryor of where the industry is at in 2017. “We are coming out of a very dark era where much of the music industry was propped up by external investment.”
Streaming is, he feels, finally going to benefit the labels and acts. And it is artist managers who are increasingly central to all of this.
“I think one of the most interesting places to be today is an artist manager,” he said. “How can you be across all these different opportunities that are now being enabled by lots of competition and lots of different ways that you can reach your audience directly? This democratisation of the distribution chain is fascinating.”
Pryor noted it was a long way from the old days in the record business where artists and managers were seen as existing at the very bottom of the pecking order. He suggested that this tilt in the power balance is of benefit to all.
“In the really old days, there were parts of the [record company] building where the artist would be allowed and other parts where they weren’t allowed,” recalled Pryor. “If you look now, the manager is ranking in parity with the label; but there is a natural tension there as well.”
On this issue of power balances, Barker suggested that streaming services are increasingly the centre of gravity and, by default, the kingmakers for artist careers.
“A lot of what happens on the platforms is dictated by editorial support from the platform owners – particularly on Spotify where playlists are a much more popular form of listening,” he said. “It is on Apple Music too but, from what we see, not to quite the extent as it is on Spotify.”
Barker noted that this power they have as gatekeepers will underline all future licensing renegotiations with labels, and added that as Spotify (and streaming) pushes into the mainstream, this is having an effect on the genres (mainly pop, rap and dance) that will dominate playlists.
He also argued the first wave of users on Spotify were being migrated from retail where they were regular music buyers, but the audiences coming in now are being migrated from radio and that is impacting the genres that bubble up to the top.
Can pureplay services like Spotify, Pandora, Deezer, Tidal and Napster survive against competition from Apple, Google and Amazon: tech giants with massive non-music businesses to underwrite the losses from streaming?
Pryor was far from effusive. “The real problem, and I think you can see that with some of the executive exits this week [referencing both Francis Keeling and Petra Hansson leaving Spotify], is that there is a deep tension between the growth curve required by investors to see an exit versus what labels and artists want to see in terms of returns from the platform,” he said.
Pryor added that the success or failure of Spotify will depend for a large part on the success or failure of Snapchat’s IPO this week, and the response of the investment world.
“This year is a really critical year for Spotify. If the Snapchat IPO goes well, then there is possibly a window to see the company go public and deliver a big return for stakeholders,” he said.
“If it doesn’t go well – or if the climate changes or the debt that Spotify has taken on becomes increasingly toxic… I don’t believe in ‘too big to fail’ and I really hope it doesn’t fail, but that will set the benchmark for all the other pureplay services.”
“It is very hard to compete when you have companies like Apple, Google and Amazon who have these incredible resources.”