Streaming and new music business models in Scandinavia (#bylarm)


photo (13)All eyes are on Scandinavia right now in the digital music world, thanks to strong recorded-music growth in Sweden and Norway – two countries where streaming music is truly mainstream.

The opening digital session at this year’s By:Larm conference in Oslo dug deep into the impact streaming and digital technology is having on Nordic markets, and what artists and labels elsewhere in the world can learn from it.

The session started with a presentation from Music Ally’s own head of research Karim Fanous, who talked about some of the current trends.

He kicked off with last year’s figures from the IFPI: that in 2012, for the first time in around a decade, the industry saw positive growth from recorded music – albeit of just 0.2%. “It’s small, but the important thing is the shift-change: after many many years of decline, we finally saw overall growth,” said Fanous.

He also talked about rising digital revenues – up from $5.36bn in 2011 to $5.8bn in 2012 globally – before drilling down into Scandinavia, where subscription streaming across Norway, Sweden, Finland and Denmark averaged 73.6% of overall digital music revenues in 2012 – compared to 27% for the UK, 12% in France, and 8% in the US and Germany.

Fanous said that the theme of this year, though, is transparency. “What people are starting to ask for is transparency in the value chain,” he said, pointing to Spotify’s explanation on its Spotify Artists website of how its payouts break down.

Fanous was followed by Daniel Nordgård, the researcher who’s been working with the local Musician’s Union on identifying the impact streaming services have had on Norwegian music – and the author of a recent Obscured by Clouds comment piece for us on that subject.

Nordgård said he’s also focusing on the need for more transparency around digital music, digging into the data around streaming music. “It’s difficult to dig into the details of music in general and streaming music in particular,” he said. “It’s also a debate that has a lot of voices, a lot of opinions, and not that much context.”

He noted that the Norwegian recorded music market is growing – up 7% in 2012 and a further 11% in 2013, with streaming now accounting for more than 65% of the market. But he warned that the share accounted for by Norwegian labels and musicians has fallen from 40-50% in the CD era to around 10-15% now.

“Do we wanna compare it with the old CD-based market, or do we wanna compare it with neighbouring countries?” he asked. Sweden, for example, where subscription streaming accounts for 70% of  recorded music revenues, but “the majority of their domestic market is local music, local acts – the Swedes listen to Swedish music.”

What about Denmark? Nordgård said that it has a local share of 48% – the percentage of recorded music revenues going to local artists – although streaming is only 39% of the overall market there. “Do these developments signal a tendency within the streaming model?” he asked, noting that Sweden has a long history of developing international acts, as well as writing songs for overseas stars.

If the Swedish numbers excluded ABBA and Avicii, how would that affect the local share?” he pointed out. On a related note, Spotify announced this morning that the latter’s ‘Wake Me Up’ has notched up 200m streams on its service – the most popular track yet on Spotify.

“The question is, in a streaming market, from an artist’s perspective, how many fans do you need to make ends meet – to produce, record and market your track… to run your business in a proper way? And if you have a thousand fans or ten thousand fans, how does that money add up?”

Nordgård is working on a report, to be published in June, that will try to shed more light on this.

He then took his seat for a panel session alongside Scott Cohen – co-founder of digital distributor The Orchard and manager of the Raveonettes and Dum Dum Girls – and Parlophone Label Group’s head of innovation Paul Sonkamble.


Cohen kicked off. Is it just the big names making lots of money from streaming? “Yes. But how’s that ever been different? When Elvis Presley was number one, he took the lion’s share of the money,” he said.

We’ve always had superstar artists and we always will. It doesn’t matter if it’s CD sales or streaming. Become wildly popular, and you’ll make a lot of money. With all the complaining that happes, I’m not hearing Justin Bieber or Miley Cyrus complaining about how much money they’re making…”

Nordgård wondered if the old model couldn’t be improved on in the streaming era, and also warned it’s not “artists versus the rest”, suggesting that in Norway, it’s independent, local labels that are struggling to make streams add up. “We should also be looking to improve past models, right?”

He also suggested that in the old days, indie artists could at least produce 5,000 CDs, sell them to fans and build a sustainable career. Can that happen now, he wondered.

Sonkamble pointed to statements from indie licensing body Merlin about stronger market share on streaming services for independent labels. And Cohen noted that artists can record and distribute their music for a much cheaper cost than in the past, but: “If people don’t wanna hear it for whatever reason, you’re still in the same boat. There’ll always be complaining,” he said.

I hate to say it this way, but there’s gonna be winners and losers. There always are. You can’t say everyone that picks up an instrument, runs an indie label, manages bands, that they should all be successful and make a living from it.”

Sonkamble suggested that streaming favours “whatever’s presented best to the audience”, noting that 75% of the recorded music revenue goes to 2m tracks from major labels.

“The value of a track being distributed by a major is x times more, and that’s because of the reach. That’s why the Adele record was worked by Columbia in the States, because they knew they could get reach… That’s how you cut through the noise of the streaming market with 20m tracks. You need reach and you need marketing.”

Nordgård suggested that there are “great” Norwegian labels putting marketing behind talented acts, yet they’re still part of that 10-15% share of local recorded music revenues.

The conversation turned to the big data coming out of streaming services, and how labels and managers can use it to the benefit of their artists. Or, alternatively, simply get confused by it all.

“We’re getting into the paradox of data. Everyone wants all this data, but then when given it… People used to get old royalty statements: incomprehensible! ‘I’m getting paid 10 grand, but I can’t see where it’s coming from!’ Now you have your statement and it’s 400 million lines on an Excel spreadsheet, and people are like ‘I don’t need it, just write me a cheque…'” said Cohen.

Sonkamble talked about a test Parlophone ran for a “teen idol-type artist” where the only hypothesis that was correct was the age demographic of his teenage, female audience – the expectation that they’d only be interested in listening through mixtapes and charts was wrong.

“When we crunched it… what I saw was they listened to actual chunks of the same artist. it’s not the mixtapes, it’s not the top artists, they’ll listen to 70% of a Katy Perry record, then 80% of an Ed Sheeran record. We can start to use that data.”

For example, persuading fans to “complete the album” – listen to the remaining 20% of the Sheeran album or 30% of the Perry album. “That’s not something we ever thought we’d be doing in streaming,” he said, before also suggesting that using streaming data to identify and reward “superfans” of artists has lots of potential.

Data should guide decisions, not make them for us, or we’ll end up in a horrible, soulless, robotic society,” he warned. But Cohen talked about the more positive side of streaming, suggesting it’s not about how many streams an artist generates, but the time people spend with them.

“People are spending more time with an artist they like, and listening to all of it, not just the hit song – which is also really good for the indies, and may be why they over-index in these services. If you have an artist that somebody cares about, and they spend more time with them on Spotify, you will make more money,” said Cohen.

“It’s not about sales versus streams, it’s about time and attention. This is the attention economy. If I have somebody’s attention in Spotify for 40 minutes, it means I”m not listening to somebody else for those 40 minutes… The goal is how do I get somebody’s attention, not the number of streams. It’s really a function of time.”

Sonkamble warned that it’s “apples and oranges” to compare streams to sales, too. “We’re earning over 13, 16, 19 months, as opposed to a single transaction,” he said. “The life of a track goes on… There’s some revenue growth when the single is launched, some when the album is launched, and then it’s sustained.”

Cohen talked about the way traditional marketing usually trailed off after the ship-date of an album. “Now the idea is the moment a track is available, the moment the marketing begins, and it’s a much longer one,” he said. “Instead of marketing for an event, it has to be marketing for an audience: your fans, your audience, to continually engage.”

“It’s not a push model any more, it’s about these millions and millions of small transactions where we have to create a relationship to the consumer. You can’t just make a print ad and then job done,” agreed Sonkamble.

Is the music industry innovating enough at the moment? Spotify started life in 2006 – it’s eight years old. Should the industry be upping the ante and learning from other areas – mobile gaming and its in-app purchases economy, for example?

“Actually, I think we’re one of the most innovative industries in the world. When you look at other media industries, they fall way behind. Books, newspapers, television, movies. The music is way ahead in terms of how music is created, how it’s consumed, every kind of business model. It’s about the attention economy, and we’re competing with everything else that has your attention. We’re in the attention business, and we use music to get your attention,” he said.

“And we can do it while you’re doing something else. You can drive a car and listen to our music, you can go to the gym and listen to our music, you can play a video-game and listen to our music. The others are very singular: you can only do that.”

Nordgård agreed. “The music industry is at least paving the way for a lot of following industries that have to go the same route, who need to meet the same challenges,” he said.

Over to questions from the audience, including someone from IFPI Sweden saying that local artists’ share of recorded music revenues in Sweden has fallen from 50% to 40% in recent years – the same trend (if not quite as drastic) as Norway, in other words.

The panel finished with a discussion of how streaming payouts are shared with artists by labels, including a warning from Cohen that it’s not yet clear what percentage labels should take – other than that it should be in proportion to what they’re doing for the artist. The value they add.

Meanwhile, Nordgård suggested there is still plenty of potential to “tweak knobs” in the streaming model to make it work better for artists, and local labels in places like Norway. “To figure out what those knobs are, and how to analyse the effect when we do try to tweak the knobs, I think that will be highly valuable,” he said.

Stuart Dredge

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