What will streaming music’s long-term effect be on indie labels?



Streaming music’s impact on artists and rightsholders remains the most argued-about topic in the modern music industry. From Thom Yorke to Beggars Group, opinions are varied and deeply felt.

So what does the shift from unit sales to streaming access mean for our industry? At AIM’s Music Connected conference in London today, Music Ally’s own Karim Fanous put forward some thoughts. “We’ve been talking about this for a very long time, it’s a topic that’s been very well covered, but it’s still relevant: it’s more relevant than it ever has been,” he said.

Fanous started by talking about recorded music revenues over the last 15 years, with a decline followed by a plateau. “Everything is stabilising now… digital is increasing year-on-year and propping up the whole market… In the next five or 10 years we expect there to be not too much change beyond around 5% either way, but the important thing is the market is stabilising.”

He noted that subscription streaming services generated 19% of recorded music income last year, with ad-supported streams – YouTube included – contributing another 8%.

Fanous also talked about the pattern of physical sales declining around the world, with some markets’ digital growth still driven by downloads, while in others – the Nordic countries especially – it’s driven by streaming.

“If we focus on streaming, according to the IFPI, last year 28m people paid for streaming services globally. That’s up from 20m people in 2012… and global revenues from streaming services crossed $1bn for the first time. They were actually $1.1bn,” he said, noting that a big chunk of these revenues still come from a relatively small number of markets.

Back to those Nordics: subscriptions are now accounting for 80.8% of digital music revenues across Scandinavia – a figure that compares to 27% in France, 15% in the UK, 14% in Germany and 13% in the US.

“Is this a sign of things to come? We like to think that it is. But the main conclusion so far is that markets are in flux, and streaming looks like the future key revenue stream,” he said, before exploring what this means for indie labels.

Indies are punching above their weight on digital platforms. That much is clear… and when it comes to streaming, they are punching above their weight even more.” He cited research from indie licensing body Merlin showing that the market share of its members tends to be 52% higher in the download market than the physical market, with a further uplift of between 12% and 20% on streaming services depending on label and territory.

Why? “Indies don’t always have access to a lot of radio play, so indie fans now they need to go and search for it on streaming platforms, and they enjoy doing it… that’s just the nature of an indie fan. They’re very devoted: they search, they discover and they play,” he said.

Fanous also cited some new figures from Beggars Group. Globally, in 2012, it generated 78% of digital revenues from downloads and 22% from streaming. In 2013, that ratio changed from 70% for downloads and 30% for streams, but in the last six months, it’s been 60-40. By the end of 2014 – or at least shortly afterwards – streaming may well overtake download revenues for Beggars.

He went on to talk about change in music formats “from tangible to intangible” music: “You can’t hold a stream in your hand: you can’t pay directly for a stream. We’re getting to a point where streaming is flowing directly through our lives,” he said.

“We pay for access to a streaming music service, for access to a searchable on-demand music catalogue. So the transaction point has been moved: it’s not so much consumer pays artist – or at least perceives that they pay the artist – to paying services for access to a large catalogue.”

Fanous moved on to the idea of the “attention economy” where musicians and labels alike risk getting lost in the digital noise: “If we lose people’s attention, we may not get them back,” he said. It’s less about single-single-album-tour as a cycle, and more about engaging fans before, during and after the recording and touring process.

What are we selling? What constitutes a musical product? What are we using to engage with people?” he said. “We’re probably selling a bit of everything.”

Fanous also talked about the idea of turning “rivers of pennies” into “oceans of revenue”, citing an interview with Sub Pop executive Tony Kiewel as his first encounter with the concept: “It’s finding these trickles of pennies and making sure you count each one” whether they be Spotify, YouTube, crowdfunding, direct-to-fan commerce, touring revenue and others.

Flexibility is important, as is a willingness to “think global” and find out more about the digital services that aren’t popular in your own country, but may be huge elsewhere in the world: he cited Line, KakaoTalk and kkbox as examples from Asia.

Fanous ended with a frank admittance that there remain plenty of questions: from whether labels and artists are giving away too much for free (or, indeed, not enough); whether releases should be windowed across download stores and streaming services, or released to all at once; and how fans AND artists can be “super served” by labels. “The companies that succeed will be the companies that get this right,” he said.

Written by: Stuart Dredge