Digital Revolution

“If you go against the wave, like the music industry- you get wiped out”- Dr. Michio Kaku, Feb 2016

We are in the midst of the digital revolution. Some call the development of the Internet our destruction, some herald it as what will be our great redeemer- but whatever the outlook, the fact that the Internet stands as the greatest communications infrastructure ever created still stands. With so much information made available to so many at the touch of a fingertip it’s hard to imagine any industry that hasn’t been transformed by it- catalysing many inventions and business models from it’s webby fingertips. The music industry is no different, in fact the changes of the digital revolution lie embedded deep in the heart of the landscape of our modern industry, affecting the way music is made, monetised and consumed every single day.

According to the IPFI (2015), the industries global digital revenues are up to 6.85 Billion US dollars- in 2014, for the first time the same proportion had been made from digital as from physical formats- although digital had been increasing year on year, going from 4.4 billion in 2009 up to 6.9 in 2014.

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Read the full report here: Digital Music Report 2015

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Niche- The Final Frontier

Fool’s Gold, a niche independent label, launched their own streaming subscription service- and according to MBW it ticks many boxes that the largest streaming platforms don’t by providing more than just music- a wide range of content specific to what subscribers actually want rather than providing access to everything (and lots of content most users don’t want) for a set amount. This could be a key way to get the other 99% of artists making money.

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MBW, (2015)

Could this be the future?

“Subscribers get new and old music, curated content, remixes, DJ sets, extras, merchandize discounts, priority access to events and more”- MBW, (2015)

Check out the Fool’s Gold platform here (some great music on there too).

 

Crowdmix- Bridging the Gap?

Crowdmix, (2016)

To summarise Titcomb for the Telegraph (2015), a British startup called Crowdmix raised £14m in 2015, and has plans to bridge the gap between social networking platforms and music, by linking the two through their interactive platform. Having recently hired Rob Wells as their Chief Commercial Officer (an industry veteran with 15 years at Universal under his belt) this direct artist to fan type of interaction is becoming more prevalent.

UK social music start-up Crowdmix secures coup in hiring Universal Music veteran Rob Wells

Ryan Leslie- Disruptive Media

Midem, (2015)

Setting an example for creators, a couple of years ago Grammy nominated US based producer Ryan Leslie launched Disruptive Media- backed by Andreessen Horowitz co-founder Ben Horowitz, as a direct artist to fan platform. Drawing inspiration from the new style of marketing, Disruptive Media’s business model is to connect artists with fans directly. Artists can provide targeted and specialised content for each fan by being able to access purchase information and fan activity- information usually reserved by intermediaries like Apple, or Ticketmaster. Hypefresh, (2014).

“Disruptive Multimedia offers a direct-to-consumer business model that is second to none,” says founder Ryan Leslie. “This will be a revolutionary model for audiences to be able to communicate with their favorite artists. Artists will now see full royalties from record one and – more importantly – retain control of their data.”

Modern Masters- Kobalt

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Kobalt are an relatively new company changing the face of the industry. Using their state of the art data-tracking technology they are able to monetise revenue from digital uses that would have been, and have historically been , unaccounted for or not passed onto artists or the proper copyright owners because of the lack of transparency within the royalties statements or because the transactions were never found in the first place. By adapting to the new digital age, they have been able to increase their revenues by “25.6% in FY 2015 to $245.1m”- their CEO,  Kobalt CEO Willard Ahdritz told MBW (2015): “We are on target to double our revenue again in the next two years…I expect to be a half-billion dollar business in [FY 2017] in revenue terms. “That isn’t bought revenue, but real growth; because people come to us and love our services.”

To summarise Gray 92015) writing for Wired, Kobalt’s platform has been described as the ‘most remarkable web portal in music business history’, allowing users to track when their work is featured in adverts, streamed on any streaming site, pirated and used in a user video, played at a venue, view requests made for licensing- 700,000 separate revenue streams made available for each song and all able to be viewed and responded to at the click of a button.

Full article here.

 

 

 

 

Social Media

Social media has become more and more important in making or breaking new artists. Data shows clearly that successful hits can be predicted monitoring social media usage and mentions. The internet has opened up a multitude of new ways to promote and release music. There would be many more new avenues outside this graph now as times have changed since publication, but this gives a good example of how online marketing can takes on a large number of different avenues:

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p.32, Digital Marketing – Dave Chaffey, Fiona Ellis-Chadwick.

“attentive audience returns great value…The mission here is full transparency in the music industry, and with the rise of streaming, both on-demand and non-interactive, there is opportunity for precisely that…Armed with this data, artists and their teams can make the more informed business decisions”.

Instant Music

Digital has changed each step of the music business. Revenues declined due to the lack of physical sales, and labels have become increasingly risk averse. The music industry has morphed from a cultural business into a fashion business, where superstar artists are ‘in’ one minute and ‘out’ the next. To make sure they are always making money the big 3 major labels invest only in what they believe is commercial, or similar enough to what has been in the recent past, to be a hit.

‘RECORD LABELS ARE PUTTING OUT INSTANT MUSIC LIKE CHEWING GUM’- Tony Visconti

Bowie’s Producer- Tony Visconti Interview

In his report Listomania, Price (2015) describes how the streaming economy has further pushed this polarisation of the industry to new levels, citing the growth of streaming as a key revenue source for the recorded music industry as coinciding with this ever increasing gap. The amount of gravitas the playlists on the top streaming services, Spotify being the case in point, works as a self-perpetuating spiral for the top 1% of artists. This is almost exactly the same as the global economy outside of the music business as well.

“Spotify commands approximately 97% of playlist impact by feature and follower count…Of the most featured artists on Spotify-curated playlists, Universal claims the lion’s share of repertoire with 12 acts in the Top 20, followed by Sony on 4 and Warner on 3. XL (Adele) is the only indie label in the Top 20”- Price, 2015

The major labels hands in terms of dictating the content that is featured as part of the Spotify curated playlists is quite evident. One can deduce that in order to use their catalogue Spotify have had to agree to feature a number of tracks from their labels within their curated playlists as part of the deal. Of course these deals are covered by NDA’s- non disclosure agreements- and labels are often given equity stakes in the streaming services as part of these deals so it’s clear where the power lies. This is detailed further in this article in Forbes written by O’Malley Greenburg (2015) here: Revenge Of The Record Labels: How The Majors Renewed Their Grip On Music

 

 

The Change in Culture

The Internet has opened up a world of options to a huge number of people. With Netflix, Video gaming culture, You Tube stars- all of these new forms of entertainment have fragmented the concentration and focus on musicians somewhat- we have many different sorts of stars now. Tubular Labs (2015) created a list of the top 10 most influential UK creators for the BBC:

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Netflix goes from strength to strength as reported of Music Business Worldwide:

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This readily available tool of promotion, the Internet, means that artists and creators can put themselves and their work out to the world at the touch of a button. The tech required and the platforms to do it available mean there are more niche goods available to us now than ever, to rephrase Anderson (2009). However artists remuneration-any artist or creator that isn’t a superstar- is still rather low. Soundcloud and YouTube are websites that have been using ‘safe harbour’ laws, operating without paying the great majority of rights holders using the service using the safe harbour defence against claims they are infringing copyright.

“User upload platforms, such as SoundCloud and YouTube, are taking advantage of…Laws that were designed to exempt passive intermediaries from liability in the early days of the internet – so-called ‘safe harbours’ – should never be allowed to exempt active digital music services from having to fairly negotiate licences with rights holders.”- Frances Moore, IFPI head

You can read the full post here: Frances Moore slams ‘Safe harbour’ websites

The internet has changed how business is done from the front-line in talent discovery, A&R, that used to be based on word of mouth or going to shows, now is more a matter of tallying up numbers to see who has a a presence online or proven following.

It has changed distribution- the biggest online retailer is a tech company not a music company, Apple- who figured out that files would continue to be shared digitally no matter what and so created a legal and convenient way for users to do it. Music companies failed to ‘ride the wave’… instead they tried to fight it by prosecuting file sharers. The Guardian reported a woman being sued (ridiculously in my opinion) for $220,000 here.

Christensen (1997, p.12) described this process whereby established companies often ‘miss the boat’ in regards to innovation:

“By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.”

The value of music has changed in the eyes of consumers-  in his book, The Longer Long Tail, Anderson (2009) writes that between 1990-2000 album sales doubled, but in the year 2000 sales went on a downward spiral and kept dropping- 2.5% in 2001, and by a total of ¼ between 2001 and 2007. The websites like Napster, Kazaa and Limewire and the file sharing capabilities, the huge amounts of piracy through these web sites all predicated this shift- and the final blow was the introduction of the iPod and it’s large storage capacities.

Streaming sites like YouTube and Spotify filled a gap in the market that was created by the closure of those file sharing platforms. Topping (2009) reported for The Guardian that:

“…Less than a third of teenagers are now illegally downloading music, the survey suggests. In January this year 26% of 14 to 18 year olds admitted filesharing at least once a month compared with 42% in December 2007”

The Guardian 2009 Article

Streaming websites have increased in popularity to the point where now, Berklee ICU (2015) write in their Fair Music report:

“The Music consumption is also shifting from ownership to access…ABI Research predicts that, by the end of 2018, we’ll see 191 million streaming subscribers, generating a whopping $46 billion in cumulative revenue”.