Newsletter #106: A Bird In The Hand

28 Mar 2014

Future-gazing is naturally a pastime for many that are interested in the recordings industry.  Is it possible that theorising about what is to come might hinder efforts to address current problems or exploit opportunities in the here and now?  Is the media’s obsession with the picture of a digital-only recordings business fuelled by mass subscription to ubiquitous streaming services eroding the confidence of those trying to maximise success using the tools at hand?

Perhaps most pernicious prediction-reported-as-fact is the notion that the CD is already dead.  Yet IFPI’s 2013 statistics show that physical format sales still make up 51% of the recording industry’s global revenue, and it still makes up 64% of the total music units sold in the UK (BPI).  In features on streaming in recent issues of the Metro and the Economist, there is phrasing like “[labels are] reeling from the death of the CD” and “consumers [are] finally giving up on CDs”.  The danger is that by peddling the idea that physical is as good as dead rather than merely being in decline, potential customers and those in other sectors will come to believe it, hastening the shrinking of the physical market.

Despite the news that the VAT loophole for digital goods will be closing in January 2015, meaning that the standard 99p download could rise to £1.19, paid downloads aren’t dead yet either, comprising 67% of the global digital market and only declining slightly, by 2.1% in 2013, whilst UK digital albums rose by 6.4%.  The great debate about access versus ownership is one about shifting trends, not sudden turnarounds; the media should be looking at the nuance of the market as it stands at least as much as riffing on the foregone conclusion of the death of unit sales.

When put under scrutiny, that media darling, subscription streaming, still has an uncertain future.  When the leading player Spotify is running at a loss at the same time that certain voices complain about supposedly paltry artist remuneration, it is clear that revenues as they stand are not yet working for all parties.  The rosy future painted by William Morris Endeavour’s Marc Geiger at MIDEM – of a $100 billion music industry – and headlines of 51% revenue growth for streaming services in 2013 are encouraging certainly, but there is a worrying lack of clarity right now about how streaming revenues work.  MusicTank will explore the state of streaming payments in its upcoming think tank on Monday 7th April The Artist Economics of Streaming, with the aim of having an honest and open discussion about how payments are calculated.

There have been some sensible suggestions for subscription services to be considered in context alongside other free services just as deserving of scrutiny over payouts, or lack thereof: namely YouTube and Soundcloud. There are of course strong arguments that both these platforms need to be serviced and monitored to some degree due to their social virality and popularity as social networks in and of themselves.  After all, YouTube is the most popular music service the world has ever known and an increasingly important revenue stream for many businesses.

Although Soundcloud doesn’t pay anything to rights holders, its elegant technology is the darling of many artists and budding music marketeers, topping a recent list of popular of music services on Twitter, coming top with 42 million tweets – more than the next seven services combined (Spotify was second with 16 million). Artists and labels use these to provide free music to the public and the wisdom of the mob would have them make everything available immediately, based on the futurists’ dictum that the per-unit cost of music is only headed in one direction.  Arguably that future is not here yet though, and strategic use of assets across platforms and giving fans the option to buy music (and other things) is always more advisable than feeling obliged to give the house away.

Admittedly not the best comparison for most, but Beyoncé recently showed that clever windowing can still generate significant value, with only officially sanctioned 30 second clips allowed to remain on YouTube.  It is not that anyone could use the same strategy but more the notion that you don’t necessarily have make everything available everywhere at the same time.

One particular topic concerned mostly with present possibilities and practicalities is that of Direct-to-Fan marketing and sales.  Primarily the preserve of the DIY/ grassroots artist press, D2F preaches the gospel of the artist’s website (and/ or mobile app) as the central hub for interactions with fans, promoting the ideas that the artist is the best marketeer and an ideal retailer when it comes to core fans who are more likely to part with money for music and other goodies than casuals.  From another perspective D2F is also a strategy about the future: certain social media platforms may not be around forever, so creating your own email database and gathering data from your website (e.g. fan location, traffic over time) should be a core pillar of running a music artist’s business. Possibly because it carries the stigma of only being for ‘small’ artists, one doesn’t hear much about D2F in the wider press compared to major label moves and streaming music, although coverage of Beats Music’s purchase of Topspin Media, a leading D2F service and advocate, briefly gave the topic an airing.

Any sensible person knows that there is an inherent futility to the business of predictions, and perhaps not enough punishment for those who make bad ones.  In any industry heavily affected by the lightning speed of technological development, future-gazing is a media addiction, albeit a dodgy science.  In a 2008 Rolling Stone article entitled “What Will the Music Industry Look Like in Five Years?” based on the findings of analysts, there wasn’t a single mention of the words Spotify, iPhone, smartphone or YouTube, all which existed at the time of publishing.  Oh cruel mistress, hindsight.

Editorial by Sam Shemtob and Tom Quillfeldt

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