Sure, Streaming’s Transformed the Music Business. But What’s Next?
The fortunes of the global record industry can be neatly summed up in three stats: Its peak came in 1999, back when Ricky Martin was Livin’ La Vida Loca, as the world’s record companies generated nearly $29 billion; by the close of 2013, according to IFPI data, that number had been slashed in half, falling to below $15 billion; and last year, thanks to growth almost entirely driven by streaming, it had recovered to just over $19 billion – an upswing from the industry’s nadir, but still roughly $10 billion off the peak of the CD boom.
Goldman Sachs, for one, believes the best is yet to come: it forecasts that, by 2030, the worldwide record business will be generating $41 billion – with $28 billion from paid streaming, from over 1 billion subscribers. Getting to that point is an exciting prospect, but record labels won’t achieve it by standing still: for example, according to a presentation given by Sony Music to parent Sony Corp. in May, the firm’s number of annual artist signings soared by 93% between 2015 and 2018.
The evolution of the music business and its future challenges were tackled in a rare and insightful interview with two music industry leaders at The Paley Center For Media in New York last Thursday: Warner Music Group’s global CEO, Steve Cooper, and Facebook’s Head of Music Business Partnerships & Development, Tamara Hrivnak.
Cooper’s business, which works with talent like Ed Sheeran, Lizzo and Dua Lipa, turned over a record $4 billion-plus in 2018. Yet when Cooper took up the role in 2011, the same year Spotify launched in the U.S., things looked rather different: a then-piracy-hit WMG was telling investors that “the recorded music industry has been declining and may continue to decline.”
Hrivnak joined Facebook in early 2017 from YouTube. She has since spearheaded global licensing deals with an array of multinational music companies, enabling the launch of products like music ‘Stickers’ on Instagram and Facebook, plus Facebook’s karaoke-like feature, Lip Sync Live.
Cooper and Hrivnak’s interview at the Paley Center fell on influential ears: attendees/speakers at the two-day conference also included two former U.S Secretary Of States – Henry Kissinger and James Baker – plus the director of the FBI, Christopher Wray, and media heavyweights like James Murdoch, Shari Redstone, Netflix COO Ted Sarandos and Verizon CEO Hans Vestberg.
Here are three key predictions made by Cooper and Hrivnak:
- Augmented Reality Will Be a ‘New Format’ for the Music Business
The record industry continues to enjoy double-digit annual growth from streaming, with the market expected to post over $20 billion in global revenue in 2020. Yet a question hangs in the air: after streaming, what’s next? What will be the next major innovation in the way fans connect with artists?
“Augmented reality has the potential to be the next format for music, and the reason for that potential [is because] it puts fans at the heart of experiences, and it’s authentic,” Hrivnak said. “It’s not about pre-produced content – it’s about something that’s real, and happening in the moment. “
Hrivnak cited Mark Ronson’s “Pieces Of Us” video as a recent example that hints at AR’s possibilities. Released in August and hosted as an evolving Instagram Story, it offered fans multiple different experiences using real-time AR effects. The video, noted Hrivnak, encouraged fans to make their own versions of the production using AR tools. “That to me has a ton of legs,” she added. “It’s all about authenticity and getting the fans into the magic.”
Hrivnak also nodded to AR-related possibilities created by Facebook’s new Portal TV hardware. She said Facebook is now testing new AR filters which could potentially allow folks to “have a lip sync battle with Nanna, where [you] look like a rap bad-ass and Nanna looks like a rocker.”
“These kind of experiences really bring something different to the market in a way that celebrates music, but that isn’t just about being top of the charts,” she added.
2. There Is “Substantial” Opportunity for Growth in the Music Market – But Streaming Services Must Think Hard About Differentiation
Universal Music Group, the largest music rights company in the world, posted year-on-year streaming revenue growth of approximately $500 million in the first nine months of 2019 – yet, in the same period of 2018, the equivalent number was actually bigger (+$611 million). Cooper is unfazed by such trends, espousing of his confidence in a “nice future for the music business.”
“When you look at smart device penetration, or [projected streaming subscription figures], there’s substantial room for our continued growth,” he said.
I asked Cooper which key lessons from his eight years at Warner he would pass on to those working in other entertainment industries – especially those in TV now experiencing their own streaming revolution. While broadly praising the impact of key digital partners, Cooper noted, “The streaming offerings in music have not been as consumer-friendly as they could have been… there isn’t [enough of a] range of options and choices for consumers.
“Right now, there’s a 50 million-track universe and it’s either free or $10 [per month], plus or minus. My view is that if [streaming services were] organized to allow people to choose by genre, or by number of tracks per day, hi-res sound, global [or] local, whatever it is, the music industry and the tech companies would have been ahead [of where they are now] by way of revenue optimization.”
This kind of service differentiation and segmentation will prove crucial if the industry wants to reach its potential in the decade ahead, suggested Cooper. After pointing to Facebook as an example of a tech company doing something different with music licensing, he added: “In the music [streaming] industry, when one company innovates, all of the others [launch a similar] innovation. What that has done, in certain respects, has been to commoditize the delivery of music. And whenever you’re in a commodity-driven environment, the only differentiator becomes price.”
Speaking of price, Cooper said: “There is no Led Zeppelin 2.0, there is no Bruno Mars 3.5. Protecting our 70 or 80 years of sound recordings – this invaluable and irreplaceable IP – will be critical. ”
3. “Storytelling” Will Become Even More Essential for Artists to Stand Out From the Crowd
Cooper mentioned a few stats that illustrated the sheer mass of music now being pumped into the leading streaming services by amateur and independent artists. “There’s 40,000 to 50,000 tracks being uploaded [to Spotify and other services] every single day,” he said. “It is almost impossible, on your own, to be able to stand out in a crowd like that.”
Surprise: The best way to “stand out,” in Cooper’s view, is signing to a global major record company. “There are somewhere around 10,000 active artists on [the major labels’ collective] rosters – the three of us, Universal, Sony and Warner,” he said. “The estimates I see are that there are 15 to 20 million musicians on YouTube and there are hundreds of millions of kids mimicking or lip syncing musicians on TikTok. “Streaming allows anybody and everybody to upload [music],” he said. “That has created a canvas of literally unlimited possibilities. Our job is to turn those possibilities into probabilities.”
On the theme of “standing out”, Hrivnak suggested that Facebook was now performing a sorely-missed function in the world of artist development – contextualizing artists beyond their music via video-led “storytelling”.
She said: “Facebook and music share something special – the ability to bring people together, to connect you to feelings, friends and moments in time. We have a great opportunity to take that superpower and channel it to fill what I see as a gap in today’s digital ecosystem. The streaming age has [generated] all this success, but what you don’t get in that plays and playlists world is: Who is the artist? What’s their story?”
She added: “We see a future that is video-first and interactive. That’s how community-building can be [achieved], and it makes a whole lot of sense for Facebook and music to build that version of the future together.”
Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis and jobs since 2015. He writes a weekly column for “Rolling Stone.”