April 7, 2024

Today's Topics

Hello and happy Sunday! After our whistle stop tour of Q1 last week, put on your favorite playlist and join us as we explore the state of the music industry, digging out the data on streaming, concerts, and why popular songs are getting shorter.

P.S. No newsletter from us tomorrow, but stay tuned for some very exciting updates from us this week!

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Here comes the sun (streaming version)

For years streaming has been heralded as the potential savior of the music world, a harbinger of change that could bring riches back to a wider pool of struggling artists, labels, and publishers. But, especially on the back of recent news that Spotify is set to raise prices by $1-2 a month for the second consecutive year, some critics are starting to ask: why is it taking so long?

Indeed, though there’s never been a more convenient time to be a music fan — with millions of songs just a tap away — in purely financial terms, the American music industry is still a fraction of its former self. Data from the RIAA reveals that, once adjusted for inflation, recorded music revenues in the US are still down 36% from their 1999 peak, when millions were heading out to get their hands on CD copies of Believe by Cher or the Backstreet Boys’ Millennium.

Conspicuous convenience

The days of checking overplayed CDs for scratches, using a pencil to fix an unspooled tape cassette, or saving up for that state-of-the-art Walkman might seem as alien to contemporary music listeners as gathering around the gramophone, but it’s hard to overstate how much change the music industry has endured in recent decades.

Vinyl’s dominance in the 1970s, when artists like Stevie Wonder and Abba were selling millions of records, was an era of music-listening that is now heavily romanticized... even by Gen Z. But, if necessity is the mother of invention, convenience is surely a close relative, with music lovers keen to take their favorite tracks with them, and 12-inch records offering little in the way of portability. Smaller cassette tapes became the on-the-go option, only for CDs, offering the same flexibility with better sound quality, to displace the cassette in the 1980s — ushering in the industry’s golden age and eventually accounting for 89% of revenue at its peak in 1999.

Another one bites the dust

Of course, the internet changed everything. Compared to video files, audio files were considerably smaller… and they were easy to share online, kickstarting a 15-year dark period for the industry in which piracy crushed its income. Downloads — and for a weird few years, ringtones — offered some respite for artists and labels, but it wasn’t until the green shoots of streaming that the recorded music industry returned to real growth.

As more and more of us sign up to services like Spotify to enjoy our favorite songs on-demand, the income generated from streaming platforms has rocketed, with the Swedish streamer reporting more than $14 billion in revenue last year. But, despite its growth, Spotify has never reported a full year of net profit, and whether those revenues are flowing through to the maestros behind the music, remains a more complicated question.

Money, money, money

Artist remuneration has been a hot topic for Spotify almost since its inception, with top artists like Taylor Swift and Radiohead’s Thom Yorke temporarily taking their songs off the service in past years and raising questions around how the company structures its royalties.

Spotify has been pretty fixed in its response to criticism from disgruntled bands and artists, often pointing to the billions of dollars it hands over to music makers each year. Indeed, Spotify reportedly paid some $9 billion to rights holders (artists, labels, publishers, distributors etc) in 2023, taking its lifetime total to more than $48 billion.

Harmony... or discord?

Those figures are from the company’s latest Loud & Clear report, which also revealed that the number of artists meeting various monetary milestones like $10k+ annual earnings has nearly tripled over the last 6 years, with some 1,250 musicians now making more than $1 million from Spotify streaming alone.

It’s worth noting, however, that with as many as 9.8 million artist profiles on Spotify according to some estimates, the 11,600 artists who are managing to make it to that $100k threshold represent a miniscule share of the overall talent on the platform, and that those figures represent payments to rights holders — not necessarily what ends up in artists pockets. Depending on individual arrangements, most will be split to varying extents with agents, labels and publishers.

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While Spotify has objectively been paying more artists more money, there’s no doubt that relying on streaming payouts alone isn’t enough for thousands of bands and musicians. Many artists, are now looking elsewhere to cash in, with one tried-and-tested method proving particularly effective in recent years.

Play to the crowd

While performing live is obviously no new thing, it’s never been so crucial to the earnings of many musicians — and that’s playing out at the very highest levels within the business too, with Taylor Swift’s recent addition to Forbes’ Billionaire List largely attributed to her record-breaking Eras tour.

Industry publication Pollstar revealed that the top 100 North American tours, thanks in no small part to Ms. Swift and Beyoncé, grossed $6.6 billion in 2023, the highest on record. And, that’s not just down to “funflation” either, with entertainment giant Live Nation reporting record concert attendance and ticket sales for last year too.

Changing the game

Bands and artists haven’t just switched up how they make money because of streaming: the very way that many now write and construct songs is changing as a result of the medium too. Indeed, recent reporting from the Washington Post highlighted how Spotify’s monetizing methods, like its pay-per-play system or needing a listener to stick around for at least 30 seconds of a song, as well as the desire to go viral on TikTok, have led artists to write shorter, sharper, more attention-grabbing tunes.

Looking at some of the biggest songs on the Billboard100 for each year since 1960, we observed a similar trend, with top songs released in the last 5 years clocking in at 2 minutes and 55 seconds, compared to the 3 minutes and 59 seconds average throughout the 1990s during the golden age of CDs and the music industry more widely. When you get paid per stream, shorter is sensible.

Thanks for reading. See you on Tuesday for some exciting news!Have some feedback or want to sponsor this newsletter?

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