There’s a good reason the global music industry pays attention to progress of new business models in a Scandinavian country with 9.5 million inhabitants. Sweden leads a handful of countries that have used the controversial streaming business model to reclaim big chunks of revenue lost in the post-Napster crunch of the 2000s.
Thanks to high adoption of services like Spotify, Sweden is rebounding when many countries are still seeking the bottom. Information released on Sunday by IFPI Sweden shows streaming growth drove a 5% gain in recorded music revenue. As streaming gains were able to compensate for declines in purchases, total recorded music revenues grew to 991.2 million SEK ($152.2 million). Although revenue is 40% below the peak in 2000, 2013 was the third straight year of growth and revenue is up 27% over the last five years.
Streaming revenue grew 30.3% to 705.9 million SEK ($109.8 million) to account for 71.2% of total recorded music revenue, up from 57.4% in 2012.
Purchases fall sharply again in 2013. CD losses deepened as revenue declined 164 million SEK ($25.5 million) after dropping 192 million SEK ($29.9 million) in 2012. Download sales declined 22.6%, or 12.9 million SEK ($2 million), after falling 24.7%, or 18.7 million SEK ($2.9 million), in 2012.
Spotify launched in a handful of countries in late 2008. Sweden was one. Another was Norway. Like Sweden, Norway has seen its recorded music revenues rebound as consumers flocked to subscription services. Last year Norwegian recorded music revenues grew 10.6%. Digital revenue increased 39.7% and streaming accounted for 84.1% of digital revenue.
How does this matter to the United States and other markets? Sweden is seen as a model for the new business after early and quick adoption of-demand subscription services. A variety of factors, from abundance of high-speed Internet to telecom partnerships, have made the country a successful testing ground for these services. These early successes have made Sweden a frequent talking point. When people wonder what subscription services will do in the United States, music executives point them to the best-case scenario: Swedish.
The billion-dollar question is to what degree the U.S. market will follow Sweden. Will subscription services, with the help of mobile carrier partners, push into a more mainstream market? Beats Music’s partnership with AT&T is the first step to such an outcome. Will most consumers opt for free streaming because Internet radio got a head start on the subscription model? Or will the market be a mix of purchases and free and paid streaming? And what will that mix look like?
There should be little doubt streaming, in all its forms, is the future of music in the United States. What’s unknown is when that growth will come. Streaming is currently experiencing tremendous growth — Nielsen says activity was up 32% last year — as the quality of services improves and consumers have greater access to them. The U.S. market may suffer some painful years as it sheds CD and download sales; last year unit sales of CDs, digital albums and tracks all declined. But, just like in Sweden, streaming will be the force that lifts the market from the bottom.
Google’s Video service may be ‘all-in on music’, but rightsholder unrest at its parent company persists‘We’ve paid out to the music industry over the last several years over a billion dollars,’ said YouTube’s Tom Pickett.
A recent piece of research by VideoInk and video analytics firm Tubular Labs claimed that music videos account for 38.4% of all views on YouTube, reinforcing the Google subsidiary’s position as the world’s biggest streaming music service.
“We’ve paid out to the music industry over the last several years over a billion dollars,” said vice president of YouTube content Tom Pickett during a panel session at the Midem music industry show in Cannes this week, during which he also stressed that “we are all-in on music”.
Not everyone is convinced. A key theme of this year’s Midem has been continued resentment towards YouTube and its parent company from musicians, independent labels and industry bodies alike. Pickett was heckled during his panel session, and the conference also saw regular anti-Google outbursts from speakers.
“Google are not music people, and that scares me,” said Colin Daniels of Australian independent music firm Inertia, which helped solo artist Passenger break big last year.
“I am concerned with YouTube entering the market because for YouTube everything is about dominance, and dominance is connected to destruction,” said Horst Weidenmueller of well-respected indie firm !K7. “I would rather prefer perhaps Google not being in music.”
Friction between Google/YouTube and the music industry is not a new trend, and there are many ways the two sides are working together, from YouTube helping labels to identify user-generated videos using their tracks and make money from them, through to the Google Play music subscription service.
Even British industry body the BPI, which has been a regular critic of Google over the high rankings for piracy sites on its search engine, has launched its own YouTube channel called Transmitter to promote British artists’ music – illustrating the perception of Google as both copyright foe and distribution friend for music companies.
Still, the foe camp have been increasingly prominent at the Midem conference this week, questioning Google and YouTube’s commitment to music, and wondering why the money it pays out to labels and publishers (who then pass it on to artists) isn’t even higher.
BPI chief executive Geoff Taylor drew attention to this while on-stage with YouTube’s Pickett, comparing YouTube unflatteringly to streaming music services like Spotify and Deezer, which mix advertising-funded free streaming with premium subscription tiers.
“I think YouTube has lacked that, and that has been a problem for the industry,” said Taylor. “When I looked at the billions of streams there were in music videos, and the pounds and pence coming in to the industry from that, it was a very small number.”
The streaming rivals are fuelling this debate. Deezer’s chief executive Axel Dauchez called YouTube “the most important legal pirate” during another Midem panel session, while Spotify recently contrasted its own average payout of $6,000 – $8,400 per million streams to the $3,000 per million streams paid out on average by a “video streaming service”. While unnamed, the reference to YouTube was clear.
YouTube has its defenders in the music industry too, some of whom spoke out at Midem. “It’s a top-five revenue source now at most of the labels, and it’s going up. It’s not perfect, but they’re moving in the right direction,” said Tom Silverman from independent label Tommy Boy.
Meanwhile, some of the multi-channel networks (MCNs) helping musicians make more money from YouTube suggested that increasing payouts requires making cleverer use of Google’s service, rather than simply demanding higher per-stream rates.
“It’s no longer an album cycle, it’s a 12-month content cycle. For every piece of content you release, there should be 6-8 other pieces of content to support that,” said Brandon Martinez, chief executive of music MCN INDMusic, which helped indie label Mad Decent capitalise on last year’s viral YouTube success of Baauer’s Harlem Shake track.
Jordan Berliant, of The Collective Music Group, was more blunt in his appraisal of why some labels complain about YouTube. “It’s not a place to make money right now, but it’s not primarily because of YouTube or Google in my mind, it’s because the people representing the content primarily don’t understand the marketplace.”
Some of those people’s concerns about YouTube tie in to their wider arguments with Google over its copyright policies, though. During Pickett’s panel session, one audience member demanded to know what YouTube is doing about ‘stream-ripping’ services that enable people to convert videos into MP3 downloads. He was backed up by BPI boss Taylor.
“We’ve been asking YouTube to deal with these stream-ripping applications for many years. YouTube is supposed to be an ad-funded streaming service, not a free download service,” said Taylor, comparing these talks with the BPI’s separate efforts to persuade Google to downgrade piracy sites in its search engine. “We can’t understand why it’s taken so long for Google and YouTube to do something about this.”
In the heated debate over streaming music’s sustainability, we seem to be gridlocked between claims of Spotify CEO Daniel Ek as the digital Messiah of the music industry, and artists’ outcry about exploitative payouts and a poor economy.
It’s a debate in desperate need for data, transparency and models. It’s also a debate that needs to move beyond the black and white / good or bad discourse and focus on what improvements have to be made in order to develop a sustainable digital platform for the future.
Amid that jungle of different reports and mixed messages, perhaps Norway can provide a case that illustrates the basic duality of today’s streaming music market by highlighting two contradictory trends: the Norwegian market for recorded music is on the rise, but Norwegian music is losing out!
Understanding streaming
In August 2013 I delivered the report from a newly established committee appointed by the Norwegian Minister of Culture, Hadia Tajik on the Norwegian streaming economy. You can find it in Norwegian here (PDF).
The committee was asked to look at the developments in the Norwegian market for recorded music, and especially the effects in a market that is truly adopting the streaming format.
We were to assess the developments and consider what types of releases are struggling in the transition to new digital platforms. We were also asked to advise on whether any political actions were needed and if so – what actions to take.
Needless to say, the committee’s assignment was ambitious, challenging but timely. There’s a growing emphasis on the nature of the streaming economy, on revenue distribution and sustainability for artists, labels and ISPs.
This is also a sensitive public debate, and there’s a challenge getting reliable and comparable data in order to provide accurate descriptions and progress. Many of the reasons for this are understandable, but they nonetheless prevent necessary studies that could perhaps provide a shared understanding of challenges and possibilities.
It’s also a question of not having a unified understanding of what the streaming model looks like, how revenues are channeled through the system from fan to artist and what mechanisms kick in on what part of the subscription-based value-chain.
Given the limited resources we had, we quickly focused on two important and very significant developments in the streaming economy, which we based our discussions on, and on which I will base this article on.
Market share concerns
To start with the first, Norway saw a promising rise in revenues of 11% last year that follows the 7% increase that we saw in 2012, according to IFPI. While streaming only represented 13% of recorded music revenues in Norway in 2010, it now accounts for 65%.
The revenues from streaming services also increased by an impressive 60% last year, which means that subscription-based revenues are the main reasons for the positive development.
By now, these numbers are well known and Norway, together with Sweden – the home of Spotify – are referred to as pioneering markets when it comes to adopting streaming and successfully turning a period of long and agonising decline into growth. However, the other, more problematic development is that the revenues for Norwegian music are in decline.
Put another way: there is more money in the Norwegian recorded music market than there has been for many years, but music made by Norwegian artists represents much less of these revenues. Estimates we made, based on figures from IFPI and TONO, shows that today, Norwegian artists’ market share is a meagre 10-15% here.
Now, one can easily agree that this is too low, but it is harder to know what we should compare it with in order to know both what we’ve lost, and what we should be aiming for.
One option is to compare it with the heyday of compact discs. The consensus within the committee was that Norwegian music used to have a market share somewhere between 40% and 50%. Around half the domestic market was based on Norwegian music.
Although this percentage needs to be treated with caution, it nevertheless indicates a dramatic decrease – and thus the conclusion that Norwegian labels and artists are getting much less income.
Swedish comparison
Another option is to compare Norway with Sweden, the only country that has embraced streaming more than Norway, and where streaming’s market share is now 71% according to IFPI Sweden.
Unlike Norway, Swedish music has a much better local share of the domestic market there. Unfortunately, we don’t have the data to give an accurate percentage or make a comparison with Norway, but a simple glance at the top 50 and top 100 charts on streaming services tells us that Swedish music is thriving.
It’s hard to say whether this represents a rise or decline compared to the mid 90s or 80s, but today’s stats nevertheless tells us that the Swedes are streaming Swedish music (and so is everyone else too).
I guess a crucial question would be to ask why the two territories act so differently, and I fear that plausible answers will move beyond the discussions of digital platforms and streaming technology. And it may not be fair to compare stats with Sweden, given its impressive international position in music production and export over the decades.
In a transition where the new economy is based on traction – you need massive volumes of streams from a good number of fans – it’s not surprising that a country that produces so many international hits is experiencing a different development than ours.
But I would argue that it’s exactly this difference that makes it interesting to compare the two markets: they represent two different positions when it comes to music creation and the music industry.
Changing habits
So, why is Norwegian music losing ground in its own territory while its recorded music market is rising? A central question here is whether people are listening to less Norwegian music. Has Norwegian music lost its relevance to Norwegian fans or is it simply that the new system rewards differently and that old listening habits are intact?
A popular explanation is that the streaming model requires repeated listening and that today’s reality simply reflects actual listening patterns in a brutally honest way. This would also imply that past models didn’t reflect actual listening patterns – that people in “the old days of compact discs” bought Norwegian music but didn’t listen to it.
This is an unlikely explanation, but one that is hard to prove or disprove. It’s also an explanation that limits music’s value to mere quantity. It would be easy to argue that there are vast amounts of great artists that have an intact following of fans that still listens to and values their music, but they value it in a way that is not rewarded through the streaming system where size and repetition is essential.
Beyond Ylvis, Norway has a proud history of supporting and exporting great music within genres like jazz, classical and black metal, to name a few obvious ones. It’s not hard to see that some of these genres may require different types of listening habits – a different type of approach from the audience.
One can also argue that past models may have been too advantageous for these artists (and perhaps even more so in a Norwegian setting with a range of subsidies) and that the new reality reflects supply and demand in a better way.
But it could be that there are more and important ways we can capture value creation in music, beyond today’s models. And perhaps, with the right tweaking, we could include this in today’s platforms.
We should also expect that these differences will change as the demographics of people who adopt and use streaming services progresses. If today’s revenue distribution reflects subscription demographics and listening patterns then two important factors on the Norwegian case would be to increase subscribers further and try to influence their listening habits.
Choices, choices…
The American psychologist Barry Schwartz argues in his book The Paradox of Choice that more options don’t necessarily lead to better choices. The resources needed to make a choice when facing a vast amount of options (25 million tracks) is more than most people can handle.
We all seek guidance in order to narrow the range of offers. And in order to make a choice that may satisfy, we tend to choose what is offered within a trusted and recognised frame. In this context we could argue that the new streaming platforms, even though representing nearly all music available, also represents a narrowing of shelf space compared to the days of old.
Here, it would be tempting to remind that radio is still referred to as the premier source for discovering new music – a medium that offers no freedom beyond switching channels.
But if we follow Schwartz theory, then clearly, marketing is of an essence. And contrary to claims that the digital revolution would liberate the small and independents from costly and time-consuming marketing campaigns, everyone we talked to during our work with the committee said that marketing is more important than ever. And it’s more expensive too. It confiscates a bigger part of an artist’s release budget, which in turn benefits the larger companies.
There are of course many more variables that deserve scrutiny and debate, and these should be approached thoroughly in future works and future studies. But there is one important factor that needs to be highlighted, namely that the case of Norway could also be explained by embedded features in the streaming model that solely benefits those with massive volume and massive catalog.
It could be worth asking what the market would look like if subscription money followed each subscriber’s streaming profile. How would this influence the local repertoire? How would it influence the smaller acts, the independent labels and the smaller genres? Are there other features that could/should be tweaked in order to make streaming more sustainable for a market such as Norway?
If we look beyond the labels and get more insight into the revenue streams from ISPs and aggregators, then perhaps we could come closer to a shared understanding of what a lasting and sustainable streaming model would look like.
Why is this important?
Beyond illustrating that the Norwegian music scene is perhaps not the biggest producer of international hits (with some very proud exceptions), I believe the findings in our report also illustrate a more universal challenge relating to a model where size and long-term recoupments are essential.
And given the massive effect we’ve seen in revenue distribution in Norway, I guess a key question for the International music industry is what we can isolate as mere Norwegian exceptions and what we must consider to be parts of the model.
The main question is not pro or con streaming. It’s not about a yes or no, it’s about finding a sustainable model that secures future investments into new artists and new repertoire.
So, by focusing on those two variables; the overall rise and the change in distribution, we need to agree on what a future sustainable market should look like, what mechanisms could foster this and then figure out how to tweak it in the right direction. And in order to get there, we need to lift the debate above the trenches and invite key stakeholders to take part in defining future improvements.
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oringally posted at musically.com, article by Daniel Nordgård
Two examples of streaming DJs have come my way of late. You may well have heard of the Pacemaker iPad app that connects to Spotify to stream songs for dj’ing. It’s gotten quite a bit of well-deserved attention. From a different angle, Streaming DJs is a service that connects you with DJs who will play your party via a streaming internet connection. Both reflect developments in streaming that indicate where we’re going though both will also be limited by the quality of one’s internet connection.
Pacemaker, the iPad app for Spotify djs, is a great idea and really speaks to the moment. It allows you to stream and mix not only Spotify tracks but iTunes downloads as well though most marketing and writer responses have focused on the Spotify streaming.
For a close look from somebody that knows what’s up, you can see Peter Kirn’shands-on post and cautionary note regarding certain tracks not being on Spotify.
Though if you have them in your iTunes library that’s not a problem so it sounds like a truly flexible device that is breaking serious ground.
Streaming DJs is a great idea and they’ve been around a bit longer. I don’t know that they’re the only ones or the first but this is the first I’ve heard of what they’re doing and it makes so much sense I wonder why I haven’t heard about something like this before.
“Streaming DJs is a new online platform that enables you to hire DJs to enjoy live private sessions with high quality video and sound: a different, new and low cost way of enjoying the best music and the best djs for your event.”
“The steps are simple: set the date of the party, choose one of the available djs (from London, Miami, Bangalore or Brussels) and get online to enjoy the session. The system also allows you to interact, leave comments and share images of the event in the social media.”
“Distance and flight and accommodation expenses will not be a problem for enjoying the dj that you want at the place and at the time you want.”
This is an awesome idea for so many reasons.
I can imagine that DJs doing well off live shows on a local basis may be concerned but, in addition to giving DJs work when they live places that don’t have a lot of opportunities, I believe it could expand the market for live DJs.
There are probably a lot of people that would hesitate to hire a DJ for a small party or would hesitate cause it seems too complex. But Streaming DJs offers an easy entry point and, for those with a real budget, may be a first step towards bringing in local live DJs.
There’s a good reason the global music industry pays attention to progress of new business models in a Scandinavian country with 9.5 million inhabitants. Sweden leads a handful of countries that have used the controversial streaming business model to reclaim big chunks of revenue lost in the post-Napster crunch of the 2000s.
