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Music Business - What's Up?
What's up with the new music industry
Curated by Catherine Hol
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Moses Supposes: - Will Music Streaming Kill The Music Business For Good? - Moses Supposes:

Moses Supposes: - Will Music Streaming Kill The Music Business For Good? - Moses Supposes: | Music Business - What's Up? | Scoop.it

In 2001 the Internet community declared the music industry DOA, predicating total decimation by illegal P2P file sharing services within five years. The major record labels disagreed.

 

Today, after a decade of lawsuits and lobbying major labels make about the same revenue from albums while selling 30% less units then they did in the pre-Internet era. (1989-2000: $48.6B, 2001-2011: $53.3B)

 

Tortured album sales (which inched ahead since 2010 with the death of the two biggest illegal P2P services: Limewire and Kazaa) has inspired cost-cutting in the supply chain, thus reducing royalties and fees paid to music creators. Net result: the industry has hovered at $10 Billion a year and thus-far survived the Internet transition many other industries have failed to do.  Score one (a big one) for the majors.

 

But will it matter?

 

The latest music Armageddon theory is that subscription based streaming services like, Spotify, MOG, Last.fm and Rdio  (“Streaming”) will cannibalize recording artist’s main revenue: ownership, both of physical CDs and downloads from stores like iTunes and Amazon.


Why buy and maintain files if you can stream them on demand any time, anywhere, through any device for nine bucks a month?


The industry jargon for this is called going from an “ownership model to an access model.”


But, even if labels and artists saw half of that nine dollars from “access” and even if 1 in 2 people in the US subscribed (and those assumptions are optimistic) that would reduce the gross revenue down from $10 Billion a year to $6.3 ($4.50 X 150M X 12). More doom and gloom for the music trade, right? Nothing new here, except that this time–strangely enough–major labels are supporting this agenda.

 

Why? Streaming/access pays far less than direct sales and it contributed to only 0.3% growth in 2012 according to the IFPI. Yet the majors are embracing this fractional medium while the technocrats still call labels dial-up dinosaurs.

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What’s in the latest issue of Music & Copyright?

What’s in the latest issue of Music & Copyright? | Music Business - What's Up? | Scoop.it

This issue details the latest financial results for the world’s two biggest music groups, UMG and SME. Vivendi, parent company of UMG reported a 9.8% year-on-year fall in revenue for UMG in 1Q14. At constant exchange rates and excluding the impact of the sale of the Parlophone Label Group, revenue dipped just 2%. Vivendi said that recorded-music sales benefitted from significant growth in subscription numbers and streaming, but the gains fell short of compensating for lower download revenue and the continued decline in sales of physical formats.

 

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Business Matters: How Amazon Could Have ‘Tens of Millions’ of Paid Streaming Music Subscribers Instantly

Business Matters: How Amazon Could Have ‘Tens of Millions’ of Paid Streaming Music Subscribers Instantly | Music Business - What's Up? | Scoop.it

Last week’s leak of an Amazon music licensing contract (posted on Digital Music News) made explicit mention of the Seattle-based retailer’s plan to launch a subscription service, possibly as soon as later this spring. Details remain scant, but the document suggests that Amazon plans to bundle streaming music with its other services -- likely including Amazon Prime, its annual subscription program that gives users free two-day shipping from its online store along with unlimited access to a rotating catalog of streaming videos and a virtual lending library for books.

 

That’s bad news for the many standalone services that have appeared over the past several years: Spotify, Beats Music, Rdio, Deezer, and comparative granddaddy Rhapsody, launched in 2001. (These on-demand services differ from Pandora, which doesn’t allow users to choose specific songs and pay substantially lower royalties.) As each service has added new features, arrived in new territories and converted free users to paying customers, signup rates have accelerated. Not every company releases subscriber numbers, but Spotify is generally assumed to be the leader; it claims at least six million paying customers among 24 million active users (although it hasn’t released updated figures for a year). At $10 a month, most digital music subscribers pay roughly $120 each year for desktop and mobile access, though plans and territorial prices vary.

 

But if Amazon, for example, were to bundle a music service with its Prime memberships, whose price recently increased from $79 to $99 annually, the retailer would instantly rank among the world’s largest on-demand music services. Amazon won’t say exactly how many Prime members it has, but in a December statement, it claimed “tens of millions,” with the plural number suggesting at least 20 million. That would be more than three times Spotify’s paying customer base, and in the ballpark of its total (free and paid) user base, per its March 2013 figures. Amazon has also said it added “millions” during the third quarter of 2013 alone.

 

By bundling product shipping, video, and music together, Amazon can deftly hide the price of each of the services from consumers, encouraging them to buy all instead of none -- and overcoming signup barriers music services have always faced. (Bundling has stimulated subscriber growth in the past, most typically via mobile deals.) If Amazon can strike deals with record labels and obtain rights to a library of about 20 million songs as other streaming services offer, it may also be able to absorb content acquisition costs at a lower price per consumer.

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Record Store Day Retailers Report Big Spikes, Best-Ever Sales

Record Store Day Retailers Report Big Spikes, Best-Ever Sales | Music Business - What's Up? | Scoop.it

In a week when overall U.S. album sales were down 2.2% over the same week in 2013, the independent record store sector collectively rode the Record Store Day sales bonanza to an 11.2% gain, according to Nielsen SoundScan (charts below).

 

Indie stores represented 19.4% of the total U.S. volume of all physical album sales this week, the sector's highest share since SoundScan started tracking sales by store strata.

 

Moreover, within album sales, the indie store sector saw its vinyl album sales grow a whopping 57.5%. Finally, numerous record stores report that it was their best day ever.

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More stats as IFPI releases annual numbers book | Complete Music Update

More stats as IFPI releases annual numbers book | Complete Music Update | Music Business - What's Up? | Scoop.it
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At SXSW, it's an iTunes world - Apple 2.0 -Fortune Tech

At SXSW, it's an iTunes world - Apple 2.0 -Fortune Tech | Music Business - What's Up? | Scoop.it

FORTUNE -- You might think that the music album died when iTunes caught on, letting customers buy the songs they want -- and only those songs -- for $0.99 apiece. But that's not how the headliners at Apple's (AAPL) iTunes Festival in Austin, Texas, see it.

 

I've spoken to a number of musicians this week about the digital music market and what it's like selling their songs on iTunes, and to my surprise they are still focused on the album. They see it as a collection of work from a particular period in their career.

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Business Matters: IFPI's Annual Report to Bring 'Cannibalization' Into Focus

Business Matters: IFPI's Annual Report to Bring 'Cannibalization' Into Focus | Music Business - What's Up? | Scoop.it

When the International Federation of the Phonographic Industry releases its twin annual economic reports on the state of the global music business in the coming days, they likely will unleash a debate that's been steadily heating up regarding the dreaded "C' word -- cannibalization.

The question, in a nutshell, is whether streaming services, which offer unlimited access to millions of tracks, leads listeners to cut down on download and CD purchases.

 

It's not a new conflict, but fresh numbers from the IFPI on global music revenues for 2013 will add new oxygen to the flames. In countries where sales of downloads and CDs declined, some will say streaming was the cause. In markets where sales increased, others will argue that streaming actually helped sales.

 

The IFPI, which is scheduled to release its digital report on March 18 and its overall recorded music sales later in the month, is expected to show recorded music revenue growth in the U.K., Norway, Sweden, Denmark, Germany and France. (The U.S. market, which saw download sales decline in 2013, is too close for an early estimate.) Among the countries expected to show an overall decline are Japan, Spain and Canada.

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Digital music market to grow $9 billion this year - CIOL

Digital music market to grow $9 billion this year - CIOL | Music Business - What's Up? | Scoop.it

MWC BARCELONA, SPAIN: Mahindra Comviva and Ovum Consulting have released a research study on Digital Music Market. The study encapsulates future trends on the uptake of digital music in terms of adoption rates; devices used to consume music services and segregation of listeners and suggested target approach.

 

The research study reveals that digital music market grew by around 9% in 2012 and is expected to grow $9 billion worldwide in 2014. Strong growth is driven by the expansion of international and regional music brands as well as active smartphone growth in South East Asia, India and Africa, all topping 20 percent CAGR. It predicts that Asia-Pacific emerging markets are expected to approach $450 million and Latin America top $200 million in trade value in 2014.

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YouTube's Parity Problem, or Why a Billion Isn't That Impressive (Guest Post)

YouTube's Parity Problem, or Why a Billion Isn't That Impressive (Guest Post) | Music Business - What's Up? | Scoop.it

First it was broadcast radio, then MTV. Now YouTube? Could it be that the music industry is a three-time loser in getting its fair share for distribution of content? Did it give away the golden goose by not suing the bejeezus out of YouTube when it was a startup, or at least cut better deals when Google acquired it in 2005?

 

Of course it’s not a simple question. At first glance it’s clear that today YouTube isn’t delivering the goods. During a MIDEM panel this year, YouTube vp content Tom Pickett said the company had paid more than $1 billion to music rights holders during the past several years. Well, that’s sweet. Hey, you know who else has done that? Spotify. The difference: Spotify did it with a fraction of YouTube’s audience.

 

THIS ARTICLE FIRST APPEARED IN BILLBOARD MAGAZINEGET THIS WEEK'S ISSUE HERE OR SUBSCRIBE TO BILLBOARD HERE

Let’s face it: When the worldwide market is $16 billion annually a billion isn’t that much, not when you consider the size and scope of YouTube’s mighty reach and insatiable thirst for more and more fresh content. While there have been some holdouts on paid streaming services, no working artist would dare skip YouTube -- one of the world’s largest promotional channels -- and limit his or her reach. According to comScore, YouTube’s 159 million active monthly U.S. users watched 13 billion videos in December 2013. And YouTube says nearly 40 percent of all videos were music-related.

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Global Digital Music Market To Grow To $9 Billion In 2014, Says New Study - hypebot

Global Digital Music Market To Grow To $9 Billion In 2014, Says New Study - hypebot | Music Business - What's Up? | Scoop.it

The digital music market grew 9% in ' 12 and will grow to $9 billion worldwide in 2014. It's driven by expansion in international and regional music brands and 20%+ smartphone growth in South East Asia, India and Africa. The study, by Mahindra Comviva and Ovum Consulting, predicts that Asia-Pacific digital music markets will approach $450 million and Latin America will top $200 million in 2014. 

 

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Spotify nation: Sweden shows why streaming is future of music

Spotify nation: Sweden shows why streaming is future of music | Music Business - What's Up? | Scoop.it

 

For the first time, streaming is to be included in the UK singles chart. This announcement was followed by reports that digital music sales now account for more than half the UK record industry’s income. But the royalties gleaned from streaming are often the subject of much complaint, most recently with musician Zoe Keating’s publication of the breakdown of her income last year, 92% of which came from sales – US$75,341 – with only US$6,380 coming from streaming services. It is obvious that the music industry is swiftly changing, but the wider effects this may have are unclear.

 

Sweden, as the home of Spotify, is ahead of the UK in the digital music world. We included streaming in our charts in September 2013, and internet-driven revenue – downloads and streaming – accounts for about 70% of the market here. So looking at the changes that have been occurring here may give some indication of the UK’s future.

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Australian Music Sales Suffer Worst Decline Ever

Australian Music Sales Suffer Worst Decline Ever | Music Business - What's Up? | Scoop.it

As predicted in December 2012, digital music revenues have now overtaken physical sales in Australia for the first time ever. Combined digital music revenues accounted for 54.7% of the market, bringing in over $192 million, while CDs, DVDs, and other physical media made up the remaining 45.3% share.

 

By dollar value however that meant digital sales increased by nearly $8 million but couldn’t account for a physical sales drop of approximately $55 million in the same 12 month period.

 

That said, digital download revenue stabilised in 2013, with an overall increase of 0.5%, while digital album sales rose 7.88% to 7.37 million units (a value of $67.4 million), but digital single sales fell 3% to 106.9 million units ($95 million), which is symptomatic of more people adopting digital music streaming services to consume music, as shown by streaming revenue almost doubling in 2013, now making up 5.9% of the total market value.

Catherine Hol's insight:

Looks like streaming is cannibalizing single downloads in Australia  then ...

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YouTube and Pandora Control 65% of all Streaming Music In the US... - Digital Music News

YouTube and Pandora Control 65% of all Streaming Music In the US... - Digital Music News | Music Business - What's Up? | Scoop.it
If streaming music is the future, then who gets to own that future?  According to data recently released by NPD Group, both YouTube and Pandora...
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Amazon's Streaming Service Launches in the United States... - Digital Music News

Amazon's Streaming Service Launches in the United States... - Digital Music News | Music Business - What's Up? | Scoop.it

  We recently covered the expected launch of Amazon Prime’s music streaming service. The expected time of launch was June or July. Expectation has become reality.  Amazon Prime Music is now available in the U.S.

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A2IM Lobbies Congress, Argues Majors' Digital Compensation Rates 'Out Of Proportion'

A2IM Lobbies Congress, Argues Majors' Digital Compensation Rates 'Out Of Proportion' | Music Business - What's Up? | Scoop.it

A2IM, which represents approximately 325 indie labels in the U.S., has been lobbying Congress to re-examine music licensing in a filing submitted to the federal Copyright office last week.

 

A2IM accuses the major record groups of using their distribution muscle to extract a majority of the royalties from services such as Spotify and Pandora, leaving the indie labels to settle for whatever is left.

 

The group, headed by Rich Bengloff, claims indie labels represent 34.6% of U.S. marketshare, making them bigger than any of the majors, though leader Universal pockets the biggest paychecks because it claims 38.9% of the market, a figure the group argues is “fallacious” in the filing as it includes the shares of distributed indie labels which are responsible for the likes of Adele (XL), Mumford & Sons (Glassnote) and Taylor Swift (Big Machine).

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Indies Band Together to Challenge Major Distribution Model

Indies Band Together to Challenge Major Distribution Model | Music Business - What's Up? | Scoop.it
A powerful collective of five independent labels is ratcheting up the tug-of-war between indies and major-label-owned distribution companies with a new agreement that allows its members to keep their digital distribution rights.

The labels -- Beggars Group, Secretly Label Group, Domino, Merge and Saddle Creek, which have dubbed themselves the Independent Distribution Cooperative -- are longtime clients of Warner Music Group's Alternative Distribution Alliance. Billboard estimates they were collectively worth approximately $45 million in sales in 2013. Artists in their stables include Vampire Weekend, Arcade Fire, Arctic Monkeys, Bon Iver and Bright Eyes.

 

The IDC's unique arrangement with ADA delivers a blow to the business model of major-label-owned distributors and sets a precedent other indies may follow. One senior executive at an ADA rival calls the pact his "biggest nightmare."

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Underwhelming Start to iTunes Radio Lights Fire Under Apple

Underwhelming Start to iTunes Radio Lights Fire Under Apple | Music Business - What's Up? | Scoop.it

The failure of iTunes Radio to halt the decline of music downloads has prompted Apple Inc. to consider the most dramatic overhaul of its iTunes music store in more than a decade, according to executives familiar with Apple’s internal deliberations.

 

iTunes Radio, which launched in September with much fanfare, so far only sees about 1%-2% of listeners clicking the buy button, while overall music downloads have been declining upwards of 15%, according to several label executives. 

 

At the same time, Apple is finding that its influence over labels is slipping as YouTube, Spotify, Pandora and other streaming services gather momentum. One independent label said that iTunes’s share of the label’s revenue has eroded from more than 70% in 2012 to about 50% today.

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Report claims Apple mulling on-demand streaming and iTunes for Android

Report claims Apple mulling on-demand streaming and iTunes for Android | Music Business - What's Up? | Scoop.it

Judging by a widely-shared Billboard reporton Friday, Apple may be finally preparing its entry into the on-demand streaming music market, spooked by a faster-than-expected “double-digit decline” in download sales from its US iTunes Store.

 

The story claims that Apple is in “exploratory talks with senior label executives” about launching a fully on-demand service. “They are feeling out some people at labels on thoughts about transitioning its customers from iTunes proper to a streaming service,” claims one source.

 

Apple taking on Spotify, Deezer and other streaming services isn’t a surprise in itself: it’s always been an inevitability given the wider transition from ownership to access that’s happening within the digital music market.

 

Yet there’s a whiff of Apple not quite being as in control of the timing of its move as would usually be the case, as US download sales look set to enter a decline – Billboard notes that overall US digital album and track sales were down 13% and 11% respectively year-on-year in the first week of March.

 

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Why Would Anybody Ever Buy Another Song?

Why Would Anybody Ever Buy Another Song? | Music Business - What's Up? | Scoop.it

Amazon confirmed this week that it's angling to join the crowded digital radio market, following Apple iTunes Radio (which followed Spotify Radio, which followed Pandora, and so on). The same week, Apple announced that iTunes Radio has captured 8 percent of the U.S. streaming music market in just one year making it the third biggest digital radio station in America, behind iHeartRadio, owned by Clear Channel, and Pandora.

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Study Finds Music Fans More Favorable to Brands Involved in Streaming and Concerts (Exclusive)

Study Finds Music Fans More Favorable to Brands Involved in Streaming and Concerts (Exclusive) | Music Business - What's Up? | Scoop.it

Streaming services and live events provide brands with an attractive opportunity for engaging fans. Those are two of the big takeaways from the new 2013 Music 360 report from Nielsen. The latest version of Nielsen's annual report is the result of nearly 2,600 online surveys with consumers in the United States. 
 

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Pierre Creff's curator insight, March 12, 2014 11:55 AM

Brand content power

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The Top 1% of Artists Earn 77% of Recorded Music Income, Study Finds... - Digital Music News

The Top 1% of Artists Earn 77% of Recorded Music Income, Study Finds... - Digital Music News | Music Business - What's Up? | Scoop.it

  

Whatever money is left in recordings, you’re probably not making it.  That’s the harsh conclusion offered by Mark Mulligan of MIDiA Consulting, whose data shows a more extreme imbalance towards superstar artists than previously thought.  ”The music industry is a ‘superstar economy,’ that is to say a very small share of the total artists and works account for a disproportionately large share of all revenues,” Mulligan noted.

“This is not a Pareto’s Law type 80/20 distribution but something much more dramatic: the top 1% account for 77% of all artist recorded music income.”

In other words, the exact opposite of the Long Tail, a theory that seemed exciting at the time but has now been thoroughly disproven (MIDiA’s report is titled The Death of the Long Tail: The Superstar Music Economy).  Because instead of embracing choice, consumers have actually been completely overloaded by it.  The result, according to Mulligan, is a ‘tyranny of choice‘ that makes consumers less likely to explore, and more likely to glom around mainstream artists.

 

 

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Jordan Pappas's curator insight, March 16, 2014 2:02 PM

This is completely outrageous! 77% of total revenue came from the 1% of "Superstar" artists that make millions. With that in mind, the other 99% of artists made up for 23% of revenue. Sounds to me like some of the cause of the problem is from Record Labels. 

 
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Global digital music market to top $9 billion in 2014 - The Economic Times

Global digital music market to top $9 billion in 2014 - The Economic Times | Music Business - What's Up? | Scoop.it
Wider usage of smartphones in emerging markets like India and the expansion of local and overseas music services are expected to help global sales.
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Spotify, Pandora and Other Streaming Music Services Will Never Be Profitable, Says Study - hypebot

Spotify, Pandora and Other Streaming Music Services Will Never Be Profitable, Says Study - hypebot | Music Business - What's Up? | Scoop.it

Subscription music services like Spotify and Pandora are on track to double by 2017, according to a new study, but they will never turn a profit. The barrier to profitability for steaming music, according to the analysis, is the 60-70% of revenue each service pays to labels, publishers and artists. Stakeholders could lower their rates, but that seems highly unlikely, according to analysts from Generator Research which produced the report. 

 

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Something is wrong in Paradise ...

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Merlin's CEO Charles Caldas on Indies, Streaming and the Market Share Issue (Op-Ed)

Merlin's CEO Charles Caldas on Indies, Streaming and the Market Share Issue (Op-Ed) | Music Business - What's Up? | Scoop.it

Following January’s flurry of sales stats and data, and with Midem complete, it feels appropriate to now look forward at the priorities and challenges facing us in 2014. In terms of Merlin, and our place in the digital music market, that means two key and interconnected areas.

 

First, the streaming market, which is quickly coming of age.

 

According to Nielsen’s recently published figures, in the US licensed streams increased last year by 32%. In the UK, streaming now accounts for 10% of the value of recorded music sales. Given the relative infancy of the market -- remember, Spotify only arrived in the States 18 months ago -- this is a significant and positive trend. And there is more to come. A new wave of competitors, following the lead of Beats Music, are primed for launch over the coming months. Meanwhile, existing services are rolling out far beyond the major markets, into South and Central America, Asia, Eastern Europe and Africa. For recorded music, streaming has genuine potential to deliver global dividends.

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MEPs to vote on easier licensing rules for online music providers

MEPs to vote on easier licensing rules for online music providers | Music Business - What's Up? | Scoop.it

More than 500 licensed digital music services operate worldwide, but only one of them is available in all EU member states. The multitude of licences and collecting societies makes it hard for service providers to offer their services across the whole of Europe.

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