Even in a year afflicted by Covid-19, the recorded music industry managed to grow its global revenues by 7.4% in 2020, according to the IFPI’s Global Music Report.
It was the sixth consecutive year of growth, fuelled by streaming, which accounted for nearly two thirds of those revenues. With music publishers’ revenues growing too, and collecting societies reporting record distributions, the industry is in a positive place.
However, it is not resting on its laurels. Executives in the global music business are not just excited about the growth so far in 2021: they are looking at the new monetisation frontiers that can keep that growth going into the next decade.
New high-potential markets: China, India, Africa…
As Universal Music Group chief Sir Lucian Grainge celebrated his company going public in September, he told the Guardian newspaper that new markets were one reason for his optimism about future growth.
“The penetration rates of digital services in some of the largest countries haven’t yet reached those of more mature markets, so there’s plenty of headroom in those key markets,” said Grainge.
China and India are two of those, while the collected markets of Africa and Latin America are also fuelling this excitement. Each has its own rich musical cultures, but historically for one reason or another – piracy, nascent industry structures and/or unfavourable environments for copyright and royalty collections – have proved challenging for the monetisation of that music.
Building the infrastructure and digital services to reach the large audiences of music lovers in these high-potential territories is the first challenge. Then it is a case of finding a business model that works: a balancing act between ad-funded and subscription-based music that may not follow the patterns of the big western markets.
This is why we are seeing the big global labels open offices, acquire or create local imprints, and make high-profile signings in China, India and Africa, with one eye on taking a share of their domestic markets, and the other on finding artists who they can break globally. UMG recently shook up its label imprints in China for example, including relaunching EMI China.
Meanwhile, the biggest global streaming services, from Spotify and Apple Music to YouTube, are just as keen to establish themselves in these territories. Like the major labels, they see these markets as the engine for their next wave of growth. And they, too, hope to prove they can break artists from these countries globally: Spotify CEO Daniel Ek has talked about wanting to help “a rise of Bollywood and new types of Indian music making it into the global scene in the very near future”, while YouTube and Apple Music (through its Platoon subsidiary) have both worked on artist development programs in African countries.
Wait, though. Music’s monetisation story in these high-potential markets is not guaranteed to be simply a tale of the biggest western companies dominating. China, India and Africa have their own ecosystems of digital services too: Tencent Music and NetEase Cloud Music; Gaana and JioSaavn; Boomplay and Mdundo to name just a few. For another emerging territory, the Middle East and North Africa, you can add Anghami to the list too.
When it comes to rightsholder relationships, these markets do not necessarily mirror the west either. In China, DSPs taking direct uploads from independent artists and working with them on promotion is well established, and (unlike in the west) uncontroversial as a model. In India, a wave of independent hip-hop musicians are finding their own path, and in Africa, there is evidence that managers and artist-entrepreneurs may play as important a role in the new industry structures as labels.
This tension, between the big global labels and DSPs coming in, and the local ecosystems of services and artists, is healthy: it will shape these markets at a rapid pace, and open up new music monetisation frontiers for musicians of all kinds.
Artist-owned communities and superfan subscriptions
The idea that artists should not put all their eggs in the baskets of large social or UGC platforms is not new: savvy managers and marketers have been advising musicians to maintain their own websites and particularly their mailing lists for the best part of a decade, even as Facebook, Instagram, Twitter and other social powerhouses grew.
Periodically, the music industry has seen tech startups try to take this a step further, with tools for artists to build their own communities – often but not always monetised by subscriptions – to which they can bring their keenest fans over from those bigger social platforms. Backplane, which created Lady Gaga’s Little Monsters community, was one prominent example.
In 2021 we are seeing a new wave of these efforts, through startups such as Fave – which has already created new tools for the fandoms of Taylor Swift and BTS – Fanbase and Unitea, each of which has its own spin on creating superfan economies around artists.
Meanwhile, Patreon continues to be a fertile platform for creators of all kinds, including musicians, with a model designed to encourage long-term, continuous support rather than simply campaign-based crowdfunding.
Ampled launched as a collective of artists supporting one another in crowdfunding, and we have even seen the move by OnlyFans, a company whose core clients came from the world of adult entertainment, expand into music as part of its attempt to show that it can serve mainstream creators too.
And while all this is happening, we are seeing superfan subscriptions and associated tips economies take a more prominent role on those big social/UGC platforms too: YouTube, Twitch, Facebook and Twitter. The ‘Twitch’s Rockonomics’ research recently commissioned by Twitch from former Spotify chief economist Will Page offered encouraging data on the potential here for musicians to make sustainable incomes from relatively small numbers of superfans.
There are still middlemen here, and questions to be asked about how the data is shared (and who owns it) from these communities, but where past efforts to create and make money from superfan communities have fizzled out, 2021’s wave feels like it could stick.
Live music goes hybrid: offline and online
The live music sector (and, indeed, the world at large) cannot yet breathe a sigh of relief and consign the Covid-19 pandemic to the past. But physical concerts and festivals are returning in many parts of the world, and artists, promoters, venues and fans alike are hoping this can continue.
What about the pandemic-era replacement for in-person concerts though: livestreams? Since the spring of 2020 there has been a frenetic period of innovation, dealmaking and fundraising by dozens of music livestreaming startups, alongside the work being done by YouTube, Facebook/Instagram, Twitch and other big platforms.
When artists couldn’t tour, they and their teams had time to invest in livestreams. As touring returns, there is a risk that livestreams could be abandoned in favour of the more established stream of income – not to mention getting back face-to-face with fans.
Or, more positively, the industry will explore a new hybrid model where concerts are experienced by fans in the venue, and also those watching online. If the latter are buying tickets and perhaps even paying for virtual experiences (think Zoom meet’n’greets) it could be a positive parallel revenue stream.
- Read the exclusive Midem white paper on livestreams and the virtual live experience
This hybrid future will involve consolidation – more announcements like September’s acquisition of livestreaming startup NoonChorus by one of its peers, Mandolin. The startups who have been most successful at raising funding will be looking to snap up rivals, and grow. Watch for Dice, for example, following its recent $122m funding round.
Bigger fish from the live sector will also be active in this consolidation. Live Nation has already taken a majority stake in livestreaming startup Veeps, for example. That’s a partnership that should be capable of experimenting with the business of hybrid offline and online concerts.
The metaverse and virtual merchandise
Online games are a great way for artists to reach huge audiences with performances: something we have known since Marshmello pulled a crowd of 10.7 million people for his Fortnite event in February 2019, then Travis Scott attracted 27.7 million to his concert in tat game (over a weekend of showings) in May 2020.
The model of a major artist being motion-captured for a performance in this kind of virtual environment (‘metaverse’) has been set, and Fortnite has since followed up with Ariana Grande, while gaming platform Roblox has hosted performances from Lil Nas X (watched by 33 million fans) and other artists.
What’s key to understand is that this is not just about reach: it is also about revenues. Travis Scott’s Fortnite concert came with a range of branded items that fans could buy, while Lil Nas X’s Roblox event had its own line of virtual merchandise. Roblox recently said that this line has generated “healthy seven figures” of sales so far.
This is why there is so much excitement around the metaverse in the music industry. The Fortnites and Robloxes of this virtual environment do not just have huge numbers of people playing; they also have thriving (and, indeed, lucrative) digital economies where players are happy to spend money on virtual items and content.
Skins in Fortnite, avatar clothing in Roblox, weapon skins in Valorant, but also song packs in virtual reality game Beat Saber, which had sold 40m songs by February 2021, and has recently launched a $12.99 pack of Billie Eilish tracks.
No wonder some artists are also exploring creating their own virtual worlds, or spaces within existing platforms. deadmau5 is working with games company Manticore Games to launch his Oberhasli virtual world, promising “a constantly evolving online world with music, games, and other interactive content curated by deadmau5 himself”.
Meanwhile, Snoop Dogg has bought some virtual land in a blockchain-powered online game called The Sandbox, and will be building a mansion there and using it as his virtual base for a business model including selling avatars and even NFTs. Talking of which…
NFTs and digital collectibles
Non-fungible tokens (NFTs) are perhaps the most hotly-debated and controversial tech trend of 2021. These digital, collectible (and resellable) items generated a wave of hype early in the year, with sales of some running into the millions of dollars.
Since then, there has also been a backlash with criticism including the environmental impact of the NFTs ecosystem (and more widely, of the blockchain technology underpinning them) and concerns that this may just be a bubble that ultimately only enriches already-wealthy cryptocurrency speculators.
But between those pillars of hype and backlash, there is something positive: engagement from artists, labels and other parts of the music industry with the question of the long-term role that NFTs might play for their businesses.
Examples? In recent months alone, Sony Music has invested in NFTs startup MakersPlace and launched its first NFTs for artists; artist 3lau has launched his own startup, Royal, to use NFTs as a way for fans to invest in music; Lil Dicky has sold a share in his publishing rights via an NFT; dance label Monstercat has launched NFTs costing just $0.50 to make them more accessible to fans; and there have been funding rounds for music-focused NFT startups including OneOf, Envoy Network and Rcrdshp.
Encouragingly, there has been less talk about quick profits, and more about NFTs as badges of loyalty, or even as a new evolution of the artist fanclub. Rock band Avenged Sevenfold have talked about their vision for NFTs as “a token that allows you to get no line into shows, free merchandise, free tickets for life, meet-and-greets whenever you want at the live setting”.
In this sense, NFTs are a new frontier not just for monetisation, but for artists to deepen their relationship with fans, and reward them rather than simply to extract money from them. That’s a useful lesson when thinking about any music-tech trend: focus first on what’s meaningful to fans, then the dollars will follow.