Spotify to Musicians: Let Us Be Your Label

Big question: Can a direct-to-consumer music service (like Spotify) cut out the record labels?

Revenue going to the artist:
1)
Major label — 15–20%
2)
Spotify direct — 50%

An argument for: Streaming is now the largest revenue generator for recorded music at $6.6B. Could Spotify use its massive data set to identify consumer tastes better than the labels?


An argument against: The top 10 best selling albums are all distributed by a major label and even an artist like Taylor Swift chose to re-up with a label. If anyone could have gone it alone it was her.

Flashback #1: The music industry’s 9-figure war for Taylor Swift

Quote from Doug Davis — Founder @ The Davis Firm:
“There’s no precedent to look to regarding the top-selling artist of the digital era becoming a total free agent…Taylor Swift is at an extraordinary point in her career where she can write her own ticket in regards to the commercial terms and deal structure. If she is seeking to break financial records and extend with a major, she could have the biggest artist deal of the century so far. If she wants to be creative and choose an alternative structure for capitalization, she could create her own business model. It’s very exciting.”

Flashback #2: Visualizing 40 Years of Music Industry Sales

YoY growth rate in streaming revenue:
1) 2012 — ↑ 61%
2)
2013 — ↑ 61%
3)
2014 — ↑ 20%
4)
2015 — ↑ 56%
5)
2016 — ↑ 83%
6)
2017 — ↑ 59%


More #1: iHeartMedia To Acquire Programmatic Radio Platform Jelli

More #2: How Liberty Media Learned To Love Pandora

More #3: Pandora’s head of ad innovation on what advertisers need to know about audio

Visualizing 40 Years of Music Industry Sales


Big news: For the first time in more than a decade, music revenue has started growing again.

Streaming revenue per year:
1) 2007 — $200M
2) 2017 — $6.6B


YoY growth rate in streaming revenue:
1) 2012 — ↑ 61%
2)
2013 — ↑ 61%
3)
2014 — ↑ 20%
4)
2015 — ↑ 56%
5)
2016 — ↑ 83%
6)
2017 — ↑ 59%


Flashback: #1: The music industry’s 9-figure war for Taylor Swift

The music industry just finished the best year in a decade with $8.7B in revenue w/ streaming accounting for 65%.

Streaming revenue by year (% growth):
1) 2014 — $1.8B
2) 2015 — $2.3B (↑ 28%)
3) 2016 — $4.0B (↑ 74%)
4) 2017 — $5.7B (↑ 43%)


Flashback #2: After Driving Streaming Music’s Rise, Spotify Aims to Cash In

How Spotify makes money:
1) Subscriptions — 90%
2) Advertising — 10%

Spotify currently has 180M users around the world.

Types of users (% of total):
1) Non-paying — 97M (54%)
2) Paying — 83M (46%)


Big question: Can anyone catch Spotify?

Pandora and SoundCloud are making moves with the announcement of a new partnership.

The details:
1) SoundCloud inventory will now be sold by Pandora reps.
2) 100M unique users between the two groups
3) 13% overlap between their listener bases

Video: Pandora teams up with SoundCloud on advertising.


More #1: ‘The industry is demanding it’: Spotify adopts Nielsen Brand Effect for verification on ad platform

More #2: Here’s why SiriusXM is purchasing Pandora for $3.5 billion

The music industry’s 9-figure war for Taylor Swift


Free agent: Taylor Swift’s current contract with Big Machine Records expires in November and the bidding war looks to be intense.

Album sales for the Billboard Top 200 during the first week of her most recent release:
1)
Taylor Swift — 1.2M
2)
Everyone else — 863K

Historic start: Her first 5 albums sold between 6–10M copies each. No other artist has ever had a start like that.

Each night of her current tour grosses between $5–9M.

She accounts for 80% of her current labels revenue!

Quote from Doug Davis — Founder @ The Davis Firm:
“There’s no precedent to look to regarding the top-selling artist of the digital era becoming a total free agent…Taylor Swift is at an extraordinary point in her career where she can write her own ticket in regards to the commercial terms and deal structure. If she is seeking to break financial records and extend with a major, she could have the biggest artist deal of the century so far. If she wants to be creative and choose an alternative structure for capitalization, she could create her own business model. It’s very exciting.”

Flashback #1: Inside The Weeknd’s $92 Million Year — And The New Streaming Economy Behind It

Streaming revenue for Forbes Celebrity 100 up 119%:
1) 2015 — $177m
2) 2016 — $387m

Musicians make just under $0.01 per stream.

14 artists from the Celebrity 100 generated 1B+ streams in 2016.

Flashback #2: After Driving Streaming Music’s Rise, Spotify Aims to Cash In

How Spotify makes money:
1) Subscriptions — 90%
2) Advertising — 10%

Spotify currently has 157M users around the world.

Types of users (% of total):
1) Non-paying — 86M (55%)
2) Paying — 71M (45%)

Big news: The music industry just finished the best year in a decade with $8.7B in revenue w/ streaming accounting for 65%.

Streaming revenue by year (% growth):
1) 2014 — $1.8B
2) 2015 — $2.3B (↑ 28%)
3) 2016 — $4.0B (↑ 74%)
4) 2017 — $5.7B (↑ 43%)


More: How Taylor Swift’s ‘Reputation’ beat streaming to become 2017’s best-selling album

Share of Ear highlights: Q1 2018

Time spent with audio according to Edison Research:
1)
AM/FM radio — 47%
2)
Pandora — 5%
3)
Spotify — 4%
4)
Podcasts — 3%
5)
Other — 41%


Weekly reach for AM/FM radio according to Pew:
1)
2009–92%
2)
2011–93%
3)
2013–92%
4)
2015–91%
5)
2017–90%


Weekly reach for online radio:
1)
2009–17%
2)
2011–22%
3)
2013–33%
4)
2015–44%
5)
2017–53%
6)
2018–57%


Weekly reach for podcasts:
1)
2013–7%
2)
2015–10%
3)
2017–15%
4)
2018–17%


Flashback #1: BIA/Kelsey: Local Radio Ads Will Inch Up To $14.2B In 2017

Spend on local linear radio advertising:
1) 2016: $14.1B
2) 2017: $14.2B (↑ 1%)
3) 2018: $14.3B
4) 2019: $14.4B
5) 2020: $14.6B
6) 2021: $14.7B

Spend on local digital radio advertising:
1) 2016: $1.2B
2) 2017: $1.4B (↑ 17%)
3) 2018: $1.6B
4) 2019: $1.8B
5) 2020: $1.9B
6) 2021: $2.1B

Flashback #2: Nielsen 360 Study Finds Consumers Love Streaming Music, But Radio Still Strong


More #1: Amazon is ready to take on Apple and Spotify in streaming music

More #2: Public Radio Networks to Merge in Big Bet on Podcasts

More #3: Spotify tests letting listeners skip any ads they want, as much as they want

Streaming TV quality sucks compared to broadcast. Here’s how the industry intends to make it better

Much of the conversation on cord-cutting is focused on consumers trying to save money.

Here are some drawbacks for high-end consumers:
1) Delay — Live content can be delayed by 30+ seconds
2) Choppy video — Digital cable is 60 frames per second vs. 30 for most streaming services.
3) No surround sound — Dolby Digital is not supported with most streaming services.

These are probably reasons why high-income consumers are adding streaming to their pay-TV service (see comScore study above).

Inside The Weeknd’s $92 Million Year — And The New Streaming Economy Behind It

Streaming is now the dominant platform for music consumption.

Usage up 76% year over year per Nielsen.

Streaming revenue for Forbes Celebrity 100 up 119%:
1) 2015 — $177m
2) 2016 — $387m

Musicians make just under $0.01 per stream.

14 artists from the Celebrity 100 generated 1b+ streams in 2016.

Awareness from streams leads to more $ from touring. The Weekend parlayed 5.5b streams into a $75m tour advance.

Streaming subscribers by platform:
1) Spotify — 140m (+40m YoY)
2) Apple — 27m (+7m YoY)

More Spotify numbers:
1) 50m paying subscribers (36% conversion rate)
2) $3.3b in revenue
3) $500m in profit

After Driving Streaming Music’s Rise, Spotify Aims to Cash In

Big news: Spotify went public last week and is currently valued at $27B!

How Spotify makes money:
1) Subscriptions — 90%
2) Advertising — 10%

Spotify currently has 157M users around the world.

Types of users (% of total):
1) Non-paying — 86M (55%)
2) Paying — 71M (45%)

Big news: The music industry just finished the best year in a decade with $8.7B in revenue w/ streaming accounting for 65%.

Streaming revenue by year (% growth):
1) 2014 — $1.8B
2) 2015 — $2.3B (↑ 28%)
3) 2016 — $4.0B (↑ 74%)
4) 2017 — $5.7B (↑ 43%)


Flashback: Nielsen 360 Study Finds Consumers Love Streaming Music, But Radio Still Strong


How artists make money: Spotify accounts for 48% of streams and pays out ≈ $0.004 per stream ($3.97 per 1,000 streams).


Below is a breakdown by label type:


Flashback: Inside The Weeknd’s $92 Million Year — And The New Streaming Economy Behind It

Streaming revenue for Forbes Celebrity 100:
1) 2015 — $177m
2) 2016 — $387m (↑ 119% YoY)

More: The odds of an artist becoming a ‘top tier’ earner on Spotify today? Less than 1%

Share of revenue for top artists:
1)
Top 0.005% — 8%
2)
Top 0.05% — 32%
3) Top 0.25% — 58%
4) Top 0.45% — 69%
5) Top 2.45% — 89%
6) Bottom 98% — 11%


Pandora is buying a startup that’s trying to become the Google of audio advertising

Pandora is making a big move in the programmatic audio front with their acquisition of AdsWizz for $150M.

Flashback: Pandora Taps Neustar To Build New CRM

Quote from Roger Lynch — CEO @ Pandora:
“The internet breaks down broadcast models…There’s a multi-billion radio industry to be replaced someday. That’s not all going to go to subscriptions. So this is a very very large opportunity.”

More:
1)
Is tech finally killing radio? Don’t let iHeart’s bleeding fool you

2) The Three Issues Keeping Brands From Going All-In On Podcast Advertising

Nielsen 360 Study Finds Consumers Love Streaming Music, But Radio Still Strong


Total time spent streaming is growing, but so is music overallwhich is a good sign for the radio/music industries.

% of adults that listen to music:
1)
2015–86%
2)
2017–90%

Hours/week listening to music:
1)
2015–26.6
2)
2017–32.1 (↑ 21%)

Average annual spend on music:
1)
2015 — $153
2)
2017 — $156 (↑ 2%)

More on this topic. Brace for Impact: What the CBS-Entercom Merger Means for Each Radio Format

Ranking by total stations:
1) iHeartRadio — 850
2) Cumulus Media — 460
3) Entercom — 244 (↑ 108)

On-demand streaming now accounts for the majority of audio consumption, says Nielsen

Album sales (digital and physical) by year (% change YoY):
1)
2016–205.5M
2)
2017–169.2M (↓ 18%)

# of streams by year (% change YoY):
1) 2016–252B
2)
2017–400B (↑ 59%)

The streaming share of audio consumption by year:
1) 2015–22%
2) 2016–38%
3) 2017–54%

Top 4 artists by # of streams:
1) Drake
2) Kendrick Lamar
3) Ed Sheeran
4) Taylor Swift

# of tracks with 500M+ streams:
1) 2016–6
2) 2017–19

Some love for the Boomers! Vinyl now accounts for 14% ofphysical album sales and has grown in volume for 12 consecutive years.