Vinyl sales may have hit their highest level in the UK since 1991 but this is hardly a sign of what is to come. Indeed, a quick look through the top 10 vinyl albums of 2016 reveals that all but one of the artists were releasing music back in 1991! The exception is Amy Winehouse and she’s dead. The majority of the volume of vinyl sales is driven by nostalgic older music fans.
Not only is vinyl not the future (it was just 2.6% of sales in 2016), the big differences between the most popular vinyl, streaming, singles and album artists reveal just how fragmented the music business has become. Each of the top 10 charts (album sales, singles, top streaming artists, vinyl sales) almost reads as a standalone group of artists with remarkably little cross over. In fact, only 2 artists appear across streaming, singles and albums. None appear across all four charts.
As large volumes of older consumers switch to streaming (and Amazon should play a key role here) there will be more opportunity to join the dots. But do not mistake this simply as an opportunity to try to revive yesterday’s formats in today’s platforms. The album is clearly fading. According to MIDiA Research survey data, 68% of subscribers state that playlists are replacing albums for them. It is time to start investing though and effort in rethinking what album experiences should be in the digital era. And that conversation should have no bounds, everything should be on the table (number of tracks, street date vs continual updates, interactivity, changing content etc.).
The Gatekeepers of Streaming’s Long Tail
Digitization has brought new strategic challenges, and falling revenue, to the industry. Yet it has also brought new opportunities to a wider variety of artists. By reducing search costs, the digitization of music makes it easier to discover new artists and albums. It is {also} less costly to release new music, leading to unpredictable successes from artists who might not have been discovered or produced an album in an earlier era.
With subscription pricing and the ability to easily skip among artists (as opposed to per-album or per-song charges, which were the norm), streaming pushes users to listen to explore new artists. This has the potential to reduce the concentration of the very top artists and albums, while also helping music lovers find what economists refer to as the “long tail” of the industry.
“Spotify has democratised the universe,” is the dramatic, understandably Spotify-centric view of Spotify’s George Ergatoudis, who joined the service this year after a decade as pop’s most powerful tastemaker at BBC Radio 1. “One of our editors can find something, believe in it, put it in a playlist, see an interesting result from the audience then accelerate the song.” Systems inside Spotify automatically create playlists of what Ergatoudis describes as “emerging stories” (songs) which editors then trawl through when they’re compiling the playlists vital in achieving true hugeness. “There’s a lot of human curation time spent on saying, ‘Right, there’s some noise there, but what do we think about it editorially?’” Ergatoudis says.
It’s reassuring that discovery isn’t left entirely to algorithms, but this editorial aspect creates another question. Namely: has streaming liberated new artists from the constraints of regimented radio playlists and the whims of ego-crazed music critics, only to replace that system with a different set of gatekeepers? “The term ‘gatekeeper’ assumes we’re blocking something worthy coming through,” Ergatoudis insists. “I’d argue we’re not doing that. We’re letting good stuff through, and amplifying it.”
Ergatoudis argues that the gate being kept is now an extremely large one, or perhaps a load of different gates, through which different artists can pass. Demographics differ from service to service – Apple Music and Tidal skew urban – but as streaming services aren’t restricted by hours in a day, like mainstream radio stations, we’re looking at the possibility of multiple concurrent musical zeitgeists. For the first time, something like the UK’s long-trumpeted guitar-music resurgence wouldn’t have to come at the expense or, say, grime’s increasing popularity.
‘Independents Are Front and Centre’
Check out this lengthy interview with Merlin BV CEO Charles Caldas on [PIAS]’s fine blog, worth reading in full. A couple of excerpts:
[PIAS]: Did Spotify save the music business?
Charles Caldas: I don’t really subscribe to the ‘silver bullet’ view of the music industry. But Spotify’s certainly led the way to helping people to understand that there are different ways to monetise these rights. They showed you could marry those disruptive technologies with real commercial opportunities – not just threats.
Now if you look at the value Apple Music, Amazon and Google Play is bringing into the streaming business, you’re starting to see that’s shaping what the future of the business will look like.
[PIAS]: A lot of people are saying streaming isn’t mainstream yet.
Charles Caldas: That’s an important point. When I was younger, I was trying to sell records into HMV in Australia which was the epitome of the mainstream retailer. Let’s be generous and say there were 10,000 titles in that store. If you weren’t in those 10,000 titles you were invisible to the people in that store.
Now, the mainstream is whatever is on the services – every bit of music ever released. That’s why independents are front and centre in the market today. We’re not relegated to the specialist retailers or to the back of the shop.
Look into it from a consumer point of view: you can come into an environment like Spotify and what you’re discovering is no longer limited to what you hear on the radio, saw on television or read about in the press.
What we call over-indexing today is to me the rightful performance of independent music in the marketplace. The days of ‘if only the record store would stock this record’ have gone.
Don’t Believe The Vinyl Hype
Earlier this week, it was widely reported that vinyl is outselling digital downloads in the UK for the first time since the iTunes store was launched here in 2004. The real story is that sales of downloads are dropping not because vinyl is wooing back digital listeners but because streaming is becoming the default way of consuming digital music.
The relentless spin on the so-called “vinyl revival” is getting ridiculous – as the Daily Mash pointed out in a piece about how vinyl has become more popular than food. The Entertainment Retailers Association (ERA) has been spinning this line for the last couple years, since taking over the reins of Record Store Day. Unless you are reissuing Foo Fighters albums to be sold in the supermarket chains that have jumped on the vinyl-revival bandwagon, the situation is nowhere near as VG+ as ERA is suggesting.
We have to ask ourselves why people prefer to buy old records. Is it because vinyl is essentially a retro format, so people naturally look backwards instead of forwards? Is it because the whole culture of music – from the BBC 6Music playlist to festival lineups – is so focused on reliving past glories? I’m guessing it’s because these things are a known quantity, and that is what people want from their records: familiarity, nostalgia, a warm and cosy signifier that can be used in ads for banks, cars and clothes.
Don’t get me wrong, it’s great that people are still buying vinyl, and it’s no bad thing that it’s becoming more widely available. But it seems to have had very little impact on the industry at large, apart from making things even more difficult.
Hard Times for MP3 Sellers
I missed this article from almost a year back, and it’s an extra-interesting read in light of industry events that have taken place since. Beyond that, there’s some valuable food-for-thought to process here.
Unless you’re Amazon and the market takes your lack of interest in making a profit with good-hearted cheer, this is a tough time to be selling goods in the music industry. It’s even harder if those “goods” happen to be music files.
I’d heard it said as recently as a year ago that a DJ-centered market would be protected from the massive shift in consumer expectations driven by streaming, to a world in which every sound ever committed to tape can be listened to for free. This is clearly not the case. After all, it was once claimed that DJs would always have a “need” for vinyl, too.
This is a bitter pill for people with some skin in the game, who look and see a larger market for music than has ever existed before. There are also more DJs now than at any time in history, but selling that market on a product with zero duplication costs and unlimited supply has been a tough racket.
Recorded music was once the foundation of billion dollar corporations – corporations which were largely gutted by sexy tech start-ups that could do everything better… except turn a profit. Now we’re entering the next stage, in which the business of selling “records” (however you want to define that) is simply too low-margin to attract the big, dumb money of a Robert Sillerman. The precise shape of that next stage of the recorded music industry is unclear but one would like to imagine it characterized by artist-centered services like Bandcamp existing in the shadow of the streaming services – a business big enough for you or me or a guy doing this out of his bedroom or a bigroom but too small for the lumbering giants to bother with.
Tearing Up The Rules Of The Album
Teens of Denial couldn’t possibly exist 15 years ago—least of all because songwriter Will Toledo hadn’t yet turned 10 years old. Toledo instead stands as a “new” voice among a younger generation of musicians (ala Chance The Rapper, age 23, or Torres, age 25) who grew up alongside our current digital music ecosystem. As such, Car Seat Headrest’s first original album for a label represents a culmination of many changes the industry has gone through in the past decade-plus: instant accessibility to vast catalogues; the democratization of recording and releasing; the need to share it all immediately.
Perhaps equally as important as making the music, Toledo always had a home for it. His first release (called 1) dates back to spring 2010, and it still lives on Bandcamp (which itself dates back to 2007). At the age of 23, Toledo already has 11 albums and an EP to his name on the Car Seat Headrest Bandcamp page (Teens of Denial will make it an even dozen).
Toledo’s first release for Matador, last year’s Teens of Style, didn’t include a single new song. Instead, the label wanted Car Seat Headrest partially because of this built-up history. Teens of Style essentially acts as a best-of for Toledo’s Bandcamp output, although the musician re-recorded each selected track. This highlights perhaps the most modern characteristic of Car Seat Headrest: any song can be a continuous work in progress.
Over the years, Toledo has kept a consistent presence on Tumblr (a service that coincidentally started the same year as Bandcamp). He posts plenty of ideas and early demos, including a recent Radiohead tribute. This transparency and symbiotic interaction with fans became part of his process. So whenever Toledo made the types of sweeping changes that services like iTunes might demonize, “people commented, but now people don’t really remember that was a thing.”
You may have heard about someone else trying a similar approach earlier this year. Kanye West released his Tidal faux-exclusive The Life of Pablo on February 14, tweaked some tracks in mid-March, and then shocked fans by producing an almost entirely new version on March 31. “What Kanye is doing is a lot more recognizable to younger people who are more used to this sort of low-key LP release,” {Toldeo} said. “Even with official LPs, people get leaks and half-finished versions before the album actually drops, and this only became prevalent with the Internet. People today are used to the having the LP come into shape more slowly and not get dropped all at once, so what Kanye did was brilliant. He got so much shit for it being a disastrous release or whatever, but that’s not what I saw. He understood the power of the Internet, and he was using his massive celebrity to use Tidal like it was the next Bandcamp.”
Who’s To Blame For Music Startups’ Bleak Outlook
(The) bleak outlook for profitability among standalone digital music companies is a direct result of the high royalty rates incumbent upon startups who wish to license digital music for use in their apps. Whether you negotiate voluntary agreements or avail yourself of the existing compulsory licenses, you will not turn a profit. At least, no one ever has. The few that refused to pay these rates were often sued out of existence.
The end result of these perilous market conditions is that the only companies who can afford to be involved with digital music are the internet giants prepared to subsidize their digital music services with profits from their other businesses. The high royalty rates and up-front cash advances required by the record companies prevent profitable, sustainable businesses from emerging. As a result, the recorded music businesses is left only with these giants: Amazon, Apple, YouTube and, to a lesser extent, Spotify and Pandora.
But this is a “crisis” of their own making. Many of us argued for years that it was in the industry’s best interest to create a healthy ecosystem of hundreds or thousands of successful companies, all enjoying successful businesses around music. But those arguments fell on deaf ears, and instead the industry fought repeatedly to raise royalty rates over and over again, despite evidence that not a single company ever achieved profitability.
In my mind, it would have been in the best long-term interests of the recorded music business to enable the widespread success of thousands of companies, each paying fair but not bone-crushing royalties back to labels, artists and publishers. But the high royalty rates imposed upon startups, even after clear signs over the past 19 years that the strategy killed companies, has prevented a healthy ecosystem from emerging. It’s a bed the music industry made for itself, and now it is left to lie in it.
On the other hand, via Hypebot:
The indie music community has embraced Bandcamp and its suite of direct to fan monetization tools. And unlike most music tech startups, Bandcamp, which launched in 2008, has been profitable “in the now-quaint revenues-exceed-expenses sense” since 2012.
Bandcamp grew 35% last year, according to new stats just released by the direct to fan music platform. Fans are paying $4.3 million to artists monthly using the site, including 25,000 records a day.
Subscription-based music streaming “has yet to prove itself to be a viable model, even after hundreds of millions of investment dollars raised and spent,” the company wrote in a blog post. "For our part, we are committed to offering an alternative that we know works.
Update; There’s now a rebuttal to the original piece, via Medium’s Cuepoint:
More and more artists have chosen to go independent, direct to consumer, self-release their art. Stuff like Blockchain is exciting. If the labels are so impossible to deal with, then shouldn’t the investment be in platforms that will succeed in a post-label world? Shouldn’t the new startups, or the established players, be investing in content and talent development directly with artists, in a more substantial way? Shouldn’t they just take their great ideas and bypass the stubborn major labels?
Update 2; via Music Business Blog:
The music industry is in a transition phase. In such periods, the old and new worlds co-exist and collide. There are statistics that both sides of any argument can hold up in their defence, in fact they can often hold up the very same numbers to support opposite perspectives. Similarly, the comparisons you chose to benchmark with, can paint entirely different pictures. Such is the nature of transitions of human and business behaviour. For example, 83% of Spotify’s gross revenue going to rights is clearly too high and unsustainable, yet $0.00098 per song going to artists is also clearly too low and unsustainable. Something needs to give, for both ends of the value chain.
Maybe if/when Spotify gets to 50 million subscribers it will feel it has enough clout to compel rights holders to rethink licensing economics. Perhaps it will take Spotify getting to a 100 million to make that happen. Perhaps it will never happen. But if it doesn’t, the economics of streaming will remain so broken that only companies with ulterior business objectives will remain viable players, enter stage left streaming’s Triple A: Apple, Amazon and Alphabet (Google). The labels need to ask themselves whether that is the streaming future they want…
Music Can’t Last Forever, Not Even on the Internet
As music has become more durable, it has—paradoxically—also become more ephemeral. Your physical records don’t evaporate if the store you bought it from closes shop or the record label that published them goes out of business. If a streaming music company goes under, a stockpile of important cultural artifacts could go with it.
Fears that exactly this could happen erupted this week when a financial statements from popular audio hosting site SoundCloud surfaced online. The company, which has become a vital resource for independent musicians and podcasters, lost $44.19 million dollars in 2014 even as it increased revenue to $15.37 million, according to the regulatory document filed with the UK government. The revelation led to immediate speculation that SoundCloud could go offline, taking with it the 110 million audio tracks it hosts.
Fortunately there are alternatives to SoundCloud, such as Bandcamp, which a spokesperson told us has been profitable since 2012, and YouTube, which has become an increasingly important part of Google’s overall strategy. But SoundCloud users would have to re-upload all of their work—if they even still have copies of it. Much of what lives on SoundCloud today would likely vanish forever.
The article does point out that fears of SoundCloud capsizing are likely overblown, though it is generally agreed that 2016 is the service’s make-or-break year. But the warning is good to heed, as it should be assumed that any of these services you may be relying on could suddenly be offline – or at least altered overnight in a way that doesn’t align with your goals or ‘brand.’ My repeated advice is to future-proof yourself by focusing primarily on your own site and promotional ecosystem, treating these third party services only as complimentary outlets. The fan-outreach gateways that you fully control should always be the primary sources of attention.
RIAA Announces Streaming Will Count Toward Platinum and Gold Certifications
Since 1958, the Recording Industry Association of America (RIAA) has awarded platinum and gold certifications based on the quantity of albums sold by an artist. One million sold copies meant a record was platinum; half a million meant gold. Today, the RIAA announced a change in that methodology. Now, it will count on-demand audio and video streaming, along with the traditional album sales, in determining whether a record is platinum or gold.
One stream doesn’t equal one sale, however. Instead, 1,500 on-demand audio or video streams will amount to one album sale. (On-demand streaming refers to the ability to choose what song you’re listening to—services like Spotify and Apple Music, not internet radio sites like Pandora.) The RIAA’s announcement didn’t mention how these 1,500 streams will be tallied up—for example, whether one stream of a 17-song album will count the same as 17 streams of a single taken from the album.
Effective immediately, the RIAA will include on-demand audio and video streams and a track sale equivalent in determining which releases get the coveted album awards, a change that follows a similar tweak in 2013 to include on-demand streams for its Digital Single Award.
“After a comprehensive analysis of a variety of factors,” writes the organization in a statement, “including streaming and download consumption patterns and historical impact on the program – and also consultation with a myriad of industry colleagues the RIAA set the new Album Award formula of 1,500 on-demand audio and/or video song streams = 10 track sales = 1 album sale. Also effective today, RIAA’s Digital Single Award ratio will be updated from 100 on-demand streams = 1 download to 150 on-demand streams = 1 download to reflect streaming’s enormous growth in the two plus years since that ratio was set.”
Touring Can’t Save Musicians (But Independence Might)
In the predigital era, labels profited only from the physical recordings they funded, but as that income began dwindling, a new logic was applied to the artist-label relationship. Labels argued that by promoting the recordings they owned, they were also promoting the artist’s career as a whole, and were entitled to profit from the full spectrum of artist’s revenue streams — the “360 deal,” named for the totality of its coverage.
But labels do not take on the additional risks associated with their additional profits. Instead of protecting the health of their revenue-generating engine, they simply point to an artist’s independent-contractor status, which releases them from any liability they would be on the hook for if artists were labeled employees. Rather than sparking a labor dispute, these 360 deals quickly became the new normal. As a result, administrators, support staff and office spaces are insured against the risks of doing business, while the company’s income generators — the creators of their master recordings — are on their own.
The question of why recording artists have been unable to organize and collectively bargain the way other artists have — actors and screenwriters, for example — is one that has dogged them since the dawn of the record deal. Musicians do have a union, the American Federation of Musicians, but it’s not a particularly strong one; it primarily represents members of symphonies, and it hasn’t been on a national strike in 70 years. *
*Perhaps musicians’ renegade spirit is what ultimately will save the next generation of recording artists, who are increasingly forgoing record deals altogether and going it alone. As true independents, they work the margin between the technology that makes recordings cheaper to create and a public that is steadily buying fewer of them. Without a label taking a bite out of multiple revenue sources, the numbers can actually work. Others are coming together in groups centered on advocacy and pressing for changes to the laws that dictate royalty payments in the new streaming economy — something that could mean all the difference when injury, accident or age brings a touring musician’s career to a halt. But in the meantime, the vans and buses roll on.