21 Talking Points from NY:LON Connect
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Music Ally NY:LON Connect Talking Points Streaming’s growth, China’s 21 Talking Points from potential, video opportunities, NY:LON Connect blockchain sceptics and more Music Ally and the Music Business music and technology industries to talk Association co-organised the first NY:LON about the current digital-music ecosystem, Connect conference, which was held in and how it could be improved. Here are London on 24-25 January 2017. The event some of the key talking points from Music brought together executives from the Ally’s coverage of the event. 1 21 Talking Points from NY:LON Connect 01 Streaming may have expanded the The caveat is that iTunes wasn’t the only digital music-buying market music downloads service at the time in the UK. But he drew a firm conclusion from At NY:LON Connect, Spotify’s chief the comparison. economist Will Page pointed to Midia Research’s estimate that 8.3 million people “At worst it’s neck and neck. At best it’s a in the UK now pay for music-streaming tipping point where we have more people subscriptions. Page compared that to past paying for access than have ever paid for research from Kantar WorldPanel claiming ownership in this country,” said Page. that there were 7.4 million total UK iTunes He also tackled the question of customers in 2012 – arguably the peak of displacement effects: whether the the music downloads market. industry’s gains from streaming are 2 outweighing its losses from declining In his keynote speech, Universal Music download sales. Group’s Jonathan Dworkin criticised suggestions that there isn’t already pricing “In the UK, for every pound we lose from flexibility in the market, pointing to mobile downloads, we’re getting £2.20 from bundles and student/family deals, as well streaming. In the US, for every dollar as Amazon’s tied-to-Echo mid-tier offering. you’re getting $2.18 from streaming,” said Page. “It’s very hard to have price attrition at the top end, and then in a future and more There was also a recurring talking point mature market, move back up,” he warned about how much bigger the global music during a panel session on streaming. “I subscriptions market can grow beyond its don’t think we have to do this by slashing current 100 million people – another Midia prices wholesale at the top end.” He was stat. That company’s boss Mark Mulligan backed up by The Orchard’s Scott Cohen: advised caution. “I don’t think we need to cut the top to bring in the bottom.” “The percentage of people who are going to pay for stuff is always going to be a Another speaker, Beggars Group’s digital minority,” said Mulligan, although he boss Simon Wheeler, suggested that the suggested that this minority could still tough economics of streaming make amount to around 200 million people ditching the $9.99-a-month price point a globally by 2021. risky endeavour for many parties. 02 Execs bite back against the pressure “It’s pretty hard for the songwriters, the to lower streaming subscription prices performers, the labels, the services… it’s kinda hard for everyone to make this a In 2016, there was a running debate about business as it is. So taking off the top end whether the standard $9.99-a-month cost when we have millions of people coming of a streaming subscription is too high. Will into the marketplace… I don’t say we don’t we soon be reaching a ceiling of early go there at some point, but that point is far adopters prepared to pay that much, and if ahead of us,” he said. so, should the price come down? 3 03 There have been plenty of losers from streaming “32 digital music services have shut About those tough economics, though... “32 digital music down in the last five services have shut down in the last five years,” explained years” Music Ally’s Karim Fanous. Of those, 53% have wound down, Karim Fanous 13% went bankrupt, and 22% were acquired. Can even the bigger pureplay services like Spotify, Pandora and Deezer survive against Apple, Google and Amazon? The industry’s biggest label is aware of the debate. “Two of the industry’s top five accounts are operating with negative margins funded by other people’s money,” said Dworkin during his keynote speech. “We need to find ways to ensure we have a balanced ecosystem of partners: platforms and pureplays… At Universal we are very mindful of the digital ecosystem’s fragility.” 4 04 ‘Cross-usage’ isn’t a factor in music “And that’s very different for the music business, which has been focused on During Page’s NY:LON Connect session, increasing penetration in the markets we saying that in the streaming TV/film space, know really well… I think there’s a world there is evidence of “cross-usage” of rival where we get to two, three, four hundred services, but not in the music market. million subs. It’s possible.” “There is growing evidence that people are The key will be treating each territory subscribing to Amazon Prime plus HBO, individually, and avoiding assumptions. A and possibly paying the BBC licence fee point made by Armonia CEO Virginie and paying for Virgin Media’s package of Berger when she talked about Africa. content,” said Page. “Usually you want to apply the same rules “In music services, I don’t think as we have in western countries, in terms cross-usage is so high. If I subscribe to of rights, copyright, piracy, monetisation. Apple Music, there’s very little chance I’m But it doesn’t work in Africa,” she said. going to subscribe to Amazon Music or “You have to forget everything about how Spotify.” it works [in the west].” 05 Many of the next 100m subscribers Warner Music’s Alfonso Perez-Soto talked will come from emerging markets about the streaming “explosion” in Latin America, where having a subscription to We have 100 million music subscribers, Spotify, Apple Music or another service but where will the next 100 million come has become an aspirational thing. from? The industry hopes many are from Latin America, China, India, Russia, Africa Like Dworkin, he said payments will be and other emerging markets. critical. “We really basically have to first work on alternative methods of payment… “We all tend to focus on the big we have to adjust and localise our recorded-music markets, but solving business,” he said. “We have to cooperate things like payments and getting the offers with carriers as much as we can, obviously right for markets like China, India, if we can get a fair deal in the share. But Indonesia… enormous growth is going to also explore other methods of payment.” come out of those markets,” said Dworkin. 5 06 China has huge potential but it is still early days “At this point, we’re talking about a little By sheer scale of population alone, China has long been seen bit over half a billion as having rich potential as a music market, but widespread people are piracy and a dearth of legal digital services has thrown cold consuming music water on those hopes in the past. Now, both of those issues online in China” are being addressed, and the industry is hopeful again. Ed Peto UMG’s Dworkin talked about China being transformed into “one of the world’s leading music markets” thanks to the growth of local streaming services. “In the next ten years, China may well become the world’s largest recorded-music market,” he said, talking of the potential for a cultural knock-on effect that “rivals the 1960s in the west”. Market expert Ed Peto of Outdustry offered a comprehensive keynote outlining the challenges and opportunities for music 6 in China, including some of the big moment. “While the licences are in place, numbers that are fuelling optimism. which is great, and we’re starting to get the reporting, which is great, now we’re There are now 731 million internet users in looking at one of the lowest per-stream China, including 695 million mobile internet rates in the world. Perhaps the lowest,” users, and an estimated 502 million online said Peto. “We think there are about 15 music users. “At this point, we’re talking million premium subscribers in China now. about a little bit over half a billion people That is the very, very beginning of where are consuming music online in China,” that’s going to go.” said Peto, adding that around 75 million of those people are listening to 07 Global growth is good for the indies Anglo-American repertoire. Streaming’s growth around the world is Peto also pointed to the dominant role of encouraging for independent labels, said tech giant Tencent in the Chinese digital Merlin CEO Charles Caldas. music market: it owns the three most popular services by market share: QQ “More than two thirds of our members two Music (39%), Kugou (28.8%) and Kuwo years in a row have said that their overall (9.6%), and has exclusive licensing deals business is growing… And one of the with Sony Music and Warner Music, albeit other reasons it’s doing that: we now have with the rights to sub-license that music to a truly global audience,” said Caldas. rivals. “We’re talking about the idea of 40% of Merlin’s members now make more someone like Warner licensing exclusively money outside their home territory than to Spotify, and then asking them to license inside it, compared to around 16% in the on to Apple Music on their own terms,” purely-physical days of the industry.