thereport ISSUE 420 | 01 FEBRUARY 2019

#2019Goals The music industry’s key challenges this year... and how we can tackle them 1

ISSUE 420 01.02.19 CHALLENGES

Up to the tasks 018 was a cracking year for the mu- when recorded-music revenues were, sales? – and that we can kick back and subscription businesses in new markets and sic industry for all kinds of reasons, seemingly, inexorably declining. Growing enjoy the golden age. the post-Article-13 YouTube relationship. but particularly the continuing, investment of all kinds – in startups, in Actually, there’s no better time to We’ve also turned to a range of streaming-driven growth for re- artists, in catalogues – is aiding that swerve that danger by considering some industry figures to pick their brains 2corded-music. The IFPI may not publish its spring in the industry’s step. of the big challenges that our industry on challenges for 2019, with guest Global Music Report until April, but all the There is plenty to be chirpy about, still faces, and how – from a position of contributions that avoid plugs for their data we’ve seen from individual countries then. The risk is that this confidence and growing financial health – they might best own companies in favour of looking at the points to another year of healthy growth. optimism tips over into arrogance and be tackled. bigger picture. We hope the overall effect

report That’s reflected in a confidence and complacency. That streaming-revenue So, to the first music:)ally report of 2019. will be to boost your enthusiasm for the optimism within the industry that feels growth is a long-term given – remember We’ve chosen some challenges that we see, industry’s prospects, rather than dampen very different from the 15-year period when people thought the same about CD from diversity and ‘fake music’ to building it down. Enjoy! :) the 2

ISSUE 420 01.02.19 CHALLENGES Views from the industry

“The music and entertainment industries hasn’t received too much attention from each DSP using a different format, creates have both made important strides when the music industry in recent years. For complex individual data sets. Meanwhile, it comes to women and the opportunities many people in the industry this young the global market demands payment available to them. I’ve had the privilege of and fast growing region is a blind spot on solutions capable of handling fluctuating meeting some exceptionally talented women the map as evidenced by the fact that it exchange rates in various currencies. in this space who are making a significant isn’t covered in official aggregated data “In 2018 Merlin saw processing volumes impact at all levels. This is inspiring and reports. Because of this, the dynamics and increase significantly yet again, as new indicative of the future that lays ahead for all opportunities in 19 countries that share the DSPs launched, existing ones expanded of us but, still, representation isn’t where it same language remain largely unknown to their business into new territories and our Carianne Marshall, COO, needs to be. the rest of the world. membership grew. At the same time, rights Warner/Chappell Music “While I’ve been a part of the “Last year however was an exciting holders rightly expect ever quicker access “We need to see greater recognition for entertainment business for many years, I am one with the arrival of more global rights to consumption data and revenues - with songwriters and their craft in 2019. After admittedly newer to the music industry. As I holders and the international expansion of extremely short timeframes in our case. So all, there is no music without a song. We’ve learn and grow, my hope is to become part of global digital service providers (DSPs). This we are investing heavily in systems and data already seen some welcome steps with a solution that is grounded in a commitment presents a pivotal moment for MENA based processing to streamline the process and digital services starting to highlight the to equality and drives real change. I hope music companies (DSPs and licensors alike) increase efficiencies. role of songwriters in their credits. I’d like the wider industry will continue to invest in as they will need to elevate their game to “Looking forward, technological to see more televised award shows around building more inclusive practices, so that compete with the global companies. innovation needs to focus on the the world honour songwriters so that fans this business can advance in ways we can “YouTube consistently sees both standardisation of processes across the understand their importance – it would all be proud of.” mainstream global artists and new acts business – whether it is streamlining the be great if the BRIT or NRJ Awards had a from MENA reach audiences around the supply of data, assignment of rights, and Songwriter of the Year category.” Liliana Abudalo, music content world. We’re excited to see this accelerate the reporting, processing and distribution partnerships manager, Middle East, in 2019 as the region comes into focus of data and revenue. All of which delivers Dawn Ostroff, Google / YouTube for the global music industry. However, increased transparency for rights holders, Chief Content Officer, Spotify “Despite a long and rich history in arts education on basic rules of copyright and which is crucial to the ecosystem. Adopting and culture, the Middle East and North rights administration poses a serious these technologies in a more standardised Africa (MENA) is a part of the world that challenge. DSPs including YouTube help to way will enable the global music licensing create more awareness around copyright chain to operate as an ever more effective by reporting authoritative data to rights marketplace.” holders, creators and artists alike.”

Helen Alexander, CFO, Merlin “Success can cause its own complications. As the recordings business revives and prospers with the global growth of streaming, sharp increases in the volume of data and

report payments pose significant challenges. “Receiving increasingly complex reports from multiple territories, with the 3

ISSUE 420 01.02.19 CHALLENGES Making the music industry more diverse n our end-of-2018 trends report in about diversity and inclusion being a December, we highlighted some of the goal everyone can work towards. It’s progress that had been made around possible to acknowledge that one specific diversity and inclusion in the music demographic dominates the senior Iindustry last year, particularly for gender. leadership within the music industry, while Mentoring schemes, databases of women not talking defensively as an attack on ‘old in the industry, and manifestos outlining white men’. These men – many not so old how further improvements could be made – have a positive role to play too. all drove this debate positively. Finally, mental health and wellbeing is However, we also looked at some of definitely part of this. If we want diversity the setbacks, including the ‘Women need of thought within the music industry, then to step up’ controversy of the Grammys, ensuring people don’t burn out and/or quit as well as the stories being shared the industry is a priority, and giving people about harassment and sexism within the the support they need to do great work, is industry. It was clear that there is much a priority. work to do. An always-on culture of email and So, one important challenge for 2019 messaging is to build on those positive efforts, while mixed with another is to root them in a wider drive the evolutions for all kinds of diversity and inclusion: wrought by ethnicity, disability, age, sexuality, mental streaming – ask health… It’s not a liberal agenda for its inclusion are goals worth working towards changed a nearby digital own sake: it’s about making an industry is equally vital. their marketer how that’s truly representative of the people it But armed with all that information, we company’s many campaigns serves – fans and artists – and also doing can also share more information about culture they’re juggling better business thanks to the resulting how to act on it: how companies who have and/or simultaneously, diversity of thought. tackled these issues went about it, and processes. for example – If we had to summarise the specific how that might apply to different kinds of Such offer danger challenge this year, though, it’s the companies within the industry who want lessons points worth importance of the ‘how’ question to follow suit. from one grappling with. alongside the ‘what’ and the ‘why’. Which It’s practical questions like how to facet of For tackling all is to say: the conversation about what approach recruitment and training, inclusion (gender, say) might also be of the above, the rewards are the same: the industry’s challenges are remains and how to draw up clear policies for applied to others (like ethnicity) and vice attracting, retaining and promoting the important – from proper data on where workplace culture. Industry bodies can versa, while also being aware that there most talented people to and within the

report we are falling short to people speaking and will play a strong role here, from are also some different challenges and music industry, and ensuring that the out about their experiences – while the workshops for small firms to reports solutions for each. growth and optimism of the last few years understanding of why better diversity and and events for people to share how they Another challenge is one of positivity: can be built on long into the future. :) the 4

ISSUE 420 01.02.19 CHALLENGES Next moves for the YouTube relationship

t the time of writing, it’s still collaboration, even if Cohen’s involvement unclear quite what’s going to hap- in particular rankles with rightsholders. pen with Article 13, the section Regardless of the outcome, YouTube’s of the proposed new copyright challenge in 2019 (musically speaking Adirective in Europe that deals with online – it has plenty of others too, particularly platforms and their liability for copyrighted around content moderation) is to put material uploaded by users. even more welly behind its YouTube Music When music:)ally spoke to a number subscription tier, with more marketing, of music-industry bodies in October, the more partnerships and a bigger push month after a European Parliament vote through Google’s enormous base of to approve its draft text for the legislation, Android devices. they were genuinely pleased at what they Alternatively, if Article 13 does go saw as a hard-won victory in an intense the music industry’s way, the lobbying campaign. challenge will be about establishing Their theory: the draft texts produced the new parameters for the YouTube by the European Parliament, European / rightsholders licensing relationship Council and European Commission were going forward – which can’t just mean sufficiently similar (in terms of Article squeezing the video service’s pips for all 13) to make it highly likely that the music they’re worth at the negotiating table, but industry’s desire for a clampdown on rather finding a balance (as with Spotify platforms like YouTube would be carried and other audio-streaming services) that through to the final text, with the vote on enables both sides to grow together. that in the spring this year a formality. Rightsholders have always said they Three months on? It’s not looking quite while remaining hopeful that it might It’s true that throughout the lobbying just want YouTube to have parity with so good for the industry. YouTube’s senior swing back before the final text would process around Article 13, YouTube and those other DSPs, while YouTube has execs (including CEO Susan Wojcicki and be produced. Meanwhile, with European the music industry have continued to work always said it wants an ever-closer music boss Lyor Cohen) pressed their MEPs set for upcoming elections, that together – on its YouTube Music service, and more-productive partnership with case against Article 13 publicly, while formality of a final vote might not be so for example, as well as original content for rightsholders. the company launched a powerful new formal after all. artists. YouTube Music is even the sponsor Whether Article 13 is watered down campaign to protest against it – from The challenge that we see is about for the Brit Awards on 20 February – a or user-upload platforms’ safe harbours encouraging YouTubers to voice their what comes after the new legislation, partnership that could feel distinctly are swept away, properly burying the support to pop-up ads pointing viewers to and how the music industry and YouTube awkward if the final text goes YouTube’s hatchet (no, not in one another’s backs, the #SaveYourInternet campaign. – within the boundaries of whatever way by that point. etc) will be vital. Particularly when, as we’ll The ‘trilogue’ process to nail the final becomes law in the various EU member Still, if these partnerships could happen explain in a couple of pages, YouTube is

report legislation has taken twists and turns: states – repair their relationship after while Article 13 was still being fought such an important streaming player in the rightsholders protested that Article 13 the fiercely-divisive lobbying in the final over, then a negative outcome for either most exciting new global markets for the was being watered down at one point, quarter of 2018 and early 2019. side shouldn’t be curtains for further music industry. :) the 5

ISSUE 420 01.02.19 CHALLENGES Views from the industry

are more or less the same and, with a few opportunities for rapid growth. However, exceptions, there is no exclusive content. To they also contain numerous overlapping answer this challenge, streaming companies challenges that must be overcome. need to work closer than ever with artists All lack stable, widespread mobile and to offer content that really engages network coverage, a serious infrastructure fans and drives listening and engagement problem which hinders streaming but also continue to innovate in how they subscription growth, albeit improving in use data and contextualisation to deliver some areas. As networks improve, market a unique and personal music experience, growth might be expedited, especially if this like we do with our signature Flow feature. leads to a fall in currently high mobile data In addition, they need to build an authentic, costs, a further barrier for DSPs. trustworthy brand that both artists and These areas still experience high levels music lovers can relate to. of piracy, a direct and obvious threat to Lastly, and this is on the streaming side legitimate services. Due to the high quality rather than the label side, the challenge of pirated material, it is very hard to convert is to build a long term business. At the consumers to paid subscription services. moment, all players are investing in growth In Russia, we have seen pirate platforms Stefan Tweraser, CMO, Deezer with huge marketing and advertising legitimise their offerings, so the focus must Let’s be honest, today’s streaming “The challenges facing our industry are as budgets. Competing in this environment as be on encouraging a similar transition in success is not due to innovation driven diverse as the music that we help users find a challenger like Deezer requires innovation, these territories. DSPs can support this by the music industry. It is largely thanks and enjoy. It’s harder than ever to break agility and a lot of focus on creative tactics.” through pricing policy, assuming there is to technology and data companies who artists in today’s environment. The pressure industry understanding of the potential saw the opportunity in digital mobility and on artists in terms of promotion and content Anne Jenniskens, licensing manager, impact on short term profits. knew they needed entertainment to make creation have never been higher. At the FUGA These solutions are not a panacea for it connect. same time the people who embrace the “The next wave of streaming markets - the all ills. Cultural differences may yet prove a Don’t despair: the industry continues to opportunities that the digital landscape Middle East, India, Africa - offer untapped further barrier. Beyond infrastructure and be a singular force in the most important and streaming offers are the ones who will investment, local market understanding and competency – artist discovery and benefit the most. Given that streaming offers a long term vision will be key to success in development. By learning some lessons from a direct link between music listening and the next wave of emerging markets.” more innovative businesses, we might be revenues, it’s key for acts to embrace and able to avoid the cliff that lies ahead on this explore close collaboration with streaming Mike Jbara, CEO, MQA premature victory lap. platforms to reach more fans. It’s also “As the saying goes, ‘History may not Three things could move us forward: important for streaming platforms to help repeat itself but it often rhymes’. If ‘The Attention Economy’ – recognise that build emerging talent and promote the wide we aren’t careful, we may look back at we have a lot to learn from competing diversity of music, something that we’ve this period as similar to when the categories such as games and film/tv; had great success with in the last two years industry thought the CD would live forever. Consumer insight – yes. Analysis – no; through our Deezer NEXT programme. In fact, I think a dose of the desperation- Excite consumers about experiences – don’t

report For music streaming platforms, the induced risk-taking of the mid- to late- scare them by leading with price. If we make biggest challenge is to stand out against 2000s could be a healthy thing right progress on these, we might just learn to competitors, given that the music libraries about now. disrupt ourselves.” the 6

ISSUE 420 01.02.19 CHALLENGES Building subscriptions in China, India and Africa

services are paying for them: so around industry ready to try pulling on some new one million. Compare those figures to, say, levers to drive subscriptions – in a country Spotify, which at the end of September where mobile gaming (and, indeed, 2018 had 87 million premium subscribers mobile karaoke) revenues undercut past out of 191 million active users overall – a assumptions of an unwillingness to pay paying ratio of 45.5%. for ‘content’. It’s fanciful to assume that what Spotify India, meanwhile, has an exciting crop has done (largely in the west) will be of popular, well-funded audio-streaming mirrored in other parts of the world, but… services like Gaana and JioSaavn, with if Tencent Music could match Spotify’s Spotify to come, and an awareness of conversion rate, it would have 293 the need for delicacy – testing how early million premium subscribers. Even at its adopters might be nudged towards paying, current average revenue per paying user while riding the wave of improved mobile (ARPPU) of RMB 8.7 a month, that would networks and cheap/free data to bring tens be a $4.5bn market annually – enough of millions more people into the free funnel, (in 2017) to make it the second biggest particularly outside the big cities. recorded-music market in the world. And Africa? That’s a big, beautiful (The fact that actual Chinese revenues challenge on so many levels: from were $292.3m that year shows the gap connectivity to the infrastructure of the between current reality and our flight of music industry itself, which may well look speculative fancy. But hopefully you see rather different to the established systems our point about the potential.) of the west – although interestingly, with hina was already a top-10 global free (but legal) music-streaming, but The challenge with China and India, artist/manager teams at the centre, it recorded-music market in 2017 the industry is keen to figure out how to in all manner of industries, has always may look quite a lot like what the western according to the IFPI, while the make that a powerful funnel towards paid been to look beyond their pure scale, music industries are moving towards. Indian music industry has made subscriptions. Or to understand if that’s a and instead to properly understand One last challenge: to understand that Cits ambitions to follow suit in the next few realistic ambition. demographics and behaviours within in India and Africa, YouTube is the early years. Africa, meanwhile, was barely on Here’s some data. At the end of June their populations, to understand how a kingpin of digital music, and it is unlikely the IFPI’s radar as a collection of trackable 2018, Tencent Music had 644 million monthly business could best position itself for to be unseated. markets, but there’s real excitement about active users for its music-streaming services success. What are people paying for That may be good (could YouTube the potential there too. in China – we’ve stripped out the company’s already? How much do they pay and how Music be the first mainstream subscription What all three territories have in other karaoke and livestreaming apps – with do they like to do it? And more specifically service in these markets?) or concerning common – and you can add in Latin 23.3 million of them paying for it. That’s a to us: how and why are they interacting (will free YouTube put a low ceiling on America if you want to expand the net paying ratio of 3.6%. with music for free already? the possible subscription growth of its

report to so-called ‘emerging’ markets that are In India, meanwhile, it’s estimated China has been on a well-documented audio-streaming rivals?) 2019 may provide further along in their development – is that just 1% of the 100 million-odd people journey from almost-entirely unlicensed the inklings of an answer to this question, that a lot of the early progress is around listening to audio-streaming music music services to free, legal ones, with the at least. :) the 7

ISSUE 420 01.02.19 CHALLENGES Dealing with fake music and fraudulent streams

potify’s cost of revenue – the executive at a rival streaming service told stronger, faster spam and fraud detection players may be battling fiercely for financial category that includes us this month. systems, alongside the mole-whacking market share, but they have also shown royalties – was €2.81bn in the first “It ends up flowing through unchecked war of staying one step ahead of hackers a willingness to work together when their nine months of 2018. Based on its and ultimately makes its way into listeners’ trying to compromise user accounts. wider lobbying goals coincide. Spotify, Sfull-year predictions, that points to around ears. Most of it goes unnoticed. Some of it, Easy to say, but hard work and hard-won Apple, Amazon, Google / YouTube, €3.89bn for this streaming service alone. however, is designed to be searched when expertise are required. Pandora and Napster in the Digital Media No wonder the music-streaming sector is listeners have a typo in the track or artist It’s also notable that the ‘fake music’ Association (DiMA) for example, or a juicy target for scammers. name. Some of music is manufactured in challenge has come barrelling into the Spotify, Deezer, SoundCloud and others We saw it last year with the ‘Bulgarian music mills with the artist name ‘workout headlines just as Spotify in particular is with Digital Music Europe (DME). scam’ involving uploading music to Spotify music’ or something similar designed to preparing to open up for direct uploads A positive step in 2019 would be and then having warehouses full of play music as search bait. Others are by some independent artists. While media for these kinds of associations to devices streaming it round the clock to get much more nefarious capturing on the coverage has tended to focus on the broker cooperation on identifying and royalties. We saw it just before Christmas misspelling of artist names and trying to tensions this may open up with labels and sharing details of potential bad actors with ‘fake albums’ gathering old B-sides steal their royalties. It’s a growing problem distributors, it’s clearly also a move that on streaming services, a bit like the and demos from Beyonce and SZA. for those who manage the catalogue will require carefully thought-out checks ‘pubwatch’ schemes in music:)ally’s And we saw it just this month with systems in the DSPs.” and balances to guard against fraud if homeland the UK, where local pubs form the BBC’s investigation into how some In one sense, it’s easy to put forward a and when it opens up widely. networks to share details of troublemakers previously-unknown artists with no online solution for this problem: the use of data Good cooperation between the DSPs and bar them en masse. footprint ended up in a number of Spotify science / machine-learning to create may also be helpful here. The main users’ most-streamed artists of 2018 lists. Cue accusations that someone, somewhere, was somehow hacking people’s accounts. The BBC called it ‘mysterycore’, although journalistic trends being what they are, ‘fake music’ may well stick as a catch-all term. As we wrote in our bulletin lead earlier this month, this is a challenge for all digital- music services, not just Spotify. “One thing that is posing a challenge for the digital service providers and mostly listeners is the growing amount of SPAM Detailed information on how the or fraudulent music out there. Much of DSPs fight fraud and fake uploads will, it comes through the typical ingestion by necessity, be kept secret. But there

report processes from low-cost distributors/ is no doubt that these efforts must be aggregators that do not qualify the music redoubled in 2019, given the recent spate as it comes through their system,” one of controversies. :) the 8

ISSUE 420 01.02.19 CHALLENGES Views from the industry

challenge in this regard will be to ward “One of the biggest challenges for artists when you link all that back to artists you off complacency. A return to growth, in 2019 is how their income from radio will have a truly massive volume of usage driven by streaming, and now supported be treated in an interactive era. Whilst data. Without a standard ID, and a system by the emergence of increasingly new many in the industry will think this is of authorisations, to permit artists access and innovative technologies, should not rehashing an old argument it’s actually to usage data, artists are missing out on be an invitation to return to the attitudes still a very pertinent issue as the launch of the value of recombining the data from and practices of the halcyon days of the BBC Sounds exemplifies. Radio broadcast multiple activities. The value of matching CD. 2019 should be the year that we in income has been paid direct to performers ISWCs to ISRCs is big, the value of the music industry acknowledge that and songwriters regardless of their label matching usage to artists is bigger. disruption in and of music is here to stay, or publishing contract and whether or Platforms and intermediaries could and as a result of that we will need to not they are recouped. However as BBC share anonymised usage data directly be ahead of the curve in anticipating a Sounds has some interactivity how it will with artists, if an ID and Authorisation constant stream of new and evolutionary be treated by PPL is yet to be determined system was standard, ISNI (International technologies and formats, and the future and some rights-holders are arguing Standard Name Identifier) could be part of music itself.” there should be no direct performer of it. The challenge is for artists to start payment. We hope that there will be a implementing a system by adding a data Annabella Coldrick, CEO, MMF more open dialogue with artists and their clause into every contract they sign.” representative and a solution found that ensures performers retain their vital income from the BBC Licence Fee.”

Jake Beaumont-Nesbitt, Raffaella De Santis, Associate at law firm executive director, IMMF Harbottle & Lewis “Distributed ledgers (blockchain “In 2019, we’ll see the rate of technological etc) no matter how sophisticated, disruption gather pace. Data and personal are only as good as the data information will become a tradable written onto them, music needs commodity for music services. Voice to standardise a system of artist activation will continue to develop, and in- ID. The progressive US Music car technologies and adaptive music will Modernisation Act makes links break into the mainstream. The availability between content ID’s (ISWC and of music will continue to be via ever more ISRC); however most CMO’s, ‘non-traditional’ platforms and formats. publishers and labels are not But for me, the biggest issue facing the compelled to adopt standards for music industry in 2019 that comes to mind artist ID’s. is, how can we harness music’s return to “The digital footprint of music growth and make that growth sustainable? creators across entertainment, and

report “In taking on that task, 2019 should social media is immense, add in be the year that the music industry the digital trail left by tickets, radio, becomes even more self-aware. Its biggest streaming and other activity and the 9

ISSUE 420 01.02.19 CHALLENGES Who will master the future of music metadata?

lright, this one was a challenge for to see tensions here. Do labels really want 2009 and every year since, rather to hand over the task of creating metadata than just 2019. Complaints about that will drive even a small-but-significant the quantity and quality of digital- chunk of their streams (and thus revenues) Amusic metadata have been going on pretty to the DSPs? Fears of a loss of control are much as long as digital music (in consumer understandable. terms) has been a thing. This question hasn’t boiled over into More than 15 years after the launch of public tensions, but behind the scenes, Apple’s iTunes; more than 10 years after Music Ally detects a renewed sense of Spotify’s debut; and nearly five years after purpose among labels to play a role here – the biggest attempt to create a ‘global the bigger ones are investing in their own repertoire database’ ran aground, we still machine-learning teams and technology, know that too much metadata is missing, while all sizes are kicking the tyres of wrong or disputed. ‘Getting our metadata startups that might have technology to help. house in order’ is the music industry’s perennial unfulfilled new year’s resolution. Actually, that’s unfair: there has been progress down the years, at the level of individual catalogues if not on a global basis. Still, when streaming services still don’t know exactly who to pay what share for some of the biggest tracks in their catalogues, there of the listener. In the former case, those making sense of huge catalogues of is lots of work to do. algorithms thrive on rich metadata. content are what big technology firms The challenge we’re spotlighting for 2019, The assumption has generally been and their machine-learning expertise though, isn’t so much about the songwriter that this is the labels’ challenge to tackle: are (or should be) good at, after all. and publisher metadata. It’s about all the to go through their catalogues, ensure the Amazon has talked openly about (One, Musiio, presented at our NY:LON other contextual information for recorded existing metadata is fit for purpose – if a creating metadata to power new musical Connect conference recently. Another, music, and how it will be used in a world 1960s band’s albums show up with a release interactions for Alexa, if it hadn’t been FeedForward, has recently launched its of algo-personalised playlists and voice- date in the 1990s as that’s when they were supplied by rightsholders. At one of indie Figaro product for this kind of catalogue controlled smart assistants. remastered, how will they be served up in body AIM’s conferences in 2018 where Music analysis and metadata creation.) This is the ‘Alexa, play me party music’ ‘sixties music’ streams? – and create any Ally moderated a panel on metadata, the Metadata doesn’t have to be a (or ‘workout music’ or ‘chillout music’ and new metadata that’s required. message from Amazon’s representative was rightsholders vs DSPs battle: they can work so on) use case, where a combination of a What hasn’t been talked about much, that labels shouldn’t be overworried about together to tackle this challenge. Even so, voice assistant and a streaming service’s although we did write about it in our 2018 metadata headaches, since his company diplomatically feeling out one another’s

report algorithms serve up a personalised stream end-of-year report, is the fact that streaming was well-placed to help. capabilities (and any red lines for major of music, based on an understanding of the services might – whisper it – be better placed Those comments were made in the labels in particular) may be an important catalogue itself, as well as the preferences to do this work. Analysing, tagging and spirit of cooperation, but it’s also possible behind-the-scenes task in 2019. :) the 10

ISSUE 420 01.02.19 CHALLENGES How labels evolve in the artist-direct era

thrive and prosper with label-services point and then signing to a label, with or distributor-only strategies; and the the leverage to strike a deal that is more awareness that managers and publishers advantageous to the artist than would have are shouldering more of the early burden been the case a few years ago.) of artist development, while the former are This feels like a healthy challenge increasingly calling the shots around artist- for labels of all sizes: to understand the marketing too. changing needs of artists and reorient There are exciting opportunities here for (if necessary) their businesses around managers, including challenges in terms of them – while also accepting that the new bringing the right people and technology era of deals is likely to also often involve in to serve artists’ needs and expectations some grown-up discussions about rights – from choosing a distribution partner ownership. Not every artist can and will and building relationships with streaming demand to retain all their rights, but the services to making sense of analytics and centre of gravity for these negotiations has mastering social-media marketing. definably shifted. This activity isn’t driven by a The fact that we’re still talking desire to kill off all labels though. about the ‘Chance the Rapper There’s a parallel opportunity effect’ – Chance’s (left) for labels to evolve into mainstream breakthrough: new kinds of companies 2016 – suggests that this themselves, with flexible effect isn’t creating a ather than unnecessarily rewrite labels system in 2019 – the existence of capabilities (and flexible conveyor belt of global, label- the introduction to a recent that alternative path – is what will fuel the deals) that ensure they can free pop stars just yet. But music:)ally bulletin lead on this next big evolution of labels (good ones, fit smoothly into the teams remember, too, that every year topic, we’ll reproduce it here as a anyway) in terms of how they’re structured, that artists are building around will bring a new spate of existing Rstarting point for discussion of a challenge what they do for artists, and how those themselves. stars coming to the end of existing for labels that’s often presented in existen- deals are structured. It’s a positive process, There is no longer one accepted way of contracts and surveying their options. tial terms. albeit one with some necessary tensions doing things to achieve musical success, no Call that the ‘Taylor Swift’ effect maybe: “We’ll be blunt: anyone who tells you along the way.” sense that a major-label deal is THE golden despite the headlines about its Spotify- that labels are dead is talking out of their That’s our position in a nutshell: ambition (even one to kick against, for windfall promise, the terms of how Swift’s trumpet. But anyone who tells you that an labels in their traditional form are being independent artists). If you sign to a major masters are licensed will be more influential artist can’t succeed without a label is just challenged on multiple fronts in 2019, label in 2019, it’s because you think that on her peers. as big a fibber,” we wrote, following the whether it be Spotify and Apple licensing label and that team can help you fulfil your This isn’t just about the biggest stars publication of an RIAA-commissioned report some artists directly (and Spotify allowing ambitions. If you could but don’t, it’s because and major-est labels though: the challenge

report on how labels are evolving. others to upload directly without even a you think another route will serve you better. of 2019 for labels of all sizes is how to stay “The truth of the matter is that the ability distributor); the steadily-growing number Both options are valid. relevant: many are already relishing this, and for artists to thrive outside the traditional of artists able to not merely survive, but (As, indeed, is going it alone to a certain serving their artist partners well as a result. :) the 11

ISSUE 420 01.02.19 CHALLENGES Views from the industry

Katie O’Leary, campaign lead, FEAT But why is this relevant given the current political climate? First off, an orderly exit from the EU would see the UK remain under the jurisdiction of the European Court until December 2020 or beyond. But post leaving, we are still geographically part of Europe, and UK artists want their fans across the continent to be protected. It is therefore critical that the live music business across Europe unites to lobby for better EU legislation, including monitoring the progress of the European Commission’s New Deal for Consumers Steve Pearce, CEO, TickX and ensuring that ticketing is on the “Ticketing is changing right now, and one of agenda when the new Parliament is the biggest challenges the music industry elected in May. Stronger legislation means will face in 2019 is the cave-in between more rights for fans and gives regulatory primary and secondary. Consumers have bodies the tools they need for effective grown tired of the secondary market and enforcement.” their willingness to pay exorbitant prices has diminished greatly, and it’s time that the Becky Brook, business development, industry responds to that change. licensing and strategy consultant at Jaak Sites like Ticketmaster are merging their “The US Register of Copyrights has less primary and secondary offerings, opening than six months to select a Mechanical up a new avenue of fan-to-fan resale; more “From legislative changes to the Licensing Collective (MLC), an “It’s unclear to me whether the MLC’s legislation is coming to regulate resale and closure of GetMeIn and Seatwave, the organisation which then has until January database can be based on an existing keep the consumer safe and it’s growing UK has recently witnessed a number of 2021 to operationalise a blanket US vendor’s database or be built from scratch more commonplace for tickets to be charged significant wins in the war against touts. mechanical license. with data supplied by publishers. Using an at what they’re worth. In 2019, we’ll see more But a quick look around certain online “This includes, most importantly, existing vendor’s database is the quickest tickets sold directly at market prices through resale platforms reveals the battle is far establishing a relevant and public option, but will bring with it many of the dynamic pricing. from won. database and arrangements for paying criticisms levelled at existing solutions. I “One of the key things that everyone “While national governments across royalties. The MLC can and is likely to highlight this not to undermine the efforts in live music needs to consider this year Europe work to address the issue, there appoint vendors, the tender process to date, but because I think the next period is transparency with the consumer. New is no Europe-wide legislation targeting alone for these services would usually will require even more collaboration and legislation is already starting that off, online resale abuses. This means take a year or more. CMOs, who have determination than it took to pass the MMA. but there is still a long way to go before regulatory bodies such as the UK’s been offering these services for decades, “The effort will be worthwhile, unlocking

report ticket sellers, musicians and the industry Advertising Standards Authority can have long laboured over the challenges innovation in music services, driving as a whole are maintaining clarity with find their hands tied when it comes to inherent in creating a conclusive view of more revenue to the industry and most consumers on the best prices.” prosecuting touts. fractional ownership of natural rights. importantly ensuring writers get paid.” the 12

ISSUE 420 01.02.19 CHALLENGES Using spoken-word content to take on radio odcasts, podcasts, podcasts. You’re grappled with in 2019, however: that of Last summer, Spotify told music:)ally next Serial / Stuff You Should Know / My going to hear the word ‘podcasts’ an understanding what radio offers that on- that it was now the second-largest podcast- Dad Wrote a Porno. awful lot this year, with Spotify, Pan- demand streaming does not, and exploring distribution platform in the world, behind only Podcasts are just one facet of spoken- dora and Deezer among the music- how to plug those gaps – which does not just Apple. That too showed the opportunity for word audio though. Another opportunity Pstreaming services already making spoken- mean copying. music-streaming services to quickly build an in 2019 might be for music-streaming word content a priority. Apple, of course, Podcasts are just a first step in this audience of podcast listeners, and increase services to do more with audiobooks – has a long-established podcasts category process: they sound like radio shows the overall audience for this content. a market where one dominant player within its iTunes empire – albeit not as yet (indeed, many are edited versions of actual How best to build on that? More and (Amazon’s Audible) could do with some integrated with Apple Music – while Google radio shows) and bring the intimacy of better tools to help podcasters make proper competition. launched its own standalone podcasts app conversation to a medium that’s been money, beyond simply paying them for There is also the challenge that none in June 2018. lacking it. exclusivity. There’s an opportunity for the of this spoken-word content is live, Even now, podcasts are a tiny share This is also a market ripe for disruption: kind of ad-tech that the streaming services which remains one of radio’s strengths. of listening on the music-streaming for example in the way podcasts are are already investing in to be deployed for Last year, Spotify CFO Barry McCarthy services, although that lends itself to recommended and discovered – a podcasts, and to thus make themselves admitted that he was unsure how news announcements of impressive-sounding challenge Spotify and Pandora are already a centre of gravity and sports will fit in to a world where on- triple-digit percentage rises. But the strategic chipping away at – and in the way they for the aspiring demand streaming has taken the place of importance of podcasts plays in to a bigger might be mixed in with streams of music podcasters broadcast radio. Now’s the time to explore challenge: the desire of the streaming (something Deezer’s ‘Flow’ feature seems who’ll come the technology and partnerships that services to take a bigger bite out of likely to evolve towards). up with the might answer this question. traditional broadcast-radio’s audience – and In the US, satellite-radio service its advertising revenues. SiriusXM’s acquisition of Pandora is In the world’s biggest recorded-music understandably the focus of attention on market – the US – this challenge can this front, as the former mulls its options for be viewed through the lens of a lack of cross-promotion and other links between performance royalties from radio spins: the the two services. Recent rumours of an argument is that shifting listeners to on- Apple partnership with iHeartRadio – with demand streaming will put more money in the Beats 1 station centre-stage – offered musicians’ pockets. But even where radio’s another glimpse at the potential. royalty structure is less controversial, this Will Apple launch more Beats-branded idea of a migration from radio to streaming is stations? Will Spotify strike deals to bring much talked-about. existing live stations to its platform, adding a The challenge, then, is to make it happen. TuneIn-style string to its bow? Will a startup That’s partly about getting the devices like Stationhead spark a new wave of user- with streaming capabilities into homes and generated radio stations? (particularly important, this) cars. Smart Perhaps ‘will streaming replace radio?’

report speakers, voice assistants and smartphones is the wrong question, compared to ‘How have all been playing a role here already. will the boundaries between streaming and We see another task that should be radio continue to blur?’ :) the 13

ISSUE 420 01.02.19 CHALLENGES Make artists more than just a line on a playlist

his challenge shouldn’t come their audience between ever in the process as a surprise: managers and the two as best they of attracting an labels have been worrying can. audience and about how to tell their art- Alongside creating fans. ists’T stories in a world of streaming this, there’s It will and curated playlists for some time an emerging also be now. And it’s true: some artists have understanding important seen millions of streams driven by that building a this year their songs getting placed on popular story outside to be wary playlists, but would struggle to sell out the streaming of the a cupboard for a live concert. Their platforms is pressures listeners simply haven’t registered crucial to success some of this who they are. on those platforms: puts on artists: It’s not a new challenge, then, but that a convincing pitch for them to be it feels sharpened in 2019 with the for inclusion on Spotify’s creative on every growth of smart speakers and voice playlists has to involve social platform, and assistants – a way of interacting with evidence of engagement and to share more and more of music where the artists aren’t *even* momentum elsewhere. Rather than themselves. Sympathy tends to be in short a line on a playlist that can be looked worrying that streaming playlists supply when an artist like Justin Bieber at by the listener. How will musicians strip away their personality, artists (pictured) is perceived to be complaining thrive in a world where the entity know that they may struggle to about the pressure of social media, yet the people are emotionally attached to is even get onto those playlists if succession of YouTubers hitting a burnout Alexa, or RapCaviar? they’re not building their story and wall in 2018 should be a reminder to take Tackling this challenge is partly getting across that personality in these complaints seriously. for the streaming platforms, building other places. The big challenge here, then, is how to on their existing work around artist Tapping in to passions outside help artists cut through – themselves as well marketing. From interviews and music is one strategy that deserves as their music – in an age of increasing digital behind-the-scenes videos in Spotify even more effort. From recent noise, social-media drama and always-on playlists, to Side By Side interviews years: Action Bronson made a cycles of creation and promotion alike. on Amazon, to documentaries cooking show with Vice; fka twigs It can sometimes be enough to make commissioned by Apple Music, to Artist selection of new artists deemed (by turned her Instagram into an episodic life as a playlist-streams-millionaire who Spotlight Stories on YouTube, to Pandora’s everyone) to be the next big thing. magazine; Marshmello launched his own can’t sell out a cupboard in the non-digital ability for artists to drop audio-messages For artists generally, though, it can gaming show on YouTube; George Ezra world sound quite appealing. But more targeted to fans… The ability to tell artists’ feel like there’s a separation between the and Jessie Ware won plaudits for their optimistically, 2019 should be a year when

report stories and reveal their personalities ‘on- platforms where their music is consumed, podcasts. Artists having extra-curricular many artists, managers and labels will find platform’ exists, even if it’s often skewed and the platforms where they actually pursuits certainly isn’t a new trend, but in paths that work for them to create true fans, towards established stars and a narrow engage with their fans, leaving them to drive 2019 these hinterlands feel more vital than not just casual listeners. :) the 14

ISSUE 420 01.02.19 CHALLENGES Views from the industry

between users, artists, and artists’ music “An important challenge for the music content. Through gamified music-creation, industry to tackle in 2019 is finding new artists can benefit from engaging with fans ways of putting money in musicians’ back and promoting their music in a new way. The pockets. It’s not a new challenge, but one complexity of a music industry ecosystem that is growing in its significance due to could create a barrier to follow this trend for small venues struggling to make ends meet, smaller businesses/music entertainment and gig opportunities decreasing. With this, product developers. artists are having to search for new ways of “Tech innovations such as AI and monetising their content. machine learning will deliver more “There’s no easy fix for the problem, but personalised experiences for users, encouraging a shift in the culture around especially across music learning and music consumption will be a big help in entertainment products. AR technology will changing these fundamental dynamics. also continue to enrich music experiences. For example, it’s great to see Mixcloud’s Investing in technology could prove new Select offering, following the lead of challenging for some businesses, so e-gaming platforms, which gives listeners it’s important to assess what value and the chance to subscribe directly to artists moral rights and publishing agreements Lana Meisak, VP of Marketing and BD, opportunities it creates for their product and and their channels. and ethics) when I could get an AI to write Gismart business metrics of their product.” “It’s also encouraging to see new it and own all rights in perpetuity”? The “Over the last few years the gaming industry companies implementing blockchain ensuing conversation invariably ends has overgrown music industry. Music David Borrie, co-founder, Pirate Studios technology to ensure artists get paid their in a question about the value of human gaming has been on the rise, particularly fair share instantly. But, in truth, more can creativity. Oh, you might say… this is all when it comes to the mobile games market. be done to find new ways for artists to get years away yet. But those who fail to learn The mobile music gaming industry will paid for their music, as well as making sure from the mistakes of their predecessors continue to be influenced by three significant that the majority of the money they do earn are destined to repeat them and the trends: simplification, collaboration and goes in their own pocket. As is always the music industry doesn’t have the best track tech innovations - all of which will create case, technology can play a massive part record in engaging with new paradigms. opportunities and challenges surrounding in opening up new opportunities and I’m “We need to at least start to have the them. confident there are some revolutionary conversation about the value of human “Simplification will deliver more changes on the horizon.” creativity now so that we put structures in accessible experiences leading to the growth place well before we risk there being no of music games with simpler mechanics Gee Davy, head of legal and humans financially capable of creating. known as the casual and hyper-casual business affairs, AIM Generative AI will start to produce game category. These products will have “Generative AIs are not just coming background music for sync. It may then better potential to appeal to mainstream soon… they’re already here! I’ve not move onto creating for voice control audiences. However businesses should be personally heard convincingly good music playlists. And as connected cars and prepared to market these games effectively. created by one yet but I’m told it exists. other tech develops it will be there too. I

report “Artist collaborations will boost the growth The question that keeps cropping up at believe this is not only the next biggest of music gaming through more opportunities conferences is: “why would I pay for a challenge for the music industry but a for both cooperation and interaction human to create music (a human with truly existential one.” the 15

ISSUE 420 01.02.19 CHALLENGES Finding and supporting startups that make a difference

quote that stood out from the startup that requires music licensing deals. investment panel at our recent It’s partly that, but also the sense of a gap NY:LON Connect conference between VCs’ expectations of startups came from Jeff Bronikowski of with high growth rates and lucrative exit AWarner Music Group, in a conversation potential, and the music industry’s desire for about startup turnoffs. “If a company is startups that are less exciting (from a growth trying to do 12 things, it’s just not going viewpoint) but more useful in terms of what to work… This one glorious unified theory they can deliver to the industry. Tools for of everything. I haven’t seen one thing marketing being just one example. succeed like that, as opposed to solving a This is a funding gap that labels are problem or taking an opportunity and just well-placed to fill: investing in startups not doing it really well,” he said. because they expect a Spotify-style windfall A challenge for 2019 – not that it hasn’t a few years down the line, but because that been for previous years – is how to continue startup’s product or service can benefit the identifying and supporting those startups label’s artists now, in practical ways. that solve one problem really well. A trend Finally, an ongoing challenge is to identify music:)ally already sees is the music meaningful startups without being overly industry’s recognition that it can be more swayed by hype, but also by its opposite. involved in that process: including as an Blockchain technology is a good example: investor itself. we’ve seen some startups with grand WMG’s Boost seed fund and UMG’s ambitions and no obvious business model, accelerator network are already examples, of subscription streaming is fuelling a caused a surge of confidence. and we’ve seen an overload of hype around as are the likes of Techstars Music, Abbey willingness to invest from major labels, and This isn’t so much a fear of funding any what blockchain will mean for music. Yet Road Red, Marathon Artists Labs and other a sense that the relationship the wise path of action now is not to accelerators with heavy involvement from with startups can’t just be about give any blockchain music startup the music industry, rather than just investors. advances that bolster the next the cold shoulder, but rather to seek One past challenge that’s been quarterly revenue figures – out those that have the technological addressed is widening the definition of and to hell with the long-term chops, proper business plans and a what a ‘music startup’ is - Techstars Music sustainability. willingness to engage with the music opened that out to companies in adjacent One challenge for the industry’s problems. industries, while at NY:LON Connect startups is that ‘music’ Don’t believe the hype, but don’t Bronikowski said that the impetus behind continues to be a slightly toxic be overly influenced by the gripe Boost was to be able to invest in startups keyword in some circles of the either: in 2019, music companies that WMG might not necessarily encounter investment community: and have an opportunity to back a wave

report at an early stage otherwise – because they this, despite last year’s IPOs of new startups that could play weren’t seeking rights. for Spotify and Tencent Music, important roles in its growth in the Anyway, it’s evident that the growth which you might expect to have coming years. :) the 16

ISSUE 420 01.02.19 CHALLENGES Views from the industry

important, brands and artists alike also need Beyond the music itself, an artist’s biggest to get smarter with their collaborations. asset is their influence. It’s why they get “At a time when many brands are remunerated for everything from streaming investing in creating memorable experiences to fashion label collaboration. In the same for customers, there’s a huge opportunity way that Snoop Dog launched his own for artists to capitalise on this growing trend. brand of weed and French rapper Booba “Content is King” has never rang truer, and launched his own whisky, artist influence artist/brand partnerships have previously can be used as a PR platform for product delivered the holy grail of engaging launches. But it’s hard work. There’s always viral content. In 2019 the challenge is to a middleman; be it a platform, product or show brands that they can leverage their brand. This middleman, however, can be partnership with music artists to further cut from the equation by setting up direct engage their consumers, turning them into financial relationships with artist’s followers. loyal fans while, on the other side, artists are And by following more of an ICO rather than provided with unparalleled exposure to new a Kickstarter type model, artists can build and broader audiences.” longer-term relationships. “An ICO is roughly like an IPO: you go Richard Lodge, music consultant, Mood Media Gilles Boisselet, Chief Strategy Officer public and your followers can invest by churn has led to the deployment of stringent and Creative Partner, UNIT9 buying the equivalent of shares through algorithms to prioritise content resulting in “One of the biggest challenges facing Blockchain and cryptocurrency. The organic reach (who receives the message) the music industry this year will be how difference between the Kickstarter and ICO below 2% on platforms like Facebook, with emerging artists – who are yet to establish model is that with an ICO, followers are not the highest engagement rate (who opens a reliable income through streaming – can simply giving money; they are investing. If the message) as low as 0.2%. diversify their portfolio of opportunities it all sounds too futuristic to have legs, it’s “Interacting with fans on social media is a in order to thrive in such a competitive not. Just take a look at The Grateful Dead. losing strategy for the music industry. and saturated landscape. One such They unwittingly pioneered this model when “More intimate online connections are the opportunity, which could be a key element they allowed fans to tape their gigs and future for both conversation and marketing, of up and coming artists’ success in 2019, profit from the recordings. And as initiatives removing concerns around privacy and is brand partnerships, providing them with like Robinhood and StockX show, today’s delivering uncluttered communications, free a healthy injection of cash as well as that younger generations are hungry to get from the feed. This is already happening, by all-important exposure. involved. There is definitely something in the the mid-point of 2018 we were sharing more “However, artists need to make sure air for the brave.” content via messaging apps than via social they’re only teaming up with brands they media platforms. But the business is still in feel a genuine connection with, and which Tim Heineke, founder of I Am Pop its infant stage with these opportunities. reflect their personality as an artist - and “What a difference a decade makes. The “The next step for music marketers vice versa. We know that more than half “As we hit 2019, the monitization challenge once-dominant social media news feeds is to switch budgets from battling (57%) of shoppers say they’ll disengage if continues to grow. But this year will see are overcrowded and increasingly irrelevant newsfeed algorithms that achieve minimal

report brands make poor music choices such as the emergence of a new solution that to users. Scandals around fake news and engagement to developing, cultivating and unenjoyable or “unfitting” music in their capitalises on artist influence through ICOs privacy breaches are further impacting on engaging audiences online via one to one, stores; so while diversifying opportunities is (Initial Coin Offerings). channels that are too noisy. Managing that opt in models. The shift has already started.” the 17

ISSUE 420 01.02.19 CHALLENGES Views from the industry

Oliver Betts, programme leader for platforms themselves but engaging with backgrounds and expresses the intricacies Publishing Rights Organizations, Artists, creative music technology, LCCM social media is now a must in the quest for of distinct social values. Yet, along the digital Record Labels, etc) are not rewarded fairly “As ‘Technoculture’ continues to drive both success. An artist must now be a “content shift has come cultural globalization that and do not have accurate data regarding the marketing and creation of music, the creator” alongside being a music maker. resulted into borderless fandom for artists frequency, where, when and by whom their importance of social media status becomes Although this is a challenge, rather than an and genres blendings for music. Never music is being played. increasingly challenging for new artists. obstacle, I like to think of it as an opportunity before has the music ecosystem been so “To solve that problem, the music Social media followers and engagement are to create an identity unique to your music, interconnected, yet lacking harmony with industry’s incumbents ought to embrace “currency” in the eyes of labels, publishers, targeting your audience directly. Whilst the the legal and technological infrastructure in technological advances, as much as promoters and investors. Having evolved time commitment can detract from music order to support this globalization. the world’s jurisdictions need to sync steadily over the last decade, it has now making, their interaction is symbiotic and “While it is true that new legal skeletons across borders and continents, in turn taken centre stage. must become part of the creative process.” are emerging – notably the MMA in the aligning with the constantly developing “The challenge is not simply the art of US and the EU Copyright Directive – laws music consumption patterns. The music making great music but building an online Brent Jaciow, Head of Blockchain Affairs and policies could never follow the fast business, the legal and the technological at Utopia Music report following that rivals stadium numbers before pace at which technology evolved in the realms are yet to harmonize their tune to the industry engages with you. The solution “Music, at its very essence, is a powerful twenty-first century. As a result, those who the requirements of their time – and that maybe is as transient as the social media social glue that unites people of varied populate the music space (publishers, altogether.” the 18 Music Ally is a music business information and strategy company. We focus on the change taking place in the Music Ally is an ISSUE 420 industry and provide information and insight into every aspect of the business, consumer research analysing 01.02.19 example of perceptive the changing behaviour and trends in the industry, consultancy services to companies ranging from blue journalism at its chip retailers and telecoms companies to start-ups; and training around methods to digitally market your best, with unrivalled artists and maximise the eff ectiveness of digital campaigns. We also work with a number of high profi le music Andrew Fisher, events around the world, from Bogota to Berlin and Brighton, bringing the industry together to have a good CEO, Shazam coverage of the commonsense debate and get some consensus on how to move forward. Entertainment digital music sector”

ANTHONY CHURCHMAN STUART DREDGE Contact: music:)ally Business development Editor at large Studio 11, Holborn Studios, 49-50 Eagle Wharf Rd, [email protected] [email protected] London N1 7ED Tel: +44 (0)20 7250 3637 b www.MusicAlly.com e [email protected] EAMONN FORDE

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