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the REPORT Issue 345 | 25 June 2014

Streaming finally counts towards the UK charts Contents: Also in this issue: from next month. And not before time given that the floor is starting to fall away from under the feet of downloads – the very format that a PAGE 6: PAGE 5: decade ago brought the singles market back to Beyond :Beyond music: glorious life. Best in Glass?Unconsole » yourselves » A streaming chart is, however, not new as there PAGE 7: a standalone chart launched in May 2012 Pinboard: PAGE 6: that had echoes of the 2004 chart that initially Stats, deals, Pinboard: isolated download sales before they were fully startups andStats, deals, » folded into the singles (and then ) chart startups and more » in 2005. PAGE 8: But rolling downloads into the UK chart was not Country profile:PAGE 7: such a big stretch no matter how slowly and United KingdomCountry » profile: tentatively the (OCC) Japan » New entry did it. Buying a download was not that different from buying a CD single or a cassette. Streaming crashes into UK chart Streaming, however, marks something very, very different. It symbolises the start of the end for the unit-based obsession that has dominated The UK singles chart will contain streaming data from the British record business and, hence, the chart for over 60 years. Labels didn’t really care how next month, bringing it in line with markets like Sweden a consumer played a song in their lifetime and the US where the very architecture of their charts – they just cared that they bought it. One play or 20,000 plays – it was all the same to them as have changed. The UK can expect tracks to take longer they’d got paid upfront. to get into the charts but, once there, to hang around. Now, however, it is all about the long game. It’s all about repeat plays as both the revenue model This will change both A&R and marketing, with new and (slowly) the chart wrap their collective head techniques deployed to get chart placings. With around access versus ownership. This issue of weighting was one that delayed the inclusion download sales now in decline, the biggest change to the of streaming into the full chart. Just how many UK chart since its inception could not be more timely. streams were the equivalent of a sale? We have COVER FEATURE the REPORT | 25 June 2014 | Page 2 continued... an answer now. It’s 100. But, as we shall see, this But the UK is nowhere near as far down the road the markets in line with the US (more of which is a number that is likely to change as streaming as Sweden. Last year, streaming accounted for below), which does include YouTube data. becomes more mainstream. just shy of 10% of UK label income according to the BPI. Downloads and CDs might be The most notable impact on the Swedish chart The UK lags behind the other markets in terms of faltering, but they make up the lion’s share of the appears to have been the elimination of singles modernising . The US chart has historically British record business revenue so that is why zipping up the chart on week of release and been a complex cocktail of sales and streaming is only tentatively counting now. tumbling back down again just as swiftly. The anyway whereas the UK chart was defiantly chart dynamic is now a lot slower and a lot sales-only. In March 2012, streaming went into the So, given that streaming is finally in the mixing steadier. US singles chart and by February 2013 YouTube bowl, what can the UK – a country where streams were also counting. It might be the consumers are arguably most interested in who “For the singles chart, it takes time to chart well,” biggest music streaming service out there but it’s is #1, if only just at Christmas – expect to happen explains Andreas Ahlenius, commercial director not counting towards the UK chart. Yet. to its beloved chart? We spoke to industry at Universal Music Sweden. “It is very different executives in the US and Sweden to ask them from the UK chart where you build a certain Nor is YouTube counting towards the Swedish level of hype, you hold everything back and how their charts have changed and what it is the reason for this is that it was worked out initially charts. For now. It is fitting that Sweden – the then release the single so the first week is very UK must prepare itself for now. in value terms – namely how many streams birthplace of , the service that arguably important – and then it usually drops from there. would be needed to generate the same value to most forced the hands of assorted national The Swedish situation: tracks will Whereas in Sweden it takes time to build up the a label as a standard download. As more people charts to into the streaming age – was an become slow builders and marketing number of streams that are needed to chart well in Sweden pay for Spotify (and, in its early adopter of streaming into its charts. Back will have to evolve as it’s about listening rather than purchases. So it in October 2010, streaming to count market, it really is the only game in town for the It makes most sense to look at Sweden first as time.” towards the singles chart and in September 2013 industry) that has made the average stream go is the most advanced market for streaming and streaming went into the chart. This is only up in value with the net result being that fewer The most pronounced impact has been on one that adapted its singles chart four years ago fitting given that streaming accounted for 70% streams now equate, in value terms, to a single the singles chart but it is still early days for to incorporate streaming data. of label revenue in Sweden last year. It would download. streaming impacting on the album chart in Sweden. In September last year, streams started be ludicrous to not have streaming count in a When asked how they weighted streaming, An anonymous source Music Ally spoke to about to count towards album chart positions but what market shaped thus. IFPI Sweden said that they cannot make this this said, “We have had to change it over time is happening there is, for now, distinct from what public due to European to make it more relevant because the market is happening for singles. UK chart rules for streaming competition law but it is has changed. And it will continue to change.” So, understood that currently as streaming grows in the UK, we can expect a “To be honest it is all Spotify figures that make 100 streams = one download for tabulation purposes 100 streams “equal” a sale similar recalibration. up the singles chart whereas the album chart for tabulation purposes. is [a mix of] physical and Spotify,” explains As with the UK, it is only data from dedicated What is perhaps more Ahlenius. “Physical on a big release is maybe 30 seconds = length a track must be played for to qualify and licensed subscription and ad-supported interesting is the fact that 50% of the value in the chart whereas in the services that count in Sweden. So, for now, that this number has changed singles chart it is all Spotify. So that is more means YouTube streams do not count. There is 10 plays = cap on number of specific track plays by streamers (and fallen) a number dynamic and it changes more quickly.” of times since 2010. The no indication of when or if they could to bring COVER FEATURE the REPORT | 25 June 2014 | Page 3 continued...

The other big impact, and related to the points streaming would have a significant impact on Chart facts (UK) raised above, is that international acts are now the chart.” 30m – 2003 single sales in the UK (25.4m/82.3% performing better in the album charts because He adds, “Since then, what I have noticed – and of them CD singles). of the recent changes. this is largely anecdotal – is that a lot of the 47.8m – 2005 single sales in the UK (55.1% of “You might have an R&B or act where the records that are performing very well for us are them downloads). fans don’t buy physically but they are listening rocketing up the chart and 183.3m – 2012 single sales in the UK (97.2% of to it on Spotify which means these acts are having an opportunity to dislodge some very them were single track downloads). now able to chart,” says Ahlenius. “A few years heavyweight competition. In the Hot 100 now you’ll see a good mix of young and new artists 3.7bn – audio streams delivered in the UK in 2012. ago it would have been very hard for an act like , who has an audience that is young and The booking agents for live do the same.” whose records are performing incredibly well on 182m – 2013 single sales in the UK (96.4% of them streaming now having the opportunity to chart.” were single track downloads). urban, [to get high in the charts]. In a market The US situation: where YouTube like Sweden it is difficult to sell CDs – even for a Unlike the slow build of tracks that Ahlenius 7.4bn – audio streams delivered in the UK in 2013. is more important that Spotify huge artist like Rihanna. So for and her chart is identifying in Sweden, things in the US are, Sweden in an outlier in terms of just how far £77.1m – market retail value of streaming in 2012 performance, it is very important that streaming fittingly, a little more brash and upfront it (7.1% of the total market value). streaming has come on but the US is closer to is included.” appears. But, as in Sweden, once they go into the UK in terms of how the market is carved up £105.8m – market retail value of streaming in the charts, they are staying there, which is an Streaming, particularly in the singles sector, is by format and revenue source; plus it is under 2013 (9.7% of the total market value). important distinction between the dynamics in also changing how A&Rs find and develop acts. greater pressure to get streaming to a more the two markets. Ahlenius says Universal is now signing acts mainstream position given that the single track in Sweden now is that the charts based on singles as streams of them are proving download market there slumped by 5.7% last “I am seeing records move up the chart very are much more reflective of how consumers the primary currency in the market. “Everything year – with sales of 1.26bn compared to 1.34b in quickly,” says Savoca. “Records are going to #1 access and listen to music. “It is a more accurate has changed,” he says. “It is not what people buy 2012. (Album sales dropped just 0.1% in the same and they are sitting there for weeks. list,” says Lisa Cronstedt of IFPI Sweden. “The that matters – it’s what people listen to. When it period, from 117.7m to 117.6m.) was a huge performer for us – massive amounts chart is very relevant for business and comes to what audience to reach, we used to of streaming for us, massive amounts of airplay The US has also included radio plays alongside everyone involved in it.” target people with money but what is now more and it is at the top of the charts, sat there sales so the inclusion of streaming into the Certain genres of music were, for a while, important is to target people with time. It is their for weeks. sat there for weeks. These charts was not such a philosophical conundrum. charting high in the album charts there, time we are after, not their money.” are very big records for us. It is much harder to Streaming’s inclusion appeared to be something notably forms of Swedish dislodge a record because the streams sustain The wider changes have been profound and of a leveller and helped open the doors for some popular with older consumers. That was for a long period of time.” both radio and the live sector have had to acts previously locked out. because those consumers still bought CDs and readjust. “It is super-important for radio and it The introduction last year of YouTube data “What happened immediately was a few records a small number of sales, before streaming data is also very important for live,” he asserts. “We was fascinating – if only for the timing of when entered the chart for the very first time which was woven in here, were all that was needed would go to radio with that they it launched as that exposed just how new hadn’t had that opportunity as the result of to get to #1. That has all changed and the new should play a certain song if it is at #5 on Spotify, dynamics could turn the chart on its head. airplay,” explains Steve Savoca, head of content charts are commonly agreed on to better has 150,000 streams a day and is huge with YouTube data’s inclusion coincided with the at Spotify US. “Streaming drove a few records reflect what the entire population listens to certain demographics. We use all this data and absolute apex of people posting their version of onto the chart and was the first indicator that and what is most popular. our chart positions as arguments to get on radio. ‘Harlem Shake’ and, as these thousands of UGC COVER FEATURE the REPORT | 25 June 2014 | Page 4 continued…

“There are certainly some high volumes of “If you streaming streaming services but not elsewhere meaning streams coming from YouTube,” accepts Savoca works, you get a lot of records in the charts that, if streaming counted towards the album before explicitly fighting Spotify’s corner. “What and because of repeat listens they become chart, this would be one of an act I will , to put a feather in our cap, is that there incumbents,” argues Savoca. “But a sales-based making an appearance that wouldn’t have are quite a few records that we out-stream chart is quite ephemeral – people purchase and otherwise. “If you look on the sales chart, you on that platform. Some of the regular hits are then there is decay. On Spotify you see records won’t see it; but it’s a record that is performing streaming serious tonnage on YouTube but, building. If you look at our top albums in the hugely well for us,” he says. “It’s great to see.” pound for pound and given our scale compared US , you’ll see on there with an While these dynamics are confined to just to YouTube’s, we have a heavy influence.” album that has been out for a long, long time. Spotify itself, when album streams finally count Then you’ll see a record like at #5 videos all used the same audio source, there was Where the streaming dynamic is at its most towards the album charts, the US will experience but it will probably chart at #1 this week in the a cumulative effect and the track itself zoomed interesting is on the album level in the US, its next great leap forward. sales-based chart. Chances are, in further weeks, to the top of the Billboard Hot 100. It was hard not just meaning that good albums become Lana Del Rey will probably grow and climb the Savoca is firm in his belief that this could happen not to see this as a revolutionary moment, a slow burners that hang around but also that [Spotify] charts, but from a sales perspective it later this year and feels its inclusion is essential. symbolic changing of the guard. But it was more or unknown acts (in the US, at will decay. There is an inverse dynamic there.” “We think that’s a much better way to reflect perhaps an extreme example of what could least) are being handed new opportunities as what is happening in terms of consumption of happen in the charts rather than an omen for the consumption model moves away from He gives the example of ’ artists,” he says. what would happen week in, week out. ownership and goes deeper into access. AM album as something that is bubbling on Chart timeline – UK Sweden USA

1952 1969 09.2004 04.2005 04.2006 05.2012 10.2010 09.2013 03.2012 02.2013 Percy Dickins The first UK UK download Downloads ‘Crazy’ by Gnarls Standalone Streaming Streaming Billboard/Nielsen YouTube streams at the NME calls official chart chart launches rolled into Barkley is the UK streaming added to added to SoundScan added to Billboard round 52 record arrives in as a standalone the main UK first single to chart singles chart. album chart. launches an on- Hot 100 (‘Harlem shops to create 1969, where, chart. chart. go to #1 on launched. demand chart. Shake’ goes the first UK commissioned download straight to #1). chart. by alone. Retailer and the BBC, the British Market Research Bureau processes postal data from 250 record shops. COVER FEATURE the REPORT | 25 June 2014 | Page 5 continued…

Martin Talbot, chief executive of Official Charts Company, on the changes in the UK

Why has it taken until now to add streaming has sold more than the #2, which has sold more the most popular music in the UK. In a lot of ways, when it has been in the Swedish charts since than the #3, we wanted it, from a public-facing we’d be cheating music fans and cheating the 2010 and the US charts since 2012? perspective, to be simple to understand. chart if we didn’t do that. We have to move with the times. Different markets evolve at different rates. It The value issue needs to be reflected and that took until the end of last year for streaming to there is a difference between an audio stream and Is streaming’s inclusion made all the more get to such volumes that we thought a download. In the singles market we will count pressing as UK download sales fell last year? something we should start actively make happen. a 29p download from certain retailers as being They did and they are continuing to decline this The Official Singles Chart in the UK has a cultural the same as an £8 7-inch single on Record Store year. That is also part of the equation. There is heritage and position in the global Day. In the singles market there is an elasticity of a with a story like this is that all the stuff which is very different for the charts in, with all price that is pretty broad. We wanted to make sure Currently 100 streams = a sale. Will this you are used to is seen as dying and no longer due respect, Sweden, the Netherlands, Norway we had a number that was broadly in the right be recalibrated as streaming’s market relevant. That couldn’t be further from the truth. and Finland. And unlike in the US where they place. We do know that it will evolve and that the share grows? Even though single sales declined last year for the have always mixed sales with other things like proportion of ad-funded versus premium will first time in 10 years, it was still the second biggest airplay and jukebox plays. For all of those reasons We will continue to look at it. The most common change over time. year on record for singles. Pre-digital, the two it was a bigger decision here than I think it was in formula around the world, and the one that is We also know that, as the market gets bigger, biggest years for singles were 1978 and 1979 when other markets. supported by the IFPI and others, is the trade economies of scale come into play and royalties we saw about 89m singles sold in each of those value of a stream as compared to the trade value, There is a broader range of stakeholders here potentially can change across ad-funded and years. There were 182m singles last year. There broadly, of a single. That is what it is based on. too. That is the one thing that slowed it down. We premium. It is something we will be keeping an is a big story here about streaming growing and We had to take into account that we wanted wanted to make sure it was fully supported by eye on. I suppose it won’t be long after we launch it is growing. But people are still buying physical one blended rate to apply across ad-supported the music industry and that people felt it was the it that we’ll probably be going back again to check product [and downloads]. and premium streams so we have had to do a right way to go. We had to work through it’s . At the moment we feel it’s right. fair amount of research to get an understanding Will you include YouTube streams as they do in what the ratio was. The market has moved of what the broad range of royalties are for the From your testing, how much will streaming the US? at such a pace that that hasn’t been the most different types of streams. Then we had to weight contribute to the chart? straightforward thing. The conversion rate of 100 We are currently only including audio streaming that according to the market – and the market in is something all the labels, retailers and managers One of the things we have been tracking is the services. We are keeping a watchful brief [on 2013 was such that 24% of all streams were ad- we have spoken to have bought into as well. The proportion of streams within the singles market. YouTube’s inclusion]. We have counted video funded and 76% were premium, so we had to take other key fact to it as well is that we have seen If you take 100 streams as being worth a single, downloads so there is no reasons to particularly that into account. such a surge in streaming in the past 12 months you can extrapolate from that. We are looking count video streams into the charts. that this time a year ago it wasn’t something We came up with a figure around the 100 mark at streams as being around 40% in terms of When will streaming count towards the that was necessarily essential and it wasn’t and it felt logical to go with 100 as a number percentage of the total singles market. When you album chart? something we necessarily needed to be doing in because it’s broadly right in terms of value and get to that point, you can’t turn the other way. the immediate future. But now it is. We feel very it’s an easy number to understand. Because this You have to on and ensure the chart It is something we are looking at and we are trying to strongly that is right now. has always been a sales-based chart where the #1 maintains its position as the definitive count of work out the methodology for that. BEYOND MUSIC the REPORT | 25 June 2014 | Page 6

Best in Glass?

Good news for Brits with Silicon Valley geeks, even coining the term £1,000 burning a hole in “glassholes” to describe them. their pocket and a desire to Others have more serious reservations explore the bleeding edge about privacy as well as the social cost of this kind of device – how people of augmented eyewear. react to the wearers, especially if they Google Glass is crossing the fear Glass as a way to shoot covert Atlantic. recordings of them spaces. Some bars have banned the device already on Google announced this week that its ‘smart these grounds. glasses’ can now be bought by anyone in the UK, making it the first country after the Still, it is very early days: Google’s big bet US to get the device – a set of glasses with is that whatever Glass becomes in 10 or 20 an embedded screen, camera, wireless years may be a mainstream product – and, connectivity and the ability to run apps and yes, that’s likely to bring with it even more recognise voice commands. opportunity to understand people’s digital (and physical, for that matter) activities, “We know there’s a pent-up demand for monetising them with ads. Glass from all over the world,” said Google’s head of Glass, Ivy Ross, as the UK launch Music, though? Well, music and Glass was announced, hinting at more countries to remains something of a novelty affair. follow. It’s estimated that several thousand Shazam launched a Glass app in the UK this people already have Glass in the US, where week, allowing wearers to say “OK Google, it’s been gradually rolled out as part of an what’s that song?” to tag something playing invite-only ‘Explorer’ programme. in the real world. Glass is one of Google’s so-called “moon Glass already ties in to the Google Play Music shots” – bold bets on new technology sitting aggressive company exploring augmented phone, back when most people laughed at service, while startup SongDrop has alongside the company’s research into self- eyewear, even if it’s not alone. them too (and couldn’t afford them). shown off a Glass app that helps fans explore driving cars and its Project Loon initiative historic music locations (think ) So far, it’s sometimes been hard to Critics? There are lots of them. Some to beam internet access to the emerging – a neat new spin on location-based music what’s meaningful about Glass and poke fun at some of the less useful initial world via giant balloons floating in the discovery. what’s pure novelty. There are a number applications for Glass: for example, stratosphere. of evangelists who believe Glass is questioning whether tweeting by talking Like we said, early days. But a sign that How big a deal is Google Glass? And what spearheading an important new category of to your glasses is an achievement for if Glass is in need of apps providing a might it mean for music? On the first wearable technology, comparing its current humankind to be proud of. Many see Glass convincing reason to use it, inventive music question, Google is certainly the most status to the earliest days of the mobile as the latest bragtoy for white, rich, male developers may be one of the sources. TOOLS the REPORT | 25 June 2014 | Page 7

Pinboard:

Deals... Stats Merlin Network: revenues YouTube: top global channels $89m Prime Music has launched in the US, offering (millions of plays, May 2014) Prime subscribers free streaming access to a catalogue of PewDiePie 311.1 1m tracks. At launch, Universal Music had not licensed its $44.5m 16% content to the service. Katy PerryVEVO 211.7 206.6 Fan-funding platform Patreon has raised $15m in Series A ShakiraVEVO 13% 4% funding, led by Index Ventures. Last year it raised $2.1m in DisneyCollectorBR 200.8 seed funding and 25,000 creators are currently using the stampylonghead 165 16% May 2012 – May 2013 – service. latenight 155.9 Apr 2013 Apr 2014 BBC’s Playlister service will now let users export their eurovision 148 4% playlists to iTunes for purchase. They were previously able Projected audio streaming payouts to SpinninRec 143 $160m to export them to Spotify, and YouTube. The BBC members for May 2014 to April 2015. Britain’sGotTalent09 141.1 will not take an affiliate retailer cut of any sales it drives. Increase in streaming consumption of Merlin members’ PitbullVEVO 138.4 Source: Tubefilter, June 2014 ≈ 30% repertoire on paid tiers over free ad-funded tiers. 5% 7digital will power ROK Mobile’s new subscription service that launches in the US on 4th July, with international roll < 25% Online video share of digital revenues for out to follow. New service... 84% of Merlin members. Sub Pop is the latest label to offer a Drip.-powered PopShack isn’t a new startup50 as100 such, but150 its app200 is brand250 new. The300 350 Source: Merlin, June 2014 subscription service, with users charged $10 a month to British MCN specialises in pop, with a roster of young artists trying to Bandcamp access a variety of content and community benefits. forge careers on YouTube, iTunes and beyond. It has just launched its iPhone app, pitching it as “THE way to get closer to awesome $3.1m Users’ total monthly expenditure on the platform pop talent from our network and PopShackTV” – the latter being its umbrella channel on YouTube. It shows how MCNs try to deepen the Tweets... relationship between YouTubers and fans – many of whom are $70m Users’ total expenditure on the platform to date a) young and b) hugely active on smartphones. Daily videos, ticket @davidemery To get this streaming/charts thing in perspective: offers and meet & greet opportunities aim to keep fans checking in No. of artists who sold one or more items on the biggest tracks this year have done 1.5m streams/week which 160k the platform in 2013 is the equiv of 15k sales daily, with the company rolling out a standalone app for its biggest star, Daniel J, who has more than 426,000 YouTube subscribers. Source: Bandcamp, June 2014 @helienne Clearly the charts should include streaming. The real question is the value of a stream – and if services that don’t pay should be included

@kierondonoghue We all knew that streaming counting YouTube clip... SoundCloud track... towards the charts was coming but it’s exciting to see it finally OK Go are back, Back, BACK! with another intriguing video. Holy Ghost celebrate ’s ‘Birthday’ with a remix. happen. Playlisting now very important http://tinyurl.com/lhvmhas http://tinyurl.com/phq5gxp MARKET PROFILE the REPORT | 25 June 2014 | Page 8

United Kingdom

With an encouraging transition (more) open arms. UK: recorded music sales UK stats happening towards access models This is also reflected (£ millions, trade value) Source: BPI and a discreet return to growth in in the fact that the Population: 2013, the UK has some interesting official UK singles 63.4m 928.8 prospects on its plate, especially charts will now Physical Digital GDP per capita: factor in streams 823.8 with consumption neatly splitting into its calculations 782.8 US $37,300 730.5 across physical and digital formats. (see cover feature). 716.7 Internet users: According to the BPI, recorded music sales In talks with Music 55.9m in the UK totalled £730.5m in trade value in Ally, Pete Leggatt, Broadband households: 2013, revealing a slight 1.9% annual increase in 740.0 598.0 504.8 390.3 365.4 revenues. Last year digital income grew 11.9% Entertainment UK’s 21m to £365.1m, more than making up for the 6.4% VP of sales, said, Mobile subscriptions: decline in physical sales to £365.4m. In 2013 the “The inclusion of 84.5m market was thus virtually split 50/50 between streaming in the chart is timely. 326.4 365.1 Smartphone users: physical and digital formats. 278.0 Streaming will 188.8 225.8 53.2m Last year the biggest acceleration in digital sales certainly gain Sources: CIA World Factbook, IFPI was seen in streaming, where income grew more momentum 2009 2010 2011 2012 2013 41.3% to £76.7m: subscription and advertising with this initiative. revenues grew 37.4% to £54.7m and 31% to £19m It means that we eyes about embracing streaming at the start of spent a good bit of money in advertising, but respectively. Cloud locker revenues accounted have to ensure that we are focused as much on a campaign on release date.” nowadays you need some deep pockets if you for the remaining £3m. On the other hand, our streaming strategy as we are on à la carte want to keep playing that game,” commented While the growth of access models in the download sales grew only 7% to £282.2m: digital downloads and physical going forward”. His Wheeler. “We can’t say that because of what UK is certainly a cause for celebration, the album downloads grew 17.8% to £160.5m while colleague Fred Bolza (VP of marketing services) happened to Bloom that pricing option doesn’t developments in this segment were somewhat single track downloads fell 4.5% to £121.7m. added that the chart “makes [streaming] very work, but it’s always going to be a challenge to marred by the recent demise of the London- real and tangible because it validates it on some get people to sign up for something. It’s Talking with several industry executives, Music based start-up Bloom.fm (see Music Ally Bulletin level as a form of consumption, which then as hard, if not just as hard, to get people to sign Ally understands that in the last 12 months 01/05/2014), whose innovative proposition means that all labels, big and small, will have to up for the £1/month option as it is to get them the transition of downloads to streaming was considered to be a promising mid-tier strategise in terms of how we bring music to to sign up for the £5 or £10 options. And I think has accelerated, with some major content approach to cater to the masses of consumers market.” that’s what Bloom found – trying to get people owners seeing annual declines in the former. who did not buy into the standard £10/month over the payment threshold is the biggest Contrasting with the weary regards for Simon Wheeler, director of strategy at Beggars on-demand streaming model. challenge that anyone has. And it doesn’t look streaming from some players not long ago, the Group, also told us, “Having streams in the chart “Bloom had a good product and certainly like just cheap pricing is the solution, contrary to industry is now approaching this evolution with will remove the nervousness in some people’s MARKET PROFILE the REPORT | 25 June 2014 | Page 9 continued… what a number of people have been saying.” UK: recorded music digital sales As the market shifts towards streaming, Bolza discusses some of the challenges that An unnamed senior executive at a major label (£ millions, trade value) this presents to labels. “One of our biggest added, “There is room [in the UK market] for 160 challenges is how to do better audience a mid-tier service. However, we prefer to use ALBUMS TRACKS SUBSCRIPTIONS development. In a world where you see Disney it as a stepping stone to £10/month. We would AD-SUPPORTED CLOUD OTHER DIGITAL buying Maker Studios, you see all these plays be more supportive if it is a part of a broader where content owners are trying to build strategy to upgrade. There is a massive base of 110 resonating audiences. How do we do that from casual consumers in the UK for this.” a social and digital marketing perspective? It’s In reference to the sheer number of access- a huge challenge. It’s about building audiences based music services now available in the that accrue to the artist, so that when you have Source: BPI UK (and in almost any developed market for 60 things to sell over the lifetime it becomes easier that matter), our source nevertheless warned, to convert those audiences into revenue.” “There could be an element of saturation. In the He adds, “In the last 12 months [Sony Music] has longer term there will be some consolidation. invested heavily in social capability – in terms of It is difficult to see how there will be room for 10 people and of partnerships.” other players to enter the market, unless they have a good distribution partner with scale and 2009 2010 2011 2012 2013 Beyond access models, it is worth considering ease to pay.” Leggatt’s views when he points out, along and how this can help to broaden the but that the services need to strive for greater “Fortunately, the UK has not yet faced the Music Ally understands that the streaming awareness of, and interest in, access models. degrees of differentiation. “If you look at more impact of a cliff event in physical [where CDs growth seen in the UK is attributable to some mature subscription markets, like cable and completely disappear]. If you take the three extent to the bundling partnership struck “From an audience perspective, there are far satellite TV, there is a lot more differentiation channels [physical, downloads and streaming] between Spotify and Vodafone. It will therefore more people who don’t fully understand or in content and exclusivity of releases,” he said. as they are, physical is still the biggest.” be interesting to see how Beats Music will know what streaming is, other than vaguely “Look at how Netflix has built itself up; it’s done approach its go-to-market strategy ahead of the knowing it exists,” warns Bolza. “These are He continues, “The supermarkets and HMV it through content you can’t get elsewhere. It’s roll out of its streaming service in the UK, which people whose music consumption is primarily will remain for some time. Potentially what price point and content – it’s the whole value is expected to take place sometime . satisfied by radio, with the occasional physical you could see in a couple of years is streaming proposition for the consumer. And I think that at purchase at the supermarket and possibly matching where à la carte is. [But] I’m not so With regards to Beats Music, however, the fact the moment streaming through the eyes of the they’re transitioning to à la carte downloads convinced that we add new customers straight that the service is now owned by Apple is what consumer looks like a series of undifferentiated because they’re now owners of smartphones. into the streaming model – they obviously brings the greatest expectations – not only in offerings that have 20m tracks at the same Still a big question is how streaming migrate from the download or physical markets. terms of what this could mean for the bundling price points with some variability in the UI. I genuinely becomes mainstream.” It would be challenging for us if we were to lose of the service with the latter’s devices but also, think that’s something that will need to change. the support of a physical retailer, potentially and perhaps more importantly, for the degree The Sony executive argues that the UK music Bundling into a wider package might be a way taking away some of the impulse market”. of clout that the Cupertino company brings subscription market is not necessarily saturated to do that.” Music Ally Music Ally is a music business information and strategy company. We focus on the Our clients include: Music Ally is an example of change taking place in the industry and provide information and insight into every perceptive journalism at its aspect of the business, consumer research analysing the changing behaviour and “ best, with unrivalled coverage trends in the industry, consultancy services to companies ranging from of the digital music sector. retailers and telecoms companies to start-ups; and training around methods to digitally market your artists and maximise the effectiveness of digital campaigns. We also work Andrew Fisher, CEO, Shazam Entertainment with a number of high profile music events around the world, from Bogota to Berlin and Brighton, bringing the industry together to have a good commonsense debate and get some consensus on how to move forward. The Team

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