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the REPORT Issue 336 | 19 February 2014

The decline in recorded music’s fortunes since Also in this issue: 2000 has pushed more and more acts onto the road in an attempt to make up for the shortfall PAGE 5: in their income. Away from blockbuster tours Beyond Music: Tickets, please: from U2, Take That and , the selling point of “scarcity” for acts at the small and mid- Big numbers from level is not so strong, meaning that they have to the hit-driven mobile cracking discovery find ways to stand out as more acts tour more games industry » often. PAGE 6: If streaming and downloading have a major Pinboard: discovery problem, then the concert business Stats, deals, arguably has it a lot worse – a problem that startups and more » is exacerbated by the fact that artists are increasingly expecting gigs to make up for the PAGE 7: dip in their recorded music revenue streams, Country profile: as CD sales give way to single-track » downloads which, in turn, are now giving way to micro-royalties from streams that will take years Acts are having to tour more than ever before and ticketing to stack up. If live is facing an over-abundance problem, how outlets are mushrooming to cater for this – from major can technology offer solutions? With more acts acts all the way down to bands playing the back rooms of touring, the consumer has more choice than ever before – but discovery is the first victim pubs. As with digital music, the consumer is balking at the here. Plus buying tickets is not as simple and dizzying amount of choice so ticketing companies have streamlined (especially not on mobile) as buying to address this – and fast. has set itself up to make a download from iTunes or streaming a song on YouTube or Spotify. Solutions, however, are recommendation and discovery easier, while giants like coming – albeit slowly. are looking to map consumer affinity across Things, simply, need to be simpler a variety of levels, using that to provide real-time and geo- “ think we are a long way off from making it as specific recommendations. How are they doing this and how easy to go to as it should be,” asserts will the face of ticketing be changed as a result? Ian Hogarth, co-founder and CEO of concert COVER STORY the REPORT | 19 February 2014 | Page 2 continued… discovery service Songkick. Wrapped up in says. “We are still quite early in the process, that is not just cracking the discovery issue but so it’s worth bearing in mind the amount of also broadening the appeal of Songkick (and opportunity there is for the industry if they other live discovery tools) to a truly mainstream engage with this idea of making concert-going audience. easier.” Songkick, he says, reaches around 8.5m unique Ticketmaster agrees that ease of discovery will users a month and that those using it go to be key for the future of the ticketing business around as many gigs as they did before and that the accumulation of rich consumer they signed up to it. It’s a start, says Hogarth; but data and advanced segmentation will play a his ambitions are much grander. central function. “That’s of progress and I am pleased “I think we have a huge role to play in that whole with that, but I think the real opportunity is discovery piece,” says Troy Suda, Ticketmaster to get to a place where we maybe quadruple UK’s VP of product. “With emerging acts, that the number of shows people are going to and social discovery aspect is something we need to we are reaching more like 50m people,” he facilitate more and more.”

Mining big data “The data is now allowing us to understand secret connections between artists and Suda talks of basic things such as fans ‘liking’ the audiences and allowing us to reach out to Ticketmaster Facebook page (in order to see people who have a strong affinity with a news feeds about acts they might be interested particular artist,” she explains. “That has also in) already being in place but says that things been a really important new thing that we have can go both broader and deeper here. really started using the past year – using our Sophie Crosby, VP of insight at Ticketmaster data in those new ways.” UK, picks up on this and says that it will be Frans Jonker, CEO of self-ticketing company powered by the consumer data the company ticketscript, suggests the data now available to has gathered over the years. Ticketmaster is his company’s clients is becoming richer and is currently “cleansing” its data to understand helping them to better understand the period what consent it has from customers about how, before a purchase and not just the period after a precisely, their data can be used in the future purchase. and how the company can work with other clients in using it. COVER STORY the REPORT | 19 February 2014 | Page 3 continued…

“Up to now [our clients] generally [got] the data Beyond CRM start to prepare for the future and anticipate are the practical applications here and how do from the point people would buy tickets to the more precisely what consumer expectations they work? Where Ticketmaster says it is innovating is in point they would enter the event,” he says. “We will be. regard to CRM and linking discovery to intricate “We can advise clients on location, pricing, line have added to that by giving our clients insight customer segmentation. “The primary channel is email for marketing, up for events – be it a rock festival or a family into the traffic to their website/sales channel but we know that the future is already looking event,” says Crosby. “We can also provide and the reach they have on the internet. We Crosby proposes that, while social media is an quite different and we are looking to maximise information to clients about their fans which help them analyse their traffic and conversion – important part of consumer discovery, email our usage of those other channels,” she says. can really help them move the needle – be that everything [people do] before they buy tickets.” remains the most powerful tool in their arsenal. “We are looking ahead to opportunities beyond through the line up or through sponsorship and “Social channels are incredibly important for Compared to other sectors, the concert CRM – which is really about insight and how marketing partnerships. It is beyond CRM which us in setting the tone, reaching out, making business is severely lagging behind, according we use data. Internally at Ticketmaster, we are is going with the data.” sure people know, helping people talk about to Hogarth. He points to companies like Netflix, becoming a business that no longer has to what they are going to,” she says. “[But] email is Hogarth says, from where Songkick sits, he can Yelp and toptable as not just offering models the rely on gut instinct and we can make informed phenomenally important for us still. As is SMS see that the concert industry is not all moving as ticket business needs to aspire towards, but also decisions through the insight we have.” and push.” one with regard to all of this and that a fractured standing as serious competitors for consumers’ To take this future gazing out of the abstract, and fragmented approach to preparing for the attention and money. That said, the company argues it needs to go what does that actually mean in reality? What future is not ideal. “There are some promoters beyond these established and reliable tools and “Depeche Mode’s manager recently said to who are very engaged with digital marketing, me that it was crazy that it was easier for him personalisation and making things simpler for to book an Uber [taxi] to get to the show than the consumer,” he says. “And there are some it was to book a ticket for the show,” he says. who don’t see it as a big deal.” “Because the live experience is a unique one, the He believes, however, that the wake up call concert industry has almost got away with not is coming in how ad money is shifting from being as user-friendly for a long time. But I think traditional media to online and this is making that is increasingly going to be a problem and it all players in the live business pay attention and will increasingly mean people will choose other recalibrate their thinking. Or at least it should be. forms of over going to a concert unless it is solved.” “The thing that I have noticed that I think is changing the game a lot is that in the last year or The time for the live sector to act – and act so the advertising spend that historically went to decisively – is now, argues Hogarth, otherwise print advertising for concerts has really shifted it will see a serious drift away by consumers. online,” he proposes. “A lot of the dollars have “As other industries innovate and make the flowed away from print and radio and towards experience seamless and frictionless for the Google, Facebook and other online services. consumer,” he asserts, “the more the concert When you see real money flowing over, that is industry is going to be an obvious laggard.” making promoters sit up and think that they COVER STORY the REPORT | 19 February 2014 | Page 4 continued… want to be as smart as possible about how they This will involve not only proximity to venues work with the industry now that it’s a big chunk but a much richer understanding of consumer of where they spend their money. I think the affinity and how recommendations can be industry as a whole is really waking up this year. served around that. It’s a really exciting time.” Crosby talks about “affinity” as a multi- dimensional understanding of the consumer Shaping live music discovery for the future that covers how recently they last bought If discovery is still at a rudimental stage in its tickets, how frequently they normally buy development, how will it evolve? Segmentation tickets, what the upper end of their spend is and is going to play a huge part in this, it appears. the acts and genres they have listed as their favourites. “We are [also] starting to deploy “It is becoming increasingly sophisticated,” says propensity – be that propensity to travel or Crosby. “In the past it was very much one size fits propensity to buy by genre,” she adds. “This all and we might have divvied up the country on is being used right now by Ticketmaster UK’s regional lines; but now, with improved customer marketing team and we are rolling out this kind insight and new tools, we are looking to a future of actionable insight to all our Ticketmaster with true one-to-one communication.” markets this year.” Suda says the company is excited about He adds, “The ability to buy a ticket right there “sharpening up our algorithms and getting on your device and walk into the venue, we better at that affinity knowledge of our believe, is hugely going to change the way that customers”, suggesting this will move into tickets are sold and promoted to our customers.” geo-specific and real-time recommendations, Slowly but surely the live business is adapting to discovery and (the crucial part of the jigsaw) changing technologies and shifting consumer sales. He talks through how this could all work in behaviour as well as figuring out ways to bridge reality very soon. the two. Big data and CRM are going to define “If we know that you like emerging artists and the coming years and tapping into a truly mass like bands in pubs and you live in Angel and we audience (and not just those already sold on the know it’s 8pm and there are tickets still available live experience) will be the goal, be it in the back for an artist that our affinity mapping says you room of a pub or a stadium. will probably like,” he explains, “with the growth “For us it is less about us moving from the of mobile and social, we could perhaps send you musical super-fan to the more mainstream a push notification to say there are tickets down music fan,” concludes Hogarth. “It is more about the road in the pub for this artist and we think moving from the more technologically savvy you would be interested.” person to the less technologically savvy person.” BEYOND MUSIC the REPORT | 19 February 2014 | Page 5

Big numbers from the hit-driven mobile games industry The music world knows all King’s revenues for 2013 were $1.88bn, with a net profit of $567.6m. The company has a about hit-driven businesses, number of games, but sweet-swapping puzzler but some of the numbers Candy Crush Saga accounted for 78% of player coming out of mobile gaming in spending on its games. By the end of the year, King was averaging 128m daily active users, 2013 are startling nonetheless. with 93m of them playing Candy Crush. This month, two of the biggest The company’s IPO filing sheds fascinating European games developers light on the economics of free-to-play gaming have published details of just – an area some executives are how much money they were eagerly studying to understand how it could making last year. translate to music. King had 324m monthly unique users (MUUs) Finnish developer Supercell currently has only across all its games in the final quarter of 2013, two games available worldwide for iOS and but 12.2m monthly unique payers (MUPs) – Android devices: Clash Of Clans and Hay Day. that’s people actually spending money within Those two titles alone generated $892m in those games. So, just under 3.8% of people revenues in 2013. Since they’re both ‘free-to- playing King’s games in Q4 spent any money, play’ games, that money came entirely from but those people spent $632m during that in-app purchases of virtual items. three-month period. The company had 132 staff by the end of 2013 Or, to boil this down to a single stat you should – a cool $6.75m of revenues per employee remember, the average paying player of King’s – and reported a net profit for the year of games spends $17.27 a month, which is why $464m. Supercell averaged $2.4m of daily the company can afford to have 96.2% of its revenues last year, with recently-leaked data players not paying a cent. suggesting that the company is currently This is why there’s a mobile games gold rush doing more than $5m a day. All that from two at the moment, despite the fact that Supercell mobile games. and King are among the very few companies Even this was put in the shade this week by making huge revenues from the sector. news of another European firm, King Digital A report this month sizing up the European Entertainment, filing to go public in the US. apps market claimed EU-based developers It makes Candy Crush Saga, the world’s made €6bn from consumer apps in 2013. If most lucrative mobile game, with the filing that’s true, then Supercell and King alone revealing just how profitable that is. accounted for a third of those revenues. Pandora RSTL7A9EE9%#1U7 B-;2<7

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Italy Amidst troubled political and due to declining domestic demand. More 60m inhabitants] sounds totally ridiculous economical times, the return to recently, the country’s troubles made the when you compare it to other markets, or Italy stats headlines again as Prime Minister Enrico Letta where [Italy] was 10 years ago.” IFPI’s data Population: growth of Italy’s recorded music resigned last week. places Italy’s recorded music revenues per market came somewhat as a capita at $3.5 in 2012 – the exact same figure 61.4m The recorded music sales growth as ’s long-troubled recording industry. surprise. Despite encouraging experienced in 2013, even if it was a small GDP per capita: The measure for fellow EU5 markets stood signs from streaming revenues, one, was thus taken as welcome news by US$ 33,000 at $13.8 in the case of France, $16 in the local music industry. According to trade however, the market still faces and $21 in the UK. Internet users: many hurdles. body FIMI, sales totalled €117.7m – an annual increase of 2%. Physical formats fell a modest Rosi argued that one of the key factors for the 37.3m According to the national statistics body 5% to €79.6m, which was made up for by performance of the Italian market in 2013 was Broadband households: Istat, Italy saw its unemployment rate reach digital revenues growing 18% to €38.1m. the fact that the physical decline was rather 12.7m 12.7% in December 2013. The reality is even stabilised, falling by only 5%. He claimed, in In talks with Music Ally, Andrea Rosi (CEO of grimmer, with the inactivity rate actually turn, that this was due to a better positioning Mobile subscriptions: Music Entertainment Italy) remained standing at 36.4% – a recent small decline in of leading high-street retailer Media World cautious. He claims, “[Growing] 2% is easy 93.5m unemployment was actually attributed to an (local subsidiary of German chain Media because the changes in the market are very increase in the number of Italians quitting the Markt) after going through a complicated Smartphone users: small in terms of numbers. We’re talking labour force altogether. Istat had previously 2012, coupled with a strong year of local 36.2m about €115m in total, which [for a country with forecast GDP to fall by 1.8% in 2013, mainly releases. Sources: CIA World Factbook, IFPI, World Bank Last year was indeed strong for local artists: %&'()*$+,-.+/,/$0123-$2'(,2$Italy: recorded music sales nine of the top 10 selling were by than in the past three to four months, GH69?--?*,0I678./56J.-45K6 domestic artists, with the remaining one the performance of downloads has been $FF1F6 being One Direction’s . $F&1F6 underwhelming, with iTunes (comfortably the $(F1&6 Music Ally understands that adults make up $$:1:6 dominant player) starting to be overtaken by &'1F6 &&1"6 $$"1E6 the majority of local content consumers who streaming services. &:1"6 remain CD buyers. (&1F6 (%1$6 Given that, as a whole, the market grew, With regards to digital sales, downloads grew the upshot would seem to be good. only 6% in 2013 to €23.5m and ad-supported $&(1E6 $$E1E6 However, it appears that the streaming $';1:6 streams fell 2% to €7.6m, as per FIMI data. %(1;6 :E1;6 growth was not necessarily organic. Music Subscription streams drove the bulk of digital Ally understands that local on-demand growth, totalling €7m for an annual increase streaming service Cubomusica (owned by of 182%. Downloads thus accounted for 62% telco TIM) accounted for approximately &''E6 &'$'6 &'$$6 &'$&6 &'$(6 of digital income in 2013, followed by ad- half of subscription revenues in 2013. An supported streams (20%) and subscriptions undisclosed local source in the independent streams (18%). Rosi warned, however, <*48>5M6NOPO6 BCD0?>.-6 )?L?7.-6 sector argued that a significant portion of

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%&'()*$+,-.+/,/$0123-$2'(,2$ GH69?--?*,0I678./56J.-45K6 %&'()*$+,-.+/,/$0123-$2'(,2$$FF1F6 $F&1F6 GH69?--?*,0I678./56J.-45K6 $(F1&6 $$:1:6 $FF1F6 $F&1F6&'1F6 &&1"6 $$"1E6 $(F1&6 &:1"6 $$:1:6 &'1F6 &&1"6 $$"1E6 (&1F6 (%1$6 MARKET PROFILE &:1"6 the REPORT | 19 February 2014 | Page 8 (&1F6 (%1$6 $&(1E6 $$E1E6 $';1:6 %(1;6 :E1;6 $&(1E6 $$E1E6 $';1:6 %(1;6 :E1;6 continued… &''E6 &'$'6 &'$$6 &'$&6 &'$(6 &''E6 &'$'6 &'$$6 &'$&6 &'$(6 those revenues probably correspond to us, for the main reason that people are not keeps evolving in order in both its marketing “Our brand partnerships are working very Cubomusica subscriptions bundled with TIM used to paying – and music services like operations and<*48>5M6NOPO6 business diversification. “We well and growing a lot. It took a fewBCD0?>.-6 years )?L?7.-6 packages (which are not reflected by actual and Spotify are not popular. They <*48>5M6NOPO6are do everything differently,” he says. “All of our to be theBCD0?>.-6 point of reference)?L?7.-6 for brands, but usage). Our source claims that many TIM growing,&'$( but if you see Spotify’s&'$& rate of free/ marketing efforts now point to the fanbase [SME Italy] has become a very reliable partner customers remain unaware or)*+,-*./0 uninterested paid subscribers&(1" [in Italy],&&1$ it turns out to be using social media and [digital campaigns].” for them. For instance last year we made a in Cubomusica, despite the fact that the telco one of the lowest in Europe.” Although traditional marketing and terrestrial huge [agreement] with supermarket chain has indeed promoted the service2/!34,/5/60785.90 strongly. :1; :1: radio are still very important, the company Esselunga.” He adds that Italy is a country where <4=0>8?@A*,60785.90 :1' &1" now dedicates approximately 35% of its Other on-demand streaming services in streaming is already very popular. “We need He concludes, “We need to have a continuous marketing spend on digital. the country include Deezer, GoogleBCD0?>.- Play to evolve:E1; the business model%(1; in order to flow of deals with brands. We’re working on Music All Access, , Rdio, make people pay the right fare,” he suggests. In the face of the challenging recorded that [allocating] specific resources”. Unlimited, Spotify and Xbox Music. Music Ally This view echoes those of other local sources, music market, it is interesting to see SME understands that Spotify leads by who claimed that, in the current scenario, exploring other areas. “In the last three to some distance, even if it was only launched €9.99/month could prove too much to ask if four years we have been investing a lot in in the country in February 2013. (Deezer, for one was to seek scale in Italy. The outlook is new business activities,” says Rossi. instance, has been available in Italy since exacerbated by the fact 2011.) that many people are still reluctant to use credit Italy: recorded music sales by format Rosi claimed that the “Outlook [for 2014] is cards online. not very positive”, with the main issue being !"#!$ !"#4$ !"#4$ that streaming is still not as significant as Nevertheless, Rosi 2012 2013 in other markets. He argued that growth remains optimistic with is stifled due to the fact that no telco is regards to the adoption %&'()*$+,-.+/,/$0123-$2'(,2$ bundling Deezer or Spotify yet. We would of on-demand streaming &'#6 GH69?--?*,0I678./56J.-45K6 add, however, that the rumours surrounding services. “It will happen $E#6 &'#6 $FF1F6 $F&1F6 the performance of Cubomusica (or that of – I’m pretty sure,” he $(F1&6 $$:1:6 Deezer with Orange in other markets) would says. “Even if it takes ;#6 &'1F6 &&1"6 $$"1E6 make TIM’s competitors think twice about more time than in other :#6 ;#6 &:1"6 bankrolling services whose potential for countries. Maybe in three  ;#6 (&1F6 (%1$6 churn reduction still remains to be proven. to five years the prices ;%#6 ;#6 will be lower and the $&(1E6 $$E1E6 As for on-demand streaming services’ : ;%#6 $';1:6 consumption of music %(1;6 potential to scale in the country organically :E1;6 as a service rather than outside of telcos, Italians’ willingness to ownership will be much pay for subscriptions is also brought into more advanced.” question. Interestingly, Rosi explains that &''E6 &'$'6 &'$$6 &'$&6 &'$(6 “[SME Italy] is making more [money] on Rosi highlighted that, )*+,-*./06 2/!34,/5/60785.906 <4=0>8?@A*,60785.906 BCD0?>.-6 YouTube than markets much bigger than in the meantime, SME )*+,-*./06 2/!34,/5/60785.906 <4=0>8?@A*,60785.906 BCD0?>.-6 <*48>5M6NOPO6 BCD0?>.-6 )?L?7.-6

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)*+,-*./06 2/!34,/5/60785.906 <4=0>8?@A*,60785.906 BCD0?>.-6 Music Ally Music Ally is a music business information and strategy company. We focus on the Our clients include: Music Ally is an 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 to have a good commonsense debate and get some consensus on how to move forward. The Team

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