Technological advancement, culture, and heavy investment dollars push the music industry into a period of resurgence
Music is culture. Music is opportunity. At its core, music is also an industry forecasted to double in size to about $142 billion in global revenue by 2030. After nearly two decades of declining global music revenue in an industry that was plagued by piracy, the music industry is experiencing a rapid resurgence and is projected to reach new heights. With this trend in sight, billions of dollars are being invested across the spectrum in a space historically prone to volatility and change. Just within the past year, Chinese conglomerate Tencent Holdings acquired a 10% stake in Vivendi’s Universal Music Group, Warner Music completed a successful IPO, and music-royalty funds have regained popularity as a lucrative asset class. On the tech side of things, Andreessen Horowitz and Google closed an investment in Steve Stoute’s UnitedMasters, SiriusXM made a $75 million minority investment in SoundCloud, and Spotify’s share price has nearly doubled in the past 12 months.
As mainstream music continues to dominate youth culture around the globe, brands seeking licensing and sponsorship deals are also at an all-time high. Kanye recently announced a 10-year deal with Gap, Drake continues to sport his allegiance with Nike, and you can find a picture of Justin Bieber on the front of every Calvin Klein store in North America.
The cultural impact is visible and investor dollars are speaking volumes. In an industry that was dried up not so long ago, what underlying factors are responsible for this newfound growth?
1. Streaming
Although streaming services like Spotify have their fair share of challenges with artists, they are often credited for saving the music industry. The affordability and user-friendliness of streaming services have made streaming the top choice for an average listener to consume their music. Not only has streaming nearly replaced all sales from physical copies and downloads, but it has significantly reduced the crux of the industry – illegally downloaded music. Music download revenue fell to the point that even Apple decided to discontinue its legacy iTunes platform in 2019.
In his new book, Los Angeles-based entertainment lawyer Donald Passman shares that the number of streaming service subscribers is growing for all age groups. Passman claims that the current average revenue per subscriber is higher than the average spend on recorded music during the historical peak of the music industry in 1999. During that time, he suggests that the average music listener spent approximately $45 per year on physical music copies such as CD’s whereas, in 2019, the average annual subscription fee (considering family and student discounts) is nearly double, at $84 per year.
2. No More Gatekeepers
Not only are there more people listening to music, but there are more artists creating music as well. From a high level, there are only five things needed to create and release a song today;
the beat: the instrumental in the song
the lyrics: the words to record over the beat
recorded vocals: recording of the lyrics over the beat
mixing: editing the recorded vocals and beat to seamlessly fit together
distribution: getting the music onto streaming services like Spotify and YouTube
Although a high degree of talent is still required, technology has commoditized and made each of these five steps relatively inexpensive. Let’s look at Lil Nas X, the 21-year-old artist behind 2019 smash-hit “Old Town Road” featuring Billy Ray Cyrus. Starting as an amateur SoundCloud artist from Atlanta, Lil Nas X bought the beat for Old Town Road for $30 on BeatStars, a digital marketplace where producers sell or license the rights to use their beats for commercial use. Taking that beat, Nas X wrote the lyrics, recorded the vocals, and mixed the song all from the comfort of his home studio. He later released the song on SoundCloud in December 2018 and promoted it for free on social media platforms such as TikTok. The rest is history.
Obsolete are the days where you need thousands of dollars to purchase beats and major labels to promote your final product. Put best by Senior Music Business Editor at Rolling Stones, Amy Wang, “Lil Nas X was able to put together a chart-smashing song for less than the price of a tank of gas is a perfect testament that the traditional structure of the music business has blown apart.” Lil Nas X is not the only testament to this radical change. Global icon Billie Eilish and her brother also completed their entire album “When We All Fall Asleep, Where Do We Go?” from their small bedroom in Los Angeles.
The biggest change in the music industry propelling independent artistry is the ability to distribute music without a record deal. Previously, major labels were a barrier to entry as they served as gatekeepers, choosing who can get their music on iTunes and in record stores. With the emergence of companies like TuneCore, DistroKid, and UnitedMasters, in exchange for a fee or royalty percentage, artists can independently release their music without giving up the rights to own their masters. From a promotional standpoint, the internet and popular social media platforms like TikTok have allowed up-and-coming artists to create their own buzz.
3. Music Discovery
We all admire an artist that many of our friends don’t know about yet, but how did we find them? Utilizing the power of machine learning, stakeholders throughout the music industry are leveraging data algorithm tools to discover and highlight new artists. Instagram uses our engagement data to expose us to similar, new posts on our Explore page. Major labels are acquiring and developing tools to help their A&R’s discover new artists that they should be working with. Even streaming services like Apple Music and Spotify are using our listening history to suggest new artists, songs, and podcasts through discovery playlists. This allows music listeners of any genre to get tailored suggestions that increase their engagement and listening time on those platforms. Such discovery tools have also created breakthrough moments for many artists.
4. Cultural Shifts
The biggest genres in the world, including pop and hip hop, not only dominate the music charts, but they also dictate youth culture around the world. Rumours of new OVO, Yeezy, or Supreme clothing lines flood social media feeds, and the chance to get their hands on a new pair of Yeezy’s, leads thousands of Millennials and Gen Z’s to wait in lines across the world. According to a Nielson US music survey from 2015, Millennials and Generation Z are spending more of their discretionary income on music entertainment than any other age group. The appeal of merchandise tied to an artist is nothing new, but the relative propensity to spend on such items is increasing. Technology and the integration of social media within the modern American lifestyle is widely credited for this trend.
5. Music Accessibility
If your favourite artist just released a surprise album, you would simultaneously need three things to legally listen to it;
a device such as a smartphone
a WiFi or mobile internet connection
access to a paid streaming service such as Apple Music or Spotify
With smartphone and internet penetration rates rising consistently in North America and globally, as well as the competition in paid streaming services driving prices as low as ~$5 per month for students, music is now more accessible than ever. Although internet and smartphone penetration rates in developing regions like Africa and India remain below 50% (as opposed to over 80% in Canada), the proportion of people who stream music on their smartphones in emerging markets is estimated to triple by 2030. Betting on these secular trends, Apple Music announced in April that it will be expanding into 52 new countries, including two-dozen in Africa, bringing its total footprint to 167 countries worldwide. Not only is Apple competing with Spotify in the race to capture global market share, but they also want to become a part of originating international music genres including KPOP, Spanish music, and UK hip-hop.
Comments