Global music on the up



The music industry touches all of us in one way or another. We’ve all happily sung along to the latest hits while driving to the office, or jogged around the block to the beat of our favourite rocker on the old iPod and watched iconic ‘70s bands strumming away on MTV in the background in the pub after a hard day’s work. We take our consumption of music for granted these days, but the music industry itself is on an extraordinary and challenging path, commercially and technologically speaking, and the business – after 15 years of continual decline – is finally on the up, with more fans purchasing and listening to more music around the globe in increasingly rich and immersive ways, mostly thanks to streaming.

Rob Stringer, CEO of Sony Music Entertainment, describes 2018 as “the most fast-paced and innovative chapter of the music business in decades.” After declining revenue characterised the global recorded music market for 15 years in a row, it’s finally on the up, with positive revenue growth for the third consecutive year. The record industry is finally rebounding in the wake of Napster and the internet’s unravelling of physical record sales, and streaming services are the main driver behind these recovering revenues.

For the first time, streaming has become the single largest revenue source with 176 million users of paid streaming services contributing to year-on-year streaming growth of 41.1 per cent. According to the International Federation of the Phonographic Industry’s Global Music Report 2018, streaming now accounts for 38.4 per cent of total recorded music revenue, and its growth has more than offset a 5.4 per cent decline in physical revenue and a 20.5 per cent decline in download revenue. Total digital income last year accounted for more than half of all revenue (54 per cent) for the first time ever.

It took a long time for record companies to face the challenges of digital and technological innovation, something they have finally embraced as they work with existing and start-up technology companies, licensing their music to create better listening experiences for fans. This is happening both with traditional partners, such as audio streaming services, and new ones, such as social media platforms.

A major factor behind recent growth in the music industry is streaming services, which also offer music subscriptions and are taking music consumption to the next level by integrating Artificial Intelligence (AI) within their platforms..The internet has played the role of catalyst in online music streaming growth, and the growth is attracting the attention of investors worldwide, who have renewed interest in the rebounding music industry. The Swedish company Spotify was recently listed on the stock market, and on its first day of trading on the New York Stock Exchange, the music streaming service finished with a valuation of $26.5 billion.

Despite a lot of criticism from their contemporaries, Spotify have evolved themselves into a ‘new record label’, functioning – in many ways – similarly to how a traditional label would. When they launched Spotify for Artists recently, it gave musicians themselves a tool to optimise the way they want to be seen and heard. Spotify describes their data tool as “a one-stop shop that helps the artist get to know their fans better by finding out where they live, how old they are, what features they’re using to discover the artists music, and what other musicians they are listening to.”

The Spotify for Artists tool is likely to worry traditional labels, who conventionally acted as gatekeepers between artists and fans. Spotify themselves have said that since the launch, more than 67,000 artists and labels have submitted music through the tool and more than 10,000 artists have been added to Spotify editorial playlists for the first time. With Artists being able to put their music up the way they want to without any interference from Spotify, counters any claims that the company’s play lists are often biased in favour of relationships within the industry, making it a win-win situation for all concerned.

Spotify is not the only streaming entity around: services such as Google Play Music, Apple Music, Amazon’s Music with Alexa, Pandora and YouTube Music have all emerged as serious competitors, so much so that Apple Music recently surpassed Spotify for the most paid subscribers within the US. Unlike Spotify, these companies have big bank balances that they have invested in artists and are under no pressure to maximise their revenue from streaming music, whereas Spotify has shareholder obligations and needs to become profitable. It’s no coincidence, therefore, that Spotify launched Showtime and Hulu streaming packages and have ventured into the podcast domain, diversifying their product offering and increasing paid subscriptions.

Streaming continues to open and expand territories where there have previously been barriers to generating revenue through licensed music. Countries where there used to be vast differences between population size and consumer-spend on music are finally beginning to realise their potential.

A big coup and potential subscriber surge for Spotify came at the stroke of midnight on the 14 November, when they officially launched Spotify Mena in a range of countries across the Middle East and North Africa. Users in the UAE, Saudi Arabia, Morocco, Egypt, Algeria, Tunisia, Lebanon, Jordan, Kuwait, Oman, Qatar, Bahrain and Palestine can now access the free ad-based, or premium subscription-based service, for the first time. Spotify Mena can be accessed in the Arabic language, and there is also a generous amount of content created specifically for the region. Through its select curators based in Dubai and abroad, more than 40 new region-specific playlists have been added.

Traditionally in business, an owner uses analytic tools to diagnose and understand customer requirements to make an appropriate business change. For the music industry, due to the rapidly-growing number of customers and the wide variety of choices now available, traditional tools don’t cut it anymore. Incorporating AI and machine-learning technologies into music streaming algorithms has quickly become the new norm. If a music service provider can’t ‘guess’ what a user wants to hear, the user will most likely switch to one that can and, if that happens, they lose the listener forever.

Technology, ultimately, rules over all of you melophiles out there, and it’s only just the beginning…


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