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Black Sky Thinking

The Reports Of The Record Industry's Rebirth Are Greatly Exaggerated
Eamonn Forde , May 2nd, 2017 10:57

Last week the major labels were all over the media shouting excitedly about new positive streaming figures. But, points out Eamonn Forde, the reality is far from rosy - especially for those artists tQ loves.

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The record industry has taken such a horrific and unrelenting shoe-ing since 2000 that any glimmer of hope is pounced on and held up as evidence that they did it – that they are through the worst of it. But hyperbolic claims, as made in this Guardian article last week, that it is somehow "saved" are way off the mark. To invert the old Mark Twain quote, reports of its regeneration have been greatly exaggerated.

Yet that was the spin off the back of the IFPI – the international trade body for record companies – recently publishing its global market overview from 2016. (Despite living in a digital age of instant reporting, it still takes several months to pull in all the data from various markets around the world.) The recorded music business saw its global revenues grow 5.9% last year to a trade value of $15.7bn.

The fact of the matter is that the industry had hit the bottom and is only now, like Alan Partridge's sadly pulped memoirs, "bouncing back"... except it still has a long way to go. 2016 was the best performance since 2009 (when the trade value was $15.8bn) but is still a long way off from its prelapsarian time in 1999 before Napster and others kicked it inside out. Back then, the global market was worth $23.8bn.

There is the added fact that in 2001, the IFPI changed what it counted, meaning comparing the reported trade value in 2016 with the reported trade value in 1999 cannot be properly squared. Back then at the start of the great global decline, the IFPI started including performance rights income and synchronisation revenue alongside that from record sales – in part to make the decline seem less pronounced than it was.

Last year, performance rights and synch accounted for $2.6bn – equal to 16.5% of the $15.7bn total. Strip that out and we are left with $13.1bn. When fully comparing like with like in terms of historical data, that "recovery" doesn't sound quite so great now.

If – and, by Christ, it is a big IF – the industry manages to replicate the same level of growth (5.9%) that it did in 2016 (and we'll let them keep their performance rights and sync money in the pot), it is going to take until 2024 until the numbers are better than the $23.8bn reported in 1999. It is only then that anyone can truly claim the record business is "saved". Like a streaming-based Steve Austin, they can rebuild it – but it's just going to take a lot longer than they'd like.

Also, when we look at where the growth was – essentially in streaming as with the myth of the "vinyl revival" is not going to save anyone's arse here – there is a time bomb that is going to fracture growth. For subscribers (so people paying for Spotify, Apple Music, Deezer and – no laughing at the back – Tidal etc.), the best way to explain their value is through the horrible acronym ARPU (average revenue per user) to show what each subscriber is "worth" to the record industry. Last year, there were 112m of them and they collectively brought in $3.48bn – meaning an ARPU of $31.07. Back in 2013, there were just 28m and they collectively brought in $1.12bn – an ARPU of $40.

So, in blunt terms, there are more subscribers but they are individually worth less. This is explained through family packages (getting up to six people on Spotify or Apple Music for £14.99 a month compared to £9.99 for one a single-subscriber package), student discounts and smaller markets where subscription services, due to lower average salaries in these countries, charge way less a month than, say, the UK or the US does.

There are two growth curves happening here – the volume of subscribers and the value of those subscribers. But speed of growth of the former is coming at a cost to the latter. They are not moving in lockstep. So the potential market will become saturated quicker but the average value per user continues to be eroded. All future growth is going to be happening within this context so perhaps the industry should switch from Krug Grande Cuvée to Lidl cava for the foreseeable.

Last year was The Great Harvesting for some of our best pop stars and the industry benefitted from a lot of catalogue sales off the back of celebrity deaths, as always managing to turn a tragedy into a triumph. Prince was the ninth biggest selling artist of the year while David Bowie was the second biggest. Blackstar was part of that, but the bulk of sales were his classic 1970s and 1980s albums as well as greatest hits. On top of this, his triple-disc Cracked Actor album (recorded in, ummm, 1974) was the biggest-selling vinyl set at the recent Record Store Day. So here lies a cruel incongruity for the record business: if it is banking on its biggest stars dying each year to pull it out of a sales hole, the music industry's twist on Logan's Run is only going to go so far until there's nothing left. A thinning crop awaits.

The bigger question is this: who, exactly, is this the early stirrings of a new golden age for? The labels and music publishers? Sure. The top 1% of acts that dominate in CD sales (Adele), streams (Drake) or both (Ed Sheeran)? Of course. But what does it all mean for those way down the pecking order and unlikely to be placed at the top of Spotify's hugely powerful playlists like Hot Hits and New Music Friday?

The three major labels were effusive in their praise for streaming in general and Spotify in particular at the IFPI press launch. No one from an indie label was there but the following day at AIM's Music Connected conference in London, indie label after indie label lined up to heap praise on streaming in general and Spotify in particular. The labels love Spotify. Plus, it should be pointed out, all the majors have an equity stake in the service, as do many indies via Merlin, their collective licensing body. But how is that paying through to the artists? Huge artists love Spotify as it's a volume game. But for those right at the end of the dinner line, it's arguably more famine than feast. And could get worse.

Universal Music and Merlin (on behalf of the indies) have both agreed new licensing with Spotify. As part of that, they can choose to hold back new albums from Spotify's free users for a fortnight. This "windowing" means only subscribers will be hearing albums in their first two weeks of release. As sure as day follows night, Warner and Sony will reach a similar agreement. Isn't that great? Isn't that going to make more people on the free tier want to pay a subscription and thereby increase their ARPU? Well, yes and no.

Reportedly buried in the deal is a clause that, contingent on Spotify hitting certain subscriber targets, labels will take a lower royalty (at the moment, Spotify pays out around 70% of revenues to labels and publishers). So who is going to take the hit here? Will the labels still pay through what they were paying to artists? Or will they reduce their payments to artists in line with their reduced Spotify royalties. No one is saying for definite, but even a cursory glance at historical label/artist deals will tell you who is going to be coming up short here. The bucket might still be dropping into the well but the rope is getting shorter.

For the smallest and most independent artists, brash talk of the industry being saved will surely rankle. If you are on a major or a decent-sized indie, you at least have a fighting chance of making it through the steeplechase to get onto the all-important Spotify and Apple Music-controlled playlists. They are like an accelerated version of the old radio playlist meetings of the recent past where careers could be made or killed before the tea trolley had even left the room. If you are not on them then, in terms of the volume of streams needed to make a living, you might as well not exist.

If you are a small act self-releasing and getting your music on services via a self-serve distributor like TuneCore or similar, it will increasingly feel like a loaded game. Just because your music is ingested onto digital music services, it doesn't follow that anyone will hear it. Standing out from the other 40m+ tracks on there is going to be like the trials of Sisyphus. If Sisyphus was an ant.

In this new digital reality, the big will get bigger and the small will be left hoping for a lucky break, the chances of which get slimmer as each day passes. For them, this is not the salvation being trumpeted by some; this is a three-card Monte.

Johnny Nothing
May 2, 2017 8:21pm

My heart bleeds. There are too many people making too much music. If you're in this to make a living, go work in a bank. Otherwise stop complaining and put out what you care about for the audience you earned.

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May 3, 2017 11:53am

In reply to Johnny Nothing:

Kind of have to agree with you there. If you're only making music to make money maybe fuck off.

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May 3, 2017 3:06pm

And Johnny Nothing, for "If you're in this to make a living, go work in a bank" - wins the destroying independent spirit award!

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Music Lover
May 3, 2017 3:13pm

In reply to Johnny Nothing:

While I agree that there are too many people "making music", it is a shame that only the most mainstream total garbage "music" and the entities that prop them up are the ones that make the money. But my guess is that you only listen to enormously popular (usually vacuous) recording artists judging from that last statement. I wonder how you would like to be judged by how popular you are instead of how good you are at what you do.

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Alan
May 3, 2017 7:27pm

In reply to Johnny Nothing:

I see...musicians and songwriters should work at their craft with no expectation of being paid or earning a living, but everyone else who works should expect to be paid.

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Johnny Nothing
May 3, 2017 7:35pm

In reply to Alan:

I find the idea of career rock star (or whatever) intensely objectionable. I despise this Britain's Got Talent attitude where people with nothing to say and no ideas expect to be put next to the real artists just because they learned a bunch of chord shapes and have a vocal coach.

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Johnny Nothing
May 3, 2017 7:41pm

And for the record the last five things I bought (reading directly off iTunes) were: Edgard Varese Essentials, Frankie Teardrop vs the Space Alien, Amnesiac/Kid A and Wailers Soul Rebels. Make of that what you will.

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May 3, 2017 10:15pm

In reply to Alan:

Of course artists should be paid for their craft but you cant compare it to being employed by someone that needs your services. If there is a demand for what you create then you should be paid accordingly. Otherwise it's like someone digging a hole that no one asked for and demanding a wage.

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David Gerard
May 4, 2017 8:22am

You'd almost think there was some sort of horrifying plunge in listeners' financial circumstances.

The whole music industry lives entirely off people's discretionary income. That's the stuff spare after rent and food.

That's why when you say stuff like this, the general public tells you to go struggle with a day job like they do.

The CD boom of the 1990s was a statistical blip, not some sort of natural law. Stop talking like it was.

If the record industry really wants the good times back, they need to be heavily pushing for social spending, redistribution of the wealth and more reliable support systems. Then people will have cash to spare.

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David Gerard
May 4, 2017 9:50am

In reply to David Gerard:

And I just noticed Forde's assumption that competition amongst artists doesn't exist or apply or matter. It's 2017! You are literally in competition with every other musician in the entire world! And with every interesting cat picture on the Internet!

You need to work out if this is pure art or a small business you're running. If the latter, then supply and demand apply to you.

I wholeheartedly support artists not having to scrape by on nothing. But this article is incoherent entitled whining that doesn't address that the problems are vast, social-scale and fundamentally political.

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Darkcarpet
May 4, 2017 10:09am

You could argue that the the post 1960's financial boom of music created this present climate of millions scrabbling for something that is long dead. When publishers realised how much money could be made from recorded music they must have been beside themselves. The great transformative power of music has been sidelined in favour of revenue now. Back in the - back in the day, musicians were probably supported by their communities and travelled around like gypsies. When the original paradigm shifting bands of the 50s-70s came up (those that are starting to die off now), they inspired millions and millions of kids want to live that rock and roll lifestyle and make those mega bucks. All for really just playing around (that's why its called playing music). A lifestyle which in the context of music and commerce through the rest of our recorded history (not to mention our collective human history!), doesnt really exist. Now people are upset because their world view is built around something that was circumstantial and temporary. The boom came about because of technology, and now technology has evolved again to right the balance. So I agree with Johnny Nothing for those reasons. Its not really what music is about. Music has always been and always will be, so what are we concerned about here? The demise of a multi billion dollar industry of which huge chunks are taken by the giants of publishing? I say let it tumble! Your well's dry buddy! :)

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Oh yeah her
May 4, 2017 12:22pm

Ever wondered how much music actually affects our brains more than money, drugs, lifestyle choices, materialistic gains? Ever seen the film 'Alive Inside' ?
Did you know that our first cells beat together and then join together, then form to make the first organ that is the heart, then they carry on betting until we die?
Ever wondered how much humans consume music because of this basic science?
Ever wondered how much music is to make, record, master, distribute, promote and lets not forget the years of musical training which some of us undertake from the ages of 5 upwards through the cost of our parents even for a small tiny indie release that doesnt want to make much money or just break-even? Or even the cost or space to rehearse, develop, find the sounds that work and speak for themselves?

EVER WONDERED HOW MANY ARTISTS HAVE FULL TIME JOBS?

All in order to bring people music to have on their phone, stereos, cars, to have at their weddings, to have in a coffee shop, to accompany TV adverts and maybe even to have at funerals etc .. so when your heartless comment and others about 'go work in a bank' or 'fuck off' pops up, maybe you all should remember that in order to make music, it sometimes requires great skill and knowledge from at least one person who needs paying SO when the top majors are rinsing the industry down through the pecking order for all they can grab and because even they are struggling because people want it all for FREE ... I want to ask you, have you actually any idea how music works inside your brain? Because if you know all the above already and you still like to make negative comments about this article ... then its you who needs to FUCK OFF.

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David Gerard
May 4, 2017 1:37pm

In reply to Oh yeah her:

You're correct that thinking about business is pretty much the opposite of art in practice. It’s ridiculous rat-race bullshit that leaves you barely able to think about the important things.

But it’s a rat-race the rest of us are stuck in too. If you don't like people pointing out that it's tough for everyone, too bad. Get to work fixing the society.

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Bawdsey Buoy
May 4, 2017 1:52pm

In reply to Oh yeah her:

Well put...
would you go into a record shop and just take a cd for nothing?! So why should you expect music for free or a pittance.
Artist have a right to earn a fair wage for their craft.
its no different from any other trade or craft be it a brick layer etc.
its taken hours and sometimes years to perfect it.
we live in a strange world, with odd values.
I hope things change for the better soon.
BB

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Johnny Nothing
May 4, 2017 6:46pm

In reply to Oh yeah her:

My, my. Big scary capitals and - what was that - poetry? You're a rare talent. You must put me on your mailing list.

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Egmond
May 4, 2017 7:18pm

In the 90s incomes for artists were hugely and artificially inflated by the peaking of the CD as the main medium. Many adult consumers bought much of their 70s record collections all over again. As for then current releases, if you liked 2 or 3 songs from an album you had to shell out £12 and more and buy tracks you didn't necessarily want. Copying was possible but relatively piecemeal, pre-I torrent. CD singles too were very highly priced when you consider that buying a single in 2017 means a 99p download, if that. At the same time recording and manufacturing costs had begun to fall. Party time.

There has never been a right of artists to be paid, only the ability of an artist to restrict delivery to those willing to pay. That was milked in its time, to the grotesque enrichment of some, but now, as others have pointed out on here, the rich recording star looks likely to become a thing of the past, with expectation for even well-known names settling down to being capable of earning an unspectacular reasonable living from live performance, teaching and so on. Problem is, we are more than ever (partly to provide teaching opportunities for surplus musicians) churning out legions of young people 'trained' to be musicians or work in a moribund industry.

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David Gerard
May 4, 2017 11:51pm

Response post:

https://rocknerd.co.uk/2017/05/04/the-music-industrys-sense-of-entitlement-how-to-get-the-money-rolling-again/

I have to say, the quality of this post is well below what I'd have expected of Forde.

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Alexander Cerevka
May 5, 2017 11:11am

Excellent article!

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Andy Tithesis
May 10, 2017 8:26pm

Soon they will charge a mandatory fee for listening at all. Refuse or unable to pay up? Then you'll be hearing a very different kind of pop. One of secluded permanence. Better learn to sign more than just your name if you can't read lips on talking heads. -Pessimism

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Steve Palfreyman
May 10, 2017 10:35pm

Thanks for the piece Eamonn. This speaks to those independents who want to play the traditional 'big label' game of building a career. You're right, it's not practical for anyone. The risk of reporting like this, however, is that independent artists will look at the figures and the argument and feel like there's no direction for them to turn. When in fact, there is an entirely different approach waiting for them. It doesn't rely on streaming or downloads to fuel their career. Even the big labels know that isn't enough to fuel their machine. But we get sucked into the fallacy that either things are improving or they're dire. This needs to stop if we want to see independent music truly flourish. What's the answer? It's no one angle for all, no quick fix, no guaranteed career. There has never been. But the reality is, if an artist can build a tribe of fans who want what they give, they will start looking at a streaming royalty as a bonus because they're making far more in other ways. I appreciate the piece and I'd love to have you speak at my next Summit on this topic, consider this a slightly odd but informal invitation. All points of view are necesary, this one has merit, it's just dangerous in my opinion.

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Steven Augustine
Jun 8, 2017 8:10am

It's fairly simple: in most cases, when someone pays money for a cultural artifact, they want a *real* artifact, not a virtual one, and they want an artifact that feels equivalent to the price they paid for it (eg: vinyl vs CD vs streaming). The "Record Industry" tried to get away with turning an enormous profit (how much does it cost to replicate a download?) and ended up with less than what they were making before. In reaching for this profit, they opted to support a format that killed them. Oh, and: you no longer wanted to "waste" money by nurturing various geniuses for two or three albums each until they broke through, right? Well now you've got your army of disposable, low-overhead, talent-free pretty faces that only kids are dumb enough to pay to hear. Enjoy.

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