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A Brief Summary of the International Music Market in 2017 We summarized the major events in investment and financing in the international music market in 2017!

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Dong lucy 2018-01-10 Collect

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– Spotify: a year with the speeding acquisition; soon to be listed

Spotify has been very active in the capital market in 2017, including their plan to be listed, which brought a lot of attention from others. In April, Wall Street Journal reported Spotify’s filing to go public in an unconventional way known as “direct listing”. After all the suffering and challenges, Spotify has finally filed its IPO paperwork in January 2018. It will be listed in the first season of 2018 if everything goes well.

There are viewers that believe the newly formed relationship between Spotify and Tencent Music Entertainment Group plays an important role in Spotify’s direct listing process. In December, a joint announcement said that they bought minor stocks in each other, which would strengthen both groups in the market of music-streaming.

Spotify’s value of assessment has raised since its filing of IPO. In April when Spotify announced its direct listing plan, its value of assessment was around $10 billion. It raised to $13 billion in June, $16 billion in September, and by December, it reached $19 billion which almost doubled since April. Spotify’s acquisition in 2017 contributed to its rise in the value of assessment. It has completed 5 cases of buying out in 2017, including U.K. music startup Sonalytic and content recommendation startup MightyTV in March, blockchain start-up Mediachain Labs in April, French music search and recommendation engine Niland in May, and Swedish online music startup Soundtrap in November. The number of paying subscribers has also increased drastically in 2017. According to Spotify’s official data, the number of its paying subscribers reached 500 million in March, and 600 million in July. Unofficially announced, the number reached 650 million in September. By January 2018, the number has officially reached 700 million.

Although Spotify has been very active in the music and capital market in 2017, more challenges are waiting ahead. Once Spotify is listed, the price of the new stock will be directly affected by the market which brings more risks to the investors. Spotify will be competing against its partner Tencent Music for the first one to be listed in 2018.

– Apple Music: a year with “breakups”; use the feature of video to increase competitive advantage.

In 2017, Apple music went through a series of “breakups” with many of its own services and features, including some services with high reviews.

Firstly, in March, Apple Music canceled it’s 90 days free trial in Australia, Spain, and Switzerland. In August, Apple Music pulled out iPod nano and shuffle, meaning the end of its era of physical music players. In September, Apple Music let go of their very own 10-year-running Apple Music Festival. In December, reports said that Apple was planning to completely end the music downloading service on iTunes store by 2019. Reports also said that all these actions are necessary in order to optimize its product structure.

On the other hand, Apple music has paid a lot of attention on the field of video and film. Wall Street Journal said in January, that Apple was planning to launch new original content including original television shows and movies. In April, Apple launched the new program named “UpNext” aiming to help new and coming artists through a one-month documentary with footages of their music, music production process and interviews. Besides “UpNext”, Apple Music also connected with Musical.ly in April with an agreement to provide song database with lip-syncing. In June, reports said that Apple Music planned to expand their video content to boost the number of subscribers, which might cost Apple another $10 billion per year.

Additionally, Apple Music has been trying to please Chinese subscribers in 2017. In June, Apple put out advertisements and promotions in major cities such as Beijing, Shanghai, Guangzhou, etc., targeting the student group with lowering subscription fee to 5 RMB/month. In August, Apple added radio content for Chinese subscribers to navigate through the app and connected with Wechat pay for an easier payment process to Chinese subscribers.

In terms of investment and acquisition, Apple has drawn the most attention with its acquisition of Shazam, a music recognition app from Europe. According to TechCrunch, Apple bought it out with $400 million which is an important income for Apple Music.

Overall, Apple has repositioned the theme of Apple Music through investment and reorganizing business layouts. News of Apple Music and its competition against Spotify in 2018 is worth following up. 

– SoundCloud: a year of rebirth

When the news came out in July that SoundCloud had cut off 173 of its employees (over 40% of the whole company) and closed up the offices in San Francisco and London, most people were shocked and thought that SoundCloud had come to an end.

SoundCloud is considered the paradise of original music for singer-songwriters and composers. It once owned 170 million users with $1 billion value of assessment. However, when it had to finish a debt financing of $70 million in March, SoundCloud didn’t improve technology and human resources to reach its goal of a 250% year-on-year increase. On contrary, SoundCloud was pushed to the edge of bankruptcy due to the competition between other mainstream media.

Fortunately for SoundCloud, it received a joint finance of $169 million from The Raine Group and Temasek last August, which was the biggest finance case of SoundCloud.

SoundCloud’s rebirth in the market in 2018 is all depending on whether it can make a breakthrough in establishing a stable business model. Otherwise, it will become the next Deezer or Google.

– Facebook: a year to become the future of music market

After signing the licensing deal with Universal Music on December 22, Facebook signed another multi-year licensing deal with Sony/ATV Music Publishing, showing its determination to march into the music market.

Before signing both deals, Facebook had been putting a lot of investment to deal with all kinds of copyright issues. In July, Facebook bought out a copyright-protection start-up Source3 in order to consolidate and improve its ability in identifying properties and handling copyright issues on social-media platforms. Later on in October, Facebook started building a new system to identify and label property, spent millions of dollar to ensure rights-holders that Facebook will play more copyrighted music and removed pirated music content.

In 2018, Facebook will make more moves in entering the music market.

– Three major record companies (Warner, Sony, and Universal): a year to expand competition

According to Music Business Worldwide in September, Warner Music Group bought out Spinnin’ Records with over $100 million. After Sony’s £67 million acquisition of the biggest independent EDM brand Ministry of Sound, it seemed important for Warner to buyout Spinnin’ Records. It has also become a typical acquisition case in copyright content from the three major record companies in 2017.

In this past year, the competition between three major record companies escalated as they all expanded their area of competition. Warner Music’s biggest move was its acquisition of Songkick an APP that provides ticket sales for live events and concert recommendations in last July. Warner now owns core capital of Songkick’s website and APP, making a huge step in connecting its users in the future.

Besides the acquisition of Songkick, Warner Music also partnered with Korean Hip-Hop Brand New Music in May, aiming to consolidate its influence in the Korean music market. Similarly, in February, Universal Music led the funding round of finance of Mass Appeal, a graffiti/hip-hop culture publication company. Due to the popularity of hip-hop culture worldwide, the three major record companies will definitely put more effort into fighting for a space in the hip-hop market.

Besides the growing recognition of hip-hop, vinyl records have been brought back to the market in the past few years as well. October 2017, Universal Music launched their online vinyl record store “THE SOUND OF VINYL” in the U.S., while Sony Music responded to the same topic with an announcement that they will set up mass production factories for vinyl records in Japan in March 2018.

Competition between the big threes has expanded to areas other than music. In October, Sony Music created its own publishing label “Unties” to release small development games for a wider audience on the PlayStation4, PC and Nintendo switch. In the same month, Universal announced its launching of startup “Accelerator Network” to help the development of music startups around the world. Universal also launched a creative agency “Bring” with One Green Bean and HOST. In the future, the competition between the big threes will only escalate.

– Kobalt: a year of development; the rising star of the copyright market.

Kobalt Music Group, a rising music company and royalty collector with a value of assessment of $789 million, had an exponential development in 2017. In May, Kobalt had raised $775 million funding led by Hearst Entertainment, including in a Series D round of $75 million with participation from previous investors Balderton and MSD. 5 months later Kobalt received another $14 million investment by venture capital firm Section 32, making the company’s value rise to $789 million. In November, Kobalt Capital raised $600 million funding for purchasing new music copyrights. In December, Kobalt bought out the catalog of Songs Music Publishing with a deal of $160 million.

According to Kobalt’s website, Kobalt now has service to 25,000 composers and songwriters, 600 publisher and 20,000 independent artists in the world. All these artists cover 40% of the top 100 songs in the U.S. and U.K. 98.5% of the artists would use their service again, which makes the amount of business increase by 40% annually.

Another news from Kobalt is that Kobalt partnered up with the fast-growing music streaming service Netease Cloud Music in December. Now Kobalt shares the deal with Netease on strategic licensing and distribution in mainland China.

There is a high expectation of Kobalt in 2018 after all the achievement it made in 2017.

– MelodyVR: a year as the oligopoly in VR

2017 has brought some success to Melody VR. As the world-famous VR music startup, MelodyVR raised £5 million in June and £15 million in October, both will be used in expanding resources and basic facilities, improving post-production technology development, and content creation. MelodyVR aimed to increase its global marketing effect and gain a bigger share in the global market.

More importantly, MelodyVR signed a licensing deal with both Warner Music and Universal Music, developing the content from artists owned by both music groups. In addition, MelodyVR’s parent company EVR Holdings signed a global partnership deal with Microsoft, as well as a mix application cooperation agreement, agreeing to bring MelodyVR platform to all Windows MR equipment and to offer MelodyVR technical and financial support from Microsoft.

Thus, MelodyVR has established its international position in the music market as a VR partner.

– Audio technology and content companies — Main areas of global music & entertainment investment

According to TechCrunch from last month, Apple bought out the music recognition app Shazam with a $400 million. People in the industry have been guessing whether Apple is trying to strengthen the function of Siri and AR. Other than that, Apple’s acquisition of Shazam will also benefit Apple Music’s function in identifying music, as Apple’s biggest competitor Spotify has just bought Sonalytic, a U.K. music startup app that not only recognizes songs but also tracks the remix elements of the music. Sonalytic’s unique calculation to improve personalized playlist can really benefit Spotify in the future. Spotify didn’t stop the development in improving its music searching and recommendation function after buying out Sonalytic, it continued and acquired Niland, a French music recommendation startup, to absorb its technology and talents and strengthen Spotify’s own function in music recommendation. It’s obvious that audio detection, searching and monitoring has become the key technology to have between music streaming service providers

Besides Spotify and Apple Music’s business layout of audio detection, other sites such as Google are laying out audio content as well. Google acquired the podcasting short-audio app 60dBin October. With the team from 60dB, Google will have the advantage in its audio and podcast business.

Another case in the market is a $75 million financing of the music recognition company SoundHound, led by Nvidia and Samsung, both the leading companies in the area of auto-pilot in automobiles. Startup Stem Music also raised a funding of $8 million in Series A round in July. In September, audio-on-demand podcast app Acast raised $19.5 million finance in Series B round.

Overall, looking at the layout of the music market, many internet companies and music technology companies have benefited from the development of artificial intelligence. In the next few years, music technology in audio detection and audio analysis will still be the main areas for capital and investment.

Translated by Paris Wu

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