At present, there are three distinct music industries: radio, on-demand music, and concert ticketing. However, we are starting to enter a new phase, where these industries will converge and produce one integrated experience for artists and fans. I’ve taken to calling this full stack music, because at heart it speaks to a holistic experience that integrates these industries through data.
The integration of these three, previously distinct industries will produce a richer experience for artists and fans, unlock a ton of additional subscription, ticketing and advertising revenue for artists and create a better experience for fans. It will resolve the central tension between fans, artists and technology companies that so much ink has been spilled about.
Three Distinct Music Industries
There are three main businesses of music:
Radio. Radio is where music discovery happens, and where the majority of casual music fans engage with music. Ninety-two percent of the U.S. population listens to music at least once per week; on average, they listen for 15 hours. It is critical to artists because a radio station decides which track a fan listens to next, and so radio has an incredible ability to drive new artist discovery. Radio is primarily monetized via advertising, generating $45 billion/year. It also is the primary channel for marketing concerts.
On-Demand Music. This is when the listener decides exactly which song comes next (unlike radio). It started with vinyl, migrated to CDs, migrated to iTunes and finally has migrated to on-demand streaming services like Apple Music, SoundCloud, Spotify and YouTube. Monetization used to be in the form of direct spend (buying a CD); it is now a mix of advertising and subscription.
Concert Ticketing. Paying to see your favorite artist live. This used to be a side business for the music industry. However, over the past 10 years this has expanded to become the main event, growing from $10 billion in 1999 to $30 billion in 2015 in gross ticket sales. It is where artists make the majority of their income — typically 70-80 percent. Most of the growth has come from increasing ticket prices — 50 percent of concert tickets go unsold and attendance has not increased anything like as fast as prices.
These industries have been loosely coupled in the past. Going back to 1999, the record company would use radio as a way to get fans to discover a new act, then monetize that investment, primarily via selling “on-demand” access in the form of CDs and, finally, drive additional discovery by subsidizing touring (known as “tour support;” a label would underwrite some of the cost of touring to help build an audience to whom to sell CDs). Touring represented a small percentage of artist income.
The industries were also coupled at a corporate level at one point, with ClearChannel. Over the course of many years, a massive roll-up of local U.S. radio stations resulted in ClearChannel. That rolled-up business exists today as iHeartRadio, with 850 local stations and 245 million monthly unique listeners. In parallel, a roll-up of local concert promoters produced a new touring behemoth, SFX Entertainment, and the two businesses — radio and concert promotion — were merged in 2000 to form a new conglomerate. The goal was to combine the No. 1 channel for concert discovery (radio) with the No. 1 promoter of concerts (SFX).
Eventually, these businesses were separated into Clear Channel Communications (iHeartRadio) and Clear Channel Entertainment (LiveNation). Subsequent to that, LiveNation embarked on a huge project of vertical and horizontal integration and, at this point, is the world’s largest artist manager (Maverick/ArtistNation), the world’s largest primary ticketing company (TicketMaster), the world’s second-largest secondary ticketing company (TicketMaster+) and the world’s largest festival owner, venue owner and concert promoter.
Internet Music: Radio And On-Demand Converge
We have seen a massive transformation of the recorded music landscape — with the growth of iTunes/Apple Music, Deezer, Pandora, SoundCloud, Spotify and YouTube — to the point where more than 1 TRILLION tracks are now streamed online across these services each year. The line between radio and on-demand is rapidly blurring across each of these services:
1. SoundCloud and YouTube both autoselect another track to play when the one you searched on-demand finishes — that is, a radio experience.
2. Pandora, historically a pure radio service, has started to enable whole album streams on-demand.
3. Spotify has shifted from a pure on-demand model to offer a radio experience very similar to Pandora, where you can select an artist and listen to a radio mix based on that cue. Every Monday now, Spotify will provide you with a personalized radio stream of songs you might enjoy, based on your listening history.
4. Finally, Apple Music has taken this integrated approach the furthest, with a live on-air radio experience seamlessly integrated with a library based on demand experience.
At the same time, discovery of local concerts has started to transform — rather than generic emails about all the tickets on sale in Los Angeles, new services like Bandsintown and Songkick (which I co-founded) will send you personalized alerts whenever the artists you listen to on these music streaming services announce a local show. These concert discovery apps now reach more than 20 million fans each month, and are more personalized and convenient way to find out about concerts.
The Next Phase: Streaming And Ticketing Converge
Leading artists have started to articulate the extent to which streaming music and ticketing are becoming joined at the hip. For example, Ed Sheeran:
“I’m playing three Wembley Stadium (shows) on album two. I’m playing sold-out arena gigs in South America, Korea, south-east Asia and Australia. I don’t think I’d be able to do that without Spotify or if people hadn’t streamed my music. My music has been streamed 860 million times, which means that it’s getting out to people. I get a percentage of my record sales, but it’s not a large percentage, (whereas) I get all my ticket sales, so I’d much rather tour. That’s why I got into the business — I love playing gigs. Recording albums, to me, is a means to an end. I put out records so I can tour. For me, Spotify is not even a necessary evil. It helps me do what I want to do.”
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