MBW Views is a sequence of unique op/eds from eminent music trade folks… with one thing to say. The next comes from Roneil Rumburg (pictured inset), Co-Founder and CEO of Audius, a San Francisco-based blockchain-powered music platform. Rumburg means that the music streaming enterprise mannequin right this moment is “akin to the all-you-can-eat buffet, the place one value is paid and consumption thereafter is limitless” and suggests an alternate mannequin for the long run.
For the final decade or so, the recorded music trade has loved a interval of relative stability and development, which is according to prior music format cycles.
Most individuals would agree that the streaming format saved the recorded music trade.
As with each technological revolution in music, nonetheless, streaming has been however a brief savior. There are clouds on the horizon. Progress in total streaming income is slowing down. Worse nonetheless, income per stream is declining, and now sure artists are deemed “unworthy” of receiving their fair proportion of the pie. That is pushed by many elements, however the next are the largest drivers:
- Will increase in consumption by every fan will not be accompanied by an increase in subscription charges. Which means development in income has to return from new subscribers reasonably than elevated engagement from current subscribers.
- Developed markets are reaching the purpose of saturation, mirrored by their slowing development charges.
- Growing markets driving development right this moment have a decrease Common Income Per Consumer – that means many extra marginal customers have to be added to drive the identical stage of development in top-line income.
- Every current person, on common, is streaming extra annually.
- Progress within the quantity of content material revealed per 12 months considerably outstrips development in total income.
Placing the puzzle collectively, we total have a plateauing quantity of complete income paired with excessive development in complete content material out there and per-user consumption, which predictably has led to a decline in per-stream income on the entire.
An more and more mounted enter of fan funds is split throughout an ever-increasing quantity of streams and content material.
This story is mirrored pretty clearly within the information too:
As creating markets additionally attain factors of saturation just like mature markets, streaming income will solely proceed to plateau additional.
The one remaining technique for driving income development with the constraints of the streaming enterprise mannequin will likely be jacking up client costs, growing per-user income throughout the board, however risking churning subscribers and negating the positive aspects made per person by dropping total customers.
These strikes are usually unpopular with shoppers for apparent causes.
So with streaming flattening, and declining on the particular content material stage, the place does development come from subsequent?
Many various solutions have been proposed to tweak the enterprise mannequin to extra effectively direct income, eg. “fan-centric payouts” or “artist-centric payouts” or “rightsholder-centric payouts”, however none of those options truly develop the general pie of streaming income, they solely quibble over how finest to separate it up between current stakeholders. For each winner in these new fashions, there may be undoubtedly a loser whose loss is the winner’s achieve.
Zero-sum video games usually have negative-sum outcomes, as increasingly money and time are spent combating over the identical restricted pool of sources, on this case total subscriber income.
The important thing query to ask ourselves right here, nonetheless, is “Why is all consumption handled equally?” Couldn’t one apply extra granular pricing guidelines to interactions with content material as a substitute of treating all of it the identical? We might argue sure, and that the brand new enterprise fashions and codecs created by unstructured and granular unstructured and granular pricing will drive the subsequent cycle of development in recorded music.
To attract a crude analogy, the streaming enterprise mannequin of right this moment is akin to the all-you-can-eat buffet, the place one value is paid and consumption thereafter is limitless.
Think about if all eating places had been all-you-can-eat. Fortuitously we don’t need to – right this moment’s eating panorama is as various as ever. Buffets, although rising rapidly, symbolize $5.5 billion/12 months within the US market, whereas total restaurant revenues within the US simply amongst franchises are $365 billion, with the quantity for total restaurant consumption being possible a lot bigger however tougher to measure. How way more cash may music be incomes with variable and granular pricing?
This isn’t apples to apples (please forgive the pun). Meals has a marginal price of manufacturing, whereas digital content material doesn’t. But it surely doesn’t take a major leap of religion to grasp that premium music experiences will very possible result in extra income generated towards that music content material than pushing it by means of the all-you-can-stream buffet.
“it doesn’t take a major leap of religion to grasp that premium music experiences will very possible result in extra income generated towards that music content material than pushing it by means of the all-you-can-stream buffet.”
Roneil Rumburg, Audius
So what does this appear like in observe? The digital music providers of tomorrow will work extra like a free marketplace for content material interactions, the place artists and rightsholders can configure any parameters they’d like governing what fee or different requirement must be glad to have interaction with the content material within the second.
This could possibly be one-time funds, subscriptions, and even issues like challenges the place a person must be amongst high listeners or anything one may think about.
General, for the primary time, this granular pricing will imply a free marketplace for content material exists, the place costs are elastic to demand reasonably than mounted by intermediaries working with rigid streaming enterprise fashions.
We’re not alone in pursuing this future – each Sir Lucian Grainge, Chairman and CEO of Common Music Group and Robert Kyncl, CEO of Warner Music Group, have argued for a renewed deal with the superfan, Spotify lately hinted at a forthcoming superfan function, and many different folks have lined dimensions of this drawback and argued for various types of enterprise mannequin that introduce pricing granularity.
Tying these arguments collectively, the underlying worth unlocked all the time comes again to granular pricing tied to a brand new type of direct distribution (permitting for the brand new pricing mannequin).
We at Audius, and lots of others within the music tech neighborhood, are constructing in direction of this future right this moment. And that future is shiny! For example, Audius’ lately launched content material market performance was utilized by the producer Kato to generate over $20k in income by means of obtain gross sales in his first month.
Armed with these high-value fan relationships aggregated in a single place, Kato can now deepen his engagement with this core viewers and create additional income alternatives.
For example, Audius’ lately launched content material market performance was utilized by the producer Kato to generate practically $25,000 in income by means of obtain gross sales in his first month. Armed with these high-value fan relationships aggregated in a single place, Kato can now deepen his engagement with this core viewers and create additional income alternatives.
This new free market mannequin, for the primary time, places management into the palms of artists and rights holders. It rewards them for fostering deeper, distinctive relationships with their followers. And it offers them the sort of direct relationships with their most passionate followers which were not possible up till now.
This new revolution will essentially change our trade for the higher.Music Enterprise Worldwide
