MBW Views is a collection of unique op/eds from eminent music business folks… with one thing to say. The next comes from Kim Bayley, Chief Govt of the UK-based Leisure Retailers’ Affiliation.
When the chief of probably the most highly effective music firm on the earth speaks out, it is sensible to concentrate, and accounts of Sir Lucian Grainge’s current handle at Common Music’s Capital Markets Day presentation made attention-grabbing studying for streaming providers and retailers particularly.
Grainge’s feedback present a constructive perception into the evolving relationship between document firms and their “go-to-market” companions, however level to a minimum of one important potential space of stress.
The important thing and opening soundbite of Grainge’s handle to buyers was clear: “Streaming has resulted in a quantum leap ahead in music entry and monetization and streaming will proceed to propel a few years of business progress.”
As Sir Lucian acknowledged, the only most necessary driver of document business revenues is now the success of streaming providers in driving subscription revenue.
“nobody takes out a streaming subscription simply because a specific artist is releasing a brand new album.”
What was lengthy the core competency of document labels, breaking new artists, has an ever-lessening bearing on the business’s monetary fortunes. New releases are very important to creating engagement on streaming platforms and producing bodily gross sales, however financially, their significance is restricted.
Put it one other approach: nobody takes out a streaming subscription simply because a specific artist is releasing a brand new album.
In worth phrases – factoring within the impression of the inclusion of higher-priced bodily codecs – the highest 4 albums of 2023 mixed accounted for barely 1% of UK recorded music revenues.
Catalogue is extra necessary than ever earlier than, high-profile chart hits generate much less money than ever earlier than, and the core marker of success for recorded music is the amount and worth of streaming subscriptions.
That is important as a result of it marks an inexorable change within the stability of energy between document labels and the streaming firms, which now generate the majority of their revenues.
Streaming firms aren’t mere “shops” – they’re market makers.
Traditionally, document firms lengthy held the whiphand of their relationship with their retail companions, they usually weren’t above utilizing their energy.
The extra equal energy relationship between labels and their retail companions that streaming has created is, I consider, fostering a way more cooperative music enterprise through which both sides sees a mutual profit in serving to one another develop and flourish.
We’re equal companions with both sides having its personal core competency – document firms supplying music and streaming firms driving revenues.
A mutual recognition of those complementary strengths appears to be like like a strong foundation for a constructive relationship.
Sir Lucian is on the cash: we must always not restrict followers’ potential to specific their ardour for music to simply £11.99 a month. Many wish to spend extra – to get extra. The important thing query is how that demand is best-satisfied.”
Probably extra problematic is the opposite focus of Sir Lucian’s handle: the chance to raised service “superfans” of particular person artists with extra focused and higher-priced items and providers.
ERA can declare some observe document on this space. Again in 2018 we recognized in a weblog for MBW the necessity for the business to nurture (even treasure) its superfans.
We adopted this up in 2022 with a groundbreaking analysis research on fandom which gratifyingly pointed to lots of alternatives highlighted in Common’s investor day programme final week.
Sir Lucian is on the cash: we must always not restrict followers’ potential to specific their ardour for music to simply £11.99 a month. Many wish to spend extra – to get extra.
The important thing query is how that demand is best-satisfied.
The apparent reply is retailers. Simply as streaming providers did the heavy lifting of returning the recorded music business to monetary well being within the digital area, so it was Excessive Road retailers who first found the re-emerging demand for vinyl and helped set it on its path to grow to be the income generator it’s as we speak.
The simmering D2C dialog…
Historical past reveals that document firms want entrepreneurial intermediaries to successfully attain the buyer. These may be established retailers or the brand new breed of direct-to-fan intermediaries.
There’s an alternate view, nevertheless, and one alluded to by Common CFO Boyd Muir in the identical investor day presentation.
Muir revealed that Common’s personal D2C enterprise is now producing €548m from 1,300 particular person shops – round 5% of UMG’s whole income.
From a margin perspective, reducing out your retail prospects to promote direct clearly has important benefits, however it isn’t essentially a path to market progress.
“A mutual recognition of one another’s strengths shall be key to essentially profit from the superfan alternative, simply as it’s in streaming.”
Simply suppose again to 2012, the historic low-point for vinyl. At that stage document firms had been busy furiously deleting as a lot vinyl as they might. It took the hive thoughts of third-party retailers – on this case indie shops – to find a possibility in adversity.
And so I consider it should show with D2C and the pursuit of the superfan. Simply as Sir Lucian now acknowledges, it’s intermediaries – beforehand often known as retailers – who’re best-placed to drive income from shoppers.
A mutual recognition of one another’s strengths shall be key to essentially profit from the superfan alternative, simply as it’s in streaming.
In the case of Superfans, nobody is aware of how greatest to interact them than the knowledgeable retailer.Music Enterprise Worldwide
