Author | Wan Yi edited | Fan Zhihui
The current top artists can't play before.
While this trend has long been discussed and worried, recent data confirm it even stronger.
According to Luminate's latest annual report, audio clicks and plays in the United States increased by 12.1% to 1.1 trillion in 2022, and total traffic increased by 121.8 billion year-on-year in 2022. At the same time, the popularity of the top ten hits of the year in the United States is declining: in 2022, the top 10 hits in the United States were played a total of 4.723 billion times, down from 5.274 billion in 2021, 5.967 billion in 2020, and even lower than 4.917 billion in 2017.
This means that the top ten US hits in 2022 accounted for only 0.425% of the US streaming market, about half of the market share in 2019 (0.83%), and even one-third of 2017 (1.23%).
Coincidentally, Warner Music's conference call in the third quarter of 2022 also reflected this trend: ten years ago, Warner's top 5 artists generated more than 15% of the company's physical and digital revenue, and in 2022, this number shrank to 5%.
So, why is this the case? What impact will this have on the big record labels and the independent music market represented by the Big Three?
Why are top artists not "top" enough?
The first is the increase in the total amount of music and total playback, diluting the market share of superstars.
With the lowering of the threshold for music production and distribution, the number of independent musicians has begun to explode in recent years, and in October last year, Apple Music announced that the number of its own music library exceeded 100 million. We know that the revenue distribution mechanism of streaming media aggregates all the views and then distributes the revenue according to the proportion of the total traffic pool played by the song. These new private traffic will share even a small piece of the cake of the streaming market.
Sir Lucian Grainge, CEO of Universal Music, has said that as long as a lot of new songs are invested, it can dilute the proportion of streaming revenue of big-name singers. This is why Spotify's plan to allow independent musicians to upload music directly to the platform in 2018 directly annoyed the three major and even had to stop this market action.
But nowadays, even if independent musicians cannot directly publish songs to streaming platforms, they can also do so through a large number of third-party distribution platforms, and this trend is basically irreversible.
Second, mid-waist musicians and musicians outside the U.S. have seen a significant increase in listening, and these new trends have taken away the share of superstars' playback.
This trend can be seen in Latin music singers such as Puerto Rican rapper Bad Bunny and Spanish singer Rosalía. According to Luminate, streaming growth in Latin music grew by 33% in 2022. In May 2022, a week after the release of Bad Bunny's Un Verano Sin Ti, Latin music surpassed country music for the first time to become the fourth largest music genre in the United States.
Global streaming platforms like Spotify, as channels that reach the world, have brought American music to the world, created the influence of American music, and opened the door to global markets for local musicians.
Jesús Triviño, Tidal's senior director of global Latin America, said the internet and streaming services have broken down a series of barriers and changed the rules of the game, allowing big-name artists and small, popular musicians to collaborate frequently. Rosalía, for example, got the opportunity to work with superstars such as Travis Scott, Bad Bunny, The Weeknd, Billie Eilish and others after gaining recognition in Spain through several albums.
Another important reason is that catalog music (songs released 18 months ago) are being heard more and more, which is a trend that has become more obvious after the epidemic. According to Luminate data, the market share of old songs increased from 66.4% in 2020 to 74.% in 2021, and the latest data shows that of the total album sales of 974.9 million albums in the United States in 2022, the market share of old songs is also as high as 72.2%.
In addition, according to Spotify data in 2022, old songs accounted for nearly one-third of Spotify's hot charts, a year-on-year increase of 155%. MBW analysis, an important reason for this phenomenon is the increase in elderly users of streaming media platforms after the epidemic.
From the explosive growth of the song library pool to the rise of mid-tail artists, local artists in various places, and even the preference for consumption of old songs, it is becoming more and more difficult to keep the share of top artists, and they also fall into the "traffic anxiety" of the streaming media era.
Good music is stuck in algorithms
Recently, Sir Lucian Grainge, CEO of Universal Music, wrote an open letter to employees to point to the chaos in the algorithmic system.
He writes that in the past, the conflict in the music industry tended to be centered between the big labels and independent labels, but now some people invest in music and musician development, and some people use quantity rather than quality to drill for loopholes in the system. "The current environment attracts a lot of players who see a business opportunity here, flooding the platform with all kinds of irrelevant content, depriving musicians and labels of their due remuneration."
According to the rules of streaming platforms, as long as there is a number of views, you will be able to share the money from it. This has led to speculators called "music streaming farms," which earn income by uploading their own music and automatically looping it through a large number of devices. According to Rolling Stone, musicians can lose $300 million a year due to such false broadcasts, accounting for 3%-4% of total traffic.
But is this really the problem?
In fact, boasting about big data and influence through fakes is not new in the music industry, and there have been fake applause and fake smirk nurseries from busking. In the era of streaming media, fake playback is used by record companies to increase the traffic of their artists and maintain popularity, while unknown musicians rely on this to attract the attention of major record companies.
There are many ways to fake, and some are more "upright and bright".
For example, in 2019, Indian rapper Badshah's video "Paagal" was viewed more than 75 million times within 24 hours of being posted on YouTube, surpassing the single-day playback record set by Korean group BTS in April in the same year, and BLACKPINK's hit "How You Like That" is also hard to match. According to Bloomberg, Badshah, one of Forbes' 100 richest Indian celebrities, is not short of money, and the way he can achieve this feat is by buying YouTube ads.
According to people familiar with the matter, record companies will buy patch ads for singles on YouTube when releasing singles, and if viewers spend more than 30 seconds watching the ad or watch the ad video, or if the user clicks on the ad, YouTube will count this as a view, which can increase the total number of views. That is, even if Blackpink and Taylor Swift would do this, Badshah just did it exaggeratedly, turning it into some kind of performance art.
In a 2021 report published in Rolling Stone, a more underground approach was introduced. The industry's professional team dedicated to artist rankings helps record companies increase the number of broadcasts and even sales of artists in an opaque way, and they can also control the IP addresses of purchase users to ensure that sales hit the most important American album lists. According to Mack, founder of 3BMD, a marketing company in the article, $12,000 can buy 1 million YouTube views, and Spotify and Apple Music are also priced at the same price. The company also said that there are now hundreds of songs that have been on the Billboard Top 100 Songs list through 3BMD.
Recently, according to the French National Music Center (CNM), after referring to a large number of data provided by Spotify, Deezer, Qobuz, and including Warner Music, Sony Music, Believe, and Universal Music, at least 1%-3% of the playback in France is fake.
If according to the French music agency SNEP, the streaming revenue of the French music market in 2021 is 492 million euros, calculated at a ratio of 1%-3%, then the revenue generated by fake playback is 4.92 million euros to 14.76 million euros. You know, the French minimum wage SMIC is around 1500 euros, so these fake broadcasts are enough to make 273 to 829 musicians in France live a good life this year.
But the scale of counterfeiting may be much larger than that. CNM noted that this 1%-3% was detected and punished by the platform, that fake broadcasts that escaped punishment were not counted, and that Amazon Music, YouTube and Apple Music also refused to participate and improve the research data.
On the other hand, streaming media platforms are also actively involved in counterfeiting.
In addition to the form of YouTube ads on the surface, Spotify has been denying the news of "fake artists." In order to reduce royalty costs, music streaming platforms can cooperate with third parties to buy large amounts of music at relatively low prices, dilute the proportion of ordinary copyright music played, and then reduce the income to be paid to the latter. These low-priced music is flooded with a variety of study and sleep playlists, and through the operation of the platform, the number of single plays can exceed some online singers.
Of course, that's not to say that only Spotify will do this. Tidal, a music streaming platform acquired by Jay Z and in which multiple celebrities participated, has also been caught in a fraud scandal, suspected of falsifying the playback data of Tidal investors such as Beyoncé, Ye, Rihanna and others.
David Turner, strategy manager at SoundCloud, believes that "the vague data of streaming platforms and the lack of auditing convince almost all parties involved that they don't move a few numbers in a spreadsheet every week... Mainstream streaming platforms and record labels have taken a clear stance against illegal data falsification, however, the reported facts show... Those dubious plays are probably happening right under the noses of musicians or record companies. ”
David Turner further pointed out that major record labels and streaming platforms should take more responsibility for vulnerabilities in their systems, "The big data fraud initiators are usually the world's largest record companies." So, if that's a problem, then the mainstream streaming platforms should devote more resources to solving them. However, the industry has pointed the finger at small-scale gray-area operators. ”
These big record labels and streaming platforms are actually the protagonists that harm most musicians.
David Turner referred to virtual record company Factory New, whose founder Anthony Martini said in an interview that his AI virtual artist FN Meka is a naked branding campaign, bluntly calling traditional A&R "inefficient and unreliable" and saying that live artists are outdated. However, labels such as Capitol Records signed with its artist FN Meka, intending to release songs, but later terminated the contract because of the racial controversy.
In the book Hearing the Cloud, author Emile Frankel cites Spotify hiring for machine learning roles, suspecting that Spotify is looking to further rely on AI to produce music to fill playlists. Sony Music Japan has even said that its goal is to build "the largest virtual artist development and brokerage program in history." "If you're an idea, or want to work with a 'real' musician," says David Turner, "then it's a very clear signpost that the road behind this means abandoning art, and you should avoid it." ”
Therefore, for the three such large record companies, data fraud and music garbage on streaming platforms may not be the problem, but the shrinking share of the three major artists in the streaming media traffic pool. At the same time, with the emergence of social media and independent music distribution platforms, more and more independent musicians can build their influence and be heard by the public on their own terms.
In the face of the crisis, what to do with the three major records?
In the face of such a crisis, of course, the three major will not sit still. According to the music herald combing, their coping strategies are roughly divided into the following three types.
The first is to turn enemies into friends and step up the acquisition of independent labels.
For example, Sony Music has acquired a large number of independent music companies such as AWAL, Som Livre, Human Re-Sources in the past two years, acquired a majority stake in New York label Alamo Records, and acquired a minority stake in Latin label WK Records, etc., to strengthen its independent musician business.
In China, Sony Music launched Indie Pie, an original music and independent musician incubation platform, inviting Xie Tianxiao as the brand leader, and signing musicians including Wang Zixuan and Peng Yongchen. Universal Music also acquired a 49% stake in AWAL-like independent music company Ingrooves and independent music company [PIAS]. Warner Music acquires 300 Entertainment for $400 million, as well as 12Tone's music assets.
The second is to adjust the A&R strategy. Warner Music, for example, has proposed to reduce its reliance on superstars and spend more of its budget on shoulder musicians and local musicians everywhere. In recent years, Warner Music has acquired Russian label Zhara Music, a stake in Serbian label Mascom Records, Rotana Music, the record label of Al Waleed Bin Talal, and African music publisher Africori.
The third is to explore a new royalty distribution model. For example, Warner Music announced in 2022 that it signed a license with SoundCloud to adopt SoundCloud's new payment distribution model - Fan-Powered Royalties, which is the only record company among the three major record companies to accept this new model.
Universal Music, as the record company that relies on superstars the most, is advantageous to the old distribution model of streaming media that pays according to the proportion of playback, and naturally cannot accept the new model proposed by SoundCloud. But seeing that the share of superstars in the old model is also declining, Universal Music CEO Sir Lucian Grainge has finally begun to propose to establish a "model that does not antagonize musicians of different music genres, nor does mainstream recording musicians conflict with independent musicians, but an innovative model that supports all musicians and is 'musician-centric'" and "a model that is powerful for musicians, fans and record labels". On January 31, Universal Music also announced an alliance with Tidal to explore an innovative music streaming economy.
Of course, the reduction of the share of playback by top artists does not necessarily mean that their appeal is necessarily less than in the past, and mainstream record companies can still monetize music value by expanding music licensing scenes and increasing fan interaction. But as the top streamers' share of streaming shrinks, we see that the old payment distribution model that allows streaming platforms to "carry the load" due to excessive royalty costs is finally no longer in the interests of record companies.
With the active promotion of these two parties, perhaps in the next few years, we will witness a more profound innovation and change in the streaming payment distribution model, so as to achieve a new balance of interests.
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