How streaming will continue to change everything in the music business

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The following MBW blog comes from Denis Simms (pictured inset), who focuses on trends and analysis across digital music and music tech. He has an artist management, market analysis and label background, and is behind weekly industry newsletter Side A&B. Denis is currently consulting and completing a masters degree in music business at Tileyard in London. You can follow him on Twitter.


In the backdrop of Spotify becoming a publicly traded company, streaming is working for a majority of stakeholders in today’s music industry.

After over a decade of being ravaged by piracy, the industry as a whole has finally returned to growth, as shown by upward trends across local trade body data globally.

Like any entity experiencing growth however, questions about the extent and durability of this prosperity loom overheard, as does the everlasting question of, ‘Well, we had vinyl, then cassettes, then CDs, then digital downloads, now streaming, what’s next?’


The ‘what’s next’ conversation often segues into discussions about the topics de jour such as AI, AR/VR, chatbots, smart speakers and the connected home.

All of these technologies are likely to have an impact, to varying degrees. However, the notion that any one of these technologies will fundamentally revolutionise the business is fanciful and simplified – particularly considering the extent of past format and technological shifts.

The next revolution in the music business will not be a new consumer-facing format or a visionary product. The next revolution is financial and multifaceted with wide implications, and it’s already started.

As a once-vertical industry disintegrates and democratises, the lower costs and increased options for producing and bringing music to market – coupled with the revitalisation of music rights and the new economic models and opportunities presented by streaming – is fundamentally revolutionising the economics and operations of the industry at its core.

“The next music industry revolution is financial and multifaceted with wide implications, and it’s already started.”

It is crucial to acknowledge that despite the current hype about music streaming, we are at the very beginning of the streaming music industry. The impacts of this new ecosystem are already materialising and disrupting several facets of the industry; from how music is funded and monetised, to the changing dynamics of copyright ownership, the relationships between artists and traditional intermediaries to market, and the monetisation of emerging global markets.

The music industry’s next revolution will not be publicised – it won’t be as sexy as the iPod or as cool as a Swedish startup with every song ever recorded – but it’s already happening.


As a pitch by a young Swedish businessman inside a major label boardroom may have posited a decade ago, the primary economic outcome of a shift from a sales model to an access model is that, simply put, you don’t get paid once anymore – you get paid forever.

The days of putting enormous pressure on first week sales to see a return on investment are fading. Instead, the game is now fixated on capturing and sustaining engagement with your audience.

Done successfully, streaming revenues will continue to flow, month after month. This has led to a renaissance for once-dormant music rights, suddenly infused with the value provided by the virtues of being a gradual and predictable (down to exact payment dates!) revenue stream.

That consistency is rare in investment and not to be smirked at, as is the fact that unlike traditionally safe investments like real estate, today’s music consumption and revenues are largely not tethered to stock market conditions.

“With music rights becoming a more secure and profitable bet, both traditional and new investors have become less risk averse and more confident.”

We have already seen inflated valuations in several M&A deals in the industry over the past year – from Concord’s staggering $550m+ Imagem deal to Round Hill’s $245m Carlin deal to Kobalt’s purchase of the pop-leaning SONGS Music Publishing catalog for $160m. Sought after rights and established brands are not selling for cheap anymore.

With music rights becoming a more secure and profitable bet, both traditional and new investors have become less risk averse and more confident.

In 2017, specialist finance startup Sound Royalties pledged to invest $100m in artists and songwriters over the next two years without taking any rights ownership. Another company, Lyric Financial, announced integrated partnerships providing funding to artists with major publisher SonyATV and independent distribution company Tunecore.

Both companies’ models essentially work by forecasting future royalty earnings and advancing artists cash against those estimated earnings, which is gradually repaid through a portion of royalty income.

Unlike traditional label advances, artists do not need to fully recoup those advances before earning their portion of royalties under this model – and all rights are retained fully by artists.


Another company making waves is Royalty Exchange, who provide an online auction platform that connects artists with investors looking to buy a portion of royalties – no copyrights are exchanged.

The company’s platform earned $3.8m for artists in the first six months of 2017 and is truly bilateral – it transparently facilitates a place where both artists can raise money and anyone – not just traditional investors in music rights – can invest in return for a share of future royalties. Potential bidders can view artists’ historical royalty earnings and, taken together with listing details such as the investment term and percentage of future royalties being offered, assess the viability of an investment.

For example, a $50k investment in return for 50% of royalties for a song or small catalogue that has consistently earned 20k per year for the past 5 years can, due to the increasing predictability of streaming revenues, be relatively safely assumed will take around 5-6 years to recoup.

“These new funding models provide viable and favourable financing alternatives for artists, often when they need them the most.”

If the artist in question is able to fund a successful new album or tour with the investment, a return could be seen sooner as streaming revenues for the artist’s back catalogue will almost certainly rise.

These new funding models provide viable and favourable financing alternatives for artists, often when they need them the most. That stands in contrast to the traditional industry, where the most financially vulnerable artists with the least leverage usually end up signing away their rights in restrictive deals in return for short-term cash.

As the new economics of streaming mean that royalties becoming increasingly viewed as a bankable asset rather than a thing of the past – thanks Daniel Ek! – we will see the balance of power continue to shift away from being firmly in labels’ hands, and even more artist-friendly funding options will surely emerge in the market.


Rumours of the machine’s death are exaggerated, but it is adapting to the economics and realities of the new streaming ecosystem.

As a result of music becoming easier and cheaper to produce, distribute and market, the traditional industry has become more flexible with the structuring of partnerships with artists. This has led to the emergence and proliferation over the past decade of the ‘label services’ model, which makes up an estimated third of the recorded music market and is often the preferred route for mid-level artists today.

I prefer to call it the ‘customisable services’ model because artists can increasingly and crucially tailor the ‘services’ they employ labels to undertake according to their individual needs.

Proof that the major labels aren’t as far behind as is often lackadaisically claimed is that all three have embraced the services model and have subsidiary brands with significant resources and market share; a recent report by independent label representative organisation WIN found that 20.2% of independent label revenue in 2016 was distributed through major label pockets.

“Kobalt’s AWAL is pretty much the reverse major label model.”

One of the main innovators driving the customisable services movement is Kobalt.

Heavily venture-backed (including by Google Ventures) and framed as a tech-first music company, Kobalt have invested hugely in infrastructure that enables simplified and expanded tracking and collection of royalties globally.

Earlier this year, the company pledged a further $150m of investment in its AWAL (“Artists Without A Label”) division, a label services and distribution company branded as an artist haven with the accompanying strapline of “being an independent artist doesn’t mean you have to do it alone”.

While the service is selective, accepting only 10% of artists that apply, it’s pretty much the reverse major label model otherwise – the company allows artists to retain their rights in return for just a 15% initial cut, and offers artists a range of services such as marketing support, sync and playlist pitching.


It’s important to remember why retaining rights is so desirable and beneficial for artists in 2017.

Put bluntly, receiving the full master right value of royalties is far more profitable than receiving a fraction, as under the old school model of signing your rights away and taking the standard royalty splits that come with traditional label deals – typically up to 20% for major label artists and up to 50% for independent label artists.

Considering that Spotify pay roughly $5,000 for a million streams, for an artist that owns their rights and manages to engage an audience on streaming platforms, with an effective D2C strategy, a million streams a month is becoming an increasingly accessible benchmark as streaming subscription and adoption rises year over year.

Consider the comfortable living and capacity to experiment that $5,000 or even $4,000 a month could provide for creators, perhaps to developing artists that aren’t household names or radio acts but are a couple of years into their careers, with small but devoted regional fanbases.

Cultivating this new ecosystem of artist sustainability is the objective of Kobalt and the ever-growing list of artist-friendly companies in the field.

The exciting reality is that there are genuinely commercially viable routes to market today outside of the traditional system. The customisable services model is a work in progress but is already working for many creators today.

As streaming scales further, the new-found financial security and freedom it will facilitate looks set to be the birth of a new ‘middle class’ of artists; empowered to build their careers on their own terms and make a living without being forced to chase the perils of radio hits and fame and developing at a sustainable pace.

And speaking of the traditional system, it’s doing great – enjoying an ever-increasing windfall from streaming’s re-monetisation of the vast catalogues owned by the bigger labels.

Let’s not fail to acknowledge that 62.6% of US streaming revenues in 2017 were derived from catalogue.

Moving forward however, there seems to be an unspoken acknowledgement that the future is a bigger pot more evenly divided, as deal terms become more equitable for artists and license deals or ‘partnerships’ increasingly common. The full effects of these paradigm shifts and what the record label of the future will resemble remain to be seen – but the customisable services cat is well and truly out of the bag.


The new dawn that is set to reshape finances of the recorded music landscape is the international long tail of streaming. Streaming has the incredible potential for widespread adoption in emerging markets such as China, India, and Latin America where music consumption has for generations been defined by piracy and where the CD and digital download markets never took off.

There is plenty of growth left for today’s established western streaming markets, but in the next decade they will gradually move towards peak market penetration – expect the Nordic countries to lead the way here as streaming revenues in Sweden and grew only 5% in 2017, compared to 51.5% in the UK and 48% in the US).

“As streaming platforms proliferate globally alongside a thriving industry where the shrewd players build the right infrastructure and strategically invest time and money into emerging markets, new revenue streams will be created.”

The international markets of tomorrow, with huge and often young populations such as that of India which has 1.3bn people and half are under 25 years old, present the biggest growth opportunity of the future. It is likely that decades from now, a majority of revenue from music rights will be from micropayments; as the world becomes ever more connected and technologies for matching and collecting royalties become more sophisticated, this will open up millions of new revenue streams for rights holders.

As streaming platforms proliferate globally alongside a thriving industry where the shrewd players build the right infrastructure and strategically invest time and money into emerging markets, new revenue streams will be created.

As labels, distributors and collecting societies develop their metadata and tracking mechanisms, new revenue streams will be created. Consequently, the worldwide growth that is set to accelerate in coming years will result in an amplification effect of micropayments.


From any perspective throughout the business, any excitement about new global revenues from emerging markets must be tempered by noting the initial low ARPU, particularly as unsustainable ad-supported free models are standard practice for streaming services today in these markets.

User conversation to paid subscriptions will be gradual, but the reality is that the inherently convenient user experience of streaming content is attracting users to streaming platforms globally. And it stands to reason that where users go, investors and brands will follow. Its global resonance is highlighted by even notoriously frustrating and piracy-ravaged European markets like Spain and even Russia seeing rare growth in recent years due to streaming revenues – an indication that what streaming platforms are offering today is superior to piracy, which for years, it clearly wasn’t.

“It is crucial to acknowledge that many of these new global revenue streams set to be unlocked simply didn’t exist or weren’t being monetised properly in the industry of yesteryear.”

The next critical challenge for the industry is ensuring the licensing and curation of local repertoire in emerging markets, as the consumption of local catalogue often indexes in the 90% percentile in non-English speaking markets not dominated by the western major labels. As these ad-supported international streaming services grow, the long-term hope is conversion to be paid user models, though this too will require careful manoeuvring; differentiation of entry and price points and sustainable bundling partnerships with telcos will be critical to on-boarding users and increasing ARPUs.

It is crucial to acknowledge that many of these new global revenue streams set to be unlocked simply didn’t exist or weren’t being monetised properly in the industry of yesteryear.

I recall travelling in the Baltics and hearing a song playing in a dodgy cafe from a British indie band who I certainly do not consider to be an international act and am almost certain had no label or publisher presence anywhere near this market.

What are the odds that act received even a fraction of a cent of royalties from that play? As metadata, matching and tracking systems improve, these revenue streams, however small they may be, will increasingly be plugged into the machine – and they will make a difference.


The long-predicted decline of traditional radio in the digital age has so far not materialised. As industry analyst Mark Mulligan put it, “Streaming music has got where it has today largely by being the future of retail and replacing the download model, which in turn replaced the CD”.

While streaming has made headlines and fostered excitement, radio still remains the main form of casual music consumption for background listening and the passive masses, particularly older audiences. Turning on the radio in the car remains a multi-generational global habit and usually still the easiest option – a single press of a button.

As Mulligan points out, radio and streaming platforms are co-existing today, due to older audiences being slow to embrace change – a “disruption buffer” of sorts. As a result, it is likely that streaming and radio will co-exist for at least two generations, but streaming’s gradual capture of these gigantic mainstream audiences globally has began, particularly with younger generations that are growing up as streaming natives. There were 112m streaming subscribers globally at the end of 2016, whereas radio reaches an estimated 5bn radio listeners globally.

“There were 112m streaming subscribers globally at the end of 2016, whereas radio reaches an estimated 5bn radio listeners globally.”

That is the potential addressable streaming audience of the future. Crucially from an economic perspective, streaming pays better than radio on a revenue per user basis.

In the mid ’00s, music piracy proponents used to argue that an illegal download doesn’t equal a lost sale as the downloader wouldn’t have necessarily discovered or spent money on legally acquiring the song or album.

By the same strand of logic, it’s a fairly safe assumption that a vast majority of lean-back or background listening wouldn’t lead to any sales revenues – but now it’s being monetised by streaming on an increasing scale. If streaming platforms can figure out how to appeal to radio consumers and fulfill their need for passive-but-personalised lean-back listening – akin to the universal relatability of radio formats – this represents a huge market opportunity.

Speaking of background listening and micropayments, this is also the most exciting facet from an industry perspective of the accelerating smart speaker market, led by the billion dollar industries of Amazon’s Alexa, Google Home and Apple. This is mass-scale, easily accessible, habitual listening in the confines of users’ homes – the role radio has always traditionally filled.


Given how long it took for the music industry to adapt to interfaces with screens, expectations should probably be tempered for its adaptation to screenless interfaces. There is optimism however, given the huge investments in the space by major tech players. Let’s hope the industry capitalises on the opportunity; Deviate Digital CEO Sammy Andrews excellently illustrated some of the challenges and opportunities ahead last month.

The future is a land of opportunity for the music business.

Looking inwards, the industry’s funding, control and distribution dynamics are shifting, with more options for artists than at any point prior. Looking outwards, perhaps we have finally reached an inflection point where industry has started to figure out how to monetise the scale of the internet and the interconnected world of the future.

As the international long tail of streaming stretches across the globe and micropayments substantiate further, we will see the industry monetising consumption, particularly from casual listeners, on a scale like never before.Music Business Worldwide