August 1, 2025 • 31 mins
Luminate Intelligence analyst Rob Steiner shares insights from Luminate's newly released special report on the state of the music business as growth slows for Spotify and other leading DSPs in developed markets, the concert scene cools off a bit and AI begins to make its impact.
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Speaker 1 (00:07):
Welcome to Strictly Business, the podcast in which we speak
with some of the brightest minds working in the media
business today. I'm Andrew Wallenstein, chief Media Analysts that Illuminate Intelligence,
the subscription market research service formerly known as Variety Intelligence Platform.
We just announced our rebrand in tandem with the release
of our latest special report all about the state of
(00:29):
the music industry, and I am fortunate to have the
reports author Rob Steiner to give us a download on streaming, publishing,
the concert business, and of course AI. So Rob, thanks
for joining us.
Speaker 2 (00:44):
Hi, thank you for having me.
Speaker 1 (00:46):
All right. So, you know, I think there was a
sense for a long time that the explosion of audio
streaming had the music industry in a growth mode for
a while now, but it seems like a more complicated
picture is emerging crossed the various revenue streams you are
tracking this report, so tell us about that.
Speaker 2 (01:05):
Yeah, So overall, it is certainly interesting because the music industry,
at least when we're talking about the top level, like
the major labels, the big companies, the major artists, it's
in a really good spot, a record breaking spot. In fact,
it basically ever since the pandemic, that sort of supercharged
(01:28):
the growth that was happening with the rise of streaming,
you know, that started taking off around the mid twenty tens,
and then the pandemic hit and that just launched that
revenue stream into the stratosphere. Same thing with live music.
All of a sudden, this post pandemic concert demand just
sent a spike in ticket sales and revenues, and that
was all great, But now twenty twenty four is basically
(01:53):
across the board signaling a slowdown. We are seeing single
digit percentage growth between twenty twenty three and twenty twenty
four for revenue growth and streaming in particular, and that's
in due part in part due to the fact that
it is sort of reaching critical mass and paid usership
in develop markets like the US. Live music is also
(02:16):
seeing a slow down in attendance, and there are it
is increasingly relying more on increased ticket prices more than
anything else to keep revenue growing. And then by extension too,
as streaming slows down, slisoda is publishing. And then that's
also not to mention the threat that AI poses to
publishing in particular. So with all of this said, basically
(02:39):
I saw the industry at an inflection point where if
they continue on their current path, it won't be bad necessarily,
but it probably means that it will be of, you know,
the next few years of flatlining in terms of growth,
which obviously a lot of these companies don't want they
want to continue growing.
Speaker 1 (02:58):
So there's a lot there. Let's go kind of one
piece at a time, starting with streaming, which seems to
be sort of at the center of all of this.
It sounds like from what you're saying that this is
a case of market saturation mature development markets. Perhaps they've
(03:19):
taken up all the Spotify and Apple Music and YouTube
that they're going to get. So what do we do now?
Is it just a matter of all, right, well, there's
plenty of emerging market runway to go, or do we
need to get more creative in these mature markets.
Speaker 2 (03:34):
Yeah, it's a little bit of both, where on one hand,
the market or the industry powers that be are now
looking towards emerging markets for streaming, especially in Latin America
and Asia and the Middle East in particular, those are
now pretty much responsible for like the major sources of
(03:55):
growth in the streaming industry because you know, the likes
of Spotify, Apple Music. They're still breaking into a lot
of these markets. So we are going to see the streamers,
the labels, et cetera, pushing hard into that. The Big
three of all established a presence throughout Latin America, Middle
East and so on, and then back home here there
(04:17):
is sort of a debate going on where basically the
Big three are really advocating for price increases for the DSPs.
They believe that ten ninety nine a month is simply
to loaf a price for all the music in the world,
and to a degree they are right. When Spotify was created,
(04:39):
it did in a sense solve the industry's biggest issue
around digital piracy, whereas, how do we get people to
pay for access to all the music in the world online.
Spotify found a really you know, streamlined solution where they
kind of simplified the experience of act accessing this music
(05:01):
online and put it behind a pay wall. People are
willing to pay for it, and they still are, but
now it seems like as usership is sort of reaching
critical mass, there's now a sense that like basically the
Big Three sort of leading this charge, this idea that
music had lost a lot of value in the Internet age.
(05:23):
You know, post Napster, post the Internet, and frankly, as
the report gets into the argument can be made that
music never really recovered the value it lost, you know,
the golden age of the nineties and the CD boom,
that when you adjust for inflation, at least in the US,
revenue hasn't reached those levels. The peak was nineteen ninety
(05:47):
nine when Napster was founded.
Speaker 1 (05:50):
And so I wonder, and I think about I make
the comparison to the video business, where you know, clearly
we see the netflixes of the world have built themselves
is a tremendous business. The other players in the market,
they'll they'll be okay, they're actually starting to turn profit
after a rough period. But I think there's also an
acknowledgment that the peak era pre streaming of cable television
(06:15):
just much better margins and much better business. And so
is the music business diluting themselves, that they could sort
of put the monetization toothpaste back in the tube here.
Speaker 2 (06:27):
It's hard to say. I mean, it does seem like
that the at least the Big three. Their argument is
that people will be willing to pay for you know,
higher streaming subscription prices. On one hand, because we you know,
the s VODs of the world and netflixes of the world,
(06:50):
they've increased their prices several times over in just the
past few years, and Spotify and the DSPs have but
only like only recently, only within the past two years.
Speaker 1 (07:00):
They've shown they've shown much more patients. And so I
just wonder whether it's going to be a mistake that
they're making to push up the prices with the same
sort of aggressiveness as the netflixes of the world, unless
they're putting more value into these DSPs, which you know,
I think of my own Spotisfy subscription and it's not
(07:21):
just about music for me, it's podcast it's audio books. Yeah,
and so maybe they're not crazy to push these prices.
Speaker 2 (07:28):
Yeah. No, especially with Spotify in particular, they have really
in just the past couple of years have started pushing
essentially transferring to platform to being a lot more than
a music streamer. They wanted to be a multimedia location.
You know, they have audio books, which has created you know,
a whole whole litany of issues in terms of music
(07:50):
royalty payments that we could get into. They have pushed
hard into video podcasting, but then on the music side
they are also pushed for. Basically, like the hot button
concept that has really dominated the industry is leading into
super fans for a lot of the for a lot
(08:10):
of the Big three, and a lot of these major companies.
Speaker 1 (08:12):
Explain fans, Yeah, yeah.
Speaker 2 (08:14):
It's basically it is the best way to describe it,
or at least the official way that Illuminate describes it
based on a survey data. Are people that engage in
I believe at least five or more music related activities,
so going to a concert, buying merch list in music,
buying music, et cetera on a pretty regular basis. And
(08:36):
this group is small, I believe it's about twenty percent
of the US music listeners according to Illuminate, but their
buying power is substantial. There is again with our data,
we have found evidence of that. We've also seen it
in practice give great results for particularly companies based in Asia.
(08:59):
Hype Corporation is probably the biggest success story. They essentially
launched a super fan app Weavers basically think like a
social media platform but for like paid private fan clubs
for like BTS and a lot of the K pop artists.
But now it's expanded to like Ariana Grande and du Alipa.
(09:21):
They have been able to generate a substantial amount of
revenue and usership. They have gone up consistently pretty much
every quarter for the past couple of years. Same thing
with ten Cent in China. Their fan club revenue again
based from like, you know, a super fan subscription streaming tier,
you know, where for an extra couple bunts a month,
(09:44):
a couple bucks a month over the standard streaming subscription,
you get exclusive content or access to you know, early
access to concert tickets or merch you know, just some
sort of perk to incentivize the most dedicated who basic like.
The idea is that like these people are so passionate
about the artists they like that if given the opportunity
(10:06):
to support these artists, they will more likely than not
take it. And the industry is really banking on this
particular group because they think they haven't been fully utilized yet.
Speaker 1 (10:19):
And I guess we'll see in time how effectively they
use that super fan segment to the best of the business.
And so I want to turn though to how the
slow down that you've described at the top relates to
the increasing headlines we're seeing around the label business. The
(10:39):
big three, particularly with regard to how the majors and
the indies are having some friction.
Speaker 2 (10:46):
Yeah, yeah, it's this particular. This month in particular has
seen a lot of friction on the label front currently,
probably the biggest, the biggest headline right now is the
back and forth around the UMG Downtown Music acquisition. Basically,
for context, UMG is I believe the biggest of the
(11:10):
Big three. They are looking to acquire Downtown Music Holdings,
which is home to a lot of vital services for
the indie music sector, both from like the individual DIY
artist label level too, you know, larger but still independent
labels and publishers and stuff. That's sort of really been
(11:33):
emblematic of the growing tension between those two worlds. And
granted there's always been animosity between the indies and the majors,
but it does seem like it is sort of being
aggravated recently due to the streaming slowing down, you know,
that core issue has basically led to the majors and
(11:54):
the leading companies in the in the music industry to
look for other ways to essentially dive versufy their income.
And also with the rise of streaming, in part due
to the rise of streaming, the indie market has actually
been really able to flourish as streaming is established in
these developing markets. Basically, it creates a more access to music,
(12:19):
which then in turn creates a larger ecosystem for these
independent publishers, distributors, labels to then operate on a global level.
Speaker 1 (12:28):
In terms of this streaming slow down to some degree,
I'm surprised given the headlines I'm seeing about the flood
of AI generated music hitting consumers ears these days, how
big is the potential for this to compound the challenges
the industry is already facing.
Speaker 2 (12:49):
Well, Yeah, to put it bluntly, it's a pretty significant one.
And it's not just from the headlines we've been seeing
from you know, like these fake bands or artists getting
thousands of listeners on Spotify and thousands of monthly, monthly followers.
That is certainly an issue, but it's also from like
(13:13):
the lesser known corners of the industry, where you know,
I have several friends who are full time freelance producers.
Their day job is creating background music for TV shows.
You know, the young and the restless needs an ambient
track for a coffee shop, they can whip up a song,
(13:34):
send it over. You know, they work with the music supervisor.
Now with AI, that music supervisor can say go to
Suno and just request give me a soft acoustic song
for a coffee shop and then there you go. So
basically it is coming from multiple corners. It can affect
(13:56):
the front facing artists that are having careers as artist,
but then it also will greatly impact working musicians as well,
like those who create background music or are songwriters or
just session musicians. All of that is at risk here.
In fact, one of the reports that I cite in
the special report basically found that the industry is set
(14:21):
to lose about four billion dollars from AI over the
next several years. So it is significant.
Speaker 1 (14:28):
And do consumers who are facing this flood of music,
how are they taking to this? Are they making the
distinction with human artists? Are they just fine with it?
Speaker 2 (14:39):
Yeah, it does seem like it is kind of a
mixed bag. I think early on there was sort of
a novelty to it for a while AI music. I think,
in at least the AI music that people were interacting
with in like a positive way, where like songs where
they took a major artist's voice and had them sing
(15:01):
another major artist song, or there was that fake song
by the Weekend in Drake a year or two ago
that gained a lot of traction. Now I think it's
I think just as the general public is more skeptical
of AI overall, that is also I think applied to
(15:22):
their view on AI music to a certain extent. I mean,
I can tell you again, based on like survey data,
I found that actually, like specifically asked musicians and industry
people and songwriters who work in the industry, like what
they thought is overwhelmingly skeptical negative for obvious reasons, And
(15:46):
it does seem like that skepticism is also applying to
these artists too, where you know, a lot of there's
been a lot of pushback to these to the news
of AR artists dominating dominating Spotify that in now people
are like worried that that is a thing they have
to potentially worry about of these DSPs putting this AI
(16:08):
generated music onto their you know, discovery playlist without them knowing.
And then there's sort of a skepticism that arises around that, like,
you know, am I listening to an AI song? How
can I tell? Should the DSP disclose this, so it
does you know, as with everything around AI, it raises
a lot of questions and answers.
Speaker 1 (16:26):
Yeah, it sounds like we're in the very early stages
of something that's going to be a pretty sticky wicket
for the industry. So let's turn to a bright spot.
The publishing side of the business seems to be booming.
What's what's going on to explain the increase in royalties.
Speaker 2 (16:43):
Yeah, so publishing has always sort of been an anchor
of the music industry. You know, what we're talking about
here is essentially like licensing for TV shows, for radio,
for streaming especially, and that you know, unsurprisingly has been
the biggest point of growth is amongst digital royalties. And
(17:07):
the simple answer is that with the rise of streaming,
publishing really flourish as a result. But you know, there
are some pretty some pretty important caveats to make there
where One part of it is also just like as
music has become easier than ever for the average person
(17:28):
to just upload to streaming services, that obviously has also
contributed to it. But at the same time, it is
disproportionately the majority of the royalties being generated are really
only going to like the top of the heap, you know,
like the Superstars, the Taylor Swifts of the world, as
(17:49):
well as like the major labels. So in reality, you
look at these numbers and you might think, oh, it's
better than ever to be a working musician, but the
you know, it's a lot more comp located to that, unfortunately,
in part because the royalties generated by these streaming services
are literally fraction of a fraction of pennies. And then
(18:10):
add to the threat of AI as I was talking
about before, and also add to the fact that certain
DSPs like Spotify and Amazon as a result of adding
you know, extra features that we were talking about earlier,
namely audiobooks that basically allowed them to utilize a legally
loophole where basically, now that they can classify their subscriptions
(18:33):
as bundles, they essentially get to pay a lower payout
rate to music artists and songwriters. So there are threats
for sure at the door here, but at least for now,
like this is probably the one of the few corners
of the industry that is still growing more than just
single digit percentages.
Speaker 1 (18:54):
So and what in your report does it say about
the state of the catalog market in twenty twenty five
which had been just cruising along at a pretty feverish
clip for the past few years.
Speaker 2 (19:08):
Yeah. Yeah, the catalog business is interesting because I do
feel like if we were having this conversation six years ago,
the vast majority of people wouldn't know what the music
catalog business even is. But like around twenty twenty two,
we started seeing all of a sudden explosion of headline
grabbing deals, you know, both for the artists involved and
(19:31):
also the price tags they were fetching. You know, like
Bob Dylan, Bruce Springsteen, Justin Bieber even, they were all
fetching you know, one hundred million plus for their catalogs.
So I would say that that sort of gold rush
is definitely dissipated. But it's not like the market has
come down to earth either. We are still seeing some
(19:52):
like pretty massive deals come out of this space, chief
among them being the first billion dollar deal for a
single artist catalog, which was between Sony and Queen last year.
So that one is interesting because again, as a result
of these companies looking for ways to diversify their income,
(20:16):
this is sort of like it's all catalogs have always
been a surefire way, especially for legendary artists. Because oftentimes
one of the key ingredients you get with them are name,
image likeness rights. So if you have that plus publishing,
plus masters, even if you only have one or two
of the of that combination, you can utilize that to
basically create a brand. You know, think of like how
(20:40):
Bob Dylan sold his catalog a few years ago and
we just got an Oscar nominated Bob Dylan biopic. You know,
that adds value to the Bob Dylan catalog at the
end of the day. And they were able to do
that because you know, I forget who owns his name
image likeness, but the fact that they was sold off
meant that they could pretty much build the brand for themselves.
(21:01):
And that's what we're seeing a lot with these sort
of legendary artists and sort of like proven hit makers.
Speaker 1 (21:09):
Speaking of proven hit makers, let's talk about the live
music business, which in your report I was surprised to
learn given the heights that this hit last year. And
this is a subject that Illuminate Intelligence in the past
has dug into the phenomenon around this market, but it
does seem to be cooling off, which is hard for
(21:31):
me to understand when it's like the level of you know,
you got Bruce Springsteen just finished a massive tour, Lady
Gaga launches another one. It's just such a wealth of
a listers on that market.
Speaker 2 (21:43):
Yeah, I mean, live music is certainly interesting where that
industry has proven to be pretty resilient to pretty much anything.
You know, there is the long held belief that music,
particularly live music, is quote unquote saying proof, with the
reasoning for that being that people love music so much
(22:06):
that they are less willing to give that up if
it comes to saving money versus like going to the movies,
for instance, And so we're sort of seeing that with
live music. And then also at the same time as
ticket prices are basically increasing higher than ever year after year,
(22:30):
that is also in part inflating what we're you know,
the the year end tallies that we're seeing, and up
until now they've sort of been able to get away
with it. That might be too strong of a word,
but like, at least as ticket prices increased, people were
still turning out, especially after the pandemic. People were willing
to pay big prices to go see the favorite artists.
(22:53):
They were willing to travel and with that incur those
expenses and we are still seeing that. Again, It's not
like it's you know, we're seeing a nose dive or
anything in live music, but we are seeing it flatline
a little bit. You know, where the past couple of
years was double digit growth and now we're seeing single
digit growth. And not only are we seeing that for revenue,
(23:16):
we are seeing that for attendance as well, which is
sort of the real sticking point.
Speaker 1 (23:21):
And Live Nation, of course is synonymous with that market.
So how has it impacted them?
Speaker 2 (23:28):
Yeah, I mean Live Nation is interesting because when you
talk about them, you are basically talking about the live
music business. And you know they have at least in
their Q one report they started the year actually with
the revenue down from the previous Q one, but they
(23:50):
basically framed it where they focused on essentially the rest
of the year, where they were like, future or sales
for or future concerts is higher than ever, We're set
to have a record breaking year. That certainly might be true,
but that is at the end of the day. They
(24:12):
are kind of seeing what is happening in the larger
in the larger live music industry, where yes, revenue is
still high, but it is slowing down in same thing
with attendance and ticket sales, and then you know, when
you couple what is happening with them versus like the
larger changes happening like from what like Polestar was tracking,
(24:32):
where you know, for the top one hundred worldwide tours,
everything was actually like down by a couple percentages average
gross tickets sold, average tickets sold, but the two things
that increased was average ticket price and gross. So to me,
that signals that you know, this the gross that is
(24:53):
being created is more more and more so happening from
ticket price, and we were definitely seeing that happened within
Live Nation as well.
Speaker 1 (25:02):
Well, we'd be remissing this conversation not to touch on
the artists at themselves in terms of both the top
of the food chain, the chart toppers that I would imagine, hey,
the more best selling acts that you get, the better
the health of the market. Then again, the music business
(25:23):
is so catalog heavy that maybe it doesn't matter much,
and then also just sort of lower down the food chain,
what it's like for perhaps the musicians that aren't household names.
Speaker 2 (25:36):
Yeah, yeah, I mean basically, like I mentioned before, for
working artists. The concept of the working class musician is
becoming much much less of a reality for the most part.
And you know, as as much as this has been
(25:59):
like a particularly you know, particularly strong topic for me personally,
or one that I feel is strongly about, there unfortunately
isn't a whole lot of data for it, at least
when it comes to the US. But what we do
have shows that, at least like from anecdotally and stuff
like you hear about musicians like needing to even successful
(26:24):
ones or quote unquote successful ones within like the indie space,
we'll still need to maintain day jobs or you know,
find other more stable sources of income. Earlier this year
we saw Chapel Roan on the Grammy stage while accepting
an award advocate for greater access to healthcare services and
(26:44):
mental health services for artists. So like, we are seeing
that happen. And the one, you know, one of the
sources we do have for data, which I was very
happy to find, was actually a music census, a musician
census done in Nashville, which probably next to New York
and LA maybe even more so, is has the highest
(27:06):
concentration of working musicians in the US. And you know,
from there we were able to get at least a glimpse,
like they offered a case study of what it could
be of what you know, the musician experience is in
the US, and for the most part, they averaged around
fifty two K per year from music, most of which
(27:28):
came from live shows rather than recordings. But you know, again,
a lot of the main concerns was access to healthcare
and rent, and you know that is also the same
in the UK. It's a very similar story.
Speaker 1 (27:45):
Well, I don't want to forget the other half of
the equation, which is the artist at the top of
the charts, the Morgan Wallens of the world, the Kendrick
Lamars of the world. Are they bigger than ever? And
you mentioned Chapel Rome earlier. Is she an example of
there's still a rising tide of new artists joining those
(28:06):
top ranks.
Speaker 2 (28:08):
Yeah, no, certainly, Like these artists are doing incredibly well.
And it's it's sort of that it's like the ones
that make it are still able to really make it.
You know, Morgan Wallen, even though like his listenership is
overwhelmingly in the US, like, he's still able to embark
on highly successful global tours. What's interesting that with that too, though,
(28:31):
is that sort of as a result of these developing
markets adopting streaming and usership growing in you know, other
parts of the world. Along with like the big artists
obviously being listened to there, we are also seeing what
sort of become known as like localization, where it's like
(28:53):
these markets will adopt streaming, but then they will continue
to listen to their local artists and sort of like
as a result of that, these artists then get access
to the global stage, as it were, a lot more
so than they were before, in part thanks to like
streaming algorithms picking them up and stuff. So that's sort
(29:13):
of like why what we've seen, you know, the rise
of K pop or the rise of Latin music, or
even the rise of country music outside of the US,
Like that's all part of it. But again, at the
same time, just given the amount of people that now
can upload music and you know, create build platforms online
(29:38):
thanks to streaming, it's sort of a double edged sword.
Like the ones who can break through the noise are
able to potentially find a lot of success, but then
everyone else kind of has to fight a lot harder,
especially as like you know, platforms like Spotify have now
instituted policies where it's like unless basically artists that don't
(30:02):
make x amount of streams per month they don't get paid,
which you know, on one hand, you can make the
argument that it's like that allows the royalties to be
better distributed for the artists that do have established careers,
and that is certainly good. But at the same time,
it does make people that are trying to you know,
float to the surface more. It just makes it a
(30:24):
lot harder than it already was.
Speaker 1 (30:26):
Well, we're touching on some trends here that make clear
the twenty twenty five, as you put it in this report,
is clearly a pivotal year. There's a lot to monitor
going forward, and so can't recommend enough people check out
the report Rob just authored, available on the Illuminate Data
dot com website on the state of the music industry. Rob,
(30:49):
thanks for coming in and giving us a taste of
what you wrote about.
Speaker 2 (30:53):
Of course, thanks so much for having me.
Speaker 3 (30:58):
Thanks for listening. Leave us a review at Apple Podcasts
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free weekly strictly business newsletter, and don't forget to Tune
in next week for another episode of Strictly Business.
Welcome to Strictly Business, the podcast in which we speak
with some of the brightest minds working in the media
business today. I'm Andrew Wallenstein, chief Media Analysts that Illuminate Intelligence,
the subscription market research service formerly known as Variety Intelligence Platform.
We just announced our rebrand in tandem with the release
of our latest special report all about the state of
(00:29):
the music industry, and I am fortunate to have the
reports author Rob Steiner to give us a download on streaming, publishing,
the concert business, and of course AI. So Rob, thanks
for joining us.
Speaker 2 (00:44):
Hi, thank you for having me.
Speaker 1 (00:46):
All right. So, you know, I think there was a
sense for a long time that the explosion of audio
streaming had the music industry in a growth mode for
a while now, but it seems like a more complicated
picture is emerging crossed the various revenue streams you are
tracking this report, so tell us about that.
Speaker 2 (01:05):
Yeah, So overall, it is certainly interesting because the music industry,
at least when we're talking about the top level, like
the major labels, the big companies, the major artists, it's
in a really good spot, a record breaking spot. In fact,
it basically ever since the pandemic, that sort of supercharged
(01:28):
the growth that was happening with the rise of streaming,
you know, that started taking off around the mid twenty tens,
and then the pandemic hit and that just launched that
revenue stream into the stratosphere. Same thing with live music.
All of a sudden, this post pandemic concert demand just
sent a spike in ticket sales and revenues, and that
was all great, But now twenty twenty four is basically
(01:53):
across the board signaling a slowdown. We are seeing single
digit percentage growth between twenty twenty three and twenty twenty
four for revenue growth and streaming in particular, and that's
in due part in part due to the fact that
it is sort of reaching critical mass and paid usership
in develop markets like the US. Live music is also
(02:16):
seeing a slow down in attendance, and there are it
is increasingly relying more on increased ticket prices more than
anything else to keep revenue growing. And then by extension too,
as streaming slows down, slisoda is publishing. And then that's
also not to mention the threat that AI poses to
publishing in particular. So with all of this said, basically
(02:39):
I saw the industry at an inflection point where if
they continue on their current path, it won't be bad necessarily,
but it probably means that it will be of, you know,
the next few years of flatlining in terms of growth,
which obviously a lot of these companies don't want they
want to continue growing.
Speaker 1 (02:58):
So there's a lot there. Let's go kind of one
piece at a time, starting with streaming, which seems to
be sort of at the center of all of this.
It sounds like from what you're saying that this is
a case of market saturation mature development markets. Perhaps they've
(03:19):
taken up all the Spotify and Apple Music and YouTube
that they're going to get. So what do we do now?
Is it just a matter of all, right, well, there's
plenty of emerging market runway to go, or do we
need to get more creative in these mature markets.
Speaker 2 (03:34):
Yeah, it's a little bit of both, where on one hand,
the market or the industry powers that be are now
looking towards emerging markets for streaming, especially in Latin America
and Asia and the Middle East in particular, those are
now pretty much responsible for like the major sources of
(03:55):
growth in the streaming industry because you know, the likes
of Spotify, Apple Music. They're still breaking into a lot
of these markets. So we are going to see the streamers,
the labels, et cetera, pushing hard into that. The Big
three of all established a presence throughout Latin America, Middle
East and so on, and then back home here there
(04:17):
is sort of a debate going on where basically the
Big three are really advocating for price increases for the DSPs.
They believe that ten ninety nine a month is simply
to loaf a price for all the music in the world,
and to a degree they are right. When Spotify was created,
(04:39):
it did in a sense solve the industry's biggest issue
around digital piracy, whereas, how do we get people to
pay for access to all the music in the world online.
Spotify found a really you know, streamlined solution where they
kind of simplified the experience of act accessing this music
(05:01):
online and put it behind a pay wall. People are
willing to pay for it, and they still are, but
now it seems like as usership is sort of reaching
critical mass, there's now a sense that like basically the
Big Three sort of leading this charge, this idea that
music had lost a lot of value in the Internet age.
(05:23):
You know, post Napster, post the Internet, and frankly, as
the report gets into the argument can be made that
music never really recovered the value it lost, you know,
the golden age of the nineties and the CD boom,
that when you adjust for inflation, at least in the US,
revenue hasn't reached those levels. The peak was nineteen ninety
(05:47):
nine when Napster was founded.
Speaker 1 (05:50):
And so I wonder, and I think about I make
the comparison to the video business, where you know, clearly
we see the netflixes of the world have built themselves
is a tremendous business. The other players in the market,
they'll they'll be okay, they're actually starting to turn profit
after a rough period. But I think there's also an
acknowledgment that the peak era pre streaming of cable television
(06:15):
just much better margins and much better business. And so
is the music business diluting themselves, that they could sort
of put the monetization toothpaste back in the tube here.
Speaker 2 (06:27):
It's hard to say. I mean, it does seem like
that the at least the Big three. Their argument is
that people will be willing to pay for you know,
higher streaming subscription prices. On one hand, because we you know,
the s VODs of the world and netflixes of the world,
(06:50):
they've increased their prices several times over in just the
past few years, and Spotify and the DSPs have but
only like only recently, only within the past two years.
Speaker 1 (07:00):
They've shown they've shown much more patients. And so I
just wonder whether it's going to be a mistake that
they're making to push up the prices with the same
sort of aggressiveness as the netflixes of the world, unless
they're putting more value into these DSPs, which you know,
I think of my own Spotisfy subscription and it's not
(07:21):
just about music for me, it's podcast it's audio books. Yeah,
and so maybe they're not crazy to push these prices.
Speaker 2 (07:28):
Yeah. No, especially with Spotify in particular, they have really
in just the past couple of years have started pushing
essentially transferring to platform to being a lot more than
a music streamer. They wanted to be a multimedia location.
You know, they have audio books, which has created you know,
a whole whole litany of issues in terms of music
(07:50):
royalty payments that we could get into. They have pushed
hard into video podcasting, but then on the music side
they are also pushed for. Basically, like the hot button
concept that has really dominated the industry is leading into
super fans for a lot of the for a lot
(08:10):
of the Big three, and a lot of these major companies.
Speaker 1 (08:12):
Explain fans, Yeah, yeah.
Speaker 2 (08:14):
It's basically it is the best way to describe it,
or at least the official way that Illuminate describes it
based on a survey data. Are people that engage in
I believe at least five or more music related activities,
so going to a concert, buying merch list in music,
buying music, et cetera on a pretty regular basis. And
(08:36):
this group is small, I believe it's about twenty percent
of the US music listeners according to Illuminate, but their
buying power is substantial. There is again with our data,
we have found evidence of that. We've also seen it
in practice give great results for particularly companies based in Asia.
(08:59):
Hype Corporation is probably the biggest success story. They essentially
launched a super fan app Weavers basically think like a
social media platform but for like paid private fan clubs
for like BTS and a lot of the K pop artists.
But now it's expanded to like Ariana Grande and du Alipa.
(09:21):
They have been able to generate a substantial amount of
revenue and usership. They have gone up consistently pretty much
every quarter for the past couple of years. Same thing
with ten Cent in China. Their fan club revenue again
based from like, you know, a super fan subscription streaming tier,
you know, where for an extra couple bunts a month,
(09:44):
a couple bucks a month over the standard streaming subscription,
you get exclusive content or access to you know, early
access to concert tickets or merch you know, just some
sort of perk to incentivize the most dedicated who basic like.
The idea is that like these people are so passionate
about the artists they like that if given the opportunity
(10:06):
to support these artists, they will more likely than not
take it. And the industry is really banking on this
particular group because they think they haven't been fully utilized yet.
Speaker 1 (10:19):
And I guess we'll see in time how effectively they
use that super fan segment to the best of the business.
And so I want to turn though to how the
slow down that you've described at the top relates to
the increasing headlines we're seeing around the label business. The
(10:39):
big three, particularly with regard to how the majors and
the indies are having some friction.
Speaker 2 (10:46):
Yeah, yeah, it's this particular. This month in particular has
seen a lot of friction on the label front currently,
probably the biggest, the biggest headline right now is the
back and forth around the UMG Downtown Music acquisition. Basically,
for context, UMG is I believe the biggest of the
(11:10):
Big three. They are looking to acquire Downtown Music Holdings,
which is home to a lot of vital services for
the indie music sector, both from like the individual DIY
artist label level too, you know, larger but still independent
labels and publishers and stuff. That's sort of really been
(11:33):
emblematic of the growing tension between those two worlds. And
granted there's always been animosity between the indies and the majors,
but it does seem like it is sort of being
aggravated recently due to the streaming slowing down, you know,
that core issue has basically led to the majors and
(11:54):
the leading companies in the in the music industry to
look for other ways to essentially dive versufy their income.
And also with the rise of streaming, in part due
to the rise of streaming, the indie market has actually
been really able to flourish as streaming is established in
these developing markets. Basically, it creates a more access to music,
(12:19):
which then in turn creates a larger ecosystem for these
independent publishers, distributors, labels to then operate on a global level.
Speaker 1 (12:28):
In terms of this streaming slow down to some degree,
I'm surprised given the headlines I'm seeing about the flood
of AI generated music hitting consumers ears these days, how
big is the potential for this to compound the challenges
the industry is already facing.
Speaker 2 (12:49):
Well, Yeah, to put it bluntly, it's a pretty significant one.
And it's not just from the headlines we've been seeing
from you know, like these fake bands or artists getting
thousands of listeners on Spotify and thousands of monthly, monthly followers.
That is certainly an issue, but it's also from like
(13:13):
the lesser known corners of the industry, where you know,
I have several friends who are full time freelance producers.
Their day job is creating background music for TV shows.
You know, the young and the restless needs an ambient
track for a coffee shop, they can whip up a song,
(13:34):
send it over. You know, they work with the music supervisor.
Now with AI, that music supervisor can say go to
Suno and just request give me a soft acoustic song
for a coffee shop and then there you go. So
basically it is coming from multiple corners. It can affect
(13:56):
the front facing artists that are having careers as artist,
but then it also will greatly impact working musicians as well,
like those who create background music or are songwriters or
just session musicians. All of that is at risk here.
In fact, one of the reports that I cite in
the special report basically found that the industry is set
(14:21):
to lose about four billion dollars from AI over the
next several years. So it is significant.
Speaker 1 (14:28):
And do consumers who are facing this flood of music,
how are they taking to this? Are they making the
distinction with human artists? Are they just fine with it?
Speaker 2 (14:39):
Yeah, it does seem like it is kind of a
mixed bag. I think early on there was sort of
a novelty to it for a while AI music. I think,
in at least the AI music that people were interacting
with in like a positive way, where like songs where
they took a major artist's voice and had them sing
(15:01):
another major artist song, or there was that fake song
by the Weekend in Drake a year or two ago
that gained a lot of traction. Now I think it's
I think just as the general public is more skeptical
of AI overall, that is also I think applied to
(15:22):
their view on AI music to a certain extent. I mean,
I can tell you again, based on like survey data,
I found that actually, like specifically asked musicians and industry
people and songwriters who work in the industry, like what
they thought is overwhelmingly skeptical negative for obvious reasons, And
(15:46):
it does seem like that skepticism is also applying to
these artists too, where you know, a lot of there's
been a lot of pushback to these to the news
of AR artists dominating dominating Spotify that in now people
are like worried that that is a thing they have
to potentially worry about of these DSPs putting this AI
(16:08):
generated music onto their you know, discovery playlist without them knowing.
And then there's sort of a skepticism that arises around that, like,
you know, am I listening to an AI song? How
can I tell? Should the DSP disclose this, so it
does you know, as with everything around AI, it raises
a lot of questions and answers.
Speaker 1 (16:26):
Yeah, it sounds like we're in the very early stages
of something that's going to be a pretty sticky wicket
for the industry. So let's turn to a bright spot.
The publishing side of the business seems to be booming.
What's what's going on to explain the increase in royalties.
Speaker 2 (16:43):
Yeah, so publishing has always sort of been an anchor
of the music industry. You know, what we're talking about
here is essentially like licensing for TV shows, for radio,
for streaming especially, and that you know, unsurprisingly has been
the biggest point of growth is amongst digital royalties. And
(17:07):
the simple answer is that with the rise of streaming,
publishing really flourish as a result. But you know, there
are some pretty some pretty important caveats to make there
where One part of it is also just like as
music has become easier than ever for the average person
(17:28):
to just upload to streaming services, that obviously has also
contributed to it. But at the same time, it is
disproportionately the majority of the royalties being generated are really
only going to like the top of the heap, you know,
like the Superstars, the Taylor Swifts of the world, as
(17:49):
well as like the major labels. So in reality, you
look at these numbers and you might think, oh, it's
better than ever to be a working musician, but the
you know, it's a lot more comp located to that, unfortunately,
in part because the royalties generated by these streaming services
are literally fraction of a fraction of pennies. And then
(18:10):
add to the threat of AI as I was talking
about before, and also add to the fact that certain
DSPs like Spotify and Amazon as a result of adding
you know, extra features that we were talking about earlier,
namely audiobooks that basically allowed them to utilize a legally
loophole where basically, now that they can classify their subscriptions
(18:33):
as bundles, they essentially get to pay a lower payout
rate to music artists and songwriters. So there are threats
for sure at the door here, but at least for now,
like this is probably the one of the few corners
of the industry that is still growing more than just
single digit percentages.
Speaker 1 (18:54):
So and what in your report does it say about
the state of the catalog market in twenty twenty five
which had been just cruising along at a pretty feverish
clip for the past few years.
Speaker 2 (19:08):
Yeah. Yeah, the catalog business is interesting because I do
feel like if we were having this conversation six years ago,
the vast majority of people wouldn't know what the music
catalog business even is. But like around twenty twenty two,
we started seeing all of a sudden explosion of headline
grabbing deals, you know, both for the artists involved and
(19:31):
also the price tags they were fetching. You know, like
Bob Dylan, Bruce Springsteen, Justin Bieber even, they were all
fetching you know, one hundred million plus for their catalogs.
So I would say that that sort of gold rush
is definitely dissipated. But it's not like the market has
come down to earth either. We are still seeing some
(19:52):
like pretty massive deals come out of this space, chief
among them being the first billion dollar deal for a
single artist catalog, which was between Sony and Queen last year.
So that one is interesting because again, as a result
of these companies looking for ways to diversify their income,
(20:16):
this is sort of like it's all catalogs have always
been a surefire way, especially for legendary artists. Because oftentimes
one of the key ingredients you get with them are name,
image likeness rights. So if you have that plus publishing,
plus masters, even if you only have one or two
of the of that combination, you can utilize that to
basically create a brand. You know, think of like how
(20:40):
Bob Dylan sold his catalog a few years ago and
we just got an Oscar nominated Bob Dylan biopic. You know,
that adds value to the Bob Dylan catalog at the
end of the day. And they were able to do
that because you know, I forget who owns his name
image likeness, but the fact that they was sold off
meant that they could pretty much build the brand for themselves.
(21:01):
And that's what we're seeing a lot with these sort
of legendary artists and sort of like proven hit makers.
Speaker 1 (21:09):
Speaking of proven hit makers, let's talk about the live
music business, which in your report I was surprised to
learn given the heights that this hit last year. And
this is a subject that Illuminate Intelligence in the past
has dug into the phenomenon around this market, but it
does seem to be cooling off, which is hard for
(21:31):
me to understand when it's like the level of you know,
you got Bruce Springsteen just finished a massive tour, Lady
Gaga launches another one. It's just such a wealth of
a listers on that market.
Speaker 2 (21:43):
Yeah, I mean, live music is certainly interesting where that
industry has proven to be pretty resilient to pretty much anything.
You know, there is the long held belief that music,
particularly live music, is quote unquote saying proof, with the
reasoning for that being that people love music so much
(22:06):
that they are less willing to give that up if
it comes to saving money versus like going to the movies,
for instance, And so we're sort of seeing that with
live music. And then also at the same time as
ticket prices are basically increasing higher than ever year after year,
(22:30):
that is also in part inflating what we're you know,
the the year end tallies that we're seeing, and up
until now they've sort of been able to get away
with it. That might be too strong of a word,
but like, at least as ticket prices increased, people were
still turning out, especially after the pandemic. People were willing
to pay big prices to go see the favorite artists.
(22:53):
They were willing to travel and with that incur those
expenses and we are still seeing that. Again, It's not
like it's you know, we're seeing a nose dive or
anything in live music, but we are seeing it flatline
a little bit. You know, where the past couple of
years was double digit growth and now we're seeing single
digit growth. And not only are we seeing that for revenue,
(23:16):
we are seeing that for attendance as well, which is
sort of the real sticking point.
Speaker 1 (23:21):
And Live Nation, of course is synonymous with that market.
So how has it impacted them?
Speaker 2 (23:28):
Yeah, I mean Live Nation is interesting because when you
talk about them, you are basically talking about the live
music business. And you know they have at least in
their Q one report they started the year actually with
the revenue down from the previous Q one, but they
(23:50):
basically framed it where they focused on essentially the rest
of the year, where they were like, future or sales
for or future concerts is higher than ever, We're set
to have a record breaking year. That certainly might be true,
but that is at the end of the day. They
(24:12):
are kind of seeing what is happening in the larger
in the larger live music industry, where yes, revenue is
still high, but it is slowing down in same thing
with attendance and ticket sales, and then you know, when
you couple what is happening with them versus like the
larger changes happening like from what like Polestar was tracking,
(24:32):
where you know, for the top one hundred worldwide tours,
everything was actually like down by a couple percentages average
gross tickets sold, average tickets sold, but the two things
that increased was average ticket price and gross. So to me,
that signals that you know, this the gross that is
(24:53):
being created is more more and more so happening from
ticket price, and we were definitely seeing that happened within
Live Nation as well.
Speaker 1 (25:02):
Well, we'd be remissing this conversation not to touch on
the artists at themselves in terms of both the top
of the food chain, the chart toppers that I would imagine, hey,
the more best selling acts that you get, the better
the health of the market. Then again, the music business
(25:23):
is so catalog heavy that maybe it doesn't matter much,
and then also just sort of lower down the food chain,
what it's like for perhaps the musicians that aren't household names.
Speaker 2 (25:36):
Yeah, yeah, I mean basically, like I mentioned before, for
working artists. The concept of the working class musician is
becoming much much less of a reality for the most part.
And you know, as as much as this has been
(25:59):
like a particularly you know, particularly strong topic for me personally,
or one that I feel is strongly about, there unfortunately
isn't a whole lot of data for it, at least
when it comes to the US. But what we do
have shows that, at least like from anecdotally and stuff
like you hear about musicians like needing to even successful
(26:24):
ones or quote unquote successful ones within like the indie space,
we'll still need to maintain day jobs or you know,
find other more stable sources of income. Earlier this year
we saw Chapel Roan on the Grammy stage while accepting
an award advocate for greater access to healthcare services and
(26:44):
mental health services for artists. So like, we are seeing
that happen. And the one, you know, one of the
sources we do have for data, which I was very
happy to find, was actually a music census, a musician
census done in Nashville, which probably next to New York
and LA maybe even more so, is has the highest
(27:06):
concentration of working musicians in the US. And you know,
from there we were able to get at least a glimpse,
like they offered a case study of what it could
be of what you know, the musician experience is in
the US, and for the most part, they averaged around
fifty two K per year from music, most of which
(27:28):
came from live shows rather than recordings. But you know, again,
a lot of the main concerns was access to healthcare
and rent, and you know that is also the same
in the UK. It's a very similar story.
Speaker 1 (27:45):
Well, I don't want to forget the other half of
the equation, which is the artist at the top of
the charts, the Morgan Wallens of the world, the Kendrick
Lamars of the world. Are they bigger than ever? And
you mentioned Chapel Rome earlier. Is she an example of
there's still a rising tide of new artists joining those
(28:06):
top ranks.
Speaker 2 (28:08):
Yeah, no, certainly, Like these artists are doing incredibly well.
And it's it's sort of that it's like the ones
that make it are still able to really make it.
You know, Morgan Wallen, even though like his listenership is
overwhelmingly in the US, like, he's still able to embark
on highly successful global tours. What's interesting that with that too, though,
(28:31):
is that sort of as a result of these developing
markets adopting streaming and usership growing in you know, other
parts of the world. Along with like the big artists
obviously being listened to there, we are also seeing what
sort of become known as like localization, where it's like
(28:53):
these markets will adopt streaming, but then they will continue
to listen to their local artists and sort of like
as a result of that, these artists then get access
to the global stage, as it were, a lot more
so than they were before, in part thanks to like
streaming algorithms picking them up and stuff. So that's sort
(29:13):
of like why what we've seen, you know, the rise
of K pop or the rise of Latin music, or
even the rise of country music outside of the US,
Like that's all part of it. But again, at the
same time, just given the amount of people that now
can upload music and you know, create build platforms online
(29:38):
thanks to streaming, it's sort of a double edged sword.
Like the ones who can break through the noise are
able to potentially find a lot of success, but then
everyone else kind of has to fight a lot harder,
especially as like you know, platforms like Spotify have now
instituted policies where it's like unless basically artists that don't
(30:02):
make x amount of streams per month they don't get paid,
which you know, on one hand, you can make the
argument that it's like that allows the royalties to be
better distributed for the artists that do have established careers,
and that is certainly good. But at the same time,
it does make people that are trying to you know,
float to the surface more. It just makes it a
(30:24):
lot harder than it already was.
Speaker 1 (30:26):
Well, we're touching on some trends here that make clear
the twenty twenty five, as you put it in this report,
is clearly a pivotal year. There's a lot to monitor
going forward, and so can't recommend enough people check out
the report Rob just authored, available on the Illuminate Data
dot com website on the state of the music industry. Rob,
(30:49):
thanks for coming in and giving us a taste of
what you wrote about.
Speaker 2 (30:53):
Of course, thanks so much for having me.
Speaker 3 (30:58):
Thanks for listening. Leave us a review at Apple Podcasts
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