by Emmanuel Legrand
1 - Big is not enough – Ginormous you must be
With the latest episode of the EMI saga unfolding, it suddenly appears that the only way to survive in the music industry is to become bigger. Universal (and parent company Vivendi) believe that being the market leader is not enough, and that the only way to keep delivering big figures is by getting even bigger. Hence the acquisition of EMI’s recorded music division. Obviously getting bigger in a shrinking market is not the same as getting bigger in times of growth. But how big can you become without significantly distorting the market? How can a market function when you only have three main players plus a mosaic of small players and when number two and three together don’t even match the market leader in size? That is the billion dollars question that regulators will have to answer. And it is not just a rhetorical question.
2 - Publishing is where the real money is
The same level of consolidation that affects recorded music is now starting to take place in publishing. Sony/ATV and EMI Music publishing combined should become market leaders, with Universal Music Publishing second and Warner Chappell third. Then comes new player BMG Rights Management, which has snapped in recent months Chrysalis and Bug Music, but failed to win EMI Music Publishing. Investing money in music publishing does not seem to worry VC companies and capital can be raised for acquisitions. These people are not in the habit of throwing money through the windows so there must be some rationale behind that. Maybe it is the belief that, no matter what, music publishing will always deliver a return on investment. But the real cost of this way of thinking is felt in the bio-diversity of the eco-system, and not for the better.
3 - Who controls data follows the flow of money
The year ended with two almost simultaneous announcements: Live Nation was acquiring measurement company BigChampagne; and Google, via YouTube, was buying RightsFlow, a music licensing and rights management company. Add to that the on-going discussions between stakeholders regarding the Global Repertoire Database, the launch of radio monitoring company Kollector, and the development of MusicMetric, which monitors “buzz” around artists, and suddenly there’s that feeling that data is king. Live Nation needs to be able to identify traction on artists to better sell concert tickets; YouTube needs a back office to cope with the scope of the data they generate on a daily basis to identify and pay rights owners; music industry stakeholders and digital services need the best database of metadata to ensure that rights owners are properly compensated. It is not only the flow of money that you can control through data, it is the market as a whole. And we ain’t seen nothing yet in this field.
4 - In video there’s a business
The successes of YouTube and Vevo have changed the currency of music videos. From a product that only had the L column filled in a P&L, suddenly there are a few pennies in the P, thanks to YouTube’s ad schemes, but mostly thanks to Vevo’s aggressive way to package videos to consumers and sell the eyeballs to advertisers. Since its inception, Vevo has poured $100 million back into the music industry. That was just based on business in the US, and the company is now expanding internationally. Against all odds, Vevo is proving that videos are still one of the most potent way to promote music, but can also be moneymakers. Bravo!
5 – Streaming is not yet a win-win
With the successful launch of Spotify in the US and Deezer rolling out its service throughout the world, the focus is now on the value of these streaming services. To consumers, these services do provide value. They allow access to millions of tracks with good sound quality and in a completely legal way. And it is so good that you don’t need to “own” the songs any more, since you can access them any time and anywhere. But with the decision by some artists like Coldplay to hold their new tracks and prevent them from being on Spotify has shifted the debate on the financial value these services bring to rights holders. A lot of record company executives (and a few artist managers too, obviously) only see these services as another form of evil in that they might be legal and fully licensed, so they lure people away from rogue sites, but they also cannibalise digital sales. Spotify CEO Daniel Ek argued that the service was a significant contributor to the music industry’s bottom line (especially in Sweden where it first launched) and that it is only the start of a process that will see more and more consumers switching to a subscription model for music, and that will see revenues grow in parallel. It is vital for the music industry that Ek’s vision prevails, but there are already new challenges…
6 – Is the cloud full of smoke?
They all went into the cloud – the Apples, Amazons and Googles of this world – and for the moment, the verdict is still open on how (or if) it will transform the landscape. But the cloud has the potential to be a massive game changer if consumers can secure in the cloud all the music that they own, and then access a vast number of services that will enhance their experience. If this idea eventually picks up, if will have repercussions for rights owners and discussions are going on about what set of rights services need to clear with rights owners. 2012 will most certainly clarify some of this and also give indications as to whether yes or no this new development is the panacea that many would like it to be.
7 – Finding the appropriate copyright regime for the digital age is complicated
Attempts to modernise or adapt copyright legislation by taking into consideration all its aspect is damn complicated, it seems. The US is caught in a battle of words (and more) between what bloggers call “Big Content” (all the creative industries) and, to simplify, internet and mobile companies over a text called ‘Stop Online Piracy Act’ or SOPA. The UK is launching the process that will see the revisions of its copyright regime and there are already clashes about which way to go. India has been delaying for many months the discussion on a new Copyright Bill. And on and on. Never has it been so difficult to strike a balance between the rights of copyright holders and the aspirations of consumers, and the needs of companies with new business models or visions. It is fascinating that copyright and rights holders could be portrayed as preventing innovation and a danger to freedom, and big businesses (seriously big businesses) could appear as the paragons of freedom.
8 – Is the music industry finally turning the corner?
Universal Music big boss Lucian Grainge believes it, and so does Nick Gatfield, CEO of Sony Music UK, who sees a turnaround in two-three years. There are indeed some indicators that something might be happening: digital sales up, countries that have been enjoying negative growth for the most part of the decade seem to have stabilised. One major trend to watch in 2012 to see if the situation really improves.
…but will she last?
10 - All hail the new Queen of Pop, Adele
It was her year! Adele’s the most successful artist of the year and it looks like she’s going to challenge Lady GaGa for the crown of the most successful act of the century. To Adele’s credit (and to that of all the Beggars team around the world), it was as organic as a success it could be, by letting the music do the talking (OK, there was a bit of marketing too, at least in the US…). Of course the videos were great, of course she has the voice, but would that be enough to warrant such success? What sold her to millions was that she did not sound fake, that she was her own self, and that she had bloody good songs too. Adele’s success marks the end of Cowell’s illusion that you can go on ad vitam in selling wind. Sure enough he will continue to offload his armies of wannabes, but Adele’s global success just killed the idea that it was just good enough to appear on TV and mumble half-baked versions of existing songs as long as you looked good. And come to think of it, half of the year she was mute, so what would have happened in she had had her voice, eh?
Best wishes for the New Year!