Mark Mulligan (MiDIA Research): 'We are at the end of the beginning of the era of streaming. So what's next?'

 

By Emmanuel Legrand

 

​What will happen to the music industry once music streaming reaches saturation point? MiDIA Research principal Mark Mulligan offered a few avenues for thoughts during his virtual presentation at the Music Tectonics conference titled 'Growth Drivers: What's Next for the Music Business?'.

 

 ​"Streaming will get to a stage of saturation so we need to know what comes next," stated Mulligan from the outset. The market dynamics had been rather positive for the past few years, with the rise of streaming revenues and the strength of the live music sector, bringing growth back to the business. Then "Covid happened and everything needs reassessing," he quipped.

 

  The recorded music sector experienced growth despite the pandemic, but live music is "decimated" and music publishing is "down." "The market is definitely being contracted and that's why we need growth drivers to pick up from this," he said.

 

Finding pockets of growth

 

  Looking at streaming, Mulligan said some markets like Sweden or even the US are starting to reach their peak, so where are the pockets of growth going to come from? "Amazon expanding the marker by getting households back into music with Echo in the kitchen, and at the younger end YouTube has been this successful platform," said Mulligan who suggested that YouTube "may be the best palace to convert [users] to subscription" but also provide consumers with engaging content that can be monetised (more on that later). 

 

  Turning his attention to artists, Mulligan stressed again that the era of the independent artists has started and will go from strength to strength. "What do artists aspire to?," asked Mulligan, taking his cue from a survey conducted by MiDIA. "The whole things about signing [to a label] is not at the front of the mind as to why they do this. Does this mean that for labels this is the end? Not necessarily. Labels still has that stamp of success: I've made it, I've signed to a label!"

 

Tools for artists

  However, for Mulligan, the advent of tools for artists to develop their careers and monetise their music is going to be one of the drivers of growth.

 

  The way people access music is also in a state of flux. Radio may have lost listeners but surveys still show that it remains the first tool for music discovery, although streaming is catching up. "Radio is about contact," he said. "It is programming led, while streaming is consumer led. Not just how do we get more revenue but also make people fall in music more?"

 

  Covid has been a great disrupting agent, one that was not on anyone's plans. To measure the impact of Covid, Mulligan looked at Disney and Live Nation, noting that in one quarter the two companies lost $10 billion in revenues. "The question is: will this spend come back and how quickly?" he asked.

 

  Covid is also changing behaviours and for Mulligan "some will quickly disappear and some will have long term legacy." One of them bound to stay is people spending more time at home and less commuting, which will have an impact on consumption. "Bars, restaurants and venues will have less passing trade and so many can be impacted by this change in how we behave," he explained.

 

Uncharted territory
 

  He is also convinced that the second wave of the pandemic, combined with lockdown, will "coincide with recession," which will impact the music sector. He offered different scenarios, suggesting that global music industry revenues (including, recorded music, publishing, live performances, merchandising and sponsorship), which reached $76.2 billion in 2019, could contract by 30% to $53bn in 2020 as a base scenario, with a mid scenario down 36% to $48.6bn, and a "bear scenario" with revenues down 43% to $43.5bn. "This is uncharted territory and anyone who tells you they know this will work out is lying! You can only have best guesses."

 

 With recession, "people will eat out less, go out less, cancel video or audio subscriptions," according to surveys. When it comes to music, he noted, is will not necessarily mean less consumption, because consumers can "cut their subscriptions and still get a good supply of music." 

 

  On the concert side, Mulligan predicts that it will take longer to get back to normal because a lot of consumers will be reluctant to take risks and go into venues. In the live music sector small venues are the most at risk. "They are not like Live Nation and have no access to financing," he explained. "They rely on grants and many won't make it and many are too small to make a social distancing gigs."

 

  Post lockdown, if small venues shut down, he predicts it will leave "a gaping hole in the live music industry system," and make it harder for new artists to build a career because there will be less venues to play at.

 

Searching for alternative revenues

 

  So what are the alternatives to boost music revenues? Covid has started a wave of livestreaming events and that's a positive for Mulligan. "The technology was ready and there's been a massive amount of innovation for concerts," he said. "The downside is a fragmentation of the scene and various business models."

 

  Consumers used to spend the most money on concerts because it was a scarce commodity. One of the risks with livestreaming is that a lot is given away for free, creating a Napster moment for the live sector. "To give away stuff for free, that's what we did with Napster and took 15 years to educate people back into spending," he said. "We need to work out how we can bring back a sense of premium and scarcity. We need a bit of structure around innovation." Overall, he added, live streamed events need to be a new format, not a poor imitation of another one."

 

  Mulligan suggested that the industry should work towards setting up a proper structure around live with a virtual live circuit. "This is a new format. It is not replacing concerts but it is creating a new stage," he said. He also believes that virtual events could be to live music "what TV is to live sports" and deliver bigger audiences and better ways to monetise them, while creating an "entire new value chain and ecosystem."

 

Monetising fandom

 

  One of the ways for the music sector to increase revenues is to build from fandom, which Mulligan called "the next monetisation frontier."

  "We need to work out a way for artists and fan to build a relationship," said Mulligan who added that artist to fan relationship had been "a collateral damage" because of streaming, which provided an open tap into music, but cut out the relationship between the users of music and artists. "Streaming is diluting fandom by shifting the focus from artists to the utility of always-on music," he explained.

  So he invited the industry to look at Asia and maybe take its cue from the way platform such as Tencent can extract more revenues from fans that just charging for access to music. "There's an amazing amount of stuff going on in Asia," said Mulligan, adding that Tencent makes twice as much revenues from not music directly. "Gaming, Chinese streaming apps, K-pop and Japanese Idol acts all show audience will pay for fandom," he said.

 

The growth of livestreaming

 

  For tech companies, added Mulligan, the next big opportunity would be to provide the tools to develop fandom formats and increase the monetisation of the relationship between fans and artists. Mulligan believes that "livestream will be huge" but there are already lots of companies in this market, while fandom remains a pretty open market.

 

  For Mulligan, YouTube could also deliver increasing revenues through the monetisation of content. "Let's forget all this massive tension between rights holders and YouTube and think about what it is in music eco-system," said Mulligan. "It is the biggest platform and most widely used digital platform to discover music and it generates a large amount of revenue. It is not not just about what YouTube pays but how you can monetise. Music as a format is about four minutes songs and this does not work in the monetisation system. Look at video gamers, they are constantly monetising. A four minute pop song does not have the same opportunity, but when you look as non-Western companies, they have taken a different approach [with YouTube]."

 

Reassessing the use of YouTube

 

  To stay engaged with the audience will also require artists to think and work differently. "It is arrogant to assume that you can stop talking to your audience and expect them to be as engaged as you left them when you are back," said Mulligan, who showed a slide listing how often channels like T-series or Channel KondZilla post new content (18 each in less than a day) versus the main channels of artists such as Justin Bieber or Ed Sheeran (zero new content in two weeks and nine months, respectively). 

 

  "Labels and artist have to think about how they use YouTube. Music can do a better job at monetising YouTube," asserted Mulligan, adding that Asian music channels "have embraced the dynamics of the YouTube music economy in a way that Western ones have not."

 

  A new approach could also come from streaming services, acting more like labels in the discovery and exposure of new talent. Spotify, said Mulligan, has understood that to have a connection with artists is important but his question is, will it make the move "to become what a record label will be tomorrow?" he asked.

 

  "With streaming, we are at the end of the beginning," he concluded. "The next ten years will be about building the house when the past were about building the foundation."