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Main takeaways of the music industry’s latest numbers - WR #174
Weekly Roundups
August 11, 2023

Main takeaways of the music industry’s latest numbers - WR #174

First half of 2023 being done, now we have some insights to build from the way our industry has been behaving. So let’s dive into the main takeaways of this week!

#1. Are superfans going to save the music industry?

Maybe we overlooked some limits regarding superfans and their impact on our field. It has been considered a highly potential growth driver, able to balance streaming growth and the volume of new subscribers slowing down. Plus, with the rise of AI and composition, superfans have held an ideal of the artists and their connection with their audience.

Historically, superfans were album buyers, driving revenues by purchasing multiple albums monthly. However, the rise of streaming platforms has capped their spending as streaming offers a wide range of music catalogs for a fraction of the cost. The challenge now is to re-engage and re-educate these superfans to find new ways to add value and deepen their fandom beyond traditional album purchases. One direction preferred by professionals would be through exclusive content or experiences.

The rise of the streaming economy and the decline of album sales reshaped the role of superfans in the music industry. We are now exploring ways to recapture superfan spending by offering unique experiences, merchandise, and exclusive content. For example, HYBE has capitalized on this by launching the Weverse fandom platform, which has seen significant growth and offers various features like private messaging, premium video-on-demand, and fan letters. Proof that the industry needs to focus on providing genuine value exchanges that go beyond what streaming services offer.

#2. What Spotify’s earnings are telling us about the market

Let’s stay on streaming for a minute and look at the business side of things. Spotify's Q2 earnings brought both positive and not-so-good news for the podcast business. Monthly active users have grown over Q2, so have premium subscribers and advertising revenue. So what was the bad news?

The growth was driven by new users in emerging markets, which could impact average revenue per user (ARPU). Spotify also fell short of revenue estimates and experienced a net loss due to podcast programming cuts, layoffs, and excess real estate. So now, Spotify is shifting its podcast strategy by reducing costs and re-evaluating exclusive deals. In parallel, they are also enhancing podcast discoverability and engagement through features like episode clips, polls, and Q&As.

Spotify is grappling with the challenge of discoverability in a vast catalog of five million podcasts. The company's shift towards empowering independent creators and its exploration of AI-driven solutions could aid in lowering barriers to entry for listeners and increasing engagement.

#3. TikTok’s new feature for discoverability

TikTok has introduced "Gimme the Mic," a music contest designed as a talent show, inviting aspiring musicians to showcase their skills on TikTok's livestreams, with fan votes determining winners.

The top performer will receive 50,000 to 500,000 "Diamonds," TikTok's in-app currency. This move is part of TikTok's efforts to promote emerging musicians, expand its livestream offerings, and position the app even more strongly into the music field.

#4. First half of 2023 went well for the Majors

In the first half of 2023, the three Majors collectively amassed over $12.99 billion in revenues from recorded music, publishing, and other income streams. This striking figure indicates a substantial increase of nearly $1 billion compared to the $11.99 billion generated during the same period in 2022. The music industry's three giants, with Universal Music Group seeing half-year revenues reach $5.57 billion, Sony's music revenues reaching $4.47 billion, and Warner Music Group hitting $2.96 billion in H1 2023, have significantly bolstered their earnings within this timeframe.

#5. A new dialog opening for Music & AI

Google is reportedly in discussions with UMG to obtain licenses for artists' vocals and musical melodies, aiming to create AI-generated songs. Warner is also said to be involved in similar negotiations with Google. The move by major music labels to tap into the potential of "deepfake" songs, produced using generative AI technology to replicate artists' voices and compositions, is under scrutiny due to concerns about proper consent and artist compensation. If such a deal materializes between Google and UMG, it could be a defining moment for the music industry's stance on AI-generated content and its impact on artists' rights.

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