Hey there, music aficionados and casual listeners alike! Are you ready to rock out to some exciting news from the world of music streaming? Well, even if you're more of a 'press play and chill' type, stick around, because things are getting interesting - and I promise to make it as entertaining as a karaoke night with your tone-deaf uncle!
The Big News: A Change is Gonna Come (not just another remix)
Goldman Sachs Research, (yep, those folks who usually talk about stocks and bonds), are tuning into music streaming. They're like that friend who suddenly got into vinyl and won't stop talking about it (facepalm). According to their latest report, which I read and misinterpreted so you don't have to, (you're welcome), the music industry may be strumming its way to a major structural change.
The Numbers Game: Where math meets music.
Before we dive into the juicy stuff, let's look at some boring numbers. Global revenue for recorded music is set to grow 7.5% in 2023. The compound annual growth rate is expected to be a toe-tapping 8.6% from 2023 to 2030. Lisa Yang, the head of the European Media and Internet Research team at Goldman Sachs, says streaming growth will remain healthy, with a CAGR of 11%. In layman's terms, streaming is here to stay, even after the boys of summer have gone (yeah, I went there, fight me…).
A Sea of Songs: From a trickle to a torrent.
Here's a fun fact: since 2017, the number of songs released on streaming platforms has soared. It's like everyone and their dog decided to drop a single. And we're lapping it up; music streaming consumption has also increased by 2.5 times. But hold your applause because there's a twist: the revenue per stream has fallen by 20%. You’re getting more cake, but artists are getting smaller slices.
Money Matters: When less is... well, less.
Now let's talk cash. Music revenue, as a percentage of what we spend on entertainment, is like the forgotten middle child, lower today than it was in the good ol' days of 1998. And get this: the average revenue per user (ARPU) on paid streaming services has plummeted by 40% since 2016. It seems streaming services like Apple Music and Spotify got a bit generous with family plans, cutting prices for bundled users. I mean, sharing is caring, but maybe not for their bank accounts which in turn impacts their content creators.
The Big Question: To charge or not to charge… more?
So, what's the industry's next move? You guessed it. Price increases! Recently, several big streaming platforms have nudged their prices up for the first time in a decade. Goldman Sachs thinks this is just the start of regular price hikes, especially with inflation doing the cha-cha.
Superfans to the Rescue: Cha-ching for the next big thing.
Here's where it gets really spicy: "superfan segmentation." Sounds like a superhero team, right? Well, it's actually a potential $4 billion opportunity. The idea is simple: not all music lovers are created equal. Some are just casual listeners, and others are superfans who would probably sell their grandmas for a backstage pass to their favourite artists. Right now, streaming services charge everyone the same flat fee, which is like charging the same ticket price for nosebleed seats and front-row spots.
Goldman Sachs thinks there's big money in catering to these superfans. How? By offering them more ways to connect with their idols through their streaming platforms. Imagine paying extra for a virtual meet-and-greet with your favourite artist or exclusive access to unreleased tracks. The potential is huge: an extra $2 billion in revenue by 2027 and $4 billion by 2030. That's a lot of fan love!
Rethinking the Money Melody: A new tune for payouts.
Now, let's talk again about how artists get paid. Since the Stone Age of streaming (around 2008), the payment model hasn't changed much. It's based on the number of streams, with each stream over 30 seconds counting the same. So, whether you're jamming to a 3-minute pop hit or zoning out to 5 minutes of rain sounds, it's all equal in the eyes of the streaming gods.
But here's the twist: this one-size-fits-all approach might be getting a makeover. Goldman Sachs hints that industry bigwigs are brainstorming new payment models. One idea is a user-centric model, where your subscription money goes directly to the artists you actually listen to. Another is an artist-centric model, focusing on the value an artist brings to the platform. What’s a little funny (not funny) about this is that it’s taken them this long to acknowledge the inequities and to make moves to manage them…
Challenges and Choruses: Navigating the new tune.
But of course, new systems aren’t without sour notes. For starters, a system that directly rewards number of streams can lead to some shady practices, like streaming fraud (yes, that's a thing). Also, algorithms might start favouring lower-royalty content, leading to a playlist full of musical filler.
Despite these hurdles, the industry seems ready to embrace change. It's finally deciding to learn the guitar after years of air-guitaring.
Encore: What does this mean for you and me?
So, dear reader, what does this symphony of change mean for us, the humble music streamers and creators? Well, expect to see more tailored offerings, maybe some price hikes, and hopefully, a fairer system for the artists we love. It's an exciting time for music streaming.
In the end, whether you're a casual listener or a superfan, one thing's for sure: the music streaming landscape is changing, and we're all here for the concert. Just don't forget your virtual lighter!
Outro: Tune in next time…
Thanks for joining me on this musical journey through the latest industry insights. Stay tuned for more quirky updates from the ever-evolving world of music streaming. Until next time, keep your playlists fresh and your enthusiasm high. Rock on!
Want to read the real research (rather than the mildly sarcastic interpretation)? Here you go: https://www.goldmansachs.com/intelligence/page/music-streaming-services-are-on-the-cusp-of-major-structural-change.html