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Music Business News, July 18, 2017

SoundCloud and other streaming services buckled under the pressure of the music industry. Also, figures indicated that the richest artists in the world make 75-percent of their income from touring. And Warner Music Group acquired Songkick.

 

backstage

 

SoundCloud, Other Streaming Services Hitting Obstacles

 

Analysts indicated that legal streaming services are reducing piracy, but also making money difficult to make for services like SoundCloud and others.

 

According to an article in Wired, SoundCloud is not the only one struggling to thrive in the current music industry. The startup, founded in 2008 has raised $193 million in funding to date, but also had to lay off half its total staff in early July.

 

Co-founder Alex Ljung said in a blog post that the layoffs were intended to help make the company profitable: “By reducing our costs and continuing our revenue growth, we’re on our path to profitability and in control of SoundCloud’s independent future.” The company’s new premium tier, launched last year, was a first step towards this same end.

 

Despite rumors SoundCloud was going to fold, Ljung has been insistent that the service will survive. Still, it is not alone in its struggle to be profitable.

 

In the current music business, there are two business models: Apple and Amazon’s “subscription-only” model; Spotify, Deezer and SoundCloud’s freemium models.

 

Chris Carey, founder of Media Insight Consulting explained, “Music has been perceived as free for a long time … There’s a perception barrier in getting people to pay for music. You’ve then got the challenge of them competing against each other and the success of one probably harming the other.”

 

Spotify is the leader of freemium, with 53 million paying subscribers. Apple Music has 28.2, and Amazon has 16 million. SoundCloud has 39.1 million paying subscribers across all the other streaming services.

 

Despite its position as a leader in the market, Spotify’s latest financial reports showed it increased its losses by 133 percent in 2016. Alexis de Gemini, Deezer’s managing director said the company is planning to turn a profit by next year.

 

Despite challenges, Apple, Amazon and Google’s music services do not feel the push to be profitable because of their huge cash supplies. However, they still struggle. For instance, Apple executive Jimmy Iovine said a free-tier subscription would make his job easier and would also significantly boost its popularity and total user base.

 

Streaming services have provided a huge boost to the music industry and have also significantly curbed piracy. The UK Intellectual Property Office reported that from March to May 2016, 70 million tracks were accessed illegally online, 18 million fewer than the same period of 2015.

 

BPI spokesperson BPI said, “Whilst individual companies have to respond to their own particular circumstances, overall we’re seeing encouraging growth in consumption of music driven by audio streaming … This is also resulting in an accompanying increase in trade revenues, which last year rose over five per cent, as more consumers switch from ‘free’ to monthly subscriptions.”

 

The BPI indicated that the UK puts out about 1.3 billion audio streams per week, and that this number could hit 70 billion for all of 2017. Castaldo said, “We appear to have reached a point where an increasing number of fans, including younger Generation Z consumers, appreciate the benefits of investing in music.”

 

This surge in popularity for music streaming services may mean only one platform can thrive. Carey explained, “Generally speaking, the internet likes one winner … For SoundCloud or Deezer to catch up with Spotify and Apple is going to take some doing.”

 

He argued, however, that innovation may be the key to future success for any of these companies – a place where all streaming platforms have felt challenged. Exclusive content did not draw in a significant number of customers, and other attempts have fallen flat. As long as customers do not understand exactly what they are paying for, streaming will struggle, which may be difficult for artists. Carey elaborated, “ The consumer perception of paying for streaming does not equate to paying the artists – whereas for live tickets it seems much more clear cut that you’re giving to artists.”

 

Richest Artists Earning 75-Percent of Income from Touring

 

Even though streaming is delivering better for artists than it has previously, the real money makers in the industry are making a majority of their money from touring.

 

According to Digital Music News and a list posted on Billboard, music streaming has given record labels a “record-breaking” revenue boost, but the richest artists are still making over 75-percent of their income from live shows and touring.

 

Beyonce makes 88-percent of her revenue from live shows: $4.3 million from sales; $1.9 million from streaming; $1.3 million from publishing and $54.7 million from her tour.

 

Her “Formation World Tour” sold 1.2 million tickets in North America and grossed $161 million.

 

Legacy acts like Guns N’ Roses and Bruce Springsteen made 96 and 97 percent from their tours, respectively. Guns N’ Roses got $670,800 from streaming, $771.7 thousand in total sales and $499,600 from publishing. But from touring, the group made $40.4 million.

 

Bruce Springsteen earned $100,000 less than Guns N’ Roses, $40.9 million gross from his tour last year.

 

Superstar Drake only earned 37-percent from touring, though he was the fourth-highest-paid artist in 2016. He earned millions from audio and video streams and, thanks to a co-tour with Future, $13.6 million from live shows.

 

A broader look at the numbers showed that, while streaming makes up the largest part of major labels’ revenue, live shows are a huge boon for the industry overall. Live concerts plus streaming are 73-percent of total earnings in the music industry.

 

Warner Music Group Acquiring Songkick

 

Warner Music Group (WMG) bought concert discovery app Songkick, minus its ticketing business, once known as Crowdsurge.

 

Music Business Worldwide reported that the move was led by Len Blavatnik’s Access Industries, owner of WMG and a major shareholder in Songkick.

 

Songkick merged with Crowdsurge in 2015, but Warner is leaving out the live ticketing component, likely to avoid participation in Songkick’s protracted legal fight with Live Nation.

 

Songkick gets 15 million new fans per month and has worked with Metallica, J. Cole, Mumford and Songs, Pixies, Red Hot Chili Peppers, Paul McCartney, Adele and a number of other artists.

 

Thanks to the deal, WMG will have control over Songkick’s concert discovery app, the website and the Songkick trademark. WMG will also take on some of Songkick’s employees.

 

The Songkick concert discovery app will now be a standalone brand managed by WEA, WMG’s artist and label services arm.

 

Warner explained that the acquisition, “expands our growing network of direct-to-fan destinations and will lead to additional offerings for Songkick users.”

 

President of WEA Tony Harlow added, “Fans all over the world trust Songkick to help them find events featuring the artists they love. It’s a passionate, highly engaged music community, always on the lookout for new experiences … Bringing together Songkick’s discovery platform and world-­class technology with our existing e­commerce expertise and global reach represents a powerful step in strengthening and evolving our direct-­to-­fan capabilities.”

 

Songkick CEO and co-founder Matt Jones stated, “Songkick was founded on the promise of improving the live experience for fans and the artists they love. Over the years, we have helped tens of millions find their next great live experience. And today, I’m excited to pass the baton on the discovery service to the great team at WMG, an ideal organization to carry on this mission and to take it in new, innovative directions … And, on behalf of the many artists and fans we’ve served over the last decade, we are committed to continuing our litigation against Live Nation and Ticketmaster independently.”