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Music Business News, April 4, 2017

The RIAA released statistics about the explosive growth in subscription streaming. Also, Vevo capitalized on YouTube’s ad-industry woes. And AEG Presents and Barclays teamed up to buy Webster Hall.


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Subscription Streaming Experiencing Unprecedented Growth


2016 was the year subscription streaming took over, revealed recent statistics released by the RIAA.


Music Business Worldwide reported that the stats showed that U.S. retail revenues earned by subscription streaming platforms grew by 114 percent last year, reaching $2.5 billion. The growth was largely driven by paid subscriptions on Spotify and Apple Music. The number of people in the country paying for a subscription to a streaming platform rose to 22.6 million.


Ad-funded streaming and SoundExchange royalties from web radio services like Pandora was also up almost $4 billion in 2016.


These two items combined made up more than 51-percent of the U.S. recorded music industry’s entire retail value, more than the combination of downloads and physical sales.


Led by streaming, the 2016 U.S. recorded music business saw retail sales jump 11.4 percent overall. The industry in the U.S. was also up 9.3 percent when it came to wholesale (the cash that trickled down to record companies and artists).


But not every aspect of streaming was positive in the music industry last year: The cash generated by on-demand, ad-funded services like YouTube and the free tier of Spotify saw very little increase.


Ad-funded streaming platforms earned $469 million, up 26 percent. However, they accounted for only six-percent of industry retail revenues.


In comparison, subscription revenues hit $2.48 billion and claimed more than 32-percent of total U.S. market sales.


Analysts offered several interpretations: “free” services are driving people towards record-number subscriptions; “free” services are stealing customers from paid tiers; somewhere in between the two.


Head of RIAA Cary Sherman has a theory: “The unfortunate reality is that we have achieved this modest success in spite of our current music licensing and copyright laws, not because of them … That’s not the way it should be.”


Experts note it does not make sense that song creators must get a thousand on-demand streams in order to earn $1 on YouTube, whereas Apple and Spotify pay creators the $7 or more for the same number.


Sherman explained, “Because a platform like YouTube wrongly exploits legal loopholes to pay creators at rates well below the true value of music while other digital services — including many new and small innovators — cannot. It may be the same song requested by the user, on the same device, but the payouts differ enormously because of an unfair and out-of-date legal regime.”


Reports from tracking services like BuzzAngle and Nielsen indicated that these services streamed over 200 billion songs to listeners in the U.S. last year.


The latest figures from the RIAA offer deeper insight into the total paid-for subscription market, including all the factors that affect performance across the market. They also show the decline in digital revenues, which were down 22-percent last year, with individual track sale revenue down 20 percent.


The total value of shipments of physical products decreased 16 percent, even though physical products still made up over 50-percent of the market not long ago, in 2010.


Vinyl was an anomaly in the physical space, up four percent. It made up 26-percent of sales in the physical market, its greatest share since 1985.


Vevo Taking Advantage of YouTube Ad Woes


Vevo capitalized on YouTube’s battle with the ad industry last week. According to Complete Music Update, the company offered up their services to companies looking for the guarantees about the types of video content that their online advertisements will appear alongside.


The original premise of Vevo was motivated by its creators Universal and Sony who wanted to increase the ad income earned by music videos on YouTube. When the service launched, they told advertisers that official music industry content was better for driving ad views than “user generated content” on YouTube.


When YouTube started to explode, the majors agreed to licensing deals with the site, excited about Vevo’s propositions. However, they were left dissatisfied by their perception that Google was under-selling advertising on the platform.


Google is currently trying to find a way to smooth over relationships with advertisers, but is currently butting heads with advertisers who would like to get more money out of the platform. Google’s struggles are presenting an opportunity for companies like Vevo that are trying to sell ads on managed YouTube channels where “random content from random people can’t randomly appear.”


In a blog post last week, Vevo’s Chief Sales Officer Kevin McGurn stated, “YouTube is an incredible open platform that’s grown rapidly, democratized video, and created opportunities to reach a seemingly unlimited office … [but] like all opportunities, it can come with risks, and is central to the current industry conversation around brand safety.”


He added, “With hundreds of millions of hours of content created and consumed on YouTube daily, some brands have found themselves in the unenviable position of being associated with highly objectionable content. I believe YouTube will take steps to address these issues. That said, we believe there is a safer way for brands to maximize their reach today, with the confidence of knowing who and what they’re aligned with.”


McGurn went on to sell Vevo as the “safe” way to proceed: “Vevo makes up less than 0.5% of all videos on YouTube, yet according to data from comScore, 43% of YouTube’s monthly audience is watching Vevo content. With Vevo content, a brand can more effectively target where, when, and what it associates with in reaching an audience on YouTube.”


He also explained, “Vevo’s content is not UGC, it’s premium, licensed, and professionally produced, with an enormous and unique global reach. The content is vetted through multiple layers of quality control to ensure the safest environment possible for advertisers including automatic categorization if the word ‘explicit’ is in the title or content tags, and manual categorization if the content includes any of the following: vulgar language, violence and disturbing imagery, nudity and sexually suggestive content, or portrayal of harmful or dangerous activities.”


McGurn’s call was to give brands more “transparency into where and how their campaigns run, and the ability to customize how they target. We believe our clients are better served in the safer environment that Vevo offers on YouTube and other platforms.”


AEG Presents and Barclays Taking Over Webster Hall


The owners of Webster Hall sold the 131-year-old Manhattan concert hall to AEG Presents and Brooklyn Sports and Entertainment. Billboard reported, the two firms will partner to take on operating rights, assets and the long-term lease from the building’s owner, Unity Gallega. Bowery Presents will take on booking and talent buying.


BSE CEO Brett Yormak said he decided to partner with AEG 50-50 after being approached by Webster Hall’s owner Lon Ballinger about a deal: “While we were having those discussions, AEG finalized the acquisition of Bowery Presents, which used to book Webster Hall.”


Bowery had an exclusive deal with the venue until March 2014, so the team is already familiar with programming and marketing there.


The deal is a part of AEG Presents’ push to grow a presence in New York, said Jay Marciano. He explained, “You’ll spend more time trying to make money in a lesser market than you will in a great market. Los Angeles, New York and London are all great markets and it’s our view that you can’t have enough venues, because, in those cities, each venue stands on its own, each venue is profitable and each service a different segment of the market.”


AEG has grown quickly in New York. In January, the company acquired a 50-percent stake in Bowery. It brought on partners Jim Glancy and John Moore to AEG and and grabbed venues such as Manhattan’s 3,000-capacity Terminal 5, plus the 550-capacity Music Hall of Williamsburg.


AEG and BSE announced they will spend $10 million on renovations to Webster Hall’s Grand Ballroom, The Studio and The Marlin Room in order “to bring them up to contemporary standards and add a few more customer features.”


Marciano added, “You can’t replace a venue of its size and stature anywhere on the island of Manhattan, and we jumped at the chance to bring Webster Hall into our growing venue portfolio.”


Webster Hall was built in 1886 by the architect Charles Rentz and acted as a social hall for the Lower East Side’s working class and immigrant population until after the Great Depression, when it became a music hall. In the 1950s and 1960s, it was owned by RCA Records and acted as a recording studio and acoustic ballroom. Then it turned into a concert venue called The Ritz in 1980. The Ballinger family took over the venue in 1989.


AEG had been searching for a venue that held around 1,500 and noted that building a venue like Webster Hall from the ground, up in the notoriously-expensive real estate market of New York City was too costly. Marciano noted, “Webster Hall is a landmark, historical building whose use as a public assembly venue dates back to the 1800s. It’s a venue that any promoter would want to have in their portfolio.”


Yorkmark said he wants Webster Hall and other AEG/Bowery Presents venues to become “feeder venues” for artists aspiring to play arena shows at places like Nassau Coliseum and Barclays Center: “We’re trying to diversify our venue portfolio so we can connect with artists early and often.”

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