Streaming Slowdown. What Slowdown? With Mark Mulligan
- Eric Doades
- 9 hours ago
- 38 min read
In this episode, Dmitri speaks with Mark Mulligan, veteran tech analyst and leading digital thinker from MIDiA Research. Topics include the slowing growth of streaming revenue, shifts in market share among major and independent labels, the rise of the global south in subscriber numbers, and the impact of super-premium subscriptions on monetization. We also talk about the future potential disruptions from AI and legal challenges and how the music industry might adapt and innovate in the face of these changes.
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Episode Transcript
Machine transcribed
Dmitri: Welcome back to Music Tectonics, where we go beneath the surface of music and tech. I'm your host, Dmitri Viza. I'm also the founder and CEO of Rock Paper Scissors, the PR and marketing firm that specializes in music innovation and music tech. Today I am talking to Mark Mulligan from Media Research. As regular listeners know, mark always helps us put what's going on in music in a wider context.
He has a unique vantage point, completely driven by fact and actual data. We cover a wide range of topics. We talk market share. Who grew in 2024 and why was one of them Sony? We dive into the quote, global south and what that means for the industry long-term, and we get into the overall forecast. How durable are we?
He also told me when you have an industry that has a long-term prognosis of stable but modest growth. All it takes is for AI to [00:01:00] blow up and legal cases not going the direction that rights holders want. And suddenly the difference between growth and decline is just a few percentage points. But first, the news with Tristan New Year, Yeager and me.
Alright, we are here with the Rock Paper Scanner, our weekly news roundup, which comes in email form, but also in podcast form where Trisha New Year Yeager, our chief strategy Officer. Hey, tri.
Tristra: Hey, Dimitri,
Dmitri: Tricia and I, or Tricia and Jade or Tricia, and somebody comes in and we just go through a couple of the headlines just to, to share kind of things that caught our eye, et cetera.
I'll kick it off, Tricia, but I can't wait to see what you've come up with. I love media research. Everybody who listens to this podcast knows and Tatiana Ciano put out an article this week. The music industry wants solutions, but do listeners see [00:02:00] problems? And I guess this isn't so much a news piece, but she really just talks about how you have to align what the listeners' needs are, what the artist's needs.
The label's needs the streaming services to come up with real solutions. Sometimes you're just solving a problem for one of them. She says the first step is to map out. What problems these stakeholders have in common, and she goes in even further and goes through several that have overlaps. So slow streaming revenue, growth, growth.
She talks a little bit about the rising cost of fandom, and it's just interesting to think through. Fans are not worried about the slow streaming revenue growth, so how are you? Solving this for one party but not the other. The one that I thought was really interesting. She also talked about demand for concerts exceeding supply, lack of ownership of fan data.
Discovery was the one that she said is the only problem on our Venn diagram that impact the trifecta, artists, listeners, and labels. Um, so,
Tristra: and that Venn diagram, if you look at just one thing from Tatiana's piece. Is so perfect. It's a [00:03:00] really great encapsulation of all the different problems and how they overlap or don't overlap, and how some, no, some of them are almost downright contradictory.
Dmitri: Yeah. So there, I started our news roundup with, not news, but just one of those interesting thought pieces. What are you looking at tr Well,
Tristra: I. Something that caught my eye in music business worldwide was AI Music Invasion. This is the headline, AI Music Invasion. 20 K bot created tracks uploaded to DR each day.
So this is a pretty hefty chunk of all of Geezer's daily uploads. And why I thought this was interesting is we're starting to see what many people have feared, hoped for. I don't know. Depends on where you're standing. A AI music that is generated and uploaded to streaming services is. Our reality right now, and the volume is pretty intense.
So it'll be interesting to see this is gonna be a problem. I think that is gonna have to get solved in the next few months, or at least discussed in depth. How do we deal with this music? Does this music belong on, um, DSPs? How are we gonna remunerate the [00:04:00] creators, quote unquote, like, what's going on here?
So this is, it's a problem that's evolving that we are gonna have to solve by chasing after it.
Dmitri: Are you not listening to a bunch of AI generated music tri? Isn't that what you listen to all day? I just
Tristra: listen to the Cure. No, I'm just kidding. Good on you. Good on, on you. I listen to, I, I believe I don't just le you know, I guess it depends on how you use your streaming service and no judgment.
You do, you everybody. But I tend to actually look for artists, look at who they are. I read artist bios. I look at who writes songs. I know I do all sorts of weird stuff. That is probably not typical Spotify user behavior. I don't know. But it's, it's, I'm record source now. What can I say?
Dmitri: I do like to look at the bios and I've been doing it more and more in Spotify and streaming services, and the other day I saw one and somebody's bio was, blah, blah, blah.
That's it. Three words and I was missed. I've seen some pretty
Tristra: off color emoji bios too, depending on, you know, how old the artist is.
Dmitri: I actually like the songs that are only named with emojis that have 50 emoji icons. I can't find [00:05:00] them ever, but I, yeah.
Tristra: Hey, music tectonics listeners, send us your favorite emoji icon, title, song, album, or artist.
Dmitri: I also caught an AI related story in music business worldwide. This is going Trisha. This is going like big, deep existential on us, but this article was called Ex Google, CEO. Eric Schmidt says AI that is as smart as the smartest artist will be here in three to five. Years. And so he is just talking about like, what are the larger consequences of having this level of knowledge on your phone in your pocket.
And he also predicts that we are around six years away from the next step beyond artificial general intelligence, artificial super intelligence, which is the theory that there will be computers that are smarter than the sum of humans. Humans,
Tristra: yeah. What, how would we even know though, if they're smarter than us?
Have you ever talked to someone who's dumb? I'm sorry. To put it this bluntly, but like, they don't know what they don't know. Like we wouldn't even know if a computer was super smart is my argument. But a music industry problem,
Dmitri: the place where the article goes and you know, it's a little bit about [00:06:00] human artistry and AI and, and what happens with that.
But what, where it really goes is to the topic of. The fact that some populations in the world are not growing fast enough to keep their population around doing the work. Mm-hmm. And that the real battle is between say, the United States and China to race for this super AI because it allows us to compete when we have lower and lower populations around the world.
And that's the other piece of it that he really brings in, is that the fear is that jobs will be eliminated. Eric Schmidt says that actually whenever there's been automation, more jobs are created over time.
Tristra: I don't know. Yeah. Yeah. Though, it's not like you can't take a West Virginia miner and suddenly turn them into a data scientist comp engineer.
It's a difficult, it's like the what kind of jobs for whom, but that is true. Just looking at a population level, general statistical perspective. Hey, you brought up something interesting, Dmitri. That's I think, on a lot of people's minds, and I'm sorry to be a Debbie Downer here, but we appear to be in the midst [00:07:00] of a trade war.
That's been sparked by tariffs and there's been some really interesting reporting from a music business perspective in a bunch of places. One article that caught my eye recently was in the Consequence of Sound and has a great title record, scratch How Tariffs and Uncertainty are Hurting Vinyl Manufacturing in America.
Hmm. So this is a really important issue for a lot of artists. Vinyl manufacturing was difficult to begin with and there was often lots of lead times and. People were trying to build capacity and now we're looking at a big setback for that world. I've also seen some similar reporting in Billboard about merch getting prohibitively expensive for artists.
So while you know, you gotta wonder, are there gonna be really creative, like DIY dirt bag responses, like you buy a bunch of Salvation Army. T-shirts and you start scree printing them yourself. Okay, are we gonna go back to a more D-I-I-D-I-Y aesthetic, or completely different other kinds of merch? This could also be maybe the advent of digital merch finally catching on for real.
But one, one other [00:08:00] little thing that was caught my eye that may not be on everyone's radar, but I'm sure there are hardware manufacturers thinking hard about this, that this was in the New York Times, and the headline is China Halts Critical Rare Earth. Exports as trade war intensifies. So China is the sole, almost sole producer, not completely.
They have an almost complete monopoly on very specific minerals that are invaluable to certain kinds of magnets and battery manufacturing. These minerals exist elsewhere in the world. Including in the us but there's no place to refine them. 'cause refining them is really toxic and dirty and expensive.
Interestingly, we're looking at a situation where some really important elements in tech gear manufacturing, including in synths, could be very difficult to come by. And there's already sort of a scramble worldwide to secure supplies if China is not going to have an export license to your company. So it's a, it's, we live in interesting times.
Dmitri.
Dmitri: Well, and we live in global times. These little, little, I shouldn't say little. These trade war [00:09:00] tiffs are having an impact on American companies in a way that maybe they wouldn't have 50 years ago. Yeah. In previous times where tariffs were discussed. And the challenge there is the supply chain is so intertwined at this point.
Mm-hmm. And so. Any little ripple in one, one part of the world can impact another part of the world in ways that are maybe unintended, so it's complicated to flip things again. Music business, Worldwide's Daniel Tensor maybe gave us a a little bit of hope. Tariff proof, recession proof music industry will thrive despite global uncertainty.
TD Coen. Analysts say, so he's summarizing this, this report. We generally view the music industry as being attractively defensive, given the currently overly dynamic political economic situation. He talks about the amount of revenue that's coming from subscription streaming, which are unlikely to see meaningful increases in churn, even if the economy goes into recession.
So there's a variety of kind of ways there. And analyzing this and looking at it, they say, not only is music still relatively inexpensive, it's [00:10:00] also benefited from a vastly improved consumer experience from streaming services offering access to a library of virtually all music ever created on portable devices.
People have important emotional connections to music that become more important during times of stress. While majors and DSPs do have some ad exposure, it's less than 20% of revenue, and historically, the live. Music business has also been resilient during recessions. We think, again, due to audience, affinities to music, and also because concerts are time limited events.
Mm-hmm. So there's a variety of things there. You know, the whole goal of all of this is to say they rate Sony U-M-G-W-M-G, and Live Nation as a buy while giving Spotify a list attractive hold rating. There's more details in the article, but it's just nice to see that maybe there is some hope for music specifically in its current digital form.
Notwithstanding vinyl of course, in physical march.
Tristra: Yeah. And notwithstanding the deluge of AI generated music, which I think is gonna be interesting to see culturally, how people value things like there is it, it is still more [00:11:00] expensive to purchase a painting versus a photograph, right? So will there be a kind of aura around human created art?
I think so, and I think it will translate into monetary terms.
Dmitri: Yeah. This has been interesting. Tricia, we covered all over. Did you have one more thing?
Tristra: No, that's it. Let's, let's hit it and quit it. Dmitri. That was great. Thanks so much, Dr.
Dmitri: Mark Mulligan is a music Tectonics og. He was the opening keynote at the inaugural Music Tectonics Conference in 2019 as and has spoken at the conference or pre-conference pretty much every year since. He's a long-term tech analyst and a leading digital thinker with more than 20 years of experience working as leading.
Global music, entertainment, and tech companies. His company, mid Research predicts the future of music and innovation, and then founders go and build those companies who in turn come and hire my company, rock Paper, scissors, or show up to the [00:12:00] Music Tectonics conference looking for investors, co-founders, label partners, and so forth.
So along with execs at the biggest music companies. I listen to Mark and the entire media team very closely, so it's always an honor to have him here on the podcast predicting our future or looking at the past and telling us what's coming down the road. Hey Mark. Thanks for coming back.
Mark: Hey, thanks for having me.
I mean, that sounds like an ecosystem you just explained there.
Dmitri: Yeah, it is. It's true. It's, I think it's why we like each other so much. It's a good synergy. You know, your last appearance was a recording of you at the conference in October. It was the bifurcation debate that you did with Tatiana Sirano.
Who knew at that point what was gonna turn out in political debates or any other kind of debate. But our podcast listeners love the episode, but a lot has happened since October, and you guys have done a lot of research. You've looked at what happened for the entire year of 2024, so I think there's tons that you can share today.
How did recorded music revenues do 2024?
Mark: Not bad. Excellent. [00:13:00] Not great, not bad. Okay, next question. No, I mean, it was a, um, it's, we've been talking about a long time now that the streaming slowdown is gonna come. That doesn't mean the decline, it just means the rate of growth is getting slower and as a consequence.
The music industry gets slower because streaming is such a big part of the music business, and we really saw that last year total growth was about 6%, but that was really boosted by expanded rights, which we'll get into in a bit. But that's basically. All this stuff around merch and live and everything else.
If you take that out, then growth was closer to between three and 4%. So that's, as I say, it's not bad, but when you factor in inflation, et cetera, it's not amazing either. And the growth was really different depending away. Sat in the world. So Global South, really strong growth. Us not great growth uk not great growth.
It wasn't bad, but we are definitely at a stage where it doesn't take much. [00:14:00] It from an okay year into a bad year or indeed into a good year, but we're at that sort of stage of growth when you're in low single digits percent growth, when you've got inflation at a decent rate as well. It really is all about optimizing and squeezing out every bit of efficiency and effectiveness you can get in the system.
Dmitri: Let me ask a stupid question. 'cause I think that's part of the job of a podcast host. It was growth, right? Not only was it profitable, but it also increased from previous years. Yeah. You're just saying that it increased less than it's increased in recent years. Yeah. That's still pretty good, isn't it?
Mark: Oh, it's 100% good.
And you know, we shouldn't ever get complacent about the fact that this is still a growth industry. You know? It is just, is the growth at the level it should be. When most of the world is not yet converted to streaming, for example, oh, most of the west is, most of the world isn't. There is a huge amount of growth yet to happen in emerging [00:15:00] markets, but it's also the, I'd be a little less critical about the rate of growth.
If there weren't challenges in the system, and there are lots of challenges in the system, the fractional nature of streaming royalties doesn't work for the majority of artists. It works for big artists, it works for big labels, but doesn't work for others. Um, we have a whole bunch of disputes and debates going on at the moment.
You've got the bundling issue in in the us. Has now gonna be codified into major label deals or that bit about discounts with the streaming services for having audio books in there. We've got two tier royalties coming in, which is upsetting part of the market and making parts of the market happy. We've got questions about whether the social platforms are paying enough, particularly TikTok, uh, about whether artists can build a career.
About what's happening to people's relationship with music when so much of it is leaned back and those playlists are filled with either [00:16:00] AI music or production music, or commissioned for playlist music. So if we had an industry where everything was looking really positive and it's just, yes, this is a nice, stable industry.
So with stable growth. A few percent is perfectly fine, but it's not. It's an industry that has got a huge amount of question marks in it at the moment, and that is the risk about when you have relatively modest growth, all you need is one of those things to turn into a crisis and suddenly got trouble.
Okay. Now do we think that's gonna happen? No. We think that there is enough growth, and those changes tend to happen fairly slowly, but it certainly raises the risk profile.
Dmitri: So I have heard you talking about the slowing of growth. That growth is continuing, but it's slowing as a percentage year over year.
And what I'm hearing you say is that is not a existential crisis at the moment.
Robot: No.
Dmitri: But if that growth continues to shrink year over [00:17:00] year, then it starts to look like it is a. A longer term direction, is that right?
Mark: So I think there is a longer term direction. Growth is slowing and it will continue to slow.
You know, you've seen loads of those sort like investor and analyst charts with a slight hockey stick growth and then it sort slows at the top. So we are getting to the top of the mountain. It, it is going to be that sort of, not plateau, but certainly much slower steadier, long-term growth, which is why things like price increases.
When you have an industry that is, has a long-term prognosis of stable but modest growth, then all it takes is for AI to blow up and legal cases not going the direction that the rights holders want, and one big disruption, and suddenly the difference between growth and decline. Is just a few percentage points.
Dmitri: Got it. Okay. All right. We'll come back to a little bit to like where things are going, [00:18:00] but you've done so much over the last month in terms of publishing reports and blog posts and content around all the analysis you've been doing. What one thing that I think people are interested in that you've written about what's changed in terms of market share among labels and also what about when we look at majors versus indies versus artist direct shares?
Where are we there with 2024?
Mark: So the thing about market shares in the music business, particularly as we are at this more stable growth stage, is it doesn't change very quickly. Normally we are talking about fractions of a percentage point of market share each year, and what you can see is the trends tend to play out over a few years rather than over a single year.
So are. Are losing a bit of market share every year. Not much, but losing a bit. Indie labels are gaining market share. Massively, but they're gaining a bit. So it's steady growth within the majors. Water music didn't have a great year. Sony has had yet [00:19:00] another really good year. So Sony is the one that is gaining market share.
In fact, when you look at the recorded music market in its entirety, you have universal music, water, music, Sony music, independent labels, and artist direct. The indie labels and Sony were the only two constituents that actually gained market share in 2024. And remember, Sony is one of the world's largest indie labels because of awol, because of the orchard, et cetera.
So it is also benefiting from the growth of independent labels. The one thing. At risk, it sounded like I'm going to talk out both sides of my mouth at the same time. The one thing that did change really quickly every year was Artists Direct. So artists Direct. Those are artists who are self releasing via platforms like TuneCore and cd, baby and district and et cetera.
And they were growing at an astronomic rate for many years. And then that growth almost ground to a halt in 23. And in 24, it is it, they grew more [00:20:00] slowly than the total market. A big part of it is things that have happened behind the scenes in terms of royalties. So one really good example is Spotify's discovery mode with distribution platforms going at platform level onto discovery mode.
That means. Potentially higher performance, but they're sacrificing a portion of the royalties to do that. And then of course, we've got the two tier royalties, or as Universal calls it, artist centric, which means that if you have fewer than a thousand streams and a certain number of listeners, your song will not receive any royalties.
You'll essentially be demonetized. Those things have started to kick in. So artist Direct is still a big important segment. $2 billion of revenue in 24, but the rate of revenue growth is slowing. And the reason why this is so important is because the actual number of artists self releasing grew by about 17 or [00:21:00] 18%.
So there are more people self releasing without a record label. And on average they're getting paid less because revenue growth is slowing. You mentioned bifurcation before, which is in a nutshell, the music in industry is gonna split into two, and one side of it is going to probably build around things like the long tail consumers leaning into, create much more social, et cetera.
What are the things Tati and I identified in that debate was that bifurcation isn't just happening on its own. It's happening as a reaction. To the imbalances in today's system and two tier royalties is one of those imbalances. So if you are a self releasing artist and you are releasing and you have less chance of earning money now than you did before then.
You're certainly gonna start looking at where are my alternatives?
Dmitri: Okay. That's super helpful. I'm not sure what to do about it or what to think about it yet, but it's good to start to think about it.
Mark: Let me give you a [00:22:00] way to think about it. Okay. Um, there are many alternatives at the moment to, to mainstream streaming in terms of a place where an artist can build a fan base, et cetera, et cetera.
Three sort of global scale ones jump out. There are loads of really cool startups and there'll be a bunch of those who are in your client roster. But in terms of global scale, IE already has a big audience. Now you've got TikTok, you've got YouTube, and you've got SoundCloud, and they're all doing slightly different things, but I've been really enthused by the path SoundCloud has been on particularly this last six months.
So they've partnered with some AI companies to help creators make music. They've been introducing the sort of fan powered royalties they've got things like auto mastering, loads of just tools as a. You want in order to be able to help you build a fan base and make your music better. And then they just announced, so we're recording this now.
In the first week of April, in the last week of March, [00:23:00] they announced a two-sided marketplace in partnership with Fiverr, which is basically a place where creators can buy and sell from each other. In order to fill their skill gaps. I'm no good at writing top lines. I'll go and find somebody who can, I'm no good at mastering.
I'll get somebody who can. I'm really good at writing baseline so somebody can pay for me to go and write them baselines, et cetera. So they collectively, not only do they make each other better, they also generate meaningful income from each other. So that I think is a one way of thinking about what the alternative is.
It's a platform that does more than simply cater. Value chain, the opposite end of the value chain are and consumer what? We think is gonna be crucial is catering for the creators to make sure that they can see a path to a sustainable career. So I'm not saying that SoundCloud is the answer, but SoundCloud is doing more than anybody on a big [00:24:00] sort of global scale.
I don't want to under. Value, the fantastic work being done by so many startups. I put up a post a couple of weeks ago talking about some of these issues and I had literally dozens of startups reaching out to me saying, Hey, we're building this and it's amazing that they are. And some of those will be part of the answer, but.
Anything to appeal to an artist. There needs to be an audience. And that's what currently outside of DSPs, TikTok, YouTube, and SoundCloud have the audience.
Dmitri: Got it. Interesting. It feels like Spotify made an attempt to go in this direction at one point, and then suddenly I. Turned 90 degrees again and went back to the, this difference that you're talking about here, where they're really providing the listening experience but not the creator experience.
Mark: Yeah, I wouldn't say there is so much turned as kicked in a different direction when the record label said, there is no way on earth you are going to allow artists to self-release. You can have self releasing artists, but you can't have our artists [00:25:00] choose on Spotify, Joe. So in a sliding doors moment, if that hadn't happened.
Everything that Spotify's doing now with podcast creators, they'll be doing with music creators.
Dmitri: Okay. That is very helpful. Thanks for sort of like putting that into that context. We are gonna talk about subscriber numbers because you've been talking a lot about revenue, but market share can also be defined by users as well.
But before we get there, are there any other insights about shifts that happened in 2024 revenues?
Mark: Yeah, so it's the first year ever that streaming did not increase its share of overall recorded music revenues. It was pretty much the same as it was a preceding year down a tiny bit, almost like a rounding error down.
So it's the first year that streaming didn't grow enough to increase its share of the business, but. Two sets of things really did grow. One is licensing, so that's performance and sync, and the other is expanded rights, so that's when labels participate in the revenues of artists [00:26:00] around things like merchandise and branding and live, et cetera.
That's up to 13%. All recorded revenues now, so it's not huge, but it's certainly meaningful and it's growing far faster than the rest of the business. And it's not just an Asian label thing, right? Because this is obviously the bread and butter of the likes of Hi and j, YP, et cetera. It's also the major labels and also a bunch of bigger indies, and even some small indies too.
The challenge is we are in this era of independence where artists say, I don't want to give away everything. I want to own my rights. I want control. I just want to do a joint venture or a distribution deal, or whatever else. In order to have expanded rights revenue, you've got to get more rights from your artists.
So this is a little bit of a paradox for Western labels. How do you deal with empowered artists who want to control as much of their own career as possible, but also get them to give you more stuff so that you can go and do more with it?
Dmitri: Hmm. I wanna dig [00:27:00] into that more in just a little bit, but we've gotta take a quick break and when we come back, let's talk about the subscription of Market Share as well.
Separate from revenue, we'll be right back.
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Dmitri: Okay, we're back. This has been great. Mark. You've already given us quite a lot of insights about what revenue looked like in 2024, what shifts are happening, what market share looks like, what that implies for what's coming down the road, and revenue is a great indicator of business market health and growth.
But you've also been looking at subscriber numbers, independent of revenue, what's going on with subscription growth and market share across the dsbs.
Mark: Well, when we put out the reports, we called it slowdown. What Slowdown? Because the slowdown in streaming [00:28:00] revenue growth is not reflected in subscriber growth.
Subscriber growth was up by about a nearly 12% in 2024. That is really about double. Just a little under double the rate that label revenues grew, and there's a couple of reasons for that. One is the sort of more mundane part of it is in western markets, the streaming services are having to do more to try to get the last sort of holdouts, so more active use of free trials, et cetera.
So that brings down the average revenue per user arpu, so that that in itself means that revenue grows more slowly than subscribers. That is really like a, it's a short term factor that will fade out a bit. The long term factor is global south. So when we are talking about global south, we basically mean the world minus North America and Europe, and that is where there's been absolutely dynamic growth.
In fact, when you look at subscriber growth in [00:29:00] 2024, nearly 88 0% is that growth. Came from Global South Markets, so we've got over 800 million subscribers globally. That was up from about 730 million the year before, and the vast majority of those new subscribers came from Global South Markets. If we'd been having this conversation two years ago.
It would've been a similar trend and we'd have said, it's all China now. It is no longer all China. So you see in India, which has been a market waiting to get going for a long period of time, is finally kicking into gear, driving really meaningful subscriber growth, Brazil, Mexico, massive growth and contribution to the market.
So the streaming market, when you look at it in terms of monetized users, remember we're talking about subscribers here, not free users, monetized users. Subscribers is. They're delivering lower ARPU because they're in markets where people have less money to spend. So streaming is price more cheaply. But there's [00:30:00] also this other really interesting thing going on.
If you look at streaming revenue growth year on year for labels versus DSPs, labels in 22 grew streaming revenues by 6%, then in 23 by 10%, and then in 24 by 6% over the same period. 8% to 16% to 19%. Right? Not only.
The extra rate of growth is getting bigger every single year, and that is partly because of things like bundle deals, monetization from other means, et cetera. The Chinese DSPs, for example, boosted up by having non-music revenue, et cetera. But we've certainly got this really interesting thing going on with the streaming market, which is if you simply look at it through the lens of record labels, you are not getting the full picture of gross.
Dmitri: I'm sure [00:31:00] that's gonna continue to create some interesting discussions between rights holders and DSPs. Can I ask the, when you talk about this disparity between revenue and subscription and the impact of the global south, is this just a kind of a top of funnel moment? Will eventually the DSPs and labels as a result be able to monetize those subscribers at a higher rate, or is it always gonna be a lower ARPU when you look at different regions?
Yeah.
Mark: It's always gonna be lower and it may need to get lower in some instances. So let me give you two examples of why this is the case. So Brazil, you know, now I think it's the fourth or fifth biggest subscriber market globally, but in Brazil only about 20% of the population has a postpay data plan on the phone, and only about 20% of the population has a credit or debit card.
So that means the addressable base for subscriptions is only about 20% of the population. So when we hit that glass. Record labels gonna have to [00:32:00] decide, do we want to go cheaper? Do we want to go more mainstream? And there is an answer already in the Brazilian market, if you look at d. D has a bundle with the Telco, Tim, which is, it's massively discounted from the standard price.
It's pre. Paid bundled, mobile zero data rate. So that basically means you don't need a credit or debit card, you don't need to have a postpay plan, and you don't even have to worry about topping up or anything like that. It automatically happens when you top up your phone and you don't have to worry about your data usage.
That is the sort of thing that could unlock those bigger markets, but it has to be a lot cheaper. So that is one example of what we call a mid-tier market for Brazil. But then India, which I mentioned before, if you look at the average price of a subscription, standard subscription in India, you are looking in dollar terms.
It is about five times cheaper than it is in the us. On a purchasing power parity basis. So that's basically a calculation to account for [00:33:00] the average cost of living income, et cetera, 12 times more expensive and. Round about a billion people in India, are all of those going to be potential targets for subscriptions?
No, but there are hundreds of millions. It could be if the price was significantly cheaper. So I think what we are looking at is essentially the emergence of two different lanes for the music business globally, you might say another bifurcation, and that is the global south is always gonna behave differently.
And the thing which I find super exciting about the rise of the global South is most of these markets were not big recorded music markets in the old music business because people didn't have the money to spend on CDs and downloads, et cetera. Now you can monetize scale in a way that you couldn't before.
The music markets have really almost come to life for the first time. So 10 years ago in India, you might not have imagined about a career as an artist or a songwriter, [00:34:00] or a label head, or an agent, or a promoter or whatever else. Now there's this vibrant music market and it's a really viable career, so these music markets are going to become much more vibrant, more and better music is gonna be made.
And the global nature of streaming more that music is gonna export. So I think at the moment we look at the global South as this other thing that is happening on the other side of the planet. I think the next 10 years we will see more and more the music that we listen to, either coming from the global south or being shaped by the sounds of the global south.
Dmitri: Wow. That is the kind of thing we look to you for, mark, to think about what we're looking at now, trends, where it's going, and how that's gonna impact what's coming down the road. And I keep going back to things that you brought up right out of the gate of this conversation, because I feel like we have to unpack each one.
I'm sure there's a lot more we could talk about the global self. We could probably spend the whole episode on that. But you were also talking about this expanded rights and revenues. I think you described it as [00:35:00] things like. Artist, merch, sponsorships, branding, that stuff has always existed, but I think you're saying labels are getting in on the action and some new types of categories are coming up.
I think that's what you're saying. Tell us more about that category and what other kind of implications there are for this growth as the share of revenue source.
Mark: You either don't work in the music industry or you don't read anything about the music industry. If you haven't noticed that the record labels for the past two years have been going all about the super fans.
And the super fans are really the what is targeted by so much of the expanded rights merchandise, et cetera. And if you think about merchandise as artist t-shirts, then well, the world has moved on a lot. You can go onto Universal Music's D two C site and get an Ariana Grande scented candles, hoodie, vinyl bundle.
You can shop the Taylor Swift Jewelry and handbag range. There's just, there's so much innovation going on in terms of [00:36:00] what, what to sell around the artist brand and more. There's also more formats been experimented with. If you look at some of the Korean labels, they make manga and anime, et cetera of of their artists.
You've got things like We versus and destinations. There's definitely more new things to do, but a lot of it is basically working out new ways in which you can monetize the artist and therefore leave you to spending of super fans. All sounds great and it is. But there is this really important thing that is a massive risk, and that is, is what myself and Tatiana think about as over harvesting.
If you think about, if you're planting a field, you've got to make sure you don't over use that field. So a field might be left fallow every fourth year, et cetera, to let its nutrients come back. You're constantly watering, fertilizing. You don't harvest it before the crop is ready. But in this [00:37:00] sort of.
Pursuits of super fund revenue, there's a real risk of if they'll spend, let's get every penny outta than we can. Rather than actually, let's focus on what makes some funds in the first place and then the revenue will come organically as a result. So I'm not sure that balance has yet been struck as well as it could be.
And I think there's, just to give you an illustration of how this. Oversaturation of fandom spending is already beginning to play out. Live music is, in many respects, the ultimate super fan product. Polestar, who always do an amazing job of rounding up the live music revenue figures and you, you have a chat to go and check Polestar end of year post looking at the top 100 tours globally, revenue was up, but number of tickets sold was down.
And the average ticket price went up, which is what drove us spend. In fact, if you compare the average ticket price with the top 100 shows according to Polestar for 2024 [00:38:00] compared to 2021, they've increased by 54%. What you hear from ticketed companies is, well, it's price elasticity. You know, so people are always willing to spend the demand is there, but if people are buying fewer tickets, then is the demand really there or are you just finding that a smaller number of people are willing to overspend to get to the tours they really want to see?
Um, I know this sounds quite outlandish, but we think there will be revenue decline in the live music market. We'd originally thought that was gonna happen about 27, 28. There's a chance it could even happen in 25. Not a big decline, but a bit of a decline, not just because of all that dynamic of people spending so much more on tickets, and of course when you factor in bundles with merch and VIP and all the rest, but also the fact that so many of the smaller venues have closed.
As a consequence, you've got this supply issue of where do the smaller next generation of bands play. So [00:39:00] I think it is unlikely live revenues will decline in 25, but there is a chance they will decline because of this over harvesting of fandom.
Dmitri: So on the one hand, you're seeing growth as a category and expanded rights and revenues in both physical merch as well as live and experiences, and probably a lot of digital types of things too, which I think we could get into a little more at some point.
But you're saying. With that growth, there's a risk of burning out fans and impacting revenue across the board as well. It's interesting to me to hear about this, 'cause in a way, I was thinking, when you talk about the artist merch side, it just feels like, oh, we're doing cooler physical stuff. It's like leveraging the vinyl craze where you could go with all the new fast fashion and so many other things.
But you did use the word likeness at one point, and I'm interested that not much of what you talked about is in the digital realm in terms of name, image, likeness, which is a whole thing that's taking over conversations around revenue in the sports industry. That could have implications for the [00:40:00] studio ojibwes and the, and the real life celebrities as well.
Is that even in this category, is that still bubbling up for music?
Mark: No, it is there, although it's ironic talking about Studio Ghibli, considering that AI just completely ripped off the image. That's why I brought it out. That's fine. Brought it. But no, I think the really big difference between sports and music, excluding the Asian and some of the Japanese label as, as Korean and Japanese labels, is that most labels do not have image and likeness rights for most of their artists.
It's something that artists have historically signed over, and so now because age. Do those things themselves. Management team in negotiations with a label would fundamentally be hands off. That's ours. So there's lots that labels would like to do with image and likeness rights. It's just they don't have enough of them to do anything as a sort of like a format move.
They can do individual initiatives when they've got those rights. But they [00:41:00] don't have enough of them to essentially launch a new, a new licensing tier or a new format as such. So is there a lot of potential to be had there? Yes, absolutely. The right situation is just so messy. I mean, the solution morally dubious as it might be, is to take the, the Korean label approach.
Not all Korean labels, of course, but the K-pop type labels where essentially, and I know I'm being really reductive here, but the artists are fundamentally employees where the, the label creates, owns and monetizes and exploits all of those rights and does fundamentally whatever they want to do with them.
Once you've got that degree of control, then you can do everything you want. And that's why we do see things like anime around some artists and of course. If you were to go and decide to launch a virtual artist, then you've got just as much control as well.
Dmitri: Hmm. Well, another digital sidebar that you brought up earlier in the conversation is super premium, I [00:42:00] think you call it super premium subscriptions this year.
There's been a lot of talk about that, maybe some hints more so than actual execution, a way to squeeze more revenue out of the plateauing subscribers of maturing streaming regions. Should the industry be hopeful about the strategy and why?
Mark: It is probably gone beyond hope to need. Now, with revenue growth slowing the way that it is and even price increases aren't enough.
So if you look at the RIAA figures, looking at the, just at the us, and this is just using the RIAA figures alone, so the price increase was equivalent to 9.1%. Inflation was running at 2.9%. Subscription revenue growth was 5.3%, and RP growth was 1.9%. So what that means is you add a dollar onto the price point and your price goes up by 1% less than inflation.
So that means you add a dollar onto the price point and you're still not keeping, you've actually [00:43:00] decreased RP in, in real terms. So super premium is super important. Will it deliver 20% of subscribers really quickly? No, it might do so over the course of four or five years. But when we've gone and asked consumers what the things that you would pay for, the most important thing that they want is exclusivity.
They want to get music before other people get it. They want to get merchandise that you can't get anywhere else. They want to get first access to tickets. These things are valuable because they're difficult to do. And so let's just say that we have premium a year from now. Um, has a one or two week release window where you get the music a week or two before anybody else does.
So that's great and you know there's a really good reason to go and subscribe. What does that mean for everybody else? It's like you've gone and booked your airline ticket with a nice airline, and then suddenly you found out you've been dumped onto a [00:44:00] budget airline because suddenly it turns everybody else into second class subscribers.
Thinking about, I'm paying my 10 99 and yet I'm not getting the full quality experience. Now, it doesn't mean necessarily that results in churn. We've seen, for example, Amazon Prime video suddenly turning its entry level tier into an ad supported one. So you have to upgrade to get rid of the ads. There's a slightly cruel way of talking about is unification.
Nonetheless, it is the way that subscriptions tend to work. I think the risk about super premium. And with price increases as well is not churn. It's, it will be, if the super premium subscribers really look like they've got way more than the signed subscriber, the bigger risk is acquisition. 'cause if the average price keeps going up, particularly for price increases, then it, if you think about the people who haven't subscribed yet.
They're the ones who weren't wowed straight away, or the ones who don't have as [00:45:00] much disposable income or less willingness to pay. So it becomes harder to grow subscribers. That's probably not a problem in the US where there aren't that many new subscribers to be had, but in markets that are mid-tier markets like Brazil and Mexico, et cetera, if the price keeps growing, going up and premiums in market.
So not only is it more expensive than it was last year, you know you're not getting the full fat product. Then that could potentially affect acquisition rates. The likelihood is that the amount of extra revenue generated by the relatively small share subscribers that will upgrade will be enough to offset that.
And we've got some amazing piece of work done by Tatiana and as the, uh, media team Perry, uh, Gresham, which is on pricing sensitivity. It's a really heavy methodology, but. Turns out people are actually willing to pay way more in addition for super premium than it's currently been listed at. Mm-hmm. [00:46:00] So all of those factors, mainstream consumers, not so much tolerance for spending more, but those hardcore super fans, you can get a lot outta them if you say, choose.
Dmitri: They're paying a lot for festival tickets and concert tickets. What's double, triple, quadruple on us, much smaller monthly fee. That's really interesting context. Thanks for that.
Okay, mark. Now that you've done all this research and analysis from 2024, what has yet to hit our eyeballs, or in this case, our earballs that you think we'll be talking about in November at this year's Music Tectonics conference?
Mark: Okay, let me put in some negatives and some positives. A negative, uh, I think we will see a groundswell of discontent from independent labels about artist centric.
We've obviously had it in play for a bit now, and it's mainly affected the independent artists. Why didn't we get the groundswell of discontent from them? Because fundamentally, and this sounds [00:47:00] harsh, but fundamentally, a very large body of them. The majority are not that clued up about how the music business and royalties work, so they weren't really that aware of what was happening.
Independent record labels know exactly how the music business works. These are entrepreneurs who understand all about how a profit and loss exit sheet, et cetera. A lot of those sort of, not even tiny labels, smaller sort of independent labels are thinking, well, I've got lots of songs in my catalog that don't get a thousand streams every month.
And so what's gonna happen if fundamentally a large body of my catalog stops generating me money, and that money is gonna start going to the bigger labels, and I haven't got a choice. I have to sign this deal that's been put in front of me by Amazon and Spotify. So I think there's. I think is something we will see a lot more independent labels beginning to question why should they have to go [00:48:00] and change the, the entire basis of how they commercialize their music and streaming services.
In terms of a sort of a positive to counterbalance it, I think we will see. More and more artists doing more with their fans. And what I mean by that is whether that be continuation of getting them to do remixes and versions, audio modification, et cetera, because that is something that's been going on for years now and just continues to grow and grow.
But it's gonna be more case of lots of individual success stories rather than, oh, this is now a new tier of the market. I think we, I think there's a really good chance we will see. Some global south hits breaking through into the West. So maybe there's going to be like a Louis Fcie moment for Sub-Saharan Africa, like an Afrobeat artist or something.
Or if an Indian artist, and I think we are really beginning to see. We started to see in 23, it accelerated in 24 [00:49:00] and we'll see more of it in 25. That is the rise of Sub-Saharan African artists, the rise of South Africa as a market. If you look, we did some work with Splice recently looking at. The genres that people are using to sample with doing some work around, uh, loop Cloud data for the, the IMS report coming up soon and just seeing things like AMA Piano and Afrobeat and Afro House really beginning to rock it up.
So I think we will see more and more African sounds, particularly in electronic music. Breaking three. And then when we think about in terms of catalog acquisition, not everybody's happy with the direction of travel. And some people think this financialization of of music isn't necessarily a good thing.
But what is absolutely clear is that this is a really meaningful influx of capital into the music business. And that will start to ripple down into. Are the parts of it. More songwriters and artists are getting paydays. More labels and publishers are getting paydays, and so [00:50:00] that, I think really those are new entities coming into music publishing and increasingly master recordings as well.
I. Who are looking at the world in a different way. They're thinking they've got different viewpoints on how you make your music work. And so if we were to go, I know you're asking about this year, but we had fast forward two or three years into the future, I think we will see that those catalog acquisition funds, they have basically just become a whole new tier of music publishers.
And when they become a tier of music publishers, then they, that changes the nature of the songwriting economy, particularly if some of those, the people who own those funds also happen to own A CMO, for example. You know? And so I think that there's a lot of structural change that will happen. One more thing for maybe for 25 and three to 26.
Is, you could argue that there hasn't really been much innovation in the consumer music side of things for quite a few years, largely because it's really expensive and [00:51:00] difficult to get the rights to do what you wanna do and Spotify and everybody else, and the streaming side is already so big. So what we've seen is a lot of innovation in the services side of the equation.
Obviously we saw recently the acquisition of STEM there year. What that reflects is there is a growing body of music startups and scale-ups who are providing top tier services for smaller record labels That levels a playing field. So you no longer have to be a mega label to be able to benefit from data science.
You no longer have to be a mega label to be able to have really good royalty reporting. So I think this democratization. Of the record label landscape is a trend that I personally find really, really interesting. It might not be exciting in the same way as talking about fan apps or whatever else, but it makes it easier for smaller labels to be able to compete on a level playing field for bigger [00:52:00] labels, and that is a.
Dmitri: Wow. Amazing. Mark, I think probably our podcast listeners have decided to listen to this at half speed because you've just shot so much information out. It's definitely an episode to listen to multiple times, to unpack everything there and to really absorb it. And I realize as we wrap up here after all these years of having you keynote and debate at the Music Tectonics Conference, I'm not sure I've ever asked you on the podcast to explain.
What are the ways for music industry innovators and executives to keep up with media research's work? Can you explain the various tiers of engaging with media as we wrap up today's conversation?
Mark: Yeah, sure. Three really basic ways. One is sign up to our newsletter. The newsletter is not a place where we sell you stuff.
It's a place where we pull together all the things we've been writing in blogs, and we sometimes have free reports and videos, et cetera. So sign up to the newsletter. You can become a subscriber. Access to all of our reports and data into the analyst, et cetera. And then we also do project consulting. So it might be [00:53:00] helping you work out how to enter a new market, understanding your customer base better, a surveying creators, et cetera.
So those are the sort of the three main ways we work. And as of just yesterday. We have changed the way that we're categorizing all of our research. So we now have music industry as one vertical, and we've got fandom and entertainment. The creator economy and social. Social is just a place of its own in the entertainment world.
It's where so much of entertainment and creation and fandom, et cetera, happens. So that's why we're.
If you look across all of this sort of research and analyst companies, nobody's dedicating time to this yet. It's arguably across not just music, but all forms of entertainment. The single most important thing that has happened to entertainment. So with doubling down on that, and then entertainment and fandom is where we're building out work on scenes and fragmentation and identity.
Really getting at the culture of entertainment, not just the business of entertainment. Thanks, essentially. [00:54:00] Amazing,
Dmitri: amazing. Mark, you've been so generous with your time. Mark Mulligan, mid Research. You can find all that he just talked about@midresearch.com. Thanks for being such a big supporter of the music innovation and music tectonic community, and thanks for coming back on the podcast, mark.
I.
Mark: Brilliant. Thanks for having me on.
Dmitri: Thanks for listening to Music Tectonics. If you like what you hear, please subscribe on your favorite podcast app. We have new episodes for you every week. Did you know we do free monthly online events that you are lovely podcast listeners can join. Find out more@musictectonics.com.
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The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Weekly episodes include interviews with music tech movers & shakers, deep dives into seismic shifts, and more.
