HOW COVID19 HAS EFFECTED THE MUSIC INDUSTRY
Today we talk about how Covid19 has effected The music industry has been hit hard by coronavirus with live performance revenue the biggest casualty. A six-month shutdown is estimated to cost the industry more than $10bn in sponsorship’s, with longer delays being even more devastating. The industry is fighting back with new ways to monetize music consumption and innovative models: Fortnite hosted a live rap concert that attracted nearly 30 million live viewers on YouTube and people are now seeing that you can buy YouTube views so they are flocking to social media providers for a boost in views for their uploaded videos. The crisis is likely to accelerate underlying trends in the music industry, based on the importance of streaming, which has grown from 9% to 47% of total industry revenues in just six years.
THE BUSINESS MODEL OF MUSIC
The global music industry is worth over $50 billion, with two major income streams. The first, live music, makes up over 50% of total revenues and is derived mainly from sales of tickets to live performances. The second, recorded music, combines revenue from streaming, digital downloads, physical sales and synchronization revenues (licensing of music for movies, games, TV and advertising). Recorded music today is close to the industry’s pre-piracy peak, a testament to the growing adoption of streaming services by both music labels and consumers. Streaming now makes up almost half of recorded music revenue.
SALES AND STEAMING
In the wake of the pandemic, physical sales, which represent a quarter of recorded music revenues, are down by about one-third – unsurprising given the closure of retail stores – while digital sales have fallen around 11%. This aligns with general falls in discretionary spending. Evidence also shows that the way people listen to music is changing in light of coronavirus. In China, Tencent Music Entertainment (TME) reported changes to listening behaviour during the pandemic, with more consumers using home applications on TVs and smart devices. “While there was some impact on our social entertainment services, we have started to see a moderate recovery recently. In the first quarter of 2020, online music subscription revenues increased by 70.0% year-over-year.
The number of online music-paying users reached 42.7 million, a year-over-year increase of 50.4%.” Tsai Chun Pan, Group Vice President, TME Content Cooperation Department. Spotify, which also added subscribers during the first quarter of this year, has likewise noted the change in consumers’ routines, saying that daily habits are now reflective of weekend consumption, as well as relaxing genres rising in popularity. In terms of the amount of music consumed, initial data showed a reduction in streaming of 7-9% in some markets – though this appears to have recovered. At the same time, on-demand music video streams have increased. The reasons are linked to a change in behaviors: the pandemic has intensified peoples’ focus on news media (especially TV), while fewer commuting journeys and the gym closures have shifted listening to different parts of the day.
The music industry is also subject to reductions in advertising spending that are happening worldwide which is why people are looking to buy cheap SoundCloud plays and other music promotional offers to increase their popularity. A survey by the Interactive Advertising Bureau shows that around a quarter of media buyers and brands have paused all advertising for the first half of 2020, and a further 46% have reduced spending. This, combined with an approximate one-third reduction in digital ad spending, will affect ad-supported music channels – and therefore both total industry revenue and individual income for artists. Spotify announced that it missed its first quarter advertising targets in light of changes to ad budgets.
On the distribution side, there is a growing list of artists delaying releases to later in the year. In part this is due to the inability to use tours to promote new albums, and live music in general has been dramatically affected. An extensive list of major concerts and events have been cancelled. As long as bans on large gatherings continue, live performance revenue is almost zero – effectively cutting the industry’s total revenue in half. Ticket and merchandise sales aside, a six-month shutdown is estimated to cost the industry more than $10bn in sponsorship’s, with longer delays being even more devastating.
In addition, the post-pandemic outlook appears challenging and growth forecasts for live music are expected to be revised significantly. Rebuilding consumer confidence in the sector will be difficult: one survey shows that, without a proven vaccine, less than half of US consumers plan to go to concerts, movies, sports events and amusement parks when they reopen. This will affect artists hugely – they generate around 75% of their income from live shows, even as data shows that a growing share of live music revenue goes to the top 1% of performers (60% in 2019, versus 26% in 1982). In response to the immediate pressures, the industry has developed actions to mitigate the impact of COVID-19.