MBW Views is a series of exclusive columns written by notable music industry figures…who have something to say. The following comes from Kim Bayley, chief executive of the British Entertainment Retailers Association.
When the leader of the world’s most powerful music company speaks out, it’s worth paying attention to, and reporting on Sir Lucian Grange Recent speech at Universal Music capital markets day The briefing is particularly interesting for streaming services and retailers.
Grange’s comments offer positive insights into the changing relationship between record labels and their go-to-market partners, but point to at least one important area of potential tension.
The key and opening soundtrack of Grange’s The presentation to investors was clear: “Streaming has led to a quantum leap in music acquisition and monetization, and streaming will continue to drive industry growth for many years.”
As Lord Lucien admits, the most important driver of record industry revenue is now driven by streaming services Subscription revenue.
“No one took out a Streaming Subscription Just because a particular artist is releasing a new album.
What has long been a core competency of record companies – discovering new artists – has become increasingly less influential on the industry’s financial health. The new release is critical for building engagement and generating physical sales on the streaming platform, but from a financial perspective, its significance is limited.
In other words: no one comes up with Streaming Subscription Just because a particular artist is releasing a new album.
From a value perspective, the top four albums of 2023 combined account for almost no market share, given the impact of including pricier physical formats. 1% UK recorded music revenue.
Catalogs are more important than ever, high-profile chart hits generate less cash than ever, and a core indicator of recorded music success is the number and value of streaming subscriptions.
This is important because it signals an irresistible shift in the balance of power between record labels and streaming companies, with streaming companies now generating the majority of record label revenue.
Streaming companies are more than just “channels” – they’re market makers.
Historically, record labels have long held the power in their relationships with retail partners, and they have been willing to use their power.
I believe that streaming creates a more equal power relationship between record labels and their retail partners, which is fostering a more collaborative music business in which both parties see it as important to help each other grow and thrive. Mutually beneficial.
We are equal partners, both parties have their own core capabilities – record company Provide music and streaming companies Drive revenue.
Mutual recognition of these complementary strengths appears to be a solid foundation for a positive relationship.
Sir Lucian is rich: We shouldn’t limit fans’ ability to express their passion for music £11.99 One month. Many people want to spend more money – to get more. The key question is how best to meet this need.
The underlying larger issue was another focus of Sir Lucien’s speech: the opportunity for better services “Super fan” Individual artists offer more targeted, higher-priced goods and services.
The ERA can claim to have some track record in this area. Back in 2018, we argued on the MBW blog that the industry needed to cultivate (and even cherish) its super fans.
We conducted a groundbreaking study of the fan base in 2022, which gratifyingly pointed to many of the opportunities highlighted during Universal’s Investor Day program last week.
Sir Lucian is rich: We shouldn’t limit fans’ ability to express their passion for music £11.99 One month. Many people want to spend more money – to get more.
The key question is how best to meet this need.
The obvious answer is Retailer. Just as streaming services have contributed significantly to the recorded music industry’s return to financial health in the digital realm, high street retailers were the first to spot the resurgent demand for vinyl and help set it on its path to becoming a source of revenue . That’s it today.
The long-gestating D2C conversation…
History shows that record companies need entrepreneurial intermediaries to effectively reach consumers. These can be Established Retailer or new varieties directly to fans intermediary.
However, there is another perspective, one mentioned by Universal’s chief financial officer Boyd Muir during the same investor day presentation.
Muir revealed that Universal Pictures’ own D2C Business is being generated now €548 million From 1,300 individual stores – approx. 5% Proportion of UMG’s total revenue.
From a profit perspective, Cut back on your retail customers Direct selling clearly has significant advantages, but it’s not necessarily the path to market growth.
“Mutual recognition of each other’s strengths will be key to truly leveraging each other’s strengths. Opportunity for super fansjust like streaming media.
Back in 2012, vinyl records were at an all-time low. At that stage, record companies were busy removing vinyl records as much as possible. Third-party retailers (in this case, independent stores) need to be focused to spot opportunities in adversity.
So I believe D2C and the pursuit of super fans will prove that. As Sir Lucien now acknowledges, middlemen (formerly known as retailers) are best placed to increase revenue from consumers.
Recognizing each other’s strengths will be key to truly leveraging each other’s strengths Opportunity for super fansjust like in streaming.
When it comes to super fans, no one knows how to best attract them than specialty retailers.global music business
