This past year has been very eventful one for the music industry. The major debates centered on royalties, the freemium model and the place of YouTube in the industry. This piece takes a look at the main digital challenges for the industry over the course of 2016.
Processing the finances.
The majority of music companies out there are still working hard to evolve their data systems. This is especially the case when it comes to how they report usage and royalties to other companies, artists and songwriters. Even where appropriate systems exist, there is still work to be done on making sure that artists and songwriters can easily navigate the data.
Artists and songwriters can’t truly audit information provided by business partners like their labels, publishers and the streaming service providers due to the lack of transparency running through the fundamentals of the deals.
A central database of music rights ownership information that shows who controls and benefits from each song and recording will go a long way in addressing these concerns. While all players in the industry agree on the need for the database, decisions on details such as how the database should be created, who should pay for it, and sources of data has remained a challenge coming into 2016.
Solving the revenue sharing dispute.
As a music lover, you simply plug in your headset anytime you need music. That’s basically it for the day, as most music lovers work, eat and even play games on bingo sites like cheersbingo.com while enjoying their favorite tunes. Have you ever stopped mid-game to wonder how artists get their money from Spotify, Apple Music and all other streaming services you use? The revenue sharing dispute has been around for a while.
This is basically a disagreement on how streaming income is split between the streaming providers and other parties like record labels, music publishers, recording artists and songwriters. Most streaming deals are revenue-sharing arrangements, even though rights owners are assured a certain per-stream payment. Since streaming services can’t sustain loss-making ventures indefinitely, DSPs have to work towards a situation where revenue sharing arrangements will always outperform minimum guarantees. Failing to do this, DSPs will simply continue subsidizing the music industry to their own detriment.
Developing more unique services.
The bulk of digital services in the industry are operating withing three core models. These are (a)the Spotify model, (b) the Pandora Model and (c) the iTunes model. Most of the services have the same catalog, and pricing is very similar. The marketing catch is often interface and music discovery tools.
With the rise of freemium platforms, a big challenge today is providing unique services that will be embraced by customers. We could see services that will bundle music with other forms of entertainment in future, but finding a way to achieve this will remain a major challenge in 2016.
Ensuring sustainable listening.
Marketing for music is taken care of by music labels, but most of the campaigns are targeted towards a favorable album release. A favurable album release is one where the maximum sales are achieved within the first month of release. After this period, marketing for the particular album generally ends, or at least drops off significantly, as the label focuses attention elsewhere.
This is a challenge today as the music industry moves towards the streaming model. Successful album sales in the first weeks will only be of immense benefit to the label. Other stakeholders will need to focus on driving sustained listening if they are to bring enough money. This means instead of “purchase marketing campaigns,” “Playlist marketing campaigns” will take center stage.