Four Key Digital Challenges for the Music Industry in 2016

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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.

 

 

5 Responses

  1. DJones

    “DSPs will simply continue subsidising the music industry to their own detriment.”

    The DSPs are NOT subsidising the music industry. They agreed to a certain price for the use of music rights & if they can’t make a profit at this price point, it is their their problem / their fault. Maybe the should think about their business model(s).

    Reply
  2. Rikki

    and then you have the other end which just screwed the hobbyist who just wanted to be more then a bedroom dj, eg live 365….by pricing them out of the market. ….

    Reply
  3. Name2

    Courtney love said it years ago: The reason that the day of the Blockbuster (like “Born in the USA”) is over is that once the company has recouped, and sales start to finally pay off more for the act than for the label, promotion dries up.

    Selling that first 2 million is dinner, drinks and dessert for the label; anything after that ends up being somebody else’s gravy.

    And it should be obvious that before sending a master off to be printed and pressed onto little round pieces of plastic, the record company damn well better know and correctly attribute who publishes what, or hello, judge. The current plaintiffs suing Spotify for not knowing who the publishers are need to ask the rightsholders (labels) of their recordings who inked the Spotify deal why exactly it was too much trouble to communicate that info to the retailer.

    Reply
  4. Chip

    Apple and Google are criminal organizations. They are breaking the law. Google can afford to drive around the world and take photos of every freaking street, but they will not pay musicians. These crimes need to stop.
    Apple plays $0.00 and so does Google. They need to be held accountable for their crimes and the financial damamge they’ve done to artists.

    Reply
  5. Niqi

    Please tell me how many artists ever really see the truly deserved compensation for their work?
    Not many…..very very few.

    Reply

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