Hello, hello! New year, same newsletter covering the ins and outs of the music industry. I hope folks enjoyed their holidays! The start of the year feels like a good time to say once again that if you wanna contact me, feel free to reach out at: email@example.com. If you’re in New York City, I’m usually down to get a coffee or, if not, I’m also very often down to hop on a phone call. If you do enjoy this work, please do share it, and if you’d like to give a few dollars, you can subscribe here. With that out of the way, let’s start talking about streaming platforms.
In 2022 I began the year with an overview of the three major labels in an effort to give a bit of historical context on firms that dominate and steer the music industry. (If you didn’t read those newsletters check them here: Warner Music Group, Sony Music Entertainment, and Universal Music Group) 2023 is going to begin on the other side of the table looking at the major streaming platforms. I started this newsletter in the fall of 2017 and though truthfully I didn’t fully realize it, the digital side of the record industry was experiencing a similar moment of consolidation. So, I’ll be kicking off the year with a review of the main western streaming platforms: Amazon Music, Apple Music, Spotify, and YouTube Music. I’ll cover other regional players later but this is where we’ll start the year.
All these platforms came to dominance during the 2010s and account for over 90% of digital streaming revenue (at least when looking at MLC blackbox data as a proxy), which considering it accounts for over 80% of recorded music revenue, means these four companies stand for 70% of American recorded music revenues. That’s an intense concentration of revenue for an industry that traditionally saw sales derived from various physical formats, and a range of retailers. That fragmentation allowed smaller-scale businesses to find their own respective niches as the industry began consolidation in the 1970s. The domination of streaming and the adjudication of payouts done through major licensing deals negotiated between major labels and streaming platforms squeezes out smaller actors on both sides. That is further exacerbated by the fact that three of the four platforms slot music within larger hundred billion-dollar businesses. That’s why we’re starting this week with Amazon, a company that’s traditionally the least associated with music but over the last few years made a real dent into the niche of music streaming.
The Easy Sale of Amazon Music
The company over the last year leaned heavily into marketing. They helped produce a documentary for Lil Baby, started a weekly live concert series in the fall, and helped do promotion for Beyoncé’s latest album. All of these efforts are the kind of extreme industry-signaling endeavors, where tech firms step into a marketing and promotion void, previously held by labels, or even radio. What’s curious about Amazon’s moves in this space is that it results in nice industry press coverage, like this interview with Tim Hinshaw, the head of hip-hop and r&b at Amazon Music, in Billboard. Can’t say it isn’t moving some needle. Amazon, via Twitch, briefly flirted with music live streaming but that receded along with Twitch’s own pandemic-era bump in attention. The cultural impact of these initiatives is beyond muted, so it's hard to see the clear reason beyond just keeping certain cultural wheels spinning.
These efforts also in a way feel fairly removed from the position that Amazon Music leaned into only a few years ago prior to the coronavirus pandemic. In the late 2010s, I certainly got caught up in the hype about Alexa and the potential impact of voice on the music industry. The thinking was that if voice started to replace things like Google search or traditional radio, then Amazon could start to wield an outsized presence in music discovery. (Alexa even got credited for a UK Christmas time hit!) However, over the last few years interest in Alexa and Amazon’s speaker products appeared to plateau. This can be seen in Google trends results but also in the recent corporate reshuffling at Amazon.
The post-pandemic aftershocks that have hit the technology sector haven’t missed Amazon. The company announced it's laying off nearly 20,000 workers with a particular eye on teams working on its Alexa products. (Just for context Amazon employs over 1.5 million…so don’t jump the gun on the recession talks from these headlines.) The targeting of Alexa workers parallel previous winter reporting at Bloomberg that said how nearly 25% of Alexa users don’t engage with it after a couple of weeks; most only use it for music and weather, third-party app interest is low, and unsurprisingly finding ways of monetization is difficult. (Even Google trend results show the product peaked in customer curiosity years ago.) Basically, it’s a tech demo with billions of investments but still very little in monetizable use cases for normal consumers. Still Dave Limp, the company’s head of hardware, reiterated the company’s commitment to Alexas products; but the product’s expense makes sense to see some scaling back. If the future isn’t voice-controlled then maybe it doesn’t matter if Alexa can recognize your umms, since it isn’t improving the bottom line.
This isn’t to imply that Amazon Music, another way to keep customers within the Amazon product suite, is next to facing downsizing. But, when Amazon announced Amp, its bizarre attempt at radio, and very quickly laid off half of the staff. It signaled a company that may not fully understand how all of its different moving parts are supposed to work together. The narrative around Amazon Music bounced from being big on country music to proposing a voice-first future, to now saying it holds a grip over rap and r&b. The validity of each public relations campaign is irrelevant when Amazon Music is understood to be a maturing business that likely brings little money or attention to Amazon’s overall brand but isn’t so much of a money sink to require headline-grabbing cuts. One can twist into little knots imagining how Amazon’s streaming business, physical distribution, etc. can become a full-service music company; Steve Boom, Amazon Music’s VP, in an interview with the Verge last year did outline that vision. However, Amazon’s most profitable business is Amazon Web Services (notable that part of the company saw no cuts…), so why would that company care about owning the entire music supply chain? They wouldn’t and don’t. So, Amazon Music will keep providing capital to budget-conscious record labels on big projects to justify their roles to their bosses and peers. Who doesn’t love that?
Let’s start the year with some good news. Songwriters won an inflation-adjusted increase in mechanical royalties for physical media at the end of 2022 that’ll go from 2023 to 202. While mechanical royalties on the streaming side also saw an increase, the inflation adjustment that many advocates supported wasn’t included. Certainly disappointing but also more attention to these fights can certainly help down the road. Now for the sad news. Spotify canceled some of its “live audio” shows that no one wanted, which unfortunately resulted in some layoffs. Bytedance is reportedly laying off 10% of its staff and expects to reduce its growth outlook in 2023 as it pares back various business lines. (A year ago the company scaled back its investment arm in fear of Chinese regulators but why did Bytedance have an investment arm in the first place??)
Then on the regulatory front, TikTok was banned for American government devices. While rooted in anti-Chinese propaganda, any moves against large social media companies are welcomed here. The Federal Trade Commission came out with a proposal to ban non-compete clauses in employee contracts, which would be a massive help for millions of American workers. Even with a split in the American house and senate, there appears to be bipartisan support for some crypto and social media regulation, what that means we’ll see. However, I did find it amusing that the Securities and Exchange Commission (SEC) basically said they didn’t need new regulations to deal with crypto, which tells me 2023 may be harsher, not kinder, to all of those who dove headfirst into crypto and NFTs.
A Note of Financialization
A light start to the year for catalog sales. Round Hill Music bought producer royalties of the producer Steve Lillywhite, this comes after the company ended 2022 saying it spent $200 million across over 40 deals. The sub-$1 price for its London Stock Exchange traded fund may not look great, especially as many other high-end catalogs/firms struggled to find willing investors, but at least the press releases keep rolling out. Beyond Music, a South Korean music catalog firm, bought the rights from the producer Greg Wells. Again I cannot help but think we’re scraping the barrel when producer rights are being gobbled up. Then last a couple of former executives at Tidal raised $7 million to buy up rights from independent artists. How exactly this will stand out amongst the other firms doing basically the exact same thing at a larger scale is unclear to me, but would love to hear how.
6 Links 2 Read
Did That Hit Arrive in 2022 or 1987? This Year, It Was Hard to Tell. - The New York Times
An exploration of how 2020s hits appear to be continuously recycling works from the past. An additional theory for this trend I’d cite is the increased financialization of song catalogs by companies like Primary Wave and Round Hill, which actively try to keep their catalog relevant in this manner. (Also the increased litigation of songwriter credits only adds fuel to that fire.) The financial incentives for this trend do appear fairly sturdy but also the bubble burst in catalog sales could taper a harder acceleration of this trend.
The undercurrent of these articles can be summed up in that record industry execs can sense that technology companies like Spotify, TikTok, etc are on their back foot and may not be able to negotiate from their usual position of strength. Last year, I covered the implications for TikTok, but the fact MBW covered Spotify’s cloud storage costs would tell me labels want the company to penny-pinch before it dares pay a rights holder less.
Ticketmaster’s Dark History - The American Prospect
A detailed history of Ticketmaster's 80s emergence and how, through aggressive lobbying and lax government regulation, it was able to dominate the American ticketing industry. The piece also outlines what is starting to become a louder movement to challenge the company’s place in the industry, and fans and critics remain unrelenting in calling for government intervention.
Confronting Music’s Mental Health Crisis - Pitchfork
A considerate piece by Jenn Pelly on the numerous factors impacting musicians’ mental health and the complicated ways of trying to address that. Great to see explicit mentions of how government support is crucial even for helping artists who appear to have “made it” from the outside.
Over the last couple of years, the record industry has shifted towards a rather aggressive Christmas music promotional cycle. New music suddenly falls off the release calendars and older catalogs are brought back out and recontextualized for the season. I’m curious about the impact of songwriters, and deep-pocketed catalog owners, flexing their muscles on this shift or if this reflects an industry unsure how to market newer acts during a traditionally lean period. Either way, a trend worth closer examination.
Did you know if you own a retailer that sells goods from a highly concentrated supply chain and simply commit to that business you can see decent results? Apparently many folks, this author included, didn’t realize that about Barnes & Noble, the once-maligned but now semi-lovable book retailer. Focus on your core competencies, ignore flash-in-the-pan gimmicks (Nook what?), and maybe you can maintain a decent business!