A little while back I was interviewed by Casino Gobbet from Yahoo Brazil. The original article is in Portuguese and can be viewed here.
I really enjoyed the questions Casino had and I thought you may find interesting reading our conversation.
Cassaino Gobbet: The consumption of music certainly hasn’t decreased, but revenue streams are. Is that correct?
Aaron Bethune: That is correct, however it would also depend on what you are counting as revenue streams. Physical sales have decreased while streaming services are gaining members rapidly and paid subscribers are also increasing. Vinyl is making a resurgence. Certainly none of these revenue streams can take the place of the record sales of say ten years ago. That being said there are far more opportunities than ever before to find creative ways to monetize music and the music experience. So in that regard I would say that at least when it comes to new available revenue streams the opportunities are increasing.
CG: Spotify and Pandora-like services were greeted as a sustainable business model for the music industry, but after almost two decades (in the Pandora’s case), the profits are still zero. How do the major labels and other industry players see the situation?
AB: We have yet to see sustainability with paid music streaming subscribers and it is still a substantial ways away. Spotify, have been focused on growth.
CEO of Sonos Andy McFarlane stated in an interview featured in an online interview last year that streaming services would reach a billion paid subscribers by 2021. This would suggest that sustainability is getting closer and headed in the right direction. I am not seeing that type of growth based on current available numbers but it is undoubtably going to increase substantially in the coming years. Especially as paid subscriptions become more common place in peoples spending patterns and paying users influence their friends. For real growth and a change in music subscription patterns to happen, it only makes sense that music be bundled into the cost of a phone bill, household entertainment, music players...you get the idea. The more seamlessly integrated music delivery services becomes into our daily lives and technology continues to become more intuitive, it makes sense that the consumer will more readily view music as a utility cost. Already the perspective of ownership vs access has changed the playing field drastically. This is across the board not only with music but software and other companies that are making the switch from ownership to access. From a label perspective, seeing as revenue deriving from music sales is decreasing, it is a matter of finding innovative ways to harness the power of streaming to lead to touring and other forms of income. It is all part of managing and exploiting music copyrights and keeping up with the times. One thing that streaming has done is make available big data and key metrics that can play an important role in all aspects of artists careers. As it is the major labels have already seen a financial benefit from the deals made with the streaming companies. They may be the only ones in fact as it has yet to trickle down to the artist. The system is in its infancy and far from perfect.
CB: Technology has made music to be even more ubiquitous than never. Do you see some possible technological development coming in aid of the main players of the industry?
AB: Virtual reality is the big one right now. I remember thinking when the visual effects company "Digital Domain” created TuPac's image as a hologram to perform with Snoop Dog at Coachella, that it was the start of something incredibly exciting. Just think of all the musicians that could be brought back, bands that could be reunited, the exclusive custom experiences, the endorsements, worldwide movie and music theatre performances, etc... Virtual reality is taking it a step further and allowing you, the audience to be a part of the experience. Now you can be on stage with the band. If that isn't a game changer I don't know what is. Keep in mind the value of music has never changed, it has always been the experience, only the packaging has changed. Technology is giving us new ways to monitize the experience.
One thing we are seeing is three generations of music consumers overlapping. Those that have always paid for music, those that paid for music for the early years of their life and then found ways to get it for free and those that have never paid for music. The irony is that those that most intuitively use technology are not of the generation that have grown up paying for music. So that might be something to consider when looking at who your audience is and how they are mostly likely to discover your music and how likely they are to want to pay for it, whether it be ownership or access. Perhaps the mostly likely to pay for music are not looking for technology to provide it to them...?
CG: Vinyl had an unexpected revival (even if as a niche market). Which other alternative revenue streams can come to rescue the industry players?
AB: Records and singles have become some amount of a loss leader to other products and experiences, I believe we are only now starting to tap into the new music revenue streams. For some time companies have been collecting data and offering data collection services, streaming services collect data, there is more data available than we know what to do with. In fact, even with the data we still need to be able to interpret it. This data can give a lot of insight into the value of an artists audience. Having access to those key metrics can highlight where there may be an exchange of value with a non musical partner with an audience of similar interests. The thing about music is it isn't contained to one industry, it spreads into all industries, it is a part of everyone's life, all cultures, it sees no colour and shows no discrimination, it brings people together. Everyone at some point interacts with music. Everyone. We may not yet have thought far enough outside of the box to find where new revenue is to be made. Technology certainly points us in the direction of what is possible. Perspective is everything and I think we are still spending a lot of time trying to fix a broken model. Ultimately music copyrights are at the foundation of the music industry and we are seeing more ways than ever before to license those copyrights. With the lack of filters due to resources like the internet and new recording technology anybody can put out music. More than ever it is finding ways to stand out above the noise. For those that do there is money to be made. Anything that helps music rise to the top is going to be key in an artists success. That takes an understanding of the new playing field and an entrepreneurial approach and quite honestly that comes from the tech world and millennial generation. What older generations have that is valuable is the experience of music without modern technology. That is something that focuses more intensely on the experience and the discovery of music by word of mouth and first hand live experiences. I think fans were much more focused than they are now, scattered across the 100's of songs they can find online in a day. There is something to be said about revitalizing the essence of the first hand live music experience and being cool by discovering a band without the involvement of technology and the constant auto recommendation of new music. Less is more. We are getting over saturated with the music that is getting thrown at us. I can barely remember the person who's music I was recommended this morning.
Crowd funding sites and ongoing support sites like Patreon need to be included because as well as selling music they are platforms that allow artists to cash in on a wide variety of products and experiences that are tied to the music. More and more these platforms are proving to be reliable sources of income. They are already giving us a glimpse of the future of revenue.
CG: Is there still a role for major labels to play within the current and future scenarios? If artists now have access to virtually all delivery platforms, which is the advantage a major label can offer to the artist to stay under contract?
AB: I would say it depends on the artist. For the big name artists, the A and to a degree B level artist, the major record labels still work for them. They invest their resources, they provide a platform and have an incredible network. They are big machines that continue to have the power to make a difference in artist careers. You also see labels turning into service companies that offer their services at a fee to the artist. There are also labels that launch specifically to help the career of a particular artist. This type of situation is more of a partnership, the label and artist are in it together. Sometimes owned by the artist.
Everything evolves, and we are in a key period of the evolution of the current music business. Because of this it is an exciting time with endless opportunity. What I see is a lot of resources available for artists that cut out the middle men and in many cases replace the need of lablels all together. With that being said, it is only a small percentage of musicians that truly make these resources work for them. It takes a lot more than simply uploading your music to an online distribution site. Part of that is just the reality of the right brained musicians excelling in the creative aspects and brilliant ideas but lacking in the linear thinking of a left brained work force that get the job done. Weather it be a label taking on that role or not, musicians still need a team of people that can make use of the resources available and move a project forward. In that sense there will alway be a space for labels and companies that can get behind an artist. There are limited examples of musicians that are truly successful on their own. They are the anomaly which is why we hear about them.
A trend that seems to be appearing more and more are brands that are starting record labels or at least getting more involved with artist careers. It seems logical as brands have been providing opportunities for years to artists through music licensing, live events, and platforms for exposure to their audiences. For the brands to get in on the action and have a stake in the musical equation makes sense. Music has constantly lead the way in the world of branding and has provided meaningful experiences that bring people together. The pairing of music and brands has a measurable impact for both the bands and the brands. So, I can see more brands doing more for artist in years to come and becoming a partner that shares in the revenue.
CG: After iTunes and streaming services like Spotify, are there any developments that the tech industry can do to further disrupt the current models?
AB: I have be spending a lot of time looking at the crossover of music and health. Not just from the perspective of the proven benefits that music has on our well being and productivity but also as a possible integration into the health system. It helps if we start looking at the benefits of a song rather than simply who performs it. From that perspective I believe there is a lot of disrupting to be done.
The focus needs to be put on the value and benefits music provides to our daily lives. If you can show the benefit of music on quality of life then you will have people who can't spend their money fast enough to buy it. Just think of people that buy powders and electric shock belts because they believe it will give them a six pack. That is crazy behaviour but they are convinced it will give them a better body and higher quality of life. Now that's how you want people to act around the consumption of music.
Currently we are seeing music taken out of the school systems and consequently reducing the perceived value of it at a very early age. It is the kids who are the consumers of tomorrow. A few years back we saw a slight rise in purchased music, this could have been based on the children of music buyers coming to an age in which they had money to start paying for things. Having been brought up seeing their parents pay for music and put a value to it teaches children to also value music. If the value of music isn’t being transmitted to kids at a young age then it is hard to imagine that perception changing as they grow older. Children up until their late teens are in the most influential time of their lives when it comes to music. They need to be playing instruments, attending live concerts, hearing music at home, learning about music history and essentially creating a soundtrack that is tied to the most important experiences of their young lives.
If we start looking beyond the music industry to solve the issue of how music creates revenue then I believe there are a lot of partners that are in a position to disrupt.