Music industry warms to streaming

Over the 28th to 31st of January, the music industry once again descended on Cannes for the annual institution that is Midem. Being on the trade floor this year and looking through the conference agenda, one prevailing theme was apparent; there has been shift in opinion from the wider industry and labels towards subscription music streaming services.
Whereas a year or so ago services such as Spotify and Deezer were still being eyed up with suspicion, they are now finding themselves being championed from within the industry as a real force for change and good.
Indeed before the event, much publicity was given to a recent statement by Universal Music Group’s (UMG) global digital business president, Rob Wells, in which he said “the idea that Spotify cannibalizes sales is bogus.”
Wells was referring to recent extensive research the label had conducted that dispelled the conventional assumptions or opinions that streaming services will, over the long term, have a detrimental effect on the music industry. This, of course, only publically represents the opinion of one label; however as the largest of the ‘big four’ it’s safe to assume that it stands as a pretty clear barometer of a wider shift in opinion within the industry.
In fact, just yesterday, the outgoing Chairman of Warner Music Group (WMG), Edgar Bronfman, described Spotify as “incrementally positive.” He was speaking at the D: Dive Into Media Conference in California and his opinion contrasts with his views last year that Spotify provided “no net benefit” to WMG.
Wells was in attendance at the Midem this year, sitting in on a panel discussion with representatives from Google, Amazon and the Indy label association, Merlin. During the session, he was keen to highlight that, despite historic difficulties, it is now easier than ever for a streaming service to have a discussion with UMG about licensing its content. However he did point out that the newer, or less well known, a service, the longer it takes for the cogs of decision-making to turn within what he described as the ‘Universal cave’.
Over the next year, raising the profile of streaming services as a way to consume music will be key. Globally, such services are still pretty nascent in the minds of consumers –streaming accounts for around 5% of all digital usage – and more service launches and increased competition between them will undoubtedly help drive awareness.
Wells certainly seemed optimistic that more services will be coming to market, as he stated, ‘I don’t think we have yet seen the critical mass of services that we really should enjoy… some markets may be reaching a sort of solid saturation point, but I still think from a macro top down level there’s plenty of room.’
Despite Wells’ optimism, in practice some feel it is becoming increasingly harder for new entrants as the dominance of already-successful services such as Spotify grows.
One anonymous service provider expressed his opinion that in markets where Spotify has already set up business it is near impossible for a new start-up service to get off the ground. This is primarily because Spotify has already set the price expectation from the labels for their content and a new entrant with shallower pockets can’t possibly hope to match these amounts of money.
Whether or not the likes of Spotify are really stunting the growth of new players is still not entirely clear. What is clear however is the labels are [realizing] that streaming services may actually be the surest way for them to finally start generating revenues again; licensing to streaming services may never enable the them to rake in profits akin to the ‘good old days’, but making some money is always better than making none.
Michael Dean is a research analyst with Informa Telecoms & Media, specializing in online and OTT content, connected devices and hybrid delivery platforms.