9 Ways Covid will Change the Music Industry

The sudden change to a rather rosy industry outlook forced artists, writers’, labels, publishers and promoters to look harder at the business than maybe they ever had. I have scoured the articles over the last 3 months and found what I believe will be the top 9 changes Covid will make to the music industry.

1. Non-Subscription Digital Revenues are important

With Live revenues drying up overnight, many indie artists looked to the other potential revenue streams such as subscription streaming and were not impressed. Remember the days if you sold one track or one album on iTunes you got paid for it at the end of the month.

Enter the Bandcamp platform where artists can sell digital music downloads and merchandise to fans and be paid daily. It has blossomed during the shutdown. Waving their 15% margin for 24 hours in May, they recorded sales of USD4.3m in 24 hours. Bandcamp site says “Since 2008, fans have paid artists and independent labels $526 million using Bandcamp, and $18.8 million in the past 30 days alone.” That translates to huge growth on the platform over the last few months.

Bandcamp thanks fans and artists for being “part of a fair, sustainable music economy!” Feedback from indie artists has been overwhelmingly positive about how they can connect and have direct access with their fans through the platform. Expect this site and others similar to grow exponentially post lockdown.

Also look for the major digital services to copy some of Bandcamp’s coolness.

2. Ticketing Digital Access to Live Events will go mainstream

Most artists have been performing live gigs, and charity events via zoom, but have largely had little chance of monetising these events in any way meaningful for their own personal bottom lines or livelihoods.

They say necessity is the mother of all inventions and in that respect, it is great to see some very notable successes. A major shout out goes to Korea and their boy bands. Super M’s global live stream concert held in May attracted over 75,000 paying customers at USD$30 a pop. BTS also notched up 750k viewers to a recent online event recording USD18.1m in revenues.

This from Phil Simmons, Booking Agent “We’re learning every day about new technologies, and I feel this new era for our (and our artists’) business is, in some shape or form, here to stay. We have a lot to learn in this area. Maybe we’ll see hybrid ‘live-and-streamed’ concerts while we get back up to speed. Maybe they’ll be around forever now.”

The consumer has allowed artists into their homes in brand new ways and have been pleasantly surprised. Expect to see post lockdown more consideration around the monetisation of Digital Access to live events whether that be special meet and greets, limited number of digital access tickets and fan events.

Also we will see significant innovation from artists and labels around how live streams and events are produced and presented with Virtual Reality and other cutting-edge ideas now being strongly embraced. Travis Scott performing in Fortnite is scratching the surface.

3. Subscription revenues distribution will increasingly come under the microscope

The Service Centric Model of how music royalties are split up to labels and artists will come under increasing pressure.

Spotify’s Covid Tip Jar concept has provided a divided debate. While welcomed by some artists, the general feeling is that it is an admission that the model is not right.

“I know a lot of musicians who felt the donation button was insulting. A group of friends recently started an organization called Union of Musicians and Allied Workers (UMAW). I think Spotify’s donation button might actually cause a negative reaction and inspire some people to start thinking about how they can organize and demand more from streaming companies.” Sean Soloman, Moaning, Vice

The constant march towards podcasting and non music content on music platforms, such as Joe Rogan’s Spotify deal further complicates the process.

4. Music Asset valuations have held up

Music rights values have increased and proven the long-held proposition that music assets and copyrights are recession proof.

What other industry launches successful IPO’s (Warner and Big Hit) in the middle of a historic downturn and has Music Rights Investment Funds such as Hipgnosis at share price levels at higher than pre Covid.

With long term investors seeking out modest returns and reliable and regular income, music as an asset class is competing strongly against near zero interest rate returns from banks and uncertainty around many other investment sectors.

Hipgnosis’ dividend yield of 4.48% is attractive given the current economic outlook. Warner, Sony and Universal valuations have never been higher.

This now tested recession proof status will have a lasting impact.

5. Music Production and collaboration will change forever

With music writers and producers grounded, there was no choice to give virtual sessions and song writing camps a trial.

Feedback from a range of indie publishers has been that the process has not been perfect, but regardless it has worked. An industry veteran recently told me “he will have a Covid virtually co-written number 1 not too far into the future”.

While the technology has lagged behind, we can guarantee that companies such as Zoom, Discord and Logix are all busily working on solutions to improve the process. Expect VR companies to wade into this space as well.

Interestingly we can expect to see more simple 50/50 co-writes during Covid. “When you have a physical song writing camp, you end up with complicated writer splits. It’s just how it works”.

6. Marketing to fans

Artists are reporting they have more time to connect with fans and have significantly increased their online interaction.

It is also being reported that label staff have more time and more focus for artists with no need to travel across the country to get 15 people in the same room for a strategy session.

There is a feeling of more creative energy than ever before and not just about ideas, but on the execution level as well.

“It feels there is time to develop, be real and connect. There has been moves away from just getting a Spotify playlist or radio add.“

A trend that should continue.

7. Music genres focused on Wellness have exploded

With a good dose of anxiety delivered via every news program, and having the family around you 24/7 it’s no wonder that music listeners looked for ways to de-stress, chill out and get to sleep.

Spotify streams around meditation, yoga and sleep are up over 100%. Podcast listening in relation to overall fitness and wellness are up even higher.

Calm (80 million downloads) and Headspace apps did extremely well with apps sitting in the top 10 grossing during the height of the Covid lockdown. Who doesn’t want a bed time story delivered by Matthew McConaughey or a Disney classic played on Peaceful Piano.

Calm is currently valued at USD$1b with Headspace not far behind. Great examples of combining audio, spoken word and lifestyle in a beautiful little package.

Expect the Commercial Divisions of the majors to stop focusing on Spotify’s 80s and 90s playlists and move towards these clever niche genre lifestyle plays through smart investments.

8. The Majors Operations will be trimmed

Video conferencing works, it’s not perfect but it proves the music business can do more with less. Less travel, less offices, less meetings, less wasted marketing.

Old school models of having to be in the office to be effective have been thrown out the window. Flying across the country for a one-hour meeting will also be questioned.

The opportunity for the majors to restructure their businesses will not be lost and expect to see a significant reduction in office space, less regional office staff and streamlined organisational structures.

9. Major Labels will launch their own platforms and digital services

Ok Ok so this has been tried many times and failed ….. but how much would music companies love to own direct customer data during Covid.

Much better than the anonymous consumer data stuff provided to them by the major digital players which the Analytics teams can only fiddle with.

With exclusive video streaming services popping up like flowers in spring, surely all music doesn’t have to exist on one service does it ? Exclusivity is ok. Cant music consumers have multiple music apps just like video?

Do we all agree that commoditisation of music services just means a lowering of the value of music? Remember there has been no price increase in any music subscription service in 9+years. Theres a reason for that and its a worry for the industry.

Going forward consumer data will be absolutely key to driving the music business, and the majors don’t have it. In fact, rumour has it they are getting less of it.

The tempting part is to be able to monetise all artist activities around windowing, fandom, live and other related assets and promotions.

This is something done very well by Tencent and Netease in China who are more than just digital music services.

My guess is there is a pretty big spreadsheet sitting in the head offices of UM, Sony and Warner trying to work all this out.

Appreciate your feedback and any other Covid trends you have noticed in comments below.