Future Echoes: The Music Business of Tomorrow Being Built Today (ft MIDiA Research)
What will the music business look like in 2033, and which of today’s bets will get us there?
This week, we’re sharing the kickoff keynote from last month’s Music Tectonics pre-conference called “Future Echoes: The Music Business of Tomorrow Being Built Today,” from Leon Farrell, senior music analyst at MIDiA Research.
Leon looks back at the tech the industry was betting on in 2026, like VR and media streamers, and what changed the business instead: artist distribution, label services, and the creator economy. Then he looks ahead with MIDiA’s forecasts on ARPU, the fan economy, and expanded rights like merchandise, licensing, and brand partnerships. We have a Q&A with MIDiA’s own Mark Mulligan at the end, who argues that the bigger business opportunity may be in background listening rather than fandom.
It’s not too late to get tickets to the conference, October 27-29 on the beach in Santa Monica (hint- there might be a discount in this episode for podcast listeners). Get your tickets here- https://www.musictectonics.com/
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Episode Transcript
Machine transcribed
[00:00:00] Dmitri: And now for our kickoff keynote. Leon Farrell is a senior music analyst at MIDiA Research with more than a decade of hands-on experience in the music industry. His career spans major labels and independent artist management, and he has helped emerging artists break through. He's also led global strategy, business development, and creator ventures at major music and podcasting companies, which gives him both deep operational knowledge and a clear view of where entertainment is headed.
Leon will share MIDiA's latest thinking on how the business' next era is already taking shape. they call this one Future Echoes: The Music Business of Tomorrow Being Built Today.
Please welcome to the stage MIDiA Research's senior music analyst, Leon Farrell. Welcome, Leon.
[00:00:43] Leon: Thank you, Dmitri. first, thanks for having me. That beach house sounds appealing, so I'm gonna have to maybe look into that at some point. But super excited to be here on behalf of MIDiA Research.
I'm Leon Farrell, senior music analyst, and today I'm gonna take you through what we call Future Echoes. So one thing we love to do at MIDiA Research is make predictions. we've been in the business for quite some time, so today, we're s- really excited to kinda walk you through what tomorrow looks like in the music business.
So I'll take you through it. Right. So right at the top, there are four key areas that we're gonna be looking at. One is how to think about change and how we frame change, which comes in all different shapes and sizes, and then taking some of that framing into the next point, which is the next wave of opportunities.
And then number three, how the market will evolve. And then finally wrapping up with how to prepare for the future so how to think of change. I'm an oil painter. I love when I look at paintings, especially those that look at what the future looks like. So with these two examples, in the early 1900s, French artists were tasked with predicting what the year 2000 would look like and how life would look like.
So on the left-hand side here, you see a maid deploying an electric scrubbing device. very, very different to what ultimately actually, panned out. But what they'd done when they created this, well, they was really looking at the technology of the day rather than kind of the needs of the end consumer.
So what you kinda see here is a scrubbing device that has the broom, it has the soap, and it ultimately panned out to be, the predecessor of something like the vacuum cleaner. And on the right-hand side here, we have the flying postman that 26 years, after when they kind of predicted this, we're still yet to see that.
But I think what we really kinda take from this is some things can be predicted in the future. But in terms of the actual technology that's created off the back of that and the actual solution itself, it can be very, very different. So there are no facts about the future, and predicting it is no easy task
So this is quite a profound example. again, looking at the year 2000 and predicting, how things, uh, will shape up. And it's probably the, you know, the best example of something that got quite close to it. As you kind of see here, this is a classroom of the future, and you have a teacher to one side loading books into a mangle machine, which consolidates the information and then disperses it across the class, here.
And at this time, headphones were just invented. But the key thing to remember here is that the artist had no idea about the technology that would be created off the back of this. But there was an understanding of, disseminating information at scale, and it's about 100 years removed from the internet.
So I think what's... again, what's key here is to understand that although things change and people have historically looked at the tech of the day to kind of look at the- potentially what the, the future holds, you know, the solutions can come in all different shapes and sizes, and it's very, very difficult to predict
So the future often isn't what we think it will be, and the music business has changed a lot in 10 years, but not in the way that 2016's new tech suggested. So what's really important here is if we are going to be looking at the future and predicting the future, it's always important to look at how the past has really kind of, developed to current day.
So in 2016, there were various different challenges that the industry faced, so I'll go through a couple of these. So really rebuilding the industry growth was kind of top of that list. Went through 10 years of industry decline up to this point. It's only about 2015 when we started to kind of see growth return.
Widening the streaming funnel, so when the platforms such as Spotify started to be developed, it's about kind of really widening that, uh, streaming funnel of people and that adoption. Converting free users to paid, of course, there was behaviors historically with piracy, people not willing to pay for music.
So how do we once get them onto the platform, then, get them into those kind of paid tiers? so various different kind of challenges, you know, really kind of faced the industry, which I won't go through all of them as we know most of these. And then in terms of tech and business opportunities, again, in 2016, VR was all the rage.
I remember in 2016, Oculus launched their consumer device, to great fanfare. At the time, there was a lot of hope around VR and content consumption and what that would do. Media streamers, your Fire Sticks, your Amazon Echos, people thought that would have a real handle in, creating a U-turn in the decline of radio.
And then you have mid-tier subscriptions, telco streaming bundles when you buy your new phones with your contracts. And then the kinda two at the bottom here, really, really important to really highlight are artist distribution. So it was a couple of years, you know, after, platforms like CD Baby and TuneCore were out of beta and being used, and then label services.
So of course, historically label services were always a thing, but not necessarily as prevalent as they are today So if we look at how things actually shook out, streaming today has become mainstream. Label services you know, are incredibly important today where artists are, more interested, willing to hold more of their IP, more of their ownership, not sign over the rights to their music and just cherry-pick the services that really kind of help them and, and their careers.
The explosion of the creator economy, socials having a massive impact and the infinite scroll of platforms like Instagram, like your TikToks. And then expanded rights is something I'll touch upon later, becoming incredibly important in the world of, like, super fans and fandom. And then a couple to kind of really note that wasn't on the left-hand side, financialization in the Global South.
So financialization is the pouring of institutional capital into the music industry. So you're getting these, you know, these big companies investing in catalogs, partnering with the major labels like Bain Capital partnering with Warner Music Group on the acquisition of catalogs. And why they weren't on the left-hand side is they really wanted to see, you know, a solid 10 years of track record of how these catalogs were, you know, were producing revenue before they felt comfortable with going and pouring that investment into the market.
And then of course you have the rise of the Global South. Key markets really kind of, forging ahead when it comes to adopting, like, the streaming platforms and everything else
So some of these things on the left-hand side didn't actually shake out. VR hasn't actually captured the world that we kind of expected it to. media streamers, they have been kind of hit and miss, but again, they haven't really, taken a hold. But what we do see is the artist distribution and label service is really becoming a massive factor today when it comes to things that have changed, looking at 2016 and looking at 2026 Right.
So taking a lot of those and kind of looking back historically, looking at the future, what is the next wave of opportunities? It's always important to understand that change will come, and kind of what is, you know, needed to understand in terms of what enables it to happen. So we've got a couple of key points here to really kind of focus on.
So one is does the catalyst, example the new tech, new platform, have a supporting market structure that it can easily piggyback off and as an ex- as an existing one? So for example, if you're creating something that can plug into label services, that's something that will drive easily adoption from the outset.
Does it solve an existing or new problem? So most innovation typically comes from a problem that needs to be solved. So you have, for example, transparency around an artist or, you know, a, a songwriter's business being solved by the likes of, you know, AWAL and Kobalt when it comes to providing transparency into the metrics and be, and for them to be able to understand exactly what's happening with the music.
But having an existing problem map solved is key Does it have a genuine need, even if that need isn't yet proven? So always starting with the audience, the fan needs, whether it's a label need or an artist need, that always is a great place to start. So always starting with the use case, uh, starting from that need is critical.
And then does it significantly improve things for some or all elements, of the people that are involved? So is there something that can really help everyone? So you take a platform like Spotify where artists were looking to have distribution at scale. You have consumers that want access to music and access to the artists.
And then of course the labels monetizing the repertoire that they have access to. So something like Spotify is an incredible good example of improving, a lot of the things and different elements within the kind of industry. And on occasion there are things that sometimes come, uh, along which, is so transformative like generative AI that really kind of paves its own path
So today's problems that need solving, have always been with us. You know, finding your audience, cutting through and connecting. All these things have historically been, prevalent and, kind of always been challenges, but why they're important today is that technology of today hasn't necessarily solved these, and they'll need to be innovated on to really solve, these things for the future.
So of course, finding your audience is always going to be key. Audiences are incredibly fragmented across different platforms. Algorithms are becoming very, you know, less predictable. making music that connects, we've seen the last 10 years has really seen song crafting optimized to really meet algorithms.
You're seeing song lengths decreasing. So if we go back 20 years and you look at the top 10 charts, quite a few of those records were, let's say, above the four-minute mark, whereas now most of the records that you're kind of really seeing cutting through are below the three-minute mark. So you're really kind of seeing that having an impact on the way that music's actually crafted.
And something that's incredibly important is the last point, which is growing cultural resonance. What we've seen across Gen Z is that music is becoming less important when it comes to their cultural and identity, and I think that's something that really can't be lost on, when it comes to anyone within this space that's trying to solve the problem and innovate.
Really kind of getting Gen Z, getting the other kind of generations on board and showing them how important music is and not really losing that. That's incredibly important here And innovation and growth opportunities, they will come from most different, you know, a lot of different places, We do have hyper-targeting already when it comes to finding your audience, but it's not necessarily about how much scale and what you're saying, but it's about how you say it.
How do you actually connect with the fans, and ensure that what you're saying is resonating? How do you ensure that the music that you create connects with those fans? And then in terms of growing cultural resonance, you know, a lot of the above will kind of really help, but it really requires the artists and the partners to better to understand and to connect and communicate with Gen Z and Gen Alpha in a way which is meaningful to them And then where innovation will happen.
So of course, AI is a massive factor and gen AI is a massive factor. That will permeate through a different, few different examples of that. Consumerization of creation, so with tools, your Sunos of the world, your ElevenLabs. Historically, people have always wanted to create music, but maybe having access to the tools wasn't possible.
So I think now that's, you know, those barriers to entry have been lessened, having access to that is gonna be a massive driver in terms of creation by consumers. First starting with things like maybe changing the speed of your favorite records or maybe implementing new lyrics into your favorite records.
But ultimately, people will go further than that to release their own music, and they have access to those platforms like the DistroKids of the world to create music and launch it at scale. New spaces for music. So maybe the platforms, the DSPs, aren't, let's say, the be all and end all when it comes to the journey.
Maybe you're gonna start to have these gen AI platforms that aren't just, uh, a space to create, but also a space to build community, maybe actually consume the content on those platforms, really collaborate on those, platforms. So maybe there's another, kind of, space for creation outside of what we kind of already see in terms of the DSPs and the other kind of platforms.
And then I'll just kind of go to the last point here, catalog innovation. So back in the slide where I looked at the twenty sixteen, that dark horse that wasn't in there in terms of financialization, what you have seen in the last couple of years is the money pouring into catalog acquisition.
And the real opportunity there is how those catalog, managers really monetize those catalogs. So once you acquire, for example, whether it is MJ's catalog that Sony acquired or another kind of big IP, what's the innovation around ensuring that you can really monetize that? Is it within the sync space?
Is it within the other kind of, you know, domains to really help monetize those catalogs? I think that is a massive opportunity moving forward when it comes to, innovation.
But what's key to not forget is that tomorrow's solutions will create a whole new world of new problems, which means we'll need new solutions until they create, you get the point, new problems. So that's always something to go, keep in mind, is the unintended consequences of the new solutions that are being created.
So as you are creating, as you are building, is to kind of think about what the next stage is when it comes to the problems, and if you can also get ahead of those as well. so, uh, we're gonna go to number point three in terms of how the market will evolve and go through some data. But beforehand, this is as salesy as it will get.
But when it comes to MIDiA, we love a forecast. we've been doing our predictions for quite some time. and you know, we're really good at it. So if you look at twenty twenty-five predictions, we were so close to the actuals, within zero point one percent when it comes to the variance of what we predicted and what actually came out, you know, to be.
Almost kind of, close to our record of zero point zero five percent, but we will take zero point one percent, but we're not perfect. We have some slight variance across the other kind of areas that you see, but, you know, a lot goes into our modeling and our predictions. We've been doing this for quite some time, so it's something to kind of really be, proud of.
but that's the extent of the sales pitch for Tectonics, anyway So although the market has matured in terms of, you know, DSPs and streaming, not to say that there isn't growth to be had. If we kind of look at the future from, you know, this point onwards to, in terms, in terms of from here to 2033, there is a lot of growth to be had.
Bear in mind, a lot goes into this in terms of the rise of the Global South. You're seeing the rise of, let's say, pricing increases. A lot goes into kind of you know, how this, plays out, but the positive is the growth that's here. and one thing we also do at MIDiA is we include expanded rights where others who are modeling, the industry or, or doing their forecast don't.
We believe, and we've seen, that expanded rights are a huge factor and opportunity when it comes to, uh, the growth of revenue within the industry. Currently, about 10% of the revenue is contributed towards expanded rights, and that will only continue to rise in the future. and you know, for those of you that maybe not be familiar with some of the industry terminology here in terms of retail values and trade values, trade values refers to master recordings revenue, so basically labels, distributors, and artists while, retail includes trade plus publishing and retailer, slash DSP shares, and expanded rights, I've kind of mentioned a couple times, are things like merchandising, licensing, brand partnerships, all the things that are adjacent to just the recorded side of the business
probably the most, looked at metric, tracked metric when it comes to the industry is ARPU, so average revenue per user. This is incredibly important. A lot of the fortunes of the business are tied to ARPU, so a great man once said, uh, when ARPU sneezes, the industry gets a cold. So, you know, for this, ARPU is incredibly important and many, many things factor into ARPU, such as pricing increases, churn, free, trials, all those things, fluctuate the ARPU when it comes to, you know, what we're looking at.
So we're at the halfway point here. So we've kind of seen, headwinds really kind of disrupt the growth of ARPU over the last 10 years or so, but then that has been because of trying to get people onto these platforms, the rise of trials, multi-user accounts. So the long-awaited, growth in ARPU wasn't realized in 2025, but it will return in 2026 and beyond, especially when those emerging markets, you know, those users go from free into paid tiers moving forward.
So again, it's a really healthy outlook when it comes to ARPU in the future And the fan economy is, and super fandom has been on the lips, on the tongues of major labels and everyone in the industry for the last couple of years, and it's being embraced to great effect. Again, I've been speaking about expanded rights quite a bit, but loads of these different things go into the fan economy and in terms of the revenue mix, and again, contribute towards the great growth that we'll be seeing, uh, in the next couple of years.
So we've got here non-DSP, so revenues that are coming from socials, from, you know, fitness applications and other kind of, platforms. We have physical music, so that is box sets to super fans in terms of vinyls and CDs, and then you have expanded rights I mentioned as well. So we see physical really kind of tailing off in the future, but still has some healthy growth to go, just yet.
But expanded rights really are something to, to really kind of keep an eye on, and we're seeing the Asian labels doing that to, you know, to great effect. We're seeing the likes of the K-pop labels now making more money from expanded rights and live music and all those things than the actual recorded music side of their business.
They're doing that to great effect. They're innovating in those spaces, and it's something that, you know, anyone that really looks at the future really can't ignore last but not least, how to prepare for the future. So lucky you guys, there's only one slide to get through on this, but it's probably the most important here.
But winning really requires a three-headed strategy. It's not just about the short-term strat or a midterm. You really have to look at the short, mid, and the long term when it comes to building your strategy or anything that you're doing, whether, whether it's building a business, you know, looking at investing in terms of the industry, but looking at optimizing in the short term, really diversifying in the midterm so, you know, you're seeing the accelerated investment and expanded rights and all the great stuff that's happening around that.
And in the long term really is about the kind of architecting or co-architecting of the future of digital music experiences. So really kind of leaning into fandom and really kind of building out that future is going to be, incredibly key. But starve one head and you weaken the whole So not to get all, management consultancy on you guys, but change is difficult. It's not to say that this is easy. I think predicting the future is incredibly difficult. so, you know, for us, in terms of giving yourself a major advantage, I think if you always start with identifying the needs and the problems, and you build the solutions for that, you're gonna be in, a great place.
And again, it's key to look at the last 10 years of the music business to kind of really showing you how even the most promising tech doesn't succeed. But that doesn't mean that there are other areas and growth, you know, growth points to be had, uh, in terms of, , you know, solutions that come with that.
and, you know, today's music business, challenges really represent major opportunities for partners that are willing to help the industry fix its problems. And I'll leave you with this, uh, one anecdote. Historically, startups, whenever they approach the major labels, it was always from a place of, you know, "The industry is, is a mess.
You guys have really dropped the ball. We're gonna come in. Give us your repertoire and we're gonna rescue you and solve all of your problems." when Daniel Ek came in, he really flipped the script on that approach. He came in with real sincerity, a real need to kind of fix and to help the industry, whether, you know, whether it's from the artist side and the label side.
But he would recognize a problem, go to the major labels and say, "Listen, I know that you're struggling with things like piracy. How can we help you build the future when it comes to your business, you know, and for the fans alike?" And I think that really is super important to collaborating, to building the things that last, and really kind of making significant changes within this industry.
so with that, I will close with a slight plug. if there's anything that you like here that you could take away as, you know, some nuggets of wisdom, feel free to sign up to our monthly MIDiA newsletter. It's incredible. It won't spam you. It's once a month, and there's loads of things in there to really understand what the future of the music business looks like.
If you've any more questions, we'd love to kind of hear from you guys. Connect with us on different platforms and, yeah. Thank you for your time.
[00:22:46] Dmitri: Hey, Leon. Thank you so much. You hit it out of the park, and we actually have about five minutes for questions. Oh, great. Um, let's hear it for Leon in the chat and so forth.
Mark Mulligan from MIDiA, has been very active in the chat. It was like you had your own AI- ... except it was a human.
[00:23:01] Leon: Love it.
[00:23:01] Dmitri: You had real intelligence happening, answering questions and interacting there. But, does anyone wanna raise their hand using the react button to ask a question for Leon and Mark?
Or Mark, if you wanna come on mic and bring up any of the topics you heard in the chat as well, that's an option.
[00:23:15] Mark: Yeah, so I, I think one of the big things that came up was talking about, ARPU, which is, you know, probably one of the least interesting things to talk about in the music business, but one of the most important.
Jay at, Your Morning Coffee called me, I think I- I either called myself or he called me MARPU in that one, because of my obsession with it. But, it's, on the surface it looks really simple, right? All you've gotta do is increase prices, but there are loads of things that push in the other direction.
You've got, because it's more difficult to get new subscribers in developed markets, you put loads of free trials in markets, and free trials become four months instead of three. That brings down ARPU. People sign up to family plans instead of individual user, that decreases ARPU. Emerging markets kick in and they've got lower prices, so all of these things have been holding it back.
What Leon was talking about, maybe you wanna pick up on this, Leon. One of the, you know, one, one of the key things Leon was talking about was the difference between sustaining innovation, i.e. the things that just help make your business operate a bit better today, and that's what price increases are, versus the disruptive innovation, the things that are gonna change the fundamentals of your business.
the second ones, they're more uncomfortable, but they're often the most important. And, you know, you were talking earlier on, Liam, about label services and, you know, artist distribution being, you know, the two sort of ones which came from 2016 to change the business of today. So I'll throw a question at you.
if you pick one thing from everything that you've spoken about, what's the thing everyone should be paying most attention to?
[00:24:41] Leon: Oh, wow, Mark, you... This is not prepared, by the way.
[00:24:44] Dmitri: Put you on the spot.
[00:24:45] Leon: Um, wow.
I don't want to turn this into a generative AI kind of discussion, but I do, you know, I'm a, I am a big believer in, providing people with tools that really kind of lower the barriers. I think, you know, in terms of the internet and access to information and education, that was absolutely transformational.
And I think there is a lot of people out there that want to create music, want to share that music. So I really think that it's- it's about, allowing individuals to kind of provide, you know, to, with a toolkit to really are able to do that at scale, and to a high quality. I think it's very, very difficult to pick up a guitar and learn it and the, you know, the learning curve is brutal.
Keyboards too. So I think that's something that I think is- going to be prevalent, for sure, in the future. but I think, you know, a wise man once told me that, when I was in, uh, the major label business, is really focus on what the fans are saying in terms of what they want, where they wanna consume their music, and don't kind of push against that, I think is absolutely key.
The major labels, for a long time, resisted things like, downloads and streaming, only for it to obviously come and really bite them in the, you know, you know what in the future. So I think really kind of focusing on the end user and the fans and kind of, you know, letting them kind of lead you is gonna be incredibly important.
So they're savvy, they're, you know, they are very nuanced with what they love and how they want to, , connect with their, artists and IP. And I think be open to those kind of changes and kind of look at those as identifiers as where to kind of, you know, go next.
[00:26:17] Mark: Yeah. and, Dmitri, if I can steal 60 seconds of the remaining one minute and f- 53, I think there's gonna be two speeds, right?
Or two different tracks. you might even say a bifurcation. You've got the interesting, cool, culturally relevant part, which is so many of the things Leon was talking about. You know, identifying with fans and giving consumers a chance to lean in and participate, and all this stuff which really is, you know, as long as we get the rights sorted out, and that's obviously a massive, massive task, and I don't want to underestimate how big a deal that is.
But if we can get that, then that's the bit about that makes music count. And then maybe we can get the Gen Z to start thinking music is as important to who they are as it was for Millennials. We don't want to look back and say Millennials was the last great music generation. But the flip side, which is possibly a bigger opportunity, a culturally less interesting opportunity, is scaling the boring consumption.
You know, more and more of us are spending the time listening to playlists that are just good enough to not interfere with what we're doing, but good enough to keep listening to them, and music is being made for that. We're doing this massive analysis of like the genres of 10,000 record labels at the moment, and one of the biggest themes in there is downtempo, chill out, rain sounds, white noise, gray noise, you name it.
All of these things which are just there to sit in the background for, you know, to serve it as a purpose. The sad reality is there's probably a bigger business in there than there is in fandom
[00:27:47] Dmitri: Perfect. Perfect.
Let's hear it again for Leon and Mark from MIDiA Research. Thank you so much, Leon, for jumping on camera, and Mark-
[00:27:55] Leon: Appreciate the time,
Dmitri. It's great. Thank you. Thank you, guys.
[00:27:57] Dmitri: Thanks.
Yeah, really appreciate that, Mark and Leon. MIDiA Research, follow them online. Check out their reports and their blog posts, which, you know, we featured on the Music Tectonics podcast and so forth.
Let us know what you think! Find us on LinkedIn, and Instagram, or connect with podcast host Dmitri Vietze on LinkedIn.
The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Weekly episodes include interviews with music tech movers & shakers, deep dives into seismic shifts, and more.
