Streaming Slowdown. What Slowdown? With Mark Mulligan

In this episode, Dmitri speaks with Mark Mulligan, veteran tech analyst and leading digital thinker from MIDiA Research. Topics include the slowing growth of streaming revenue, shifts in market share among major and independent labels, the rise of the global south in subscriber numbers, and the impact of super-premium subscriptions on monetization. We also talk about the future potential disruptions from AI and legal challenges and how the music industry might adapt and innovate in the face of these changes.

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Episode Transcript

Machine transcribed

Dmitri: Mark Mulligan is a music Tectonics OG. He was the opening keynote at the inaugural Music Tectonics Conference in 2019 as and has spoken at the conference or pre-conference pretty much every year since. He's a long-term tech analyst and a leading digital thinker with more than 20 years of experience working with leading global music, entertainment, and tech companies.

His company, MIDiA Research predicts the future of music and innovation, and then founders go and build those companies who in turn come and hire my company, Rock Paper, Scissors, or show up to the Music Tectonics conference looking for investors, co-founders, label partners, and so forth. So along with execs at the biggest music companies.

I listen to Mark and the entire MIDiA team very closely, so it's always an honor to have him here on the podcast predicting our future or looking at the past and telling us what's coming down the road. Hey Mark, thanks for coming back.

Mark: Hey, thanks for having me. I mean, that sounds like an ecosystem you just explained there.

Dmitri: Yeah. It is, it's true. It's, I think it's why we like each other so much. it's a good synergy. You know, your last [00:01:00] appearance was a recording of you at the conference in October. It was the bifurcation debate that you did with Tatiana Sirano, who knew? At that point, what was gonna turn out in political debates or any other kind of debate.

But our podcast listeners love the episode. but a lot has happened since October, and you guys have done a lot of research. You've looked at what happened for the entire year of 2024, so I think there's tons that you can share today. How did recorded music revenues do in 2024?

Mark: Not bad. Not great. Not bad. Okay. Next question. No, I mean, it was a, um, it's, we've been talking about a long time now that the, streaming slowdown is gonna come. That doesn't mean a decline, it just means the rate of growth is getting slower. And as a consequence, The music industry gets slower because streaming is such a big part of the music business.

and, we really saw that last year. total growth was about 6%, but that was really boosted by expanded rights, which we'll get into in a bit. But [00:02:00] that's basically, I. All this stuff around mech and live and everything else. If you take that out, then growth was closer to between three and 4%.

So that's, as I say, it's not bad, but when you factor in inflation, et cetera, it's not amazing either. And the growth was really different depending ways sat in the world. So global, south, really strong growth. US not great growth UK not great growth. it wasn't bad, but we're definitely at a stage where it doesn't take much to turn it from an okay year into a bad year or indeed into a good year.

But we're at that sort of stage of growth when you're in low single digits percent growth, when you've got inflation at a decent rate as well. it really is all about optimizing and squeezing out every bit of efficiency and effectiveness you can get in the system.

Dmitri: let me ask a stupid question. 'cause I think that's part of the job of a podcast host. it was growth, right? Not only was it profitable, but it also increased from previous years. You're just saying that it [00:03:00] increased less than it's increased in recent years. That's still pretty good, isn't it?

Mark: Oh, it's 100% good. you know, we shouldn't ever get, complacent about the fact that this is still a growth industry. it is just, is the growth at the level it should be when most of the world is not yet converted to streaming, for example. Most of the west is, most of the world isn't.

there is a huge amount of growth yet to happen in emerging markets. but it's also. The, I'd be a little less critical about the rate of growth if there weren't challenges in the system. And there are lots of challenges in the system. the fractional nature of streaming royalties, doesn't work for the majority of artists.

It works for big artists. It works for big labels, but doesn't work for others of. Disputes and debates going on at the moment. You've got the bundling issue in,in the US which [00:04:00] has now gonna be co-defined into major label deals, all that bit about discounts with the streaming services for having audio books in there.

we've got two tier royalties coming in, which is upsetting part of the market and making parts of the market happy. We've got questions about whether the social platforms are paying enough, particularly TikTok, about whether artists can build a career. About, what's happening to people's relationship with music when so much of it is leaned back and those playlists are filled with either AI music or, production music or commissioned for playlist music.

So if we had an industry where everything was looking really positive and it's just. Yes, this is a nice, stable industry. So with stable growth, a few percent is perfectly fine, but it's not. It's an industry that has got a huge amount of question marks in it at the moment, and that is the risk about when you have relatively modest growth.

All you need is one of those things to turn into a crisis [00:05:00] and suddenly got trouble. Now, do we think that's gonna happen? No. We think that there is enough growth, and those changes tend to happen fairly slowly, but it certainly raises the risk profile.

Dmitri: So I have heard you talking about the slowing of growth. That growth is continuing, but it's slowing as a percentage, year over year. And what I'm hearing you say is that is not a, existential crisis at the moment, but I. If that growth continues to shrink year over year, then it starts to look like it is a, a longer term direction.

Is that right?

Mark: so I think there is a longer term direction. Growth is slowing and it will continue to slow. You know, you've seen loads of those sort, like investor and analyst charts with the slow, the hockey stick growth and then it slows at the top. So we are getting to the top of the mountain. it is going to be that sort of, not plateau, but certainly much slower steadier, long-term growth, which is why things like price increases super premium are also important.[00:06:00]

The point I'm making is when you have an industry that is, has a long-term prognosis of stable, but modest growth, then all it takes is for AI to blow up and legal cases not going the direction that the rights holders want and one big disruption. And suddenly the difference between growth and decline is just a few percentage points.

Dmitri: Okay. All right. we'll come back to a little bit to like where things are going, but you've done so much over the last month in terms of publishing reports and blog posts and content around all the analysis you've been doing. What, one thing that I think people are interested in that you've written about.

What's changed in terms of market share among labels and also what about when we look at majors versus indies versus artist direct shares? where are we there with 2024?

Mark: So the thing about market shares in the music business, particularly as we are at this more stable growth stage, is it doesn't change very quickly. normally we are talking about [00:07:00] fractions of a percentage point of market share each year. and what you can see is the trends tend to play out over a few years rather than over a single year.

So the long term trends are. Major labels are losing a bit of market share every year. Not much, but losing a bit. India labels are gaining market share. Not massively, but they're gaining a bit. So it's steady growth within the majors. water music didn't have a great year. Sony has had yet another really good year.

So Sony is the one that is gaining market share. In fact, when you look at the recorded music market in its entirety, you have universal music, water, music, Sony music, independent labels, and artist direct. The indie labels and Sony were the only two constituents that actually gained market share in 2024.

and remember, Sony is one of the world's largest indie labels because of awol, because of the orchard, et cetera. So it is also benefiting from the growth of [00:08:00] independent labels. the one thing. At risk of, sounded like I'm going to talk out both sides of my mouth at the same time. the one thing that did change really quickly every year was artist Direct.

So artist direct. Those are artists who are self releasing by platforms like TuneCore and CD Baby and Ed, et cetera. And they were growing at an astronomic rate for many years. And then that growth almost ground to a halt in 23. And in 24, it is it, they grew more slowly than the total market. Why? a big part of it is things that have happened behind the scenes in terms of royalties.

So one really good example is, Spotify's discovery mode with distribution platforms going at platform level onto discovery mode. That means. Potentially higher performance, but they're sacrificing a portion of the royalties to do that. And then of course, we've got the two tier royalties, or, as Universal calls it, artist centric, which means that [00:09:00] if you have fewer than a thousand streams and a certain number of listeners, your song will not receive any royalties.

You'll essentially be, demonetized. Those things have started to kick in. So artist Direct is still a big important segment. $2 billion of revenue in 24, but the rate of revenue growth is slowing. And the reason why this is so important is because the actual number of artists self releasing grew by about 17 or 18%.

So there are more people self releasing without a record label, and On average they're getting paid less because of revenue growth is slowing. You mentioned bifurcation before. which is in a nutshell, the music in industry is gonna split into two and one side of it is going to probably build around things like the long tail consumers leaning into, create a much more social, et cetera.

One of the things Tati and I identified in that debate was that [00:10:00] bifurcation isn't just happening on its own, it's happening as a reaction. I. To the imbalances in today's system and two tier royalties is one of those imbalances. So if you are a self releasing artist and you're releasing and you have less chance of earning money now than you did before, then you are certainly gonna start looking at where are my alternatives?

Dmitri: Okay. that's super helpful. I'm not sure what to do about it or what to think about it yet, but it's good to start to think about it.

Mark: let me give you a way to think about it. Um, there are many alternatives at the moment to, mainstream streaming in terms of a place where an artist can build a fan base, et cetera, et cetera. three sort of global scale ones jump out. There are loads of really cool startups and there'll be a bunch of those who are in your client roster.

But in terms of global scale, IE already has a big audience. Now you've got TikTok. You've got YouTube and you've got SoundCloud and they're all doing slightly different things. But I've been really enthused by the path [00:11:00] SoundCloud has been on, particularly this last six months. So they've partnered with some, AI companies to help creators make music.

They've been introducing the sort of fan powered royalties. They've, got things like,auto mastering, loads of just tools that as a creator. You want in order to be able to help you build a fan base and make your music better. And then they just announced, so we're recording this now.

In the first week of April, in the last week of March, they announced a two-sided marketplace, in partnership with five, which is basically a place where creators can buy and sell from each other, in order to fill their skill gaps. I'm no good at writing top lines. I'll go and find somebody who can.

I'm no good at mastering. I'll get somebody who can. I'm really good at writing baseline so somebody can pay for me to go and write them baselines, et cetera. So they collectively, not only do they make each other better, they also generate meaningful income from each other. So that, I think is a, what one [00:12:00] way of thinking about what the alternative is.

It's a platform that does more than simply cater for the opposite ends of the value chain. The opposite ends of the value chain are rights holders. And consumers. What we think is gonna be crucial is catering for the creators to make sure that they can see a path to a sustainable career. So I'm not saying that SoundCloud is the answer, but SoundCloud is doing more than anybody on a big sort of global scale.

I don't want to under, I. Value the fantastic work being done by so many startups. I put up a post a couple of weeks ago talking about some of these issues and I had literally dozens of startups reaching out to me saying, Hey, we're building this. And it's amazing that they are, and some of those will be part of the answer.

But for anything to appeal to an artist, there needs to be an audience. And that's what currently outside of DSPs, TikTok, YouTube, and SoundCloud have the audience.

Dmitri: [00:13:00] Got it. Interesting. It feels like Spotify made an attempt to go in this direction at one point and then suddenly turned 90 degrees again and went back to the, this difference that you're talking about here, where they're really providing the listening experience but not the creator experience.

Mark: I wouldn't say there is so much turned as kicked in a different direction when the record label said, there is no way on earth you are going to allow artists to self-release. You can have self releasing artists, but you can't have our artists choose and Spotify chose. So in a sliding doors moment, if that hadn't happened, everything that Spotify's doing now with podcast creators they would be doing with music creators.

Dmitri: Okay. That is very helpful. Thanks for sort of like putting that into that context. we are gonna talk about subscriber numbers because you've been talking a lot about revenue, but market share can also be defined by users as well. But before we get there, are there any other insights about shifts that happened in 2024 revenues?

Mark: Yeah, so it's the [00:14:00] first year ever that streaming did not increase its share of overall recorded music revenues. it was pretty much the same as it was a preceding year down a tiny bit, almost like a rounding error down. So it's the first year that streaming didn't grow enough to increase its share of the business, but.

Two sets of things really did grow. One is, licensing, so that's performance and sync. And the other is expanded rights. So that's when labels participate in the revenues of artists around things like merchandise and branding and, live, et cetera. That's up to 13% of all recording music revenues now.

So it's not huge, but it's certainly meaningful and it's growing far faster than the rest of the businesses. And it's not just an Asian label thing, right? Because this is obviously the bread and butter of the likes of hi and JYP, et cetera. It's also the major labels, and also a bunch of bigger indies and even some small indies too.

The challenge is we are in this [00:15:00] era of independence, where artists say, I don't want to give away everything. I want to own my rights. I want control. I just want to do a joint venture or a distribution deal, or whatever else. In order to have expanded rights revenue, you've got to get more rights from your artists.

So this is a little bit of a paradox for Western labels. How do you deal with empowered artists who want to control as much of their own career as possible, but also get them to give you more stuff so that you can go and do more with it?

Dmitri: I wanna dig into that more in just a little bit. but we've gotta take a quick break and when we come back, let's talk about the subscription, market share as well, separate from revenue. We'll be right back. Okay, we're back. this has been great. Mark. You've already given us quite a lot of insights about what revenue looked like in 2024, what, shifts are happening, what market share looks like, what that implies for what's coming down the road.

And revenue is a great indicator of business market health and growth. But you've also been looking at subscriber numbers, independent of revenue, [00:16:00] what's going on with subscription growth and market share across the DSPs.

Mark: Well, when we put out the reports, we called it slowdown. What Slowdown, because the slowdown in streaming revenue growth is not reflected in subscriber growth. Subscriber growth was up by about a nearly 12% in 2024. that is really about double, just a little under double the rate that label revenues grew, and there's a couple of reasons for that.

One is, the sort of more mundane part of it is in western markets, the, streaming services are having to do more to try to get the last sort of holdouts, so more active use of free trials, et cetera. So that brings down the average revenue per user arpu. so that. That in itself means that revenue grows more slowly than subscribers, but that is really like a, it's a short term factor, that will fade out a bit.

The long-term factor is global south. So when we are talking about global south, we basically mean the world minus [00:17:00] North America and Europe, and that is where there has been absolutely dynamic growth. In fact, when you look at subscriber growth. in 2024, nearly 80% of that growth. Came from Global South Markets, so we've got over 800 million subscribers globally.

That was up from about 730 million the year before, and the vast majority of those new subscribers came from Global South Markets. If we'd been having this conversation two years ago. It would've been a similar trend and we've said it's all China now. It is no longer all China. So you see in India, which has been a market waiting to get going for a long period of time, is finally kicking into gear, driving really meaningful subscriber growth.

Brazil, Mexico, massive growth in contribution to the market. the streaming market, when you look at it in terms of monetized users, remember we're talking about subscribers here, not free users, monetized users. [00:18:00] Subscribers is really strong growth. it's just the, they're delivering lower ARPU because they're in markets where people have less money.

Dispensers, streaming is priced more cheaply. But there's also this other really interesting thing going on. If you look at streaming revenue growth year on year. For labels versus DSPs.

labels in 22, grew streaming revenues by 6%, then in 23 by 10%, and then in 24 by 6%. Over the same period. DSPs went from 8% to 16% to 19%, right? So not only are DSPs growing revenue more quickly than labels, the extra rates of growth is getting bigger every single year, and that is partly. Because, of things like, bundle deals, monetization from other means, et cetera, the Chinese DSPs, for example, boosted up by having,non-music revenue, et cetera.

But we've certainly got [00:19:00] this really interesting thing going on with the streaming market, which is if you simply look at it through the lens of record labels, you are not getting the full picture of gross.

Dmitri: I'm sure that's gonna continue to create some interesting discussions between rights holders and. DSPs. can I ask the, when you talk about this disparity between revenue and subscription and the impact of the global south, is this just a kind of a top of funnel moment?

Will eventually the DSPs and labels as a result be able to monetize those subscribers at a higher rate, or is it always gonna be a lower arpu when you look at different regions?

Mark: it's always gonna be lower and it may need to get lower in some instances. So let me give you two examples of why this is the case. So Brazil, you know, now I think it's the fourth or fifth biggest subscriber market globally, But in Brazil, only about 20% of the population has a postpay data plan on the phone, and only about 20% of the [00:20:00] population has a credit or debit card.

So that means the addressable base for subscriptions is only about 20% of the population. So when we hit that glass ceiling record, labels gonna have to decide, do we want to go cheaper? Do we want to go more mainstream? and there is an answer already in the Brazilian market. You look at Dza, DZA has a bundle with the Telco, Tim, which is, it's massively discounted from the standard price.

It's pre-paid bundled mobile zero data rate. So that basically means you don't need a credit or debit card. You don't need to have a postpay plan, and you don't even have to worry about topping up or anything like that. It automatically happens when you top up your phone and you don't have to worry about your data usage.

That is the sort of thing that could unlock those bigger markets, but it has to be a lot cheaper. so that is one example of what we call a mid-tier market from Brazil, but then India, which I mentioned before, if you look at the average price of a subscription, standard subscription in India. You are looking in [00:21:00] dollar terms, it is about five times cheaper than it is in the us but on a purchasing power parity basis.

So that's basically a calculation to account for the average cost of living, average income, et cetera. It's 12 times more expensive, and so if there's. Roundabout a billion people in India, are all of those going to be potential targets for subscriptions? No, but there are hundreds of millions.

It could be if the price was significantly cheaper. So I think what we are looking at is essentially the emergence of two. Different lanes for the music business globally, you might say another bifurcation. And that is the global south is always gonna behave differently. and the thing which I find super exciting about the rise of the global south is most of these markets were not big recorded music markets in the old music business because people didn't have the money to spend on CDs and downloads, et cetera.

Now you can monetize scale in a way that you couldn't before. The [00:22:00] music markets have really almost come to life for the first time. So 10 years ago in India, you might not have imagined about a career as an artist or a songwriter, or a label head, or an agent, or a promoter or whatever else. Now there's this vibrant music market and it's a really viable career.

So these music markets are going to become much more vibrant, more and better music is gonna be made. And in the global nature of streaming more that music is gonna export. So I think at the moment we look at the global South as this other thing that is happening on the other side of the planet.

I think the next 10 years we will see more and more than music that we listen to, either coming from the global south or being shaped by the sounds of the global south.

Dmitri: Wow. That is the kind of thing we look to you for, mark to, think about. What we're looking at now, trends, where it's going and how that's gonna impact what's coming down the road. And I keep going back to things that you brought up right out of the gate of this conversation, because I feel like we have to unpack [00:23:00] each one.

I'm sure there's a lot more we could talk about the global self. We could probably spend the whole episode on that. But you were also talking about this expanded rights and revenues. I think you described it as things like. Artist, merch, sponsorships, branding. that stuff has always existed.

But I think you're saying labels are getting in on the action and some new types of categories are coming up. I think that's what you're saying. Tell us more about that category and what other kind of implications there are for this growth as the share of revenue source.

Mark: you either don't work in the music industry or you don't read anything about the music industry. If you haven't noticed that the record labels for the past two years have been going all about the superfans. and the super fans are really. The, what is targeted by so much of the expanded rights, merchandise, et cetera.

and if you think about merchandise as artist t-shirts, then well, the world has moved on a lot. you can go on to universal Musics D two C site and get an Arian Grande scented candle [00:24:00] hoodie, vinyl bundle. You can shop the Taylor Swift. Jewelry and handbag range.

there's just, there's so much innovation going on in terms of what, what to sell around the artist's brand and the likeness, et cetera. so there's more things being made to sell. there's also, more formats being experimented with. If you look at some of the Korean labels, they make manga and anime, et cetera of, of their artists.

you've got things like we versus, fan destinations. there's definitely more new things to do, but a lot of it is basically working out new ways in which you can monetize the artist and therefore leave your spending of superfans.

All sounds great and it is. But there is this really important thing that is a massive risk, and that is, is what myself and, Tatiana think about as over harvesting. if you think about, if you're planting a field. you've got to make sure you don't overuse that field.

So a field might [00:25:00] be left fallow, every fourth year except to let its nutrients come back. You're constantly watering, fertilizing. You don't harvest it before the crop is ready. I. In this sort of, pursuit of super fund revenue, there's a real risk of, if they'll spend, let's get every penny outta than we can.

Rather than actually let's focus on what makes some funds in the first place. And then the revenue will come, organically as a result. So I'm not sure that balance has yet been struck as well as it could be. And I think there's, just to give you an illustration of how this.

Oversaturation of fandom spending is already beginning to play out. live music is in, many respects. the ultimate superfan product, Polestar, who always do an amazing job of rounding up the, live music revenue figures. And if you haven't checked to go and check, pole Star's end of year post, looking at the top 100 tours globally, revenue was up.

But number of tickets sold was down, and [00:26:00] the average ticket price went up, which is what drove us spend. In fact, if you compare the average ticket price with the top 100 shows according to Polestar for 2024 compared to 2021, they've increased by 54%, what you hear from ticketed companies is, well, it's price elasticity.

You know, so people are, always willing to spend the demand. Is there. But if people are buying fewer tickets, then is the demand really there or are you just finding that a smaller number of people are willing to overspend to get to the tours they really want to see? I know this sounds quite outlandish, but, we think there will be revenue decline in the live music market.

we'd originally thought that was gonna happen about 27, 28. There's a chance it could even happen in 25. Not a big decline, but a bit of a decline, not just because of all that dynamic of people, spending so much more on tickets. And of course when you factor in bundles with merch and VIP and all the rest, [00:27:00] but also the fact that so many of the smaller venues have closed.

As a consequence, you've got this supply issue of where do the smaller next generation of bands play. I think it is unlikely live revenues will decline in 25, but there is a chance they will decline because of this over harvesting of fandom.

Dmitri: So on the one hand, you're seeing growth as a category and expanded rights and revenues in both physical merch as well as live and experiences, and probably a lot of digital types of things too, which I think we could get into a little more at some point. But you're saying with that growth, there's a risk of.

Burning out fans and impacting revenue across the board as well. it's interesting to me to hear about this, 'cause in a way I was thinking,when you talk about the artist merch side, it just feels like, oh, we're doing cooler physical stuff. It's like leveraging the vinyl, craze and where you could go with all the new fast fashion and so many other things.

but it, you did use the word likeness at one point, and I'm interested that [00:28:00] not much of what you talked about is in the digital realm in terms of name, image, likeness, which is a whole thing that's taking over conversations around revenue in the sports industry that could have implications for the studio ojibwes and the,and the real life celebrities as well.

is that even in this category, is that still bubbling up for music?

Mark: No, it is there. Although it's ironic talking about Studio Ghibli, considering that AI just completely ripped off their image and likeness. Yeah. Yeah. but no, I think the really big difference between sports and music, excluding the Asian and some of the Japanese label has, there's Korean and Japanese labels, is that most labels do not have image and likeness rights for most of their artists.

It's just not something that artists have historically signed over and they're reluctant to do so now because, it's all part of this age of the empowered artists where they want to be able to do those things themselves. management team in negotiations with a label would fundamentally be hands off.

That's ours. so there's lots that labels would like to do with [00:29:00] image and likeness rights. It's just they don't have enough of them to do anything as a sort of like a format move. They can do individual initiatives when they've got those rights, but they don't have enough of them to essentially launch a new, a new licensing tier or a new format as such.

So is there a lot potential to be had there? Yes, absolutely. the right situation is just so messy. I mean, the solution. morally dubious as it might be, is to take the, the Korean label approach. Not all Korean labels of course, the K-pop type labels where essentially, and I know I'm being really reductive here, I.

The artists are fundamentally employees, where the, the label, creates, owns and monetizes and exploits all of those rights and does fundamentally whatever they want to do with them. Once you've got that degree of control, then you can do everything you want. And that's why we do see things like anime, around some, Kpop artists.

And of course, if you were to go and decide to launch a [00:30:00] virtual artist. Then you've got just as much control as well.

Dmitri: Well, another digital sidebar that you brought up earlier in the conversation is super premium, I think you call it super premium subscriptions this year. There's been a lot of talk about that, maybe some hints more so than actual, Execution a way to squeeze more revenue out of the plateauing subscribers of maturing streaming regions.

should the industry be hopeful about the strategy and why?

Mark: it's probably gone beyond hope to need now, with revenue growth slowing the way that it is. and even price increases aren't enough. So if you look at the RAA figures,looking at the, just at the us and this is just using the RAA figures alone.

So the price increase was the equivalent to 9.1%. Inflation was running at, 2.9%. Subscription revenue growth was 5.3%. and RP growth was 1.9%. So what that means is you add a dollar onto [00:31:00] the price point and your price goes up by 1% less than inflation.

That means you add a dollar onto the price point and you're still not keeping, you've actually decreased RP in, in real terms. So super premium is super important. will it deliver 20% of subscribers really quickly? No, it might do so over the course of four or five years. but when we've gone and asked consumers what are the things that you would pay for?

The most important thing that they want is exclusivity. They want to get music before other people get it. They want to get merchandise that you can't get anywhere else. They want to get first access to tickets. These things are valuable because they're difficult to do. and so let's just say that we had Supreme a year from now, has a one or two week release window where you get the music a week or two before anybody else does.

So that's great and you know there's a really good [00:32:00] reason to go and subscribe. But what does that mean for everybody else? It's like you've gone and booked your airline ticket with nice airline, and then suddenly you found out you've been dumped onto a budget airline because suddenly it turns everybody else into second class.

Subscribers and you think about, I'm paying my 10 99 and yet I'm not getting the full quality experience. Now, it doesn't mean necessarily that results in churn. we've seen, for example, Amazon Prime video. Suddenly turning its entry level tier into an ad supported one. So you have to upgrade to get rid of the ads.

there's a slightly cruel way of talking about is and ification, nonetheless it is the way that, subscriptions tend to work. I think the risk about premium and with price increases as well is not churn. It's, it will be if the super premium.

Subscribers really look like they've got way more than the signed subscriber. The bigger risk is acquisition. 'cause if the average price keeps going up, particularly for [00:33:00] price increases, then it, if you think about the people who haven't subscribed yet, I. They're the ones who weren't wowed straight away, or the ones who don't have as much disposable income or L less willingness to pay, so it becomes harder to grow subscribers.

That's probably not a problem in the US where there aren't that many new subscribers to be had. But in markets that are Mid-tier markets like Brazil and Mexico, et cetera, if the price keeps growing, going up and premiums in markets, so not only is it more expensive than it was last year, you know, you're not getting the full fat product, then that could potentially affect acquisition rates.

The likelihood is that the amount of extra revenue generated by the relatively small share subscribers that will upgrade will be enough to offset that. And we've got some amazing piece of work done by Tatiana and another of the, media team Perry, Gresham, which is on, pricing sensitivity.

It's a really [00:34:00] heavy methodology, but really robust. Turns out people are actually willing to pay way more. In addition for super premium than it is currently been listed at. So all of those factors, mainstream consumers, not so much tolerance for spending more, but those hardcore super fans, you can get a lot outta them if you say choose.

Dmitri: they're paying a lot for festival tickets and concert

Mark: yeah.

Dmitri: what's double, triple, quadruple on a much smaller monthly fee. that's really interesting context. Thanks for that. We have to take one more quick break and when we come back, let's go into the future a little bit further.

We'll be right back. Okay, mark, now that you've done all this research and analysis from 2024, what has yet to hit our eyeballs, or in this case, our earballs that you think we'll be talking about in November at this year's Music Tectonics conference.

Mark: Okay, let me put in some negatives and some positives. a [00:35:00] negative, I think we will see a groundswell of discontent from independent labels about artist centric. We've obviously had it in play for a bit now. and it's, mainly affected the independent artists. Why didn't we get the groundswell of discontent from them?

because fundamentally, and this sounds harsh, but it's true fundamentally, a very large body of them, the majority are not that clued up about how the music business and royalties work. So they weren't really that aware of what was happening. Independent record labels know exactly how the music business works.

These are, entrepreneurs who, understand all about how, a profit and loss sheet, et cetera. a lot of those sort of, not even tiny labels, smaller sort of independent labels are thinking, I've got lots of songs in my catalog that don't get a thousand streams every month.

And so what's gonna happen if fundamentally a large body of my catalog stops generating me money and that money is gonna start [00:36:00] going to the bigger labels. and I haven't got a choice. I have to sign this deal that's been put in front of me by Amazon and Spotify. so I think there's, that, I think is something we will see a lot more independent labels beginning to question why should they have to go and change the.

The entire basis of how they, commercialize their musical streaming services. in terms of a sort of a positive to counterbalance it, I think we will see, more and more artists. Doing more with their fans. And what I mean by that is, whether that be, continuation of getting them to do remixes and versions, audio modification, et cetera, because that is something that's been going on for years now and just continues to grow and grow.

but it's gonna be more case of lots of individual success stories rather than a, oh, this is now a new tier of the market. I think we, I think there's a really good chance we will see some global south hits [00:37:00] breaking through into the west. so maybe there's going to be like a Louis FCI moment for Sub-Saharan Africa.

like an Afrobeat artist or something. Or for an Indian artist. And I think we are really beginning to see. This, we started to see it in 23. It accelerated in 24, and we'll see more of it in 25. And that is the rise of Sub-Saharan African artists, the rise of South Africa as a market.

if you look, we did some work with, splice recently looking at. The, genres that people are using to sample with. doing some work around, loop Cloud, data for the, the IMS report coming up soon. And you're seeing things like AMA Piano and Afrobeat and Afro House really beginning to rock it up.

So I think we will see more and more African sounds, particularly in electronic music, breaking through. and then when we think about in terms of Catalog acquisition. not everybody's happy with the direction of travel. some people think this financialization of, of music isn't necessarily a good [00:38:00] thing.

But what is absolutely clear is that this is a really meaningful influx of capital into the music business. And that will start to ripple down into. You know, are there parts of it more? Songwriters and artists are getting paydays, more labels and publishers are getting paydays. and so that, I think really those are new entities coming into music publishing and increasing, to, master recordings as well, who are looking at the world in a different way.

they're thinking they've got different viewpoints on how you make your music work. And so if we were to go, I know you're asking about this year, but we, to fast forward two or three years into the future, I think we will see that those catalog acquisition funds, they have basically just become a whole new tier of music publishers.

And when they become a tier of music publishers, then they, that changes the nature of the songwriting economy, particularly if some of those, the people who own those funds also happen to own A CMO, for example. [00:39:00] You know? And so I think there's a lot of structural change that will happen. One more thing for maybe for 25 and three to 26.

Is, you could argue that there hasn't really been much innovation in the consumer music side of things for quite a few years, largely because it's really expensive and difficult to get the rights to do what you want to do and Spotify and everybody else, and the streaming side is already so big. So what we've seen is a lot of innovation in the, the services side of the equation.

obviously we saw recently, the acquisition of stem, there, and there've been plenty of others,over the last year or two. What that reflects is there is a growing body of music startups and scale-ups who are providing top tier services for smaller record labels That levels a playing field.

So you no longer have to be a mega label to be able to benefit from data science. You no longer have to be a mega label to be able to have really good royalty reporting. [00:40:00] So I think this democratization. Of the record label landscape is a trend that I personally find really, really interesting. It might not be exciting in the same way as talking about fan apps or whatever else, but it makes it easier for smaller labels to be able to compete on a level playing field for bigger labels, and that is a good thing.

Dmitri: Wow. Amazing. Mark, I think probably our podcast listeners have decided to listen to this at half speed because you've just shot so much information out. it's definitely an episode to listen to multiple times, to unpack everything there and to really absorb it. And I realize as we wrap up here after all these years of having you keynote and debate in the music tectonic

Conference, I'm not sure I've ever asked you on the podcast to explain what are the ways for music industry innovators and executives to keep up with MIDiA research's work? Can you explain the various tiers of engaging with MIDiA as we wrap up today's conversation?

Mark: Yeah, sure. three really basic ways. One is sign up to our newsletter. the newsletter is not a place where we sell you stuff. It's a [00:41:00] place where we pull together all the things we've been writing in blogs, and we sometimes have free reports and videos, et cetera. So sign up to the newsletter. you can become a subscriber.

Get access to all of our reports and data into the analyst, et cetera. And then we also do project consulting. So it might be helping you work out how to enter a new market, understanding your customer base better, a surveying creators, et cetera. So those are the sort of the three main ways we work. And as of just yesterday, we, have changed the way that we're categorizing all of our research.

So we now have music industry as one vertical. then we've got fandom and entertainment. The creator economy and social. Social is just a place of its own in the entertainment world. it is where so much of entertainment and creation and fandom, et cetera, happens. So that's why we're covering that as its own vertical, the creator economy.

If you look across all of this sort of research and analyst companies, nobody's dedicating time to this yet. It's arguably across [00:42:00] not just music, but all forms of entertainment. The single most important thing that has happened to entertainment. So with doubling down of that, and then entertainment and fandom is where we're building out work on scenes and fragmentation and identity.

Really getting at the culture of entertainment, not just the business of entertainment. There's the sales pitch.

Dmitri: Amazing. Mark, you've been so generous with your time. Mark Mulligan, MIDiA Research. You can find all that he just talked about@MIDiAresearch.com. Thanks for being such a big supporter of the music innovation and Music Tectonic community, and thanks for coming back on the podcast, mark.

Mark: Brilliant. Thanks for having me on.

Let us know what you think! Tweet @MusicTectonics, find us on LinkedIn, Facebook and Instagram, or connect with podcast host Dmitri Vietze on LinkedIn, Twitter, and Facebook.

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.