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CMU@CMW: “We as an industry have a deeply impoverished product”

By Andy Malt | Published on Wednesday 11 May 2016

Streaming is growing at a phenomenal rate, we know that, but gaining investment for new services is growing more difficult. And while bashing some of the companies streaming music is popular at the moment, couldn’t we be looking inwardly at how to create more value? These were some of the key points raised during the ‘Digital Perspectives’ session presented by CMU Insights at Canadian Music Week last week.

“We’re seeing ongoing, phenomenal growth in streaming”, said Merlin CEO Charles Caldas in an interview with CMU Business Editor Chris Cooke. “In December 2015 alone, Merlin collected $23 million. Consumers like streaming and they’re paying for it in increasing numbers. The growth dynamic is showing no signs of slowing yet, and the entry of Apple in the streaming space last year accelerated the growth of all the other services”.

“At current growth trends, even if we halve them, this business is going to double in the next ten years”, he continued. “We’re looking at it becoming a market that is incredibly lucrative. There are consumers out there willing to pay for music and willing to pay for what’s in front of them. A lot of them don’t yet understand streaming, but this is just a matter of marketing. As these services become more mainstream, we’ll see that change”.

However, he added: “The depth of choice we had pre-digital hasn’t yet emerged. We currently have the megastore or the free-for-all”.

Building a wider variety of streaming music services is partly a matter of investment, though that is becoming more tricky for start-up platforms that want to actually play music, noted music industry consultant Jeremy Silver in a follow-on interview.

“A lot of money has been burnt by a lot of businesses”, he said of digital music start-ups. “The reality is that music still has this incredible global appeal and the reason that people who invest in music get excited about it is because music appeals across borders. However, there are very few investors who want to put money into anything that requires licenses from the music industry. That is seen, from an investor perspective, as being a troublesome area”.

There is still hope for those with a great idea though. Silver added: “There are always fanatical investors who are personally passionate enough to believe that these things are worth putting money into. And long may that last, because we need these people to be passionate despite what their brains might tell them”.

Of course, the other big concern in the record industry at the moment is the growth of YouTube, and the so called ‘value gap’ created by its use of safe harbour laws, giving it an unfair advantage over other on-demand music set-ups, both established and start-ups. Various industry bodies are now lobbying for changes in the law to stop YouTube et al from claiming safe harbours on user-uploaded music.

“I think [indie labels are] very concerned [about the value gap]”, said Caldas. “The fact that the service with the most streams pays the least shows that there’s something very wrong with the market. And I think that holds the market back”.

Noting that SoundCloud, another safe harbour dweller, had now done deals with the labels, Caldas said of its plans: “SoundCloud has recognised that streaming music has a value, and that price should go up over time. They’re building a model that’s more sustainable. It’s astonishing in these years of growth that in most cases video streaming represents around 5% of [indie labels’] income”.

Silver was less convinced, saying: “I think YouTube is another MTV. It’s only because the music industry empowered it to become so big that it’s become so powerful. I find it very disappointing that we’re in this position. Bleating about why someone isn’t paying enough, well there’s a negotiating process. I’m not sure it’s really the case that we need governments involved”.

A bigger concern, he said, was the issue Caldas raised on the depth of digital music products. “Digital music is still a scandalously disastrous product”, he said. “If you look a vinyl release, with the music and all the art and information that comes with it, we’ve lost that because it was easier for the labels to not to send all that information across when it went to iTunes. But it means we as an industry have a deeply impoverished product. We talk about ourselves as a copyright industry. Well, it has two parts, one is attribution and the other is payment. We seem to have forgotten attribution”.

“Discovery is probably the single biggest issue that any of the streaming services have”, he added. “Part of discovery used to be seeing that someone playing on one track and saying, ‘Oh, he was the same saxophonist as played on that track’. Now no one knows who the producer is on any track, or who the musicians are. How are we going to enthuse people? That’s about under investment in our own industry”.

Look out for further reports from CMU Insights @ Canadian Music Week later this week.