Breakdown: Music Today & Tomorrow
Luminate Mid-Year Report & Music In the Air
Two big music industry reports just dropped:
The mid-year report from Luminate
Goldman Sachs’ forecasts (Music in the Air)
I analyzed both.
Come have a look at where we're going 👇
I’ll focus on 7 areas of opportunity:
1. Fandom is still an untapped opportunity.
How many people are superfans?
Luminate says 15% of us (over 13)
Goldman says 20%
But, superfans are under-monetized:
They spend 1.8x more than others now
But, spent 3x more than others in the download era
Streaming captures none of it with a single tier
📈 GS Forecasts: Superfan monetization creates net new revenue of $4.2B annually by 2030, mostly from premium streaming tiers where superfans pay 2x normies.
🧠 Streaming can capture some of superfan value. But most is gained in layers on top of streaming that offer something deeper & more connective.
You can’t just segment out & gouge superfans.
2. Direct Fan Relationships Matter More Than Ever
Direct to fan sales are up 20% in the US from last year.
VINYL: ↑26% | 2.1m→2.6m
CD: ↑15% | 1.5m→1.7m
CASSETTE: ↓15% | 73k→62k 🤔
And while only 27% of US streaming is current music..63% of direct to fan sales are.
🧠 A direct artist-fan relationship is increasingly valuable as streaming drowns out to catalog & 100k+ tracks per day. It's a move from monetizing attention to monetizing intent.
3. The Album is Making a Comeback
US physical album sales are up 13% from last year.
VINYL: ↑22% (23.6m) 🚀
CD: ↑4% (17.5m)
CASSETTE: ↑6% (212k) 🤏🏻
Hell, even CDs are up.
Only digital album downloads are down (↓12% to 9m).
📈 GS Forecasts: Physical to fall 15% from 2022 to 2030…up $2.9B → $3.9B from their previous forecast. I think they’ll need to make another edit after seeing this year’s growth.
🧠 There is huge opportunity to create a new digital album format that people love & put value on it. Something that lets the long tail of ever-increasing niche artists take advantage of this unit of fandom.
4. Rock’s Resurgence 🤘(and how different genres are consumed)
#2 most streamed genre
#1 album sales
#1 digital albums
#1 physical albums
Rock sells more physical albums than the next 7 genres combined 🤯
Latin: 0.4% 😲
Rock isn’t just on top, it’s grown every year since 2019
And has moved from 14.7% → 17.1% in stream share in that time.
5. Streaming’s Growing Globally, but…
Streaming is up 31% globally in 2023-H1
Asia: +107% 👀
Latin America: +70%
And GS forecasts paying subscribers will grow 103% by 2030
But monetization is bad & getting worse:
Revenue per stream: ↓20% from 2017-2022
Spotify streaming hours: ↑5x 2015-2021
Global streaming ARPU: ↓40% since 2016 (when Spotify & Apple launched family plans)
Spotify now earns 4x less per hour streamed than Netflix.
📈 GS Forecasts: 3% price increases annually thru 2030 (on avg).
🧠 Apple, Amazon, Tidal & Youtube Music all raised prices this year. Spotify’s tests have shown no churn. I expect a rise soon, perhaps in tandem with the rumored “Supremium” HiFi tier.
6. Streaming’s Model is Broken
Goldman thinks 2 things need to change or evolve:
Treating all 30+ second streams the same
The pro-rata model
They call out 3 reasons:
Rise of streaming fraud
Explosion in the amount of music being released
Propensity of algorithms to push lower royalty content
🧠 I think pro-rata is done. But we need to make sure indie artists aren’t thrown into some “non-premium” category.
7. Emerging Platforms Rising Market Share
Emerging platforms paid $1.57b to the music industry in 2022.
Peloton: 17% 👀
Youtube Shorts: 8%
(Yes, Peloton paid more to the music industry than TikTok.)
📈 GS Forecast: Emerging platform revenue will go from 6% of recorded music revenues to 14% in 2030. That’s $1.57B in 2022 to $7B in 2030.