Making Music Social: What Drives Streaming Revenues

14 November 2018
By Sergey Bludov, SVP Media & Entertainment

what-drives-streaming-revenues

Following many years of declining revenues, the music industry has finally started growing exponentially, with consumption in the first half of 2018 reaching the highest peak we’ve seen for the past 15 years.

The total music consumption in 2017, which combines traditional album sales, track equivalent album units, and on-demand streaming equivalent album units from video and audio streams, increased by 12.5 percent to reach 636.65 million units. Clearly, the music industry is experiencing a powerful resurgence that shows no signs of slowing down.

Simultaneously, we see massive growth in social media usage. To give you an idea, a recent Pew Research Center survey finds that the majority of U.S. adults visit social media sites on a daily basis.

Not surprisingly, these related trends are resulting in the significant integration of social networks and music platforms, providing new levels of music engagement for fans and new revenue potential for social media sites. Are we headed for a time when the division between music platforms and social media networks disappears?

Social Music

Music has always been a primarily social activity. At the same time, you’d be hard-pressed to find someone who isn’t immersed in social media these days. From young children to older adults and everyone in between, social networks have become a fabric of our society. So, it’s only natural that people are increasingly using social media sites to share the music that they love with their friends and family, telling everyone about a new song or artist that’s making a difference in their lives and following updates from their favorite artists and bands. As Russ Crupnick declares: “Music drives social media”.

While traditional features of connecting with social media platforms for sharing, following and liking continue to exist, a new world of additional tools is being introduced to increase user engagement and encourage socializing among listeners. For instance, streaming giant Spotify has released Branded Playlists as a method for brands to create engagement, while Choon is offering the world’s first Monetized Playlists. Another example is Instagram and Spotify joining together to release a new sharing feature, allowing users to post what they’re enjoying on Spotify to their Instagram Story simply by tapping the option while listening to a song. The new “Friends Mix” from Apple Music, which is already available in beta for selected listeners, suggests songs based on what a user’s friends listen to. SoundCloud has just relaunched comments on mobile with a brand new experience for both iOS and Android users. And we expect the list of companies that will jump on board to continue growing from there.

Looking Behind the Curtain

Who and what is behind these convergences? Social networks and music companies are increasingly joining together in licensing deals to ensure that artists and songwriters earn royalties from all the music played on social networks. YouTube has struck deals with both Universal Music Group and Sony, while Facebook has entered into licensing deals with Universal, Sony, and Warner Music Group. At DataArt, we meet more and more companies looking to upgrade their software and digital assets to comply with current market requirements. Both social networks and music businesses increasingly invest in development and improvement of their copyright management systems and other technical solutions, such as digital fingerprinting and automating content recognition technologies that are intended to enhance the industry’s ability to track and manage music.

Spotify has been acquiring a wide range of startup tech companies to expand its reach into the tech world that drives the digital music industry. The recent purchase of music identification firm Sonalytic is supposed to help the streaming giant track copyright-protected materials, while the acquisition of machine-learning startup Niland is meant to help build better personalized playlists and thus support user involvement. And how about Spotify’s recent hiring of professor and AI researcher Francois Pachet? An expert on teaching computers to write music, Pachet is an interesting addition to the Spotify team, with the company explaining in a blog post that his role will be heading up its new Creator Technology Research Lab, which will “focus on making tools to help artists in their creative process.” Will this also include tools for artists to engage and communicate with their fans?

On the other side of the fence, Facebook is making giant steps towards the music business. In January, the company hired Tamara Hrivnak, former YouTube and WMG executive, to lead the network’s global music licensing strategy. Facebook has also been actively enhancing its Rights Manager system to compete with YouTube’s Content ID. In addition, to better protect music content creators’ rights, the social network acquired Source3, a company established by the same people who created RightsFlow for Google.

As I stated at the beginning of this article, music has always been a very social activity. Therefore, the convergence of music with social media is a natural occurrence. Whether the division will completely disappear or simply become increasingly blurred is yet to be seen. However, it’s clear that these worlds are coming together profoundly to expand engagement and further the interests of artists, fans, and the entire music industry.

What are your thoughts about the merging of social media and music? Please share your opinions in the comments below.


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