Last week in the intro, I wrote about how AI is currently the most discussed topic in the music industry. This is also reflected in this newsletter. However, the enthusiasm is not always great, as evidenced by the mostly negative feedback for Spotify’s AI DJ. In addition to these more critical perspectives, which must also be allowed, there is also a highly recommended deep dive into AI in the music industry.

Last night, the eagerly anticipated Stream On event from Spotify took place, and there is a lot to report from there as well. Spotify has launched its own pre-save feature, expanded the use of videos, and significantly increased the number of artists available in Discovery Mode. You can find all the news at the beginning of the newsletter.

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Spotify launches Pre-Save feature, Discovery Feed, and expands Discovery Mode

• Discovery Feed: This information had already been leaked before the event, so it’s not really a surprise. The TikTok-style vertical feed will be prominently featured on the Spotify homepage and should help users discover new music.
• Pre-Save feature: It has been requested for a long time, and now it’s finally here. Spotify is introducing a Pre-Save button that allows fans to bookmark a song before its release on a so-called Countdown Page. They will also receive a push notification from Spotify on the release day. On the Countdown Page, fans will also be able to preview the song, see the tracklist, watch exclusive video clips, and pre-order merchandise.
• Spotify Clips: Not only will artists be able to upload videos on the Countdown Page, but also on their profile page and album page. This gives them the opportunity to talk about the background of a release, for example.
• Discovery Mode: All artists whose distribution participates in Discovery Mode can now submit their songs directly through Spotify for Artists.
• Finally, the visibility of concert tickets and merchandise will be expanded, and they will not only be visible on the artist profile but also on the “Now Playing” screen, for example.
• So a lot has been announced, but not everything. Daniel Ek still hasn’t decided on a price increase, and there was no update on Spotify HiFi either. Slowly but surely, everyone must be wondering what exactly Mr. Ek is waiting for.

The Loud & Clear update with the latest figures

• As part of the Stream On event, the Loud & Clear website has also been updated with the latest figures.
• There are now 914,000 songs with over 1 million streams. 133,000 have reached 10 million streams, 13,000 have over 100 million streams, and 360 tracks are in the billionaire’s club.
• In 2022, 1,060 artists received over a million from Spotify (or their label/distributor). Of the 9 million acts on Spotify, 57,000 received more than $10,000, a quarter of which are DIY artists. Over 10,100 artists generated over $100,000, and these artists come from over 100 countries.
• 95% of all payouts go to 200,000 artists, but they are only responsible for 15% of the uploaded songs.
• Therefore, Spotify continues to maintain that there are around 200,000 professional artists on their platform. I have discussed this in this article.
• Overall, Spotify has soon paid out over $40 billion to the music industry.

TikTok launches paywall feature and risk of possible ban increases

• As I previously announced, it is now official: TikTok offers its users another way to earn money with the paywall.
• The new program is called “Series” and offers the ability to put collections of up to 80 videos behind the paywall.
• What is also new is that the videos can be up to 20 minutes long.
• The creator can set the price for the collection, but it must be between $1 and $190.
• So far, the paywall option is only available to selected creators, but in the coming months, there should be the opportunity to apply for it.
• However, this otherwise positive news is somewhat overshadowed by the increasing likelihood of TikTok being banned in the US.
• US politicians are competing with each other to introduce bills, making it easy to lose track. The latest is called the RESTRICT Act, and unlike previous attempts, it also enjoys the support of the Biden administration.
• The bill would give the government the power to take action (including bans) against technology companies owned by foreign entities if they pose a risk to national security.
• It probably doesn’t help that China’s President Xi Jinping is now calling on private Chinese companies (such as ByteDance) to fight against Western oppression alongside the Communist Party.
• Some see this as just a show of strength by the US against TikTok and China, while others believe that the ban is more or less a done deal and recommend that everyone start looking for new platforms for their marketing activities. I’ll keep you posted!

Universal now also searching for the new streaming model with Deezer

• As I reported, Universal Music had chosen TIDAL to search for a better streaming model. Now they have announced another partnership, this time with another DSP with a manageable market share: Deezer.
• Interestingly, the Deezer CEO recently announced in an interview that he wants to continue working towards the user-centric model (which Universal disagrees with) and that the pro-rata model is outdated (here they agree).
• Now they are setting out to find a new and better system. It will not only be interesting to see what comes out of it, but also whether the result will be the same for TIDAL and Deezer, or whether Universal actually has a specific model in mind for each DSP.
• Universal also praised Apple and Amazon for their price increases, thereby putting pressure on Spotify to finally follow suit.

Is ChatGPT a threat?

• Amid all the hype about ChatGPT, it’s worth taking a critical look. And the criticism is not unfounded. ChatGPT actually invented the death of the author and supported it with fake media links.
• This naturally leads to the point that most people consider everything that the chatbot spits out to be true. After all, why would artificial intelligence lie?
• Furthermore, the author sees problems with privacy and data protection, as ChatGPT uses all the information available on each of us on the internet without any regard.
• But even more crucially, ChatGPT is far too easily manipulated.
• Since various people told ChatGPT that the author was not dead, the chatbot no longer claims that he is. Of course, this game can also be played in reverse, and the author is especially thinking of states like Russia, Iran, or China, all of which are already known for online manipulations.
• His conclusion: ChatGPT is a threat and must be destroyed. Based on all the evidence we have seen over the past four months with regards to ChatGPT and how it can be manipulated or even how it will lie without manipulation, it is very clear ChatGPT is, or can be manipulated into being, malevolent. As such it should be destroyed.

How AI made social media a monster

• Bill Ready, the CEO of Pinterest, writes in this post that when discussing AI, its use on social media platforms is often forgotten.
• According to Ready, they used AI to make people addicted, which increasingly negatively affects the mental health of users.
• He asks what social media platforms will do with this new generation of AI.
• In the past, the platforms were meant to connect people with friends and acquaintances. Today, however, the platforms no longer unite people, but rather divide them. He sees AI as the culprit, which aims to maximize view time.
• And it didn’t take long for AI to figure out that the best way to extend view time is with the lowest instincts: fear, anger, envy, and greed.
• An interesting post until towards the end when he begins to paint himself and his company in too good a light. However, I fully agree with the part about anger, hate speech, and filter bubbles.

Should sampling be legalized?

• In this article, Dan Charnas, author of the book about J Dilla, argues that sampling should be treated similarly to covering songs and thus legalized.
• For Charnas, the right to create art should be given higher weight than the right to property.
• The comparison with cover songs is compelling on the one hand, but on the other hand, it is flawed. Because what counts as a cover and what doesn’t is quite clearly defined. However, sampling can occur in completely different forms, and it is questionable whether a one-second drum sample should be treated the same as a 4-bar loop.
• Most rights holders, and even more so, lawyers would certainly object vehemently. Plus, they now have another tool to find out whether a song illegally used a sample: Google Assistant.
• Some sample nerds found out that they could use Google Assistant to find sample sources that remained undiscovered for many years. Even samples shorter than one second could be recognized by AI.
• For nerds, this is a great story, but as mentioned, it also puts more pressure on producers to clear their samples or to refrain from the art of sampling altogether.
• It is also possible that Google Assistant will eventually replace Content ID as it has apparently proven to be much more effective.

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Bonus Reads

• It takes a bit of time, but this deep dive into AI in the music industry, including case studies and the presentation of numerous platforms, is definitely worth reading.
• Not only Spotify, but also SoundCloud is launching a Discovery Feed in the style of TikTok. The vertical feed is currently being tested with a limited number of users. Songs will be suggested based on your previous listening behavior, and there will also be an explanation of why a song is being suggested.
• This interesting article by MIDiA shows how streaming is becoming more like radio, even though its on-demand approach originally seemed to be the opposite. However, passive listening is being encouraged more and more, with Spotify now doing this with its AI DJ, and YouTube Music with its newly launched radio stations. The problem with this is that in the past, physical products were available for active listeners as a counterpart to radio. As usual, MIDiA has some solutions ready.
• More and more social media platforms are launching subscriptions, where you have to pay for things like a blue tick. This article shows why. In the past, your feed was filled with posts from friends and acquaintances, but now you primarily see posts from professional creators. And these creators want and need the advantages that subscriptions offer, and are willing to pay for them. This probably also explains why only a small percentage of users have subscribed.
• Last week, I wrote that interest in catalog sales of hip-hop artists is slowly but surely growing. Here is further proof: Metro Boomin sold a portion of his publishing catalog to Shamrock for $70 million.

2023 was supposed to be the year when Web3 and NFTs take a big step towards mainstream adoption. However, currently these topics have slightly fallen out of focus in the music industry, which is now dealing with new streaming models and especially the topic of AI.

Will there soon be an innovation that brings Web3 back to the forefront? You’ll find out here, of course. But this week we’ll first talk about TikTok bans, Snapchat and ChatGPT, the growing German music market, and scrapped experiments by TIDAL.

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The EU, USA, and Canada prohibit their employees from using TikTok

• In the USA, government employees have been banned from installing TikTok on their work phones on several occasions. Now this has also arrived in Europe.
• The European Commission justifies this with data protection and cyber security concerns, or in other words, the data should not fall into the hands of the Chinese government.
• Around 32,000 employees are affected by this ban.
• The USA quickly followed suit, affecting no fewer than 4 million government employees. Canada also joined in.
• I always think it’s important when data protection is taken seriously. But the double standards are unmistakable here because otherwise, products from Meta, Google, and Co. would have long since been banned. I don’t want to sugarcoat anything about the Chinese government; it’s an anti-democratic regime that at best completely monitors its citizens and at worst, like the Tibetans and Uighurs, suppresses them completely. However, it’s not any better for me if my data ends up with the US giants and therefore with the various intelligence agencies of the USA and their partners, such as in England.
• Double standards aside, Europeans are following the USA here, and one has to wonder whether this is another step towards a total ban of TikTok in the West.
• This is exactly what the “Deterring America’s Technological Adversaries Act” is trying to do, whose initiator describes TikTok as “a spy balloon in your phone”.
• This strong Techdirt article shows why this focus on TikTok is hypocritical. Yes, it may not be a bad thing if TikTok is not installed on company phones. However, this does not solve the actual problem, namely the generally too lax handling of data protection. The Chinese government does not need TikTok to access the data of Western consumers; it can also obtain it on the market for user data, which policymakers simply do not regulate because it is far too lucrative.

Snapchat integrates AI in collaboration with ChatGPT

• As mentioned in the intro, AI is currently on everyone’s lips and Snapchat has reacted quickly. They are now integrating a chatbot called “My AI,” which is based on the latest version of ChatGPT.
• For the moment, this is only available to paying Snapchat Plus subscribers. However, the goal is to make it available to all 750 million users.
• In addition to conversations with friends, users will also be able to chat with the AI.
• However, the version on Snapchat is somewhat limited and adapted to Snap’s guidelines. Specifically excluded are swearing, violence, sexual topics, and politics.
• It will be interesting to see how other social media platforms incorporate AI tools.

TIDAL ends user-centric experiment

• In a previous newsletter post, I already mentioned that TIDAL and Universal are searching for a better streaming model and are therefore discontinuing the use of user-centric.
• Now there is some further information about this, which shows that discontinuing the experiment is not a big deal.
• During the experiment, TIDAL paid 10% of the revenue from their HiFi customers to the most listened-to artist of each user. It was thus only a very limited test with only one artist per user at a time.
• Throughout the entire test, which began in November, only $500,000 was paid out to around 70,000 artists.
• They now prefer to invest the money in their TIDAL Rising program, and indeed ten times as much, or $5 million.

Should artists only be paid above a threshold?

• In the context of the discussion around new streaming models, I previously reported on the idea of introducing a threshold above which payouts would occur.
• Tatiana Cirisano now elaborates on this idea in her article for MIDiA.
• In the current pro-rata model, a significant portion of the pot goes to artists with very few streams. While individually they receive very little, together it still amounts to a high sum.
• Cirisano therefore suggests introducing a threshold, such as 1,000 streams. This could mean that artists are only paid above 1,000 streams, or that they must achieve a minimum of 1,000 streams on a song each month to be paid.
• While this would affect many artists, it would only apply to those who already receive very little from Spotify anyway.
• This would free up a large sum of money to better compensate artists who have already reached a higher level.
• Would this fix the streaming system? No. Would it be completely fair? No, but it might be better than sorting by audio quality or song length. It’s worth considering.

Podcasts are coming to YouTube Music

• In the near future, YouTube Music will also have podcasts on offer, but for now, only in the US.
• This will allow YouTube to offer a solution for those who only want to listen to podcasts, not watch them. This will also be possible in the background.
• This further positions YouTube as a direct competitor to Spotify.
• Unlike Spotify, they currently have no plans to produce their own shows or license well-known podcasts.
• Podcasts are already a big topic on YouTube and at the parent company Google in general. As such, some speculate that Google Podcasts may be discontinued in the near future.

German music market generates over 2 billion for the first time in 20 years

• The Federal Association of the Music Industry (BVMI) has released the figures for the German music market for 2022. They can report an increase for the fourth consecutive year.
• In addition, they have broken the 2 billion Euro for the first time since 2002. This was achieved for the first time in the streaming era.
• The 2.07 billion represents a growth of 6.1%, which is less than in previous years due to the difficult market environment, but still satisfactory.
• Streaming grew by 14% again and now accounts for 73.3%. Overall, the online sector accounts for 80.3% of revenue.
• This also means that the physical sector still accounts for one fifth. This is also because the CD remained the second most important revenue generator (12.9%), even though there was a decline of 17.1%.
• The rise of vinyl has slowed down somewhat and was still at 5.1%, contributing 6% to total revenue.

How do the music markets in Germany and the USA differ?

• The USA is the world’s most important music market, with Germany being the fourth most important. But what are the differences and similarities between the two?
• One difference is, of course, that the USA adopted streaming much faster. In 2015, physical media revenue in Germany still accounted for 70% while it had already dropped to 24% in the States.
• Today, the differences are much, much smaller. Streaming accounts for 84% of the market share in the USA and already 73% in Germany.
• The difference in actual streaming revenues, however, is much larger. In the first half of the year, it amounted to 22.13 billion in the USA and 1.5 billion in Germany. This is surprising given that one third of users in the USA use a freemium subscription.
• With 20%, the share of physical media in Germany is still much higher than in the USA (13%). This is mainly due to CDs, which still account for two thirds of physical sales in Germany. In the USA, it is the opposite, with vinyl contributing two thirds and CDs only one third.
• In the USA, however, downloads generate more revenue than CDs, while in Germany, with a market share of 2.5%, they are practically irrelevant.

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Bonus Reads

• Billboard summarizes here once again what TikTok is testing in Australia and why they have removed the music of major label artists for a certain number of users. Music is definitely becoming a bargaining chip in negotiations and this is coming from a company that says, “Music is at the heart of the TikTok experience.” It may even be true, but definitely not when it comes to payouts to artists.
• So far, we’ve mainly heard about catalog sales of big pop and rock stars. But lately, there has been growing interest in the catalogs of hip-hop artists, as this article from Billboard shows.
• And once again, Billboard Magazine. In this article, it’s about AI music and the possibility that millions of songs will eventually flow onto streaming platforms every month. These would mainly be releases in the area of “functional music,” which are made for passive listening. This area is already responsible for 120 billion streams annually (for comparison: Taylor Swift has 8 billion streams annually). This is probably not the future that Universal CEO Lucian Grainge envisions.
• I had announced it before, now it has happened: The Weeknd is the first artist to have more than 100 million monthly listeners on Spotify. This means that about one in five Spotify users listened to one of his songs in the last month (and I’m not one of them). The short Music.Ally article explains how it came about.
• Finally, this: My favorite culture, and maybe yours too, is celebrating its 50th birthday this year. To mark the occasion, one of the greatest MCs to ever touch a mic, The Roots’ Black Thought, has recorded a love letter to hip-hop in rhyme form here. Happy Birthday HipHop!

Correct me if I’m wrong, but I can’t shake the feeling that music NFTs still haven’t really taken off. Sure, if you read the relevant newsletters, you get the impression that the revolution is just around the corner. But without those rose-colored glasses? I still see the moment when NFTs go mainstream as being far off.

The fact that music NFTs now seem to be losing one of their biggest advantages will not exactly help more artists start their first attempts. If an artist sold a CD, vinyl, or hoodie and that product increased significantly in value over time, the artist did not benefit from a resale. This problem should have been addressed by NFTs, with creators also earning from subsequent resales. Now it seems that this massive advantage has been quietly buried. Perhaps this was another nail in the coffin of NFTs’ mass appeal.

On the other hand, Spotify has a lot of innovations to boast about this week.

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Will Spotify soon roll out the Discovery Feed?

• For over a year now, Spotify has been testing a vertical Discovery Feed, influenced by TikTok and designed to appeal to Gen Z users.
• Now, there are indications that Spotify will present the feed as a new feature at the StreamOn event on March 8th.
• With the Discovery Feed, users will be able to swipe through recommendations that will automatically begin playing. In addition to Canvas, there may also be podcasts and audiobooks.
• Will the StreamOn event also present price increases and information about better sound quality? It would be about time, since it has been two years since Spotify promised its users better audio quality. If there is no new announcement at this StreamOn event, then maybe never.

Spotify launches AI-DJ with OpenAI

• Just before the StreamOn event, Spotify surprised everyone with the launch of AI-DJ, a collaboration with OpenAI, the company behind ChatGPT.
• This provides users with not only a curated selection of songs tailored to each individual, but also comments on the songs, just like a live on-air radio DJ. Check out this video if you’re still not sure what to expect.
• While OpenAI provides the technology, Spotify emphasizes that their editors have an important influence on the facts that the comments are based on.
• Is this the first step towards revolutionizing the way we stream music? Or will it remain just a fun gimmick? We’ll soon find out.
• Speaking of gimmicks, just before I was about to send out the newsletter, news came in that Spotify is working with various NFT collections. There will be playlists that are exclusively accessible to owners of certain NFTs. The ability to make playlists accessible only to certain groups has potential with or without NFTs.
• By the way, if you want to try out the AI-DJ right now, I’m afraid I might have to disappoint you. It’s currently only available for premium users in the United States and Canada.

Is one of the biggest advantages of NFTs being abandoned?

• No matter which article you read about NFTs, one of the big advantages was always highlighted – that artists earn again on resale. Unfortunately, this is no longer really the case.
• In a previous newsletter, I hinted that many NFT platforms do not offer royalties to creators on resale.
• Now, OpenSea, one of the biggest players, has also caved in and will be lowering the shares for creators in the future.
• Why this is not a smart idea is explained by Chevy from the highly recommended Web3 Daily Newsletter on Twitter.

Meta sells blue verification badge

• After Twitter offered its verification badge for sale with moderate success, Meta now wants to use it as a new source of revenue.
• Mark announced from his Zuckerberg throne the launch of Meta Verified, which allows users to purchase the blue verification badge on Facebook and Instagram.
• The fun costs $11.99 per month on the web and $14.99 monthly on mobile. The subscription is designed to increase visibility and reach, as well as provide more direct access to customer service. Additionally, exclusive stickers for stories and reels are available, as well as 100 free stars per month, which is the digital currency used to tip creators.
• Users in Australia and New Zealand can already take advantage of this offer, and more markets are expected to follow soon.
• Whether subscriptions are the future for social media platforms is discussed in this MIDiA article.

TikTok: 150 Million users in Europe

• TikTok announced that they have a total of 150 million monthly users in Europe. They last communicated this number in September 2020 when they had 100 million. Since then, they have gained an average of 1.7 million new users per month.
• Overall, over 5,000 people work for TikTok in Europe, specifically in the 10 countries of Belgium, Germany, France, Ireland, Italy, the Netherlands, Poland, Sweden, Spain, and the UK.
• Why did TikTok release this number at all? They are required to do so under the Digital Services Act.
• Therefore, not only they, but also their competitors, announced their monthly active users. Facebook has 255 million, Instagram has 250 million MAUs, Twitter has 100.9 million, Snapchat has 96.8 million, and YouTube has 401.7 million logged-in MAUs, which increases to over 500 million when counting those who are not logged in.

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Bonus Reads

• So far, it has been reported everywhere, including by myself, that TikTok’s SoundOn works with TuneCore as its distribution partner. That WAS correct, but since September last year, the new partner is actually FUGA, which is based in Amsterdam.
  
• Earlier in this article, there were detailed figures on social media users in Europe, and now here’s another one from Snapchat. They have 750 million monthly active users worldwide, including 150 million in North America. For comparison: Instagram has over 2 billion MAUs, TikTok reached the billion mark in September 2021 and has not posted an update since then, but estimates suggest that there are around 1.8 billion MAUs worldwide.
  
• Is AI music a threat to musicians or should they use artificial intelligence to their advantage? This article by Vice shows that it’s complicated. The author manages to neither appear too tech-optimistic nor too future-averse, and somehow finds a hopeful approach.
  
• It’s been almost a year since Epic Games acquired Bandcamp, and in an article we discussed what this could mean for musicians. Since then, it’s been relatively quiet, and you wouldn’t have noticed that Bandcamp has a new owner. Now, the first collaboration that is visible to outsiders is happening, as Bandcamp curates the Fortnite in-game radio station “Radio Underground”.

2023 is expected to be a groundbreaking year for TikTok. It remains to be seen whether they can further expand their reach and cultural impact or whether, as many articles have already predicted, they have reached their peak. Additionally, the threat of a permanent ban in the US looms, and this year will likely determine whether this reality will come to pass or whether it was just a side effect of a new Cold War. It will also become clear whether an agreement with the music industry will be reached, which would be the basis for an expansion of their streaming service Resso. Speaking of streaming services, Dan Runcie believes that the majors should operate their own. I don’t.

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Does TikTok need the music industry – or vice versa?

• This is the crucial question in the negotiations between TikTok and the music industry. Does TikTok need music to attract users, or do labels need TikTok to launch hits? Of course, both do, but who needs the other more?
• Therefore, everyone will be closely watching the impact of the removal of major label content in Australia.
• The article shows, however, that hits are no longer the most important source, but royalty-free sounds and other resources are increasingly used as well.
• In summary, a social app like TikTok is much less dependent on major label content than DSPs.
• For the labels, on the other hand, non-DSP streaming is a growing source of income, and of course, there is also the marketing power of TikTok and other providers.
• The tug-of-war continues, hopefully with a result that benefits the musicians.

Will TikTok introduce a paywall?

• Let’s stay on TikTok for a moment. As important as the platform has become, it is widely agreed that it provides only indirect financial benefit to its users. This is why negotiations with the music industry are so important. And for the same reason, this report is interesting.
• More and more money is flowing directly from users to creators on TikTok, through the tipping feature.
• Rumors suggest that a new feature will be added: a paywall that allows selected videos to be put behind a payment barrier.
• This is something that some (including myself) have been calling for, especially for the DSPs. In general, there need to be more opportunities for creators (i.e., musicians) to monetize their content and their super fans.
• Music.Ally sees this as an opportunity for TikTok, especially if they manage to aggressively expand their streaming service Resso.

The last hurrah of the mainstream era

• There has been much discussion about Rihanna’s performance at the Super Bowl, but for Tatiana Cirisano of MIDiA, it was mainly the last hurrah of the mainstream era.
• Many superstars from the 2000-2010 era have returned after long breaks (Beyoncé, Adele, Kendrick, SZA, and now Rihanna). They benefit from having built their audience in a very different time.
• Today’s artists struggle to break through, and even if they do, they cannot afford to take as long breaks as Adele or Rihanna have.
• Tatiana Cirisano attributes this to the fact that there are hardly any hits that everyone can agree on today, only hits for niche markets.
• She also believes that in the future, much more will develop in niches, not just in consumption, but also, for example, in festivals. The classic superstars, as we know them today, will increasingly disappear.

Are labels signing too many artists?

• A similar direction is taken in the Billboard article which shows that in the years 2001-2004, on average 30 acts reached the Billboard Top 100 for the first time. In 2022, there were only 12.
• Therefore, fewer and fewer acts are really making it into the mainstream, despite labels signing more acts than ever before.
• Major label employees are quietly expressing that so many artists have been signed that labels cannot offer them the necessary service. Not enough new people have been hired to support all the new artists.
• Currently, for example, product managers are completely overwhelmed as they have to deal with far too many acts at once. It is said to be similar in the marketing departments.
• The many signings of the majors are apparently a somewhat clumsy attempt to fight against their declining market share.

Should the majors run their own streaming services?

• Trapital also addresses the topic of the new streaming model and brings a completely new perspective. Dan Runcie believes that the majors should build/acquire their own DSPs.
• He argues that the majors used to operate the profitable area and had power over the less profitable part. They have now lost that power.
• Of course, having their own DSP would require many resources, but Runcie believes it would pay off, and the labels could showcase their premium content.
• Runcie also believes that with their own DSP, majors could offer added value to their artists.
• As it is a significant effort to build a streaming service from scratch, he could also imagine acquiring Tidal, SoundCloud or Audiomack.
• It is an interesting, if controversial proposal. One can certainly have some doubts about how much added value it would provide for artists in the end and how desirable it is for the big three to remain leaders in this area.

How algorithms influence our listening behavior

• It is undisputed that algorithms influence how we consume music. A British study wanted to find out how great the influence actually is.
• The study neither found evidence for nor against the fact that certain groups are preferred over others by the algorithms. But what is actually much more important: users believe that it is the case. Here, the DSPs clearly have a trust problem.
• The algorithms are also used less than many may think. Around 70% of all streams are “user-controlled” and only about 30% are directed by the algorithm.
• The last point is less pleasant: regardless of the user’s gender, the recommendations predominantly favor white male artists. This should definitely be investigated more closely.

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Bonus Reads

• I always doubted the number of 100,000 tracks uploaded per day. An article by Billboard magazine (behind a paywall) now comes to the same conclusion. Much more realistic is approximately 49,000 tracks per day – which is still a hell of a lot.
  
• In time for Rihanna’s Super Bowl performance, one of the producers of “Bitch Better Have My Money” dropped a portion of his master rights as an NFT. Why it will take a long time to even recoup the investment is shown in this article. As I have already explained here, this is often the case.
  
• When Snoop Dogg bought Death Row, he wanted to make it an NFT label. Consequently, he removed the Death Row releases from the DSPs. However, they will soon be streamable again. Before that happens, Snoop has given exclusive access to Death Row music to TikTok for a week. This is also the first major catalog reissue through SoundOn, and it is likely that more will come, possibly with further exclusive deals.
  
• To put it mildly, there has been some movement in the discussion about a new streaming model. Deezer, as it has for years, wants to introduce the user-centric model, as its CEO Jeronimo Folgueira explains in this interview. For him, it is certain that Pro Rata has no future. He is likely to be right about that.
  
• If you have children or listen to music frequently for falling asleep or working out, you may know this: Spotify suggests a lot of music that you don’t actually want to listen to. By popular demand, Spotify has now responded and you can now manually remove playlists from your “Taste Profile” so that they no longer influence recommendations. This is definitely in the category of nice to have, but many will be happy about it (if they even notice).
  
• The South Korean company Hybe is known for its K-pop releases, such as BTS. But its ambitions are bigger. This is shown, among other things, by its purchase of the US hip-hop label Quality Control (Lil Baby, Migos, Lil Yachty) for a whopping 320 million USD.

As you may have suspected, this week’s newsletter wouldn’t be complete without the topic of “new streaming models.” In this context, it’s worth noting that the share of majors in the streaming market is steadily declining.

The other story of the week is the blatant provocation by TikTok towards major labels. Read more about it below.

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Can a new streaming model actually solve the problems?

• As mentioned, the topic of “new streaming models” is still in focus. Not surprisingly, one of the most insightful articles on the topic comes from MIDiA.
• In this article, Mark Mulligan points out that none of the parties involved are really satisfied. Artists want a bigger slice of the pie, rights holders (labels, distributors, etc.) want higher licensing fees, and some streaming services, particularly Spotify, are running at a loss.
• However, it is impossible for all involved parties to receive more from the pie. If one party gets more, another gets less. This would hardly change with a new model.
• Nevertheless, Mulligan also presents a new idea, which is that each stream is paid a fixed amount (e.g. 0.01) and each user can then listen to as many songs as they want until they reach their monthly limit of 9.99 (i.e. 999 tracks). Those who want to listen to more pay extra.
• Additionally, Mulligan clearly shows that the problems lie on the supply side (i.e. artists, labels, DSPs) and not the demand side (listeners). We must never forget the needs of customers.
• Finally, he concludes that it is unlikely that the streaming model can be fixed, as even doubling the payout would not help most artists, but would cause the entire streaming system to collapse. Therefore, we must look for other sources of income and alternatives to streaming, as I have already outlined in this article.

Indies’ share of the streaming pie is growing

• A closer look at the numbers from Spotify reveals that 75% of streams come from the majors and Merlin (which includes iGroove). Conversely, every fourth stream is generated by a DIY artist or indie label that does not work with Merlin.
• Among those not contributing to the 25% are, for instance, DistroKid, which works with Merlin. However, other major distributors like TuneCore or UnitedMasters are not affiliated with Merlin.
• Merlin claims to represent about 15% of the music market. Therefore, the three majors would account for 60%.
• The share of DIY/indies is steadily growing, from 13% in 2017 to 15% in 2018, 18% in 2019, 22% in 2020, and 23% in 2021.
• This loss of 12% market share in five years clearly demonstrates why even the majors are now demanding a new streaming model.

TikTok without major label music?

• Even though everything is currently happening behind closed doors, it is clear that the majors and TikTok are in intense negotiations. It is also clear that much more money would have to flow from TikTok into the music industry. However, TikTok may see this somewhat differently.
• Australia has now been chosen as the playing field for some tests. On the one hand, some users Down Under currently cannot use music from major artists for their videos (and even for older videos, it is muted). On the other hand, TikTok’s distribution arm SoundOn is expanding into Australia. It is no coincidence.
• Why is TikTok doing this? It is presumed that they want to test the influence of major content and what happens when it is no longer present. This, of course, is with the negotiations in mind.
• Naturally, TikTok hopes that no significant effect will be felt. However, if it does, it was obviously a shot in the dark.
• Almost at the same time, it was announced that TikTok has launched its distribution platform SoundOn in Australia (it was previously available in the US, UK, Brazil, and Indonesia).
• With SoundOn, you can make your music available directly to TikTok and Resso. However, thanks to the collaboration with TuneCore, all other relevant stores are also supplied.
• This article from MBW goes into more detail about what TikTok without major content would look like and also highlights the role of SoundOn, as well as AI.

YouTube Shorts: 50 billion views daily

• In the first quarter of this year, YouTube reported 30 billion daily views, but at the end of last year, that number grew to 50 billion views.
• However, Shorts still lags behind Instagram Reels, which are said to generate 140 billion views per day. There are no figures available for daily views on TikTok.
• Since this month, YouTube has been sharing a portion of the ad revenue generated by Shorts with creators. It will be interesting to see if this has an impact on the number of Shorts produced and ultimately, the number of views.
• Meanwhile, YouTube’s ad revenue in Q4 fell to $7.96 billion, down from $8.63 billion the previous year. Revenues had already declined in Q3. Is a trend emerging here?
• Looking at the whole year, ad revenues did at least grow minimally, from $28.85 billion to $29.24 billion.

Piracy is on the rise

• In an older article, I already mentioned that I want to regularly remind everyone of what we actually all know: streaming has never completely eradicated piracy, but has created new options for it.
• Two new studies show that piracy is increasing again. A British study shows that 25% of respondents illegally consumed music at least once in the last 3 months. A year ago it was only 15%.
• It is particularly young consumers who are most likely to consume music illegally.
• At least it is only 3% who consume music exclusively illegally, but the number of those who use both legal and illegal methods has increased significantly, from 13% to 22%.
• A second study comes from the United States and also shows an increase in 2022, although music is less affected than films, for example.
• Many problems are identified in Russia, China, and Eastern Europe. A bit of Cold War rhetoric still.

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Bonus Reads

• Originally, Spotify recommended only five distributors. Now this list has been updated again and there are now 23 names on it (iGroove has been one of them for several years). See here to find out which distributors are among the “Preferred Distributors”.
• Billboard annually compiles a list of the most powerful women and (mostly) men in the music industry. The latest one can be found here.
• This Trapital article argues that celebrities in the audio industry don’t have the same impact. Rather, fragmentation can be observed: there are streaming artists, touring artists, album sales artists, or festival artists – but hardly anyone is everything in one.
• There are currently some developments in the field of search engines and AI: Google, Baidu (China’s Google), and Microsoft (with ChatGPT) announced news this week. What this could mean for musicians, how such search AI could also be used in DSPs, and why one should probably revise their SEO strategy is shown in this article.
• The Grammys just took place. After such award shows, one can of course wonder if they have a strong influence on the streaming numbers of the artists. An investigation shows that it can, but doesn’t have to.
• Like in any industry, there are also some assholes in the music industry who, for example, enjoy shouting at people. But more so than in other industries, these are romanticized as rebels or geniuses. We urgently need to stop doing this, argues this article. That they continue to break spirits and destroy careers is not because they are admired but because they are feared.
• The L.A.-based music licensing company Songtradr has acquired 7Digital for £19.4 million here.

In the first newsletter of this year, I reported on Universal CEO Lucian Grainge’s call for a new streaming model, and now this is already the fourth consecutive newsletter in which I address the topic. This shows that Sir Grainge has successfully launched a discussion, and the topic definitely has a high level of urgency. While MBW presents various possible models in a very informative article, Universal is already taking concrete steps by choosing TIDAL as a guinea pig partner.

One might wonder why TIDAL was chosen. Of course, this is pure speculation, but perhaps TIDAL, as a smaller DSP, is a bit more agile and therefore more suitable for such tests. Maybe there are also some small power games being played by Universal against Apple Music and Spotify. Speaking of Spotify, they have released their Q4 numbers, and therefore the figures for the entire year 2022. Let’s just say that there are ups and downs. I wish you good reading.

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What Could a New Streaming Model Look Like, Pt. 2?

• Grainge is focused on fraud streams, so-called fake artists, which are anonymous artists that primarily serve mood playlists and so-called “functional music”, such as frequently 31-second tracks for relaxation, sleep, etc.
• Universal is unhappy with the current pro-rata model, but also believes that the user-centric model has too many disadvantages. MBW lists 5 models that could be considered.
• I already mentioned this model before. Here, active streams, i.e. when the song is searched for or liked, are paid better than passive listening, such as through the radio function.
• The pro-rata-temporis model would pay more if tracks are listened to for a longer time. Currently, an artist receives the same amount whether the song is listened to for 31 seconds or 5 minutes. But of course, many players would simply adjust the length of their songs, and suddenly you have 5-minute rain sounds instead of 31 seconds.
• The idea behind this model is that the more streams an artist has, the less they receive per stream. This model aims to distribute revenue more fairly. However, the majors are unlikely to be in favor of it.
• The fourth model relies on micro-payments from fans to artists. Bandcamp is given as an example, but the tipping feature is also available on Spotify, without being very successful.
• Universal may also favor a model based on different tiers, where users can create their own package similar to TV.
• Definitely a very interesting article that shows that there are alternatives in the streaming area.

Universal tests new options with TIDAL

• Universal clearly doesn’t just want to initiate the discussion about a new streaming model, but actively shape it. Together with TIDAL, they are now searching for a new, innovative and economical model.
• Everything starts with research and the goal of finding out how streaming platforms can create greater commercial benefits for all types of artists through fan engagement.
• To be able to focus entirely on this, TIDAL’s experiment with user-centric is temporarily put on hold. I just hope that they don’t miss the opportunity for a direct comparison between the dominant pro-rata model, user-centric, and a new model.
• Now, of course, the question arises as to whether similar tests are planned with the larger DSPs.
• It is also unclear to what extent other players will be involved, such as publishers, but also Merlin as a representative of the independent industry and other independent labels.
• I personally remain slightly skeptical when the change is driven by a publicly traded company, which as the largest major label naturally has its own interests in mind, despite all the nice words. Of course, I am happy to be proven wrong here.

Spotify now has over 200 million paying subscribers

• Since the last quarter, Spotify has gained 10 million new paying subscribers, breaking the 200 million mark. The 205 million subscribers represent a growth of 25 million or 14% compared to the previous year.
• The ad-supported offering is used by 295 million users, 25% more than a year ago.
• In total, Spotify has 489 million monthly active listeners (MAUs), 33 million more than in Q3 and 20% more than in 2021. Over the whole year, 83 million active listeners have been added (without the withdrawal from Russia, it would be 88 million, according to Spotify).
• Their revenue in Q4 has also grown significantly, by 18% to 3.17 billion euros.
• Subscriber revenue grew by 18% to 2.72 billion euros.
• Ad revenue also grew by 14%, reaching 449 million euros.
• Looking at the whole year, revenues amounted to 11.73 billion euros, 21% more than the previous year.
• With such impressive numbers, Spotify must have made a profit, right? Not quite. In Q4 alone, the net loss was 231 million euros, and over the whole year, it was 430 million euros.
• The origin of customers has shifted in the last five years. The number of users from Europe (from 36% to 30%), North America (from 30% to 21%), and even South America (from 22% to 21%) is decreasing. The so-called “rest of the world” has grown significantly, from 12% to 28%, which means they will soon take the lead.
• Paying users are a bit different. The numbers for Europe (from 40% to 39%) and North America (from 30% to 28%) only decreased minimally, and South America grew slightly from 20% to 21%.
• The situation is somewhat different for paying users. In Europe, the numbers fell only slightly from 40% to 39%, and in North America, they decreased from 30% to 28%. In contrast, South America slightly increased from 20% to 21%. The “Rest of the World” only grew from 10% to 12% over these five years.
• In the first quarter of 2023, Spotify aims to break the milestone of half a billion active users.

Google created a music AI, but won’t release it yet

• Last week, I wrote in my intro about Google and its plans to release numerous AI projects this year.
• Now, one of these projects has been introduced: MusicLM, which creates songs solely based on textual descriptions.
• MusicLM was trained on 280,000 hours of music, and of course, copyright is already an issue here. However, Google seems to be aware that the question of how to deal with the songs used to train the AI is still unresolved.
• It is quite possible that more clarity will emerge soon, as some cases are already before the courts.
• Even though the tool has not yet been released, you can already check out how it sounds here.
• The fact that tests are already underway that aim to integrate the search engine with AI elements shows how much ChatGPT has pushed Google to move forward.

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Bonus Reads

• Instagram turned everyone into photographers, TikTok later turned everyone into videographers. Creating music has so far been too complex for that, but this could change with AI, as this MIDiA article impressively illustrates.
• Australian company Jaxsta, which calls itself the world’s largest database for music credits, has created a list of the 100 most successful producers of the past year. This was measured by chart placements, Spotify streams, Grammy wins and nominations, gold and platin awards, and the number of producer credits over the year.
• Spotify has countless New Music Fridays. The website www.superfridaychart.com summarizes them and creates a ranking of the artists who appear in the most New Music Fridays of the week and also shows how many followers the playlists have in total. Pretty handy, I think.
• Streamers on Twitch earned over $1 billion last year. This amount is made up of channel subscriptions, tips, and shares of advertising revenue. As is well known, many musicians have discovered Twitch, which is owned by Amazon, for themselves, especially during the pandemic.
• The Guardian wonders if bands are outdated and only solo artists dominate the (single) charts. In the top 100 singles in the UK in 2022, only four bands can be found.

In 2022, I often wrote about layoffs and already suspected that this would not change in the new year. As expected, Microsoft (10,000 people) and Google (6% of their workforce, which is about 12,000 people) announced layoffs, and Spotify will also be parting ways with 6% of its employees, around 600 people. I will discuss Spotify in more detail below, but first, let’s briefly touch on Google.

Like many tech companies, Google grew too quickly during the pandemic. As a result, they want to “shrink to grow,” but this doesn’t seem to be the case for their AI department. According to an article from The Verge, in response to ChatGPT, Google may launch as many as 20 AI products this year. Internal reports on the shortcomings of their AI technology may no longer be relevant. I’m always amazed at how thoughtlessly everyone uses Google’s “free” products without questioning the company’s methods and incredible power, as if Edward Snowden and numerous other revelations never existed. The products are just so convenient that people don’t want to know the details…

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Spotify lays off around 600 employees

• As mentioned in the intro, Spotify is laying off 6% of its workforce and making some changes to its management team.
• Daniel Ek wrote to employees that operating costs have grown twice as fast as revenue, which is not sustainable, especially in this difficult economic environment.
• However, not everything is due to the current economic situation, as this great deep-dive from MBW shows. Spotify, and Daniel Ek in particular, have made numerous mistakes. The short version: 1. Excessive spending on personnel, sales, and marketing. 2. Too much spending on the podcast strategy, which has not paid off yet. 3. Persistent refusal to finally raise subscription prices. I would call it a must-read.
• It will be interesting to see how the stock market reacts (currently, as is usually the case with layoffs, still positive). As I mentioned before, Spotify could become an acquisition target due to the falling stock price. One name that is often mentioned is Microsoft, who has not been able to build a successful streaming service themselves.
• Spotify is in good company. According to a survey, 173 tech companies have laid off a total of 56,000 workers in recent months.

Amazon Music raises prices

• Amazon Music has announced a moderate price increase for its streaming service, following similar moves by Apple Music and YouTube.
• The price increase will apply in the US, UK, Canada, Germany, and Japan, with the standard monthly subscription rising from 9.99 to 10.99 (USD, GBP, or EUR). The Unlimited Student Plan will also increase from $4.99 to $5.99.
• The question now is whether Spotify will follow suit. Some believe Spotify will delay as long as possible and try to benefit from its competitors’ price increases. Whether this plan will work remains to be seen.
• In this article, I explain why price increases are necessary and why they should actually be much higher. Since 2008 (Europe and UK) or 2011 (USA), Spotify has held its price at 9.99, while inflation has risen 30.1% in the USA and 31.1% in Europe. As a result, artists and labels earn almost a third less from each Spotify subscriber. To simply offset inflation, the price would have to rise to 12.99.

Why Universal doesn’t want user-centric and what artist-centric could mean

• The most talked-about topic of the year so far is Universal Music’s call for a new streaming model. However, they have yet to provide a clear vision of what this system would look like and what they mean by artist-centric.
• The choice of words indicates that Universal does not support a shift to the user-centric model, which is already partially used by SoundCloud and Tidal.
• The reasons for this can only be speculated. Music.Ally suggests that there are several factors, such as the weaknesses of the user-centric model, just like the existing pro-rata model. Analysis has also shown that hip-hop would suffer losses if there was a switch to user-centric, and Universal has many rap artists under contract.
• Contrary to previous assumptions, Music.Ally believes that Universal would actually be better off with the user-centric model or at least just as good. Their larger acts would likely lose out, but they would gain some from the middle tier.
• Music.Ally also believes that Universal has not created a fixed artist-centric model but hopes that each DSP will apply it based on their strategy.
• They view it positively and hope that artist-centric could be a further development of user-centric and that the entire industry is moving towards a model that could be the next step for the streaming economy. Let’s hope so!

TikTok: It’s not just the algorithm and users that decide what goes viral

• Those who believed or hoped that it was solely TikTok’s amazing algorithm that decides what is shown in the “For You” feed will be disappointed.
• Revelations show that it’s not as democratic as many had hoped. TikTok can internally select videos and make them go viral. They call this “heating.”
• Specifically, TikTok employees can manipulate the algorithm to push videos into users’ feeds. The total number of “heated” videos is said to be around 1-2%. This may sound like a small percentage, but it’s definitely a significant intervention.
• Heating was primarily used to push influencers and brands with whom TikTok wanted to build business relationships.
• This is all pretty shady, but even worse, the feature was apparently also used by TikTok employees to push their own videos or those of friends.
• From a user’s perspective, this means that the videos displayed may not necessarily be the ones that the algorithm thinks you’ll like.

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Bonus Reads

• Music.Ally has released the guide for marketing in 2023 and talked to numerous experts in the music industry.
• Is Twitter going bankrupt soon? According to an article in The Guardian, it could happen.
• It seemed like catalog sales were cooling down and especially Hipgnosis made headlines for not closing deals for a while. Well, this changes with the purchase of Bieber’s catalog for an estimated 200 million. This makes Justin one of the few artists who cannot be called a legacy act and who has sold his catalog. And at 28, he may still have a very long career ahead of him.
• Interesting article by Trapital’s Dan Runcie on YouTube’s ambitions to become the music industry’s most important partner.
• Rap veteran Papoose is now searching for new hip-hop talent for TuneCore. As Head of HipHop, the MC from Brooklyn will report directly to CEO Andreea Gleeson.
• OK Boomer – The Rolling Stones are now on TikTok (and tempting the Music.Ally team to some wordplay).

Dear music industry disruptors,

It is rare that (supposed?) adversaries agree on anything. In the debate about the future of streaming, we are experiencing one of those rare moments. Both streaming critics (artists, smaller labels), as well as streaming beneficiaries (primarily Universal), are suddenly calling for the same thing – a new streaming model. Even if the similarities may end there, it is more than obvious that change must come. And it will. The strong contribution by MIDiA, which I have placed first here, shows what this could look like and what specific changes could be possible.

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What could a new streaming model look like?

• While the independent music community has been demanding a new model for some time, this demand is new to major labels. MIDiA explains this with the declining market share of majors due to the fragmentation of music consumption (more niches and local music) and, of course, the incredible amount of music that is being released.
• According to MIDiA, only 15% of consumers find it difficult to discover new music on DSPs. They are thus contradicting the arguments of the Universal CEO, who is primarily focused on the sheer volume of songs.
• The demand for an artist-centric model by Universal ignores the fact that streaming has also changed the way music is consumed. And that includes chill playlists, whale songs to fall asleep to, or other background music these days.
• In the search for a model, one should not make the mistake of trying to change consumer behavior, but rather take it into account.
• So what could change concretely? As already written elsewhere, there would have to be more different subscription models and the possibility for artists to generate additional income with exclusive content via DSPs.
• I would find the introduction of a payout threshold a very exciting possibility. Only when a song has reached a certain number of streams over a defined period of time will anything be paid out at all.
• Also up for discussion is the following option: there are higher royalty rates for active listening behavior (when searching for a song or listening via one’s liked songs list) compared to passive behavior (listening via the radio function or in mood playlists).

Study shows extent of fake streams

• This study by Centre National de Musique, known for their evaluation of the User-Centric model, fits very well into the discussion about a new streaming model.
• For the study, they used data provided by Spotify, Deezer, and Qobuz, as well as various distributors (including Universal, Sony, Warner, or Believe).
• What came out? At least 1-3% of streams from France are fraudulent streams. In concrete numbers: between one and three billion streams.
• In reality, it is probably much more because this number only refers to streams identified by the DSPs as fraud. And we know that the eagerness of DSPs is limited…
• The monetary damage to the French market amounts to between €4.92 and €14.76 million.
• Assuming that there are also 3% fraudulent streams worldwide (as mentioned, there are probably more, also because France is hardly the epicenter of fake streaming), we are talking about $507 million.

New releases and top 10 hits are continuously losing market share

• The annual report by Luminate is here and gives us insights into global listening behavior, but with a strong focus on the USA.
• According to their calculations, on-demand streams worldwide have grown by 25.6% to 5.3 trillion streams. Of these, 3.4 trillion are audio and 1.9 trillion are video. In the USA, the growth was at least 12.2% (1.3 trillion streams). This means that every fourth stream worldwide comes from the USA, although they make up only about 4% of the world’s population.
• The share of catalog releases (anything older than 18 months) has increased again in the USA. In 2021, they accounted for 69.8%, now it has grown to 72.2%. Five years ago, the value was only at 54.9%. Current music only grew by 0.5% in 2022, while catalog grew by a whopping 12.9%. It is pretty clear where things are headed…
• Another trend that continues is the declining impact of hits. The top 10 most-streamed songs in the USA in 2022 accounted for 4.72 billion streams. In previous years, this figure was always higher (2021: 5.27 / 2020: 5.97 / 2019: 6.22). Even in 2017, when far fewer streams were listened to, it was at 4.91 billion.
• Their market share now only accounts for 0.5%, or about one out of 200 streams was one of these top 10 hits. In 2017, it was one out of 100 streams.

TikTok is driving down online advertising prices

• TikTok is undercutting the prices of advertisements in an effort to lure advertising clients away from Meta, YouTube, or Twitter.
• All of this is happening in an environment of declining advertising spending, which Meta and YouTube are feeling even more acutely.
• 1,000 impressions on TikTok are only half as expensive as on Instagram Reels and one-third less expensive than on Twitter.
• While previously all major advertising clients could be found on Instagram, now more and more are also on TikTok.
• However, TikTok has already had to revise its revenue targets for 2022 downwards. Nevertheless, revenue is expected to grow from $4 billion (2021) to around $12 billion (2022).
• The number of users has also grown significantly, with 1.8 billion monthly active users (600 million of whom are in China) now using the platform. At the end of 2021, there were still only 1.2 billion.
• As MIDiA shows in a post, TikTok is not only putting pressure on its competitors, but also vice versa. In its home market of China, the giant Tencent and its short video service Channels are becoming serious competitors. In particular, they could capture market share from ByteDance in the live streaming shopping sector.
• In the West, as reported last week, YouTube has increased pressure by now sharing advertising revenue from YouTube Shorts with creators from February. TikTok has yet to respond, so it is not unlikely that Shorts will become more important for many creators.

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Bonus Reads

• Ted Gioia argues in this post that the music industry (primarily the majors) botched the vinyl revival. In his opinion, with a little courage and foresight, much more would have been possible. While he may be a bit too optimistic, he definitely has a point.
• Austin Staubus argues in this short article that the skip rate on Spotify is vastly overrated. That may be true, but what I found much more interesting here: although the skip rate is one of the four most important metrics, it is not visible to artists and labels in Spotify for Artists. Unless you are with one of the majors or one of the selected distributors (such as The Orchard), which receive this data via API.
• What career stages can artists actually go through? This article lists them very well in my opinion and is a good guide for artists.
• The Weeknd is on track to become the first artist to surpass 100 million monthly listeners on Spotify (currently at 95.71 million). In other words, around one in five Spotify users listened to one of his songs last month.
• I’m sure I’ll be writing about AI a lot this year. Currently more of a toy, this app creates playlists using prompts. While playlist AIs are the first here, as Music.ally rightly notes, streaming services themselves are likely already working on such tools.
• Music legend Nick Cave is not a fan of ChatGPT. Various fans had ChatGPT write “songs in the style of Nick Cave” and Cave is not at all impressed with the results.

Happy New Year Fellow Travelers,

The holidays are unfortunately over and I am back in Switzerland, which is comparatively cold but also frighteningly warm at the same time. This newsletter focuses on some legal disputes, with Universal Music in the role of plaintiff and defendant. In general, the biggest major label takes center stage in the first edition of 2023. The CEO of Universal is demanding nothing less than a new streaming model. Many have made similar demands, but he is undoubtedly being listened to. Why? Because Universal is incredibly powerful. This is already evident from the fact that Universal’s market value is three times higher than that of Spotify.

Will 2023 bring us a new streaming model? Due to Spotify’s weakness in the stock market, it may even become a takeover candidate, and is ChatGPT the revolution that NFTs and the Metaverse have yet to deliver? Yes, it will be an exciting year, and I will stay on top of developments for you.

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Universal wants a new streaming model

• Since it became known that there are now 100,000 songs being uploaded to DSPs every day, the return of gatekeeping has been discussed. I have already discussed this in this article.
• This discussion was primarily initiated by the majors, and it is Universal Music CEO Lucian Grainge who is now getting more specific.
• In a message to employees, he writes that the abundance of new music is causing listeners to be directed towards inferior content by algorithms.
• He is particularly focused on the 31-second tracks, which are usually based on sounds or used for mood playlists.
• He does not see it as a fight between major and indie or DIY, but between quality and quantity.
• The bottom line: a new streaming model is needed. And compared to many others, Universal is not interested in the user-centric model.
• He envisions an artist-centric model, without explaining exactly what he means by that.
• Of course, it is true that a new streaming model is needed. And at first glance, it may be good that the most powerful label sees it this way. However, it should not be forgotten that Grainge is criticizing a system that he helped build and from which his company has profited enormously for years. It can be assumed that any model initiated by Universal will primarily benefit Universal itself.
• Furthermore, the problem remains that neither Sir Grainge nor anyone else really has the right to judge which music is worthy of existing on DSPs and which is not.

Universal sues Triller

• I already reported that Triller ended its cooperation with Merlin and is fighting Sony in court. However, the cooperation with Universal and Warner continues as usual. Well, not quite.
• In February 2021, Universal removed its content from Triller due to outstanding payments. In May 2021, they reached an agreement, but now the short-lived peace is over.
• In a lawsuit, Universal accuses Triller of not having transferred the due payments for the last three quarters and of having failed to provide the usage reports.
• So, it looks like Triller will soon have neither Universal’s releases nor those of Sony and Merlin. Triller remains optimistic, but this is either blinded optimism or pure wishful thinking.

Universal sued over deal with Spotify

• The fact that the majors own or have owned shares in Spotify has always been viewed critically. Now this so-called backroom deal may even go to court.
• The lawsuit comes from a rather unexpected source, namely the hip-hop duo Black Sheep, which released two albums on the Universal-owned label Polygon in the 90s.
• What is Universal accused of? Universal is said to have agreed to lower royalties in exchange for receiving shares in Spotify.
• The lower royalties allegedly cost Universal’s artists $750 million.
• They also demand that Universal’s artists be included in the share ownership.
• Unlike the other majors who sold all (Warner) or part (Sony) of their shareholdings and included their artists in them, this was never the case with Universal.
• Universal describes the lawsuit as “obviously false and absurd.” Hopefully, the court will see it differently, and the process will shed light on the deals between majors and Spotify.

Universal is worth three times as much as Spotify

• A year ago, Universal Music and Spotify had roughly the same market value. This has changed dramatically in the past year.
• The New York-listed shares of Spotify were worth a total of $15.26 billion. The Amsterdam-listed Universal shares were worth $43.7 billion at the end of the year.
• Last year, Spotify’s stock lost a whopping 67.7%, even though they delivered good numbers.

How ChatGPT Could Change the Music Business

• You may have already heard of ChatGPT, the chatbot that is ahead of its competitors.
• While much of the discussion around AI in the music industry has focused on using it to create music, this MIDiA article explores a very different aspect.
• ChatGPT could assist artists who are just starting out with marketing and career planning.
• Instead of creating music itself, the AI would relieve musicians of certain tasks so they have more time for their music.
• The chatbot could help with creating promotional materials (such as press releases), marketing ideas, best practices, and even planning.
• In another article, MIDiA even calls ChatGPT a “smartphone moment” and suggests other revolutionary possibilities that may soon become a reality.

What Do You Get for 1 Billion Views on YouTube?

• Over 300 music videos on YouTube have reached one billion views.
• Billboard wanted to know how much money you make when you hit this astronomical number.
• Of course, this depends on many factors, such as which countries the views come from, whether someone with a free or premium subscription watches the clip, what kind of advertising is displayed, etc.
• According to Billboard, it also makes a difference whether you are signed to a major label or an indie label, or have no contract at all.
• A major artist earns approximately $2.6 million for one billion views, according to their calculations. However, this is before the label takes its share.

YouTube Shorts: Monetization starting in February

• As previously announced, creators on YouTube Shorts will soon be able to receive a portion of the generated ad revenue.
• Now it’s official: Starting February 1, creators can generate revenue through the YouTube Partner Program for Shorts.
• To participate, creators need at least 1,000 subscribers and either 4,000 watch hours in the last 12 months or 10 million short views in the last 90 days.
• If a Short contains a song, half of the revenue goes to the creator pool. If there are two songs, it’s one third. 55% of this pool stays with YouTube, and 45% goes to the creator.
• The other half (or two thirds in the case of 2 songs) goes to the music rights holders. As a musician, you can generate revenue both by having your music used and by creating Shorts.
• Now it’s up to TikTok to follow suit!

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Bonus Reads

• So far, it was completely unclear why a video appeared in the For You feed. TikTok now wants to create more transparency about how their algorithms work by providing a justification for each video (even if it’s somewhat hidden). This little charm offensive is helpful for users, but is likely aimed primarily at politicians and regulatory authorities who are closely watching TikTok.
  
• One of the biggest advantages of NFTs is that artists can earn money even when their works are resold. However, it has now been revealed that many platforms deny this right to artists, as reported by Billboard.
  
• Music Ally sums up what happened in the music industry last year in relation to the metaverse.
  
• Streaming in better audio quality is definitely not just a niche thing. Apple Music announced that over 80% of their subscribers consume music in spatial audio quality.
  

Apple Music announcing their price increase has finally brought an issue back into the spotlight that iGroove Magazine has broached time and again: the price structure of DSPs. For the longest time, it seemed like the price of 9.99 was set in stone in the US, UK, and the important European markets. Now, Apple Music is increasing their subscription fees for the first time ever to 10.99. YouTube and Amazon, too, adjusted their prices, and who knows, maybe even Spotify will follow suit.

Of course, there have been price increases here and there over the past years – including on Spotify. But most of the time, these only applied to specific subscription plans, such as the family plan that got more expensive, or the price increases were exclusively implemented in smaller or less strong markets.

How musicians profit from price increases

But why would you even want prices to increase as a musician? It’s pretty simple: As long as the big streaming services continue to rely on the pro-rata model, meaning that all revenues are thrown into one big pot, this pot needs to somehow actually grow big – especially since there are more and more artists and releases that want a share of the cake. It can only grow in three ways:

• More paying subscribers: While there is indeed a continuous growth of subscribers, there is also a certain saturation on the horizon.
• More ad revenues: Here, too, revenues are growing, but they are also dependent on many different factors that the DSPs often have limited control over, such as the economic cycle.
• Price increases

The fourth option would be that the DSPs keep a smaller share of the cake for themselves, but that’s pretty unlikely. Price increases are therefore an important tool to make the cake bigger. Apple has additionally mentioned that through these price increases, more money would be going to the artists and songwriters, as well.

Price increases are long overdue!

Last but not least, price increases are also entirely justified. Users are being offered way more than they were a few years ago: more music, more podcasts, more tools, etc. Another thing to keep in mind is that, when adjusted to purchasing power, subscription fees have actually dropped significantly over the years. In short, price increases are long overdue and should’ve been way higher if the world wasn’t in crisis mode right now.

More piracy through higher prices?

It is indeed a pretty weird moment for price increases considering multiple crises are hugely influencing the purchasing power of many consumers at the same time right now. Some may thus wonder if these added costs will lead to more piracy, as Spotify has argued time and again when explaining why they chose to keep their prices the same. Since all of the increases have been very modest, this is not likely to happen. If anything, more people will switch to a freemium offer, which wouldn’t be a desirable outcome either, but at least wouldn’t result in a complete lack of revenues for artists and labels.

Since it can be assumed that the freemium model will reach its saturation point in the established markets over the coming years, we can hope that the DSPs will have more courage and foresight to continuously raise the prices in the future – and not just so they can somewhat keep up with inflation.

Innovations are necessary, too

Since customers are used to prices staying the same, the DSPs have put themselves in a situation where they need to offer more to justify the increase. Apple Music actually implemented better audio quality in their standard offer at no additional cost shortly before they raised the price to 10.99.

It would be time for DSPs to rethink the structure of their pricing and offers in general. In order to better cater to different needs, a bigger variety of subscription models would be appropriate – models that people would go for who are in principle willing to pay more if they are offered more. Using cheaper subscription models that come with some limitations, more listeners may also be convinced to move away from the freemium model.

Last but not least and as we have often mentioned, DSPs should give superfans more ways to support their favorite artist financially. DSPs need to move away from the one-size-fits-all mentality and instead create a varied offer selection both for more passive listeners as well as superfans who like to be more engaged. At the end of the day, it is these innovations that will in turn justify price increases and raise payouts for artists.

Recently, two earth-shattering numbers have been published that have sparked quite a debate. For one, Apple Music announced that their library reached the 100 million song mark. Soon after, Amazon Music and YouTube Music also made it known that they have broken this sound barrier.

On the other hand, the CEOs of Universal Music and Warner Music disclosed that there are currently 100,000 new songs being uploaded to the DSPs every day. In the first half of 2018, Spotify was still listing 20,000 songs per day, in April, the number grew to 40,000, and finally, in February 2021, the often-cited 60,000 track milestone was reached. Now, a year and a half later, they’ve apparently broken the 100k mark, as well. Why the 60,000 and therefore also the 100,000 uploads are exaggerated is what this article will show, however.

Lots of music no one listens to

Let’s actually assume that there are 100,000 new songs being uploaded every day and that you can therefore find one million new songs on the DSPs every 10 days. In one year, that would come out to 35 million new songs, and in three years, the current number of 100 million songs would be doubled. Considering this nearly inconceivable quantity of music, it is hardly surprising that countless releases are rarely or never played at all.

Last spring, we already posted some data on this: Out of the 8 million artists on Spotify, 6.27 million have fewer than 50 monthly listeners. Out of the 78.4 million tracks on Spotify at the time, 17.54 million (22.37%) were streamed fewer than 100 times, while 38.69 million reached more than 500 streams. This means that more than half of all available tracks remained below the 500-stream mark.

Drowning in the constant flow of music

Obviously, it’s extremely hard to stand out in this enormous quantity of newly uploaded songs. However, the bigger competition actually comes from catalog releases, as older songs steadily have a higher market share. The DSPs like to brag with their big collection of tracks, and the major labels want to portray themselves to be the people who can help you stand out from the enormous masses. Of course, this is not wrong. If you’re with a major label, you will certainly receive a certain level of attention. But even the bigwigs are having more and more trouble creating stars and generating actual hits that don’t immediately disappear into oblivion.

Should gatekeeping make a return?

In the streaming age, gatekeeping has practically been eradicated, and the number of releases has skyrocketed. To put it in comparison: In the 60s, only 5,000 albums were released – per year. Even if these albums had 20 songs each on average, that would only amount to 100,000 songs – which is as many as we see being released today on a daily basis.

So, what we’ve got here is an unmanageable amount of music, and some parties, including the major labels, have called for some restrictions. Of course, what they mean here isn’t their own repertoire but artists who release their music independently. There is, no doubt, a certain arrogance there, when these majors give off the impression that DIY releases are only there to clog up the DSPs. Sony Music’s CEO, for instance, called a big portion of uploads flotsam and jetsam. Universal’s CEO expressed the concern that the algorithms are directing listeners more and more towards low-quality content. Universal’s EVP Michael Nash simply referred to it as noise, arguing that few artists actually reach more than 50 monthly listeners.

The major labels are obviously acting entirely in their own interest. On the other hand, no one can deny that there is a lot of music on these streaming platforms that could be removed without a problem, and what’s more, without any loss of quality either.

Quantity of music causing financial problems

For the streaming services, this enormous quantity of songs has become a problem, as well – at least for those that don’t have cloud storage like Google, Amazon, or Apple does. MusicBusinessWorldwide has calculated that just this year, Spotify has spent at least 130 million USD for cloud computing services, which is the place in the cloud where all these vast quantities of songs (and podcasts and audiobooks…) are stored.

So, that’s one problem. The other is that it may well be that one day, even the best algorithms won’t be able to manage this flood of new releases, and recommendations get less accurate. Both of these points beg the additional question: What happens when 300,000 songs are being uploaded daily, like when more AI-generated music pops up or space-consuming video content becomes more important?

How can you make the product range smaller?

When it comes to 100 million existing and 100,000 new songs, it is, of course, impossible to sort through the library manually and weed out low-grade products. Additionally, the problem remains that low quality is in many cases in the eyes of the beholder, as trashy sound quality can actually be a stylistic device, as well.

At the end of the day, the issue will probably have to be solved using numbers: If a song doesn’t reach at least 1,000 streams within 6 months, for instance, it will either be removed from the platform or the artist has to pay to keep it online.

A lot of substandard music would disappear this way, and it would actually open up a new source of income for the DSPs.

On the other hand, there is the question of whether it’s fair to judge based on numbers alone. Especially for artists who are more active in smaller markets and maybe within a niche genre on top of that, it is much harder to reach this benchmark. So, it can be assumed that quite a lot of good music would disappear, as well. For the DSPs and perhaps their partners, too, there will be administrative expenditures that cannot be underestimated.

Many open questions

But the main question is: Who would take the first step? For Spotify and their enormous Cloud costs, it would certainly be lucrative. But why should the tech giants like Apple, Amazon, and Google follow suit if they’ve just celebrated their 100 million songs as a milestone and have their own cloud at their disposal?

Would Spotify be at a disadvantage if they have less music to offer? Should the DSPs invest in a more refined algorithm to filter out racist content and other scum but also to make a pre-selection of additional uploads that could be removed? Should the curation of content additionally be boosted, not just through algorithms but primarily with human resources, to give listeners actual guides to help them navigate the release jungle? But wouldn’t we be right back with issues of transparency when it comes to both algorithms and content curation? And most of all, isn’t curation also a form of gatekeeping? As you can see, things are quite complicated, and there are no easy solutions.

It’s no secret that social media platforms often copy each other and that the best ideas get adopted by everyone. The most studious in this regard are Facebook and Instagram. Their users often not only accept this but actually take it on with much enthusiasm. But it seems like the tides have turned. More and more voices have expressed their wish for Instagram to return to the way it used to be, and the leaked documents show that Instagram Reels are not as popular as previously assumed.

Many creators don’t use Reels

Here are some numbers that show how badly Reels are performing:

• Users on Instagram spend 17.6 million hours per day on Reels. That’s less than a tenth of the time users spend on TikTok (197.8 million hours).
• Out of the 11 million creators in the U.S., only a measly 20.7% use Reels.
• Even when Reels are used, they are often only a secondary outlet: 30% of all Reels have previously been uploaded to a different platform.

Competition from TikTok and YouTube Shorts

So, the plan to use Reels to lure users away from TikTok seems to have failed. And there is yet more defeat looming, as contrary to Reels, YouTube is doing really well with their own clone “Shorts.” Additionally, starting next year, they will be offering these creators a portion of the ad revenues, as well. Yet another reason not to post primarily on Reels.

The fact that TikTok is currently the most popular platform goes without saying. But when it comes to Instagram, we have to ask ourselves whether this is just a small loss of form or whether the platform that up until recently has been indispensable to musicians has already cloned itself into dispensability. We will see in the coming months, one way or another.