MBW’s Stat Of The Week is a series in which we highlight a single data point that deserves the attention of the global music industry. Stat Of the Week is backed by Cinq Music Group, a technology-driven record label, distribution and rights management company.
One of the most dramatic impacts streaming has had on the recording industry is the democratization of listening.
The logic goes like this: In the pre-Spotify past, consumers had to make an engaged decision about which record they wanted to buy next. This transactional buying decision was restrained and largely guided by the media and broadcast channels – the legendary “gatekeepers” – who were limited in the number of artists they could recommend to the unwashed greats.
Nowadays, no transactional purchase decision is required. No consumer needs to “gamble” their money on a new, untested disc – just load it up on Spotify/YouTube Music/Apple Music, etc., hit play, and see if it’s in.
If they like it, they can keep listening. If they don’t, they may just skate to another auditory delight.
Year after year, this phenomenon dramatically dilutes the concentration of total music listening claimed by a handful of the world’s biggest megastars.
As a result, in any given year, a growing share of the total number of streams moves away from the Top 10 biggest hits and into a much wider range of artists in the “class average” with significant fanbases, but not necessarily breaking the charts. .
MBW has released this stat a few times this year, but it bears repeating: according to our calculations of Luminate’s numbers, the top 10 streaming audio tracks in the US in H1 2022 have been played cumulatively 1 billion times less than they were in H1 2019 (2.74 billion against 3.81 billion).
The impact of streaming on live activity
This phenomenon is not exclusive to the recording industry.
In an upcoming interview at Music Business around the world Yearbook 2022/2023Jay Marciano, CEO and President of AEG Presents, notes that the democratization of listening on streaming services has had a significant impact on his company’s “bars and theaters” business – i.e. venues that typically hold hundreds, rather than thousands, of ticket holders.
“A club that would do 100 shows a year in 2012 is now doing 180 a year,” says Marciano. “It’s a direct result of there being more talent [with a viable fanbase] available. It’s a great by-product of the benefits of streaming.
“A club that would do 100 shows a year in 2012 is now doing 180 shows a year.”
Jay Marciano, AEG presents
He adds: “What’s new is how often fans go [these] shows: the statistic quoted years ago was that the average audience attends shows at 1 point something per year.
“In our experience, at the level of clubs and theaters [today]where the public is mainly made up of 22 to 32 year olds, it is more like eight times a year.
Warner’s “portfolio” strategy
All of this, in turn, has impacted the A&R strategy of major music companies.
You may recall that in September, outgoing Warner Music Group CEO Steve Cooper noted that – thanks to streaming – his company had shifted towards a “portfolio” A&R strategy.
“What we have done over the last few years is reduce our [financial] addiction to superstars. reducing this dependency has allowed us to continue to strengthen our approach to A&R, which is the long-term development of artists.
Steve Cooper, speaking in September
This strategy, Cooper explained, meant that WMG now spread its A&R budget among a wider range of artists, reducing the company’s “financial dependence on superstars”.
Or to put it another way: Warner invests a smaller proportion of its growing A&R budget each year on a handful of global stars, and distributes a larger proportion of that budget on artists who have yet to trouble the Top 5 of the world. Billboard Hot 100.
A major new data point to play with
Speaking on Warner Music Group’s calendar third quarter earnings call on Tuesday (November 22), Cooper provided us with a stark statistic that reflected the business reality of the above trends.
Cooper revealed: “Ten years ago, our top 5 artists generated more than 15% of our physical and digital recorded music revenue. In 2022, they generated just over 5%.”
To explain this to you again: the top 5 selling artists from one of the major record labels, as a subset, have seen their cumulative share of revenue generated by that major record label reduced by two-thirds over the course of of the last 10 years.
Where have those two-thirds gone? We’ll get to that — because it’s a bit more nuanced than “they all disappeared into the ‘middle class’ of artists that MBW can’t stop babbling about.”
“Ten years ago, our top five artists generated more than 15% of our physical and digital recorded music revenue. In 2022, they generated just over 5%.”
Steve Cooper, speaking this week
For now, let’s keep our eyes on the price, sift through some SEC filings, and do the numbers.
According to Warner Music Group’s annual tax reports, WMG’s physical and digital recorded music revenues (i.e. CDs, vinyl, downloads and streaming royalties combined) were $3.868 billion in fiscal year 2022 (the 12 months through the end of September of this year).
A decade earlier, in fiscal year 2012 (the 12 months ending September 2012), the equivalent figure at WMG was $1.830 billion.
(Just a moment, please, to marvel at the fact that, under Steve Cooper’s leadership, that figure has more than double in 10 years at WMG…and back to the math.)
Below you can see what the ballpark percentages Steve Cooper presented this week – RE: Warner’s Top 5 Annual Artists for Fiscal Years 2022 and 2012 – look like in (i) real money terms and (ii) as a pie chart. [Click on the chart to view numbers.]
The take away key?
According to MBW’s calculations of Steve Cooper’s figures, Warner Music Group’s top 5 recorded music artists in fiscal year 2012 appear to have cumulatively generated a greater sum annual digital and physical royalties (≈ $274.5 million) than WMG’s top 5 equivalent artists generated in FY2022 (≈$193.4 million).
It’s not just a drop in to share income; it is a decrease of real revenue generated.
This, remember, represents a ten-year period when WMG’s overall recorded music royalties more than doubled ($1.83 billion in 2012 vs. $3.87 billion in fiscal year 2022).
Warner’s ‘expanded and deepened’ artist roster
Steve Cooper took the time on Tuesday to explain some of the causal reasons behind Warner’s top 5 artist revenue share decline over the past decade.
He noted that in addition to losing share to “middle class” artists – as described above – the current clutch of top superstars are also battling for viewing share with (I) artists from many more countries than ever before, and (ii) artists from different eras.
Indicate (ii) was summarized this year by the Warner Music-distributed Run up that hill by Kate Bush, which was officially the most popular hit in the world on Spotify this summer after appearing on Netflix Strange things.
Indicate (I) is summed up when you look at the range of major league stars from different parts of the world who have signed with Warner labels in recent years – including Anita (Brazil), who was just nominated for a Grammy for Best New Artist in 2023, as well as Burna Boy (Nigeria), Twice (South Korea), and Paulo London (Argentina).
“Ten years ago, we were an Anglocentric company. Today, we are a truly global music entertainment company.
Steve Cooper, WMG
Indeed, this week, Warner announced a global deal with Dalia Mubarak, described by WMG as one of “the most influential female superstars in the Middle East”.
Steve Cooper said on Tuesday’s earnings call, “As we broaden and deepen our roster of artists and prioritize a holistic approach to national music, the mix of our revenue has evolved…We “We also proved once again that music can come from anywhere and resonate everywhere. Not only are we developing Anglo-Saxon blockbusters, but also superstars in their home regions.”
Cooper added: “Ten years ago we were an Anglo-centric company. Today, we are a truly global music entertainment company, operating in over 70 countries.
Five Music Group’s repertoire has won Grammy Awards, dozens of RIAA Gold and Platinum certifications, and numerous No. 1 positions on a variety of Billboard charts. His repertoire includes heavy hitters like Bad Bunny, Janet Jackson, Daddy Yankee, TI, Sean Kingston, Anuel and hundreds more.The music industry around the world