Over the last months the music industry has been trying to assess the immediate impact of the COVID-19 pandemic within every sector of the ecosystem. The live sector has been undoubtedly the most affected due to lockdown measures, and streaming has experienced steady consumption, but the overall revenue has experienced decline mainly due to advertisers cutting back on spending. In the last weeks several reports have been focusing on the long term impact, discerning within all sectors of the industry (live, recorded music, publishing, artists & managers, sponsorship and merch).
Taking as a starting point the recent blogs from Soundcharts, the Music Industry Blog (MIDiA) and the latest figures from PRS for Music, we move to analyse the challenges that the music industry will face over the next couple of years.
It is the most affected sector with the pandemic. Not only because of the immediate shut down due to the lockdown measures around the world, but also because it will be the last sector to activate, with security measures in some cases not yet discussed that will lead to an uncertain recover. As stated by Soundcharts, the uncertainty around live events is huge. Despite some territories like some states of the US, Spain and China are allowing certain live events to be realized, social distancing measures bring the inevitable question of financial viability: promoters are now faced with the challenge of achieving profitability with somewhere about a third of the ticket sales, very limited international logistics for touring and a diminished sponsorship revenue.
Moreover, the planning of every initiative must take into account the fact that a small size of the population is willing to attend public events before a vaccine, and the fact that, once quarantine is lifted, a second wave of contagions will inevitably cause venues to close again, as we’ve seen in South-Korea and China.
The live sector accounted for $25bn revenue in 2018, while recorded music summed $19,1bn in that same year. The figures clearly indicate the dimension of this sector within the whole music industry. Besides, it directly affects other sectors as we will see further down.
Recently PRS for Music published their 2019 figures. Over the year, they paid out £686m in music royalties, a 13.7% increase over 2018. The majority of this income came from international collection (34%), followed by public performance (28%), online platforms (22%) and finally broadcast (16%). One of the biggest changes in revenue distribution was in online platforms, where PRS collected revenue from Facebook, Instagram and Mixcloud for the first time.
However, it is important to remember that collecting societies operate on a 6 to 18 months lag, which means that the real impact of the pandemic will be felt around the end of 2020 and during 2021. PRS CEO Andrea Martin said to Music Ally: “With TV and film productions on hold, closure of businesses, public premises, and the cancellation of festivals, concerts and other live music events, we will inevitably see a decline in future royalties in 2020 and into 2021”. Soundcharts also points out that even though radio consumption is up, their revenue is still dependent on advertising, therefore the royalties generated from radio could also see a decline.
It is the sector that shows less dramatic disruption so far. Steady figures in streaming consumption and subscriptions shed some light considering streaming has been the main driver of the industry in the digital era. Nevertheless, the concern remains around consumers cutting discretionary spending, and advertisers reducing their overall budgets, as we explored analysing Spotify’s and Youtube’s Q1 results. On the other hand, TV and film production has stopped, which will certainly reduce sync revenue. Record stores have been forced to close as well, most of them relying heavily on e-commerce, crowdfunding and initiatives such as #LoveRecordStores supported by IMPALA to keep their business afloat and employees on payroll.
Merch sales rely heavily on live tours, which is why artists and their teams will have to come up with innovative strategies within the digital ecosystem to compensate. It will be interesting to see how Facebook and Instagram new e-commerce features support those initiatives.
Below you’ll find Soundchart’s forecast on how long it will take each part of the industry to go back to the revenue they were generating before the pandemic.
There is no question it is going to be a hard period for the music industry. Livestreaming –specially Twitch–, is trying to offer solutions to monetize online experiences, but the general monetization and proper rights management and licensing is still an ongoing discussion with many areas to be agreed upon and further implementation on the technological side. Some very interesting experiments are taking place around the improvement of digital live experiences, with Travis Scott’s Fortnite digital concert taking the lead, and music-tech initiatives such as the #NextStageChallenge hackathon. Make sure to follow up on this!