Digital music nation 2013
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CONTENTS BPI (British Recorded Music Industry) 02 24 Riverside Building Digital Music Nation 2013 the challengE of illegal free County Hall Westminster Bridge Road by geoff taylor illegal music downloading in the uk London SE1 7JA creating breathing space for legal services Tel: 020 7803 1300 04 support for action on piracy UK digital music at a glance in conversation with ole obermann www.bpi.co.uk in conversation with leanne sharman 06 30 Music leads the charge in digital innovation what’s next for digital music? Digital highlights of 2012 the move towards 4G integration music as a driver of social media engagement looking ahead with mark foster the album as app deals and services for a new audience adding value to the music experience music connectivity in the home in conversation with cosmo lush in-car audio 16 January 2013 Designed and produced digital music’s tipping point by Dogstar Abstracts the digital music switchover legal and illegal music consumption © 2013 BPI LIMITED streaming services take off No part of this book may be reproduced ownership versus access in any form without written permission from the copyright owner. in conversation with paul smernicki
Digital Music BY GEOFF TAYLOR A decade ago, the outlook for Social media continued to grow in importance in 2012 with some acts, such as Lady Gaga, setting up their Nation 2013 the record business was gloomy. own social networks while others, like Blur, turned to them to debut new songs. While they are changing the ‘Digital music’ was dominated very nature of engagement between musicians and fans, by piracy; the market for legal they are also playing an important role in music discovery services had barely emerged. and recommendation, and Facebook’s Open Graph and Graph Search look set to deliver this further. Looking back over the past 10 years, from when UK labels are strategically well placed to take advantage the iPod was still a new device for consumers, the of these developments. English is a global language. speed of innovation has been dizzying. In that decade Labels have become experts in using digital and social we have seen the entry of iTunes, Amazon MP3, media marketing to build and connect with a global 7digital, YouTube, Spotify, Deezer, Rdio, Vevo, Xbox fanbase, as the international success of bands like Music, Google Play and more – not to mention the One Direction, Mumford & Sons and Muse illustrates. arrival of Facebook, Twitter, smartphones, tablets, We can now market our music to the world more mass broadband, 3G and now 4G mobile connections. effectively than ever before. Alongside all this innovation, The music industry has embraced all of these piracy remains a continuing challenge, although the changes, which has helped drive impressive growth growing appeal of streaming services, from Vevo to in digital – not just in revenues but also in the diversity we7, Spotify, Deezer and Rdio and progress on blocking of services in the market. There are now over 70 illegal sites and delisting illegal search results means licensed music services in the UK, meeting a huge the elements are in place to help carry users over range of consumer needs. from unlicensed sites to fully licensed ones. Like the US, Sweden and South Korea before it, the The introduction in 2012 of the Official Streaming Chart UK experienced an important tipping point at the start stands as an important marker of how far we have come of 2012 when digital music revenues overtook physical in such a short period of time. It comes eight years after music revenues for the first time. More affordable, the first download chart and today downloads make capable and easy to use tablets and mobile devices up almost 100% of the singles chart. The change has are bringing more consumers to digital music for the been seismic. And it continues. Market growth and first time and both the music business and digital digital innovation are dynamically intertwined, meaning music services are rising to meet them. the next 10 years should be equally as game changing and thrilling, as we look forward to the impact of 4G, The consumer is at the heart of these changes. connected TVs and in-car streaming on the horizon. The emphasis placed on design, convenience and speed is encouraging music fans to transition UK record labels are in the vanguard of this new wave quickly from testing the waters with a download to of global opportunities. Digital is in our DNA and music building a digital albums collection or subscribing to is set to realise its potential for growth in a fully a streaming music service. The music consumer in connected world. 2013 is dramatically different from the music consumer of 2003 and it is to the credit of everyone in this ecosystem – labels, artists, publishers, digital services, technology companies – that the platforms are in place to meet their growing expectations. Geoff Taylor Chief Executive, BPI BPI digital music nation 2013 Introduction 02 / 03
UK digital music at a glance 1 Official Charts Company 189,000,000 22,000,000 20% 345,000,000 2 3 4 BPI UKOM/Nielsen Kantar Sales of singles in 2012, 99.6% of which were digital1 Monthly UK audience for YouTube 3 Proportion of Spotify’s global users who are paying Number of tracks downloaded using BitTorrent 5 Harris Interactive subscribers between January and June 20128 6 EMI Music Consumer Insight 7 YouGov Sixth Sense 8 MusicMetric 938,000,000 27.7% 93% 44,000,000 9 10 Futuresource Consulting Ltd ABI Research Digital tracks sold to date in the UK Percentage of Brits who purchase downloads by December 20121 or stream content legally4 Satisfaction rate with music streaming services 6 Forecasted number of 4G subscribers by 20169 114,000,000 3,700,000,000 1,000,000,000+ 18,000,000 Digital albums sold to date in UK by December 2012 1 Number of audio streams in the UK in 2012 1 Number of playlists already created on Spotify Potential number of tablet owners by 20169 71 £49,000,000 62,000,000 239,000,000 Legal digital music services in the UK2 Value of streaming market to British record labels2 Number of music tracks that have been shared Number of tracks downloaded legally between on Facebook January and June 20121 51% 68% 54% 50,900,000 Proportion of UK record label revenues accounted for Proportion of people who believe search engines by digital sales (Q3 2012)2 should make it harder to find illegal music websites5 Proportion of music fans who prefer Forecasted number of cars with streaming facilities to own downloaded music7 to be sold every year by 201710 20,000,000 80% 4,000,000 14.5% Individual tracks available for licence Proportion of people who are aware to legal digital services of streaming services4 Number of people regularly engaging in Percentage of Brits using P2P networks to filesharing in the UK3 fileshare music4 BPI digital music nation 2013 UK DIGITAL MUSIC AT A GLANCE 04 / 05
Music leads the charge Innovation is the lifeblood of digital music and the scale and speed of Competition heats up in the streaming market The US-based streaming service, Rdio, launched in digital innovation developments here in recent years in the UK adding web browser access alongside a has been phenomenal. The UK is the range of apps, streaming integration for audio systems and an Artist Program offering musicians a cut of world’s most competitive digital subscriptions they drive. Deezer expanded into the music market, with more than 70 live music video streaming market and was bundled legal services, catering for all with Everything Everywhere’s 4G mobile service at different kinds of music fan. launch. A major revamp to Spotify’s service included an enhanced recommendations engine, playlists from musicians and celebrities, and notifications Five digital highlights when new music from favourite artists is released. of 2012 The Napster service was bought and relaunched by Watershed moment for digital music Rhapsody, helping raise its profile in the UK market. Q1 2012 saw a ground-breaking moment for digital Digital radio manufacturer turns music when revenues from downloads and streaming to subscription accounted for more than 50% of record label income Digital radio manufacturer Pure brought its own Pure for the first time in digital music’s history. Music subscription service to music fans in the UK, following on from its existing FlowSongs offering. First official streaming chart Users can stream content and tag tracks they hear launches in the UK on their DAB set to get more from that artist. The growth and popularity of streaming was marked in May 2012 with the launch of the UK’s first Official DOWNLOADS Streaming Chart, which collates data from both ad-funded and subscription services. UP LOADS Cloud services fully launch in the UK Cloud services launched by three of the biggest digital players – Google, Amazon and Apple – DIGITAL MUSIC arrived in the UK offering consumers the opportunity to access digital purchases remotely, stream stored OUTSELLS CDs IN UK content, and upload or scan-and-match music files from their own collections. FOR THE FIRST TIME! past the A record number of downloads took digital sales £1billion mark for the first time last year. d by Streaming of music, films and video games rockete 11.4% and now make up a quarter of the market. MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION 06 / 07
Music as a driver of social Twitter followers: music artists dominate Genevieve Ampaduh media engagement social media networks Head of Digital Marketing January 2013 – Followers (millions) A cursory look at major digital entertainment platforms Sony Music and social media services shows how the global appeal “Social media has changed the face of music marketing of British music and its popular artists attracts huge 1. Lady Gaga 32.859 forever. The ability for artists to reach out to their audiences to many online businesses, helping them potential fans in every corner of the globe in real time to achieve the traction they need to gain momentum in a notoriously competitive environment. 2. Justin Bieber 32.647 is incredibly powerful and cannot be replicated by traditional media. Three of the top 10 most-liked pages on Facebook are arly advocates of an artist have become an extension E by musicians1 – Rihanna, Eminem and Shakira. Music 3. Katy Perry 30.962 of the label’s marketing teams and play an invaluable also leads the way on Twitter: the top four positions for role in breaking artists in their local countries. the most-followed people on the service globally are claimed by musicians – Lady Gaga, Justin Bieber, 4. Rihanna 27.728 Empowering super-fans should be a staple of any music marketer’s strategy, as should entertaining Katy Perry and Rihanna. The power of social media fans. Why shouldn’t a marketing campaign be exciting, 1 At the time of writing in January 2013 5. Barack Obama 25.523 in breaking acts overseas memorable and fun? It should be. And if it is, fans will Source: twittercounter.com stay with you for the journey ahead.” One Direction’s harnessing of the power of social media played a significant role in securing the Mike Allen All time most-viewed YouTube content January 2013 – Views (millions) band’s huge worldwide fanbase, helping their debut album Up All Night to top the charts in the United States, Australia, Italy and many other territories. VP International Marketing UK warner Music UK 200,000 People participated in “Social media has emerged as a mission-critical activity the challenges of the One innovative digital marketing campaign 1. P sy – Gangnam Style 1,146.3 around the album featured a virtual character in breaking artists internationally. While its impact may One Direction campaign called 1Dcyberpunk and a story centred around vary from market to market, it is only heading one way 2. J ustin Bieber – Baby 819.4 a missing laptop, creating a “transmedia adventure” that went viral across Europe and America. everywhere you look, and that’s upwards. For artists such as Ed Sheeran and Birdy in 2012, social media 2.5M was the foundation on which their international YouTube views generated 3. J ennifer Lopez – On The Floor 638.1 One Direction was at the heart of the campaign rewarding fans on completion of a series of success was built. In the case of a well-established global act like Muse, it’s equally essential that from the One Direction campaign Rihanna Justin Bieber challenges with an online album listening party, communication is channelled directly to the fanbase, 4. E minem – Love The Way You Lie 529.2 where new tracks were streamed to the online community. The band spent three to five hours with social media being a big component of that. The fans expect it, and rightly so.” a week creating videos of themselves thanking 5. L MFAO – Party Rock Anthem 513.5 fans for joining them in the race to retrieve the Source: YouTube laptop, discussing their favourite entries and enjoying some detective work. Over 50 days the campaign almost doubled traffic to One Direction’s website, attracting 200,000 participants who completed 20 separate challenges. It created 12 Twitter trends and racked up more than 2.5 million YouTube views, with 1DCyberpunk having her own social media following. BPI digital music nation 2013 MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION 08 / 09
Music central to YouTube’s appeal Music also makes up a large percentage of plays and The album as App videos on the most widely known and used streaming Calvin Harris, 18 Months service, YouTube, which has a monthly UK audience Columbia Records/Sony Music of 22m users. In November, Psy’s Gangnam Style Calvin Harris released his third studio album became the most viewed video in YouTube’s history 18 Months in October 2012. The challenge was (passing 1bn views in late December 2012) to encourage a single track-buying audience to and the top five most viewed clips of all time engage with the full album. are music videos. A week prior to the album’s release, the team Music by British artists features prominently among worked with SoundCloud API and the album the most popular videos on the service, with Adele’s artwork to create an interactive experience that Rolling In The Deep having been viewed over 360m let fans listen to the album and directly affect times and singles by One Direction and Jessie J also the visuals by using flyposters created in real ranked near the top of the all-time chart. For many time from their tweets. consumers, especially younger ones, YouTube is their They also created a free app for the iPhone and primary digital music discovery and playback service. Android platforms that allowed fans to stream the The sheer scale of its reach and the depth of material album it in its entirety for free, but only if they kept available are helping to make on-demand cloud-based experience on legal services and return to them rather in 2011) have used the platform to reach fans. Perhaps dancing – the app uses the accelerometer on 22M streaming a daily occurrence for many consumers than unauthorised platforms. Twitter is also flexing its the biggest players in gaming are now on the mobile smartphones to detect movement. Fans were also and serves as an important bridge to other muscles here as a marketing and promotional platform platform. Rovio’s Angry Birds franchise expanded in able to unlock additional content upon scanning the subscription services. YouTube’s UK monthly for music. DJ Tïesto became the first act to live stream 2012 with a Green Day-themed version of its wildly album sleeve, using an image recognition feature. audience Social media for sharing and selling music a full show over the service and Blur performed two successful gaming brand to tie in with their release Facebook, with its 1bn users around the world and new tracks on the site in the summer of 2012 – ahead of three consecutive albums. Twitter, with more than 500m users, are proving powerful and important partners for the music of radio and TV plays. The use of Twitter hashtags and global trending topics to reach new audiences are 1Bn Views of Psy’s Gangnam The album as App industry as new global platforms for releasing music. increasingly important marketing tools for musicians. The concept of the album as an app has continued Style on YouTube in total to develop. The most famous example of this was built The recent focus for such services has been on The popularity of social games and bespoke for Björk’s 2011-released album Biophilia. Through creating opportunities for ‘frictionless sharing’ between users to encourage music discovery. Facebook partnered with streaming services Spotify, social networks Some acts are looking to control the social network experience with their fans more directly by building 500,000+ Lady Gaga fans registered the app, fans owning mobile phones or tablets downloaded not just the audio tracks but a whole host of multimedia content. From a central menu, the user Deezer, and Rdio and launched its ‘Listen With’ their own platforms. Lady Gaga is the most well known on her LittleMonsters.com can access the individual tracks, each with stunning button, and later its ‘Share Music’ option, allowing of the acts to do so and her LittleMonsters.com had social network graphics and scrolling lyrics, as well as special features subscribers to drag and drop music into fellow over 500,000 members by August. such as games, essays, bespoke animations and even users’ playlists. an introduction narrated by Sir David Attenborough. Social media and mobile have helped to pick up While some listeners create playlists simply to round the slack following the decline in the appeal of The possibilities of what the format can offer are up all their current favourite tracks in one place, console-based music gaming, particularly Rock Band still being explored. As music consumption moves there is solid evidence that they also encourage music and Guitar Hero. Console games still attract big name increasingly to portable devices, artists and labels discovery: in one recent month on the Spotify service, acts such as Katy Perry (e.g. her bespoke version of will inevitably be considering the rich fan experience 10% of all the playlists streamed were created by The Sims) but third-party Facebook app developers they can offer around an album’s release. someone other than the user and these streams like Zynga are delivering mass audiences to artists. accounted for 20% of the overall total. Functions Both Enrique Iglesias (through CityVille) and such as these help ensure users have a rewarding Lady Gaga (through a bespoke version of FarmVille BPI digital music nation 2013 MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION 10 / 11
Artist apps driving fan engagement Play Guetta In late November 2012, the French DJ and Producer David Guetta launched Play Guetta – an interactive app available globally on Spotify which invites fans to come and “join the permanent party”. It is an innovative listening experience offering a deeper connection with David Guetta, his music and his other fans around the world. Guetta’s fans have made him a social media superstar with over 36m Facebook ‘Likes’ and close to 7m Twitter followers, culminating in his position as the most streamed artist on Spotify in 2012. D2C turns the artist-fan relationship The Play Guetta app features: upside-down • real-time global communal listening experience A As fans become increasingly used to connecting for fans. with their favourite acts online, a new breed of services has emerged to directly serve these needs. • uilt in ‘World EQ’ powered by fans of David B D2C (direct to consumer) retailers such as Bandcamp Guetta in Spotify’s 20 territories, giving users allow labels and artists to set prices for their products live info on engaged users’ locations. and sell directly, with digital material available in high • he first use of Soundrop directly integrated into T quality formats for audiophile fans. a stand-alone artist Spotify App. In a similar vein, Topspin helps content creators Plan B • sers can share their own snapshot of the World U with ecommerce, providing bespoke online solutions EQ at the time by clicking ‘Like’ or ‘Tweet’. to help manage and tailor their offer, while fan-funding Working together: ore than 100,000 fans took part in the album’s M 36M+ 100,000 • sites such as Kickstarter and Pledge Music have Traditional and Digital Media launch party which was streamed live online via • sers can subscribe to a playlist of ‘Trending’ U enabled artists to turn to their fanbase to fund new Plan B Ill Manors Launch YouTube. party tracks from the Play Guetta app. projects, with exclusives and limited edition People who ‘Like’ David Number of fans taking experiences as incentives. Guetta on Facebook Atlantic Records UK • nline, mobile and in-game advertising via PS3 O part in the live stream • eal-time chat functionality and the ability to R launch party The launch campaign for Plan B’s latest album, and Xbox provided platforms for teasers and vote for songs to be played next in the Play homepage takeovers on a host of music, games, 7M Augmented Reality: the relationship Ill Manors, was borne out of a combination of traditional Guetta app. 1 between music and visuals and digital media. Engagement with fans centred on film and lifestyle forums. • avid Guetta will now be able talk to fans within D The increased ownership of mobiles and tablets five core elements. People follow David • ans were given the opportunity to vote for their F the Spotify app and using a #PlayGuetta hashtag has opened up new avenues for communicating Guetta on Twitter Chart position of • ‘tweet to unlock’ campaign promoted via TV A favourite album track on Facebook to win tickets via his official Twitter stream. with music fans. One new technology that is Ill Manors on week and online video pre-rolls where the hashtag to Plan B’s performance at the iTunes Festival. increasingly being utilised by artists and labels of release in July 2012 1ST • ewer fans can view the David Guetta N #illmanorsalbum unlocked pre-released tracks. is that of Augmented Reality (AR). Through The combined impact of the various initiatives music catalogue aiding the discovery of his bespoke apps used in conjunction with a device’s • ‘Tag London’ campaign where fans tweeted their A resulted in 5.9m Facebook fans, 342,000 Twitter previous productions. David Guetta is the camera, fans are able to view specially created opinions on the social and political climate using the followers, 8.3m YouTube views of new album most streamed artist hashtag #ILLMANORS which were later projected content and a boost in sales. visual content at specific locations or in conjunction on Spotify in 2012 with certain products – this can take the form onto the Houses of Parliament, Olympic locations of special animations or exclusive videos. and other iconic London landmarks. BPI digital music nation 2013 MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION 12 / 13
In conversation with spread across the industry so that in a few years Cosmo Lush time access to music and the ability to licence and SVP Digital Business Development, to use music in the digital production process will EMI Music be much easier. What do you see as the next big thing for the industry? I think the next big thing that will impact the music industry is the proliferation of really smart devices on which people can and want to consume digital content. We in the music industry need to be ready and in a position to license and distribute our music across all those different types of devices because therein lies the seed of innovation and creativity around digital music consumption. In 2011, EMI launched its Open EMI initiative. Cosmo Lush, SVP Digital Where does social media fit in? Business Development at EMI Music, There’s no doubt that social media will continue to explains to BPI OpenEMI and the issue be at the heart of what we do in the digital world. of innovation for the industry. I think it’s particularly apt in the music world because music is all about fantastic artists and passionate Tell us about the Open EMI initiative. fans who want to engage with those artists and EMI launched Open EMI in 2011 with a view to the music they create. Social media is all about fostering and supporting innovation in digital music. connectivity, it’s about networks of friends and And at the heart of Open EMI is the concept of family, and in many ways that’s the perfect sandboxes. We’ve joined up with a technical partner environment to promote and sell music content. The Rolling Stones called The Echo Nest to create secure environments What effect will new technologies have? “ Augmented Reality “The album reveal created a real buzz on social on the internet where developers can play with EMI’s The Rolling Stones, GRRR! The release of The Rolling Stones’ compilation album media,” said Deborah Hyacinth, Vice President of Digital Marketing at Universal Music Group, 24% rich music repertoire and experiment with products or services that they may be developing. They can The proliferation of new devices and new technologies paves the way for a whole variety of new formats. Whether it’s the app or some other in a recent Music Week article about the campaign. Click-through rate of very quickly and easily publish those products in I think the next big Grrr! was accompanied by a bespoke AR app for use The Rolling Stones the most suitable digital environment or channel as yet undiscovered format the opportunity is to take thing that will impact on mobile devices. Fans were able to use the app at “The 50 cities stage adds another level of interaction Augmented Reality app for their creation. music and to add in a whole bunch of other content the music industry is 3,000 locations in 50 cities around the world to bring to this global campaign, giving fans that little bit the proliferation of and rich media to offer fans another way to engage artwork from the album to life at famous landmarks, extra to mark such a fantastic lifetime achievement. really smart devices Do you think it is fostering a mutual with music and to engage with artists. There’s all with the added incentive of exclusive prizes for the This pioneering use of mobile technology extends on which people can understanding between the music sorts of challenges around that from an economic best photos shared. The app used Augmented Reality The Rolling Stones’ reputation for innovation and want to consume and tech sectors? and distribution point of view, but frankly those are on artwork but also real buildings (such as Big and imagination.” challenges that we relish. Our job is to work with digital content.” I hope so. The idea of Open EMI is to build stronger Ben and Sydney Opera House) to allow fans to links – and more trusted links – between the music developers and other partners across the media unlock content. Developer Aurasma revealed that community, the developers’ community and the space to bring those kinds of concepts to life The Rolling Stones’ app had a click-through rate investment community who are putting money behind in a way that is creative and compelling to our of 24% – meaning users were engaging with it on the development of new digital services. I think it is artists’ fans. an extremely high level. This presents enormous a gradual process. It will take time and we need to be opportunities to sell tracks and merchandise patient. But I have no doubt that it will accelerate over To listen to the full interview with Cosmo, via the app. time and that what we are doing here at EMI will please visit www.bpi.co.uk BPI digital music nation 2013 MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION 14 / 15
digital music’s The digital music switchover A significant moment in the history of Digital’s share of trade income Quarterly and annualised (2008-2012) tipping point the UK music business occurred in Q1 2012, when digital income accounted for over half of all recorded music income for the first time. 60% This trend of digital dominance carried through into Q2 and Q3, although sales figures suggest that Q4 will revert to a majority CD-based business, largely due to the gifting market in the final two months of 50% the year. The CD still has an important role to play, but the continuing rise of digital is proof that consumers are embracing its immediacy, convenience and breadth of catalogue. The idea that digital is a ‘new’ or ‘niche’ format is finally coming to an end. It is the driving format and, most importantly, a growing format. 40% The singles market is now 99.6% digital (based, for now, on paid downloads) and this has proved an important testing ground for consumers, using Annualised services like iTunes, Amazon MP3 and 7digital to buy tracks. The corresponding rise in the singles 30% market has been phenomenal – from 32.3m in 2004 to more than 183m in 2012. Digital has revitalised the official charts. In the albums market, almost a third of all albums in the UK were sold digitally in 2012. This has risen to more than 40% in early 2013 as consumers spend 20% digital gift cards post-Christmas and enjoy music on the latest smartphones and tablets. Record labels’ digital income is drawn from a variety of sources – à la carte downloads (iTunes, 7digital, Amazon MP3), subscription downloads (eMusic), 10% ad-supported music and video streaming (Vevo, YouTube, Spotify, Muzu, we7), subscription streaming (Spotify, Deezer, Rdio), games and ringtones. 0% Q1 '08 Q3 '08 Q1 '09 Q3 '09 Q1 '10 Q3 '10 Q1 '11 Q3 '11 Q1 '12 Q3 '12 Source: BPI Surveys BPI digital music nation 2013 DIGITAL MUSIC’S TIPPING POINT 16 / 17
More than a quarter of Brits use legal Why use illegal when you can have legal? are no estimates made of past purchasing, just an Filesharers only account for less than a fifth music services % age groups accurate recording of spending patterns over time. of overall music spend Data from Kantar Worldpanel’s survey2 shows that The panel data demonstrated that filesharers spent more than one in four (27.7%) people in the UK claim Using legal digital services only an average of £26.64, compared with £33.43 Average spend to use legitimate digital music services to purchase 27.7% Total 100% by legal-only consumers, refuting the popular Filesharers Legal only downloads or stream content. Encouragingly, this is argument that filesharers are the heaviest almost double the number of people (one in seven) 31.4% Men spenders on music. £26.64 £33.43 who admit they use peer-to-peer (P2P) networks According to Kantar Worldpanel’s survey, legal users % of total population to fileshare. 23.9% Women outnumber filesharers by a ratio of almost two to one 14.5% Filesharers 100% 38.7% 13-19 and their relative spend is much greater. Filesharers’ One in five consumers dedicated to digital 27.7% Legal only recorded music expenditure constituted 16.3% of the Data from Kantar Worldpanel3 reveals that almost 44.2% 20-24 market total in the period under review, while legal-only one fifth (19.6%) of music consumers in the UK respondents accounted for 42.1%. Some surveys % of total music spend only buy digital. 38.7% 25-34 have suggested that filesharing encourages greater 16.3% Filesharers While digital single sales continue to increase, 34.6% 35-44 purchasing because of the ‘discovery’ element. it is digital albums that are driving the real growth However, Kantar’s survey found that a large proportion 42.1% Legal only 22.4% 45-54 (44.8%) of filesharing respondents had bought no in the download market overall. music in the past 12 months according to their Source: Kantar Worldpanel Digital Music Survey 2012 First-time buyers of digital music gave two thirds 15.7% 55-64 individual purchase records. (66.4%) of their digital music spend to album 9.2% 65+ purchases in 2012. While services like Complete The kids are alright 13-24 year-olds spend most on digital music My Album on iTunes are there to bridge the divide % age group sales Physical Music Digital Music Digging further into the digital spend of music between tentative single downloaders and album Filesharing consumers reveals to what extent age affects average downloaders, these numbers suggest that new 40% 14.5% Total 100% spend. Predictably, young people spend more on digital converts to the online music market are increasingly 35.3 music than the older generation – who remain active feeling confident enough to start downloading albums 35% 17.2% Men in the CD market, as the graph shows. But they also straight away rather than building a collection of spend most in total – a third more than any other single tracks. 11.8% Women 30% age segment. 25.3 Filesharers spend less on music 28.5% 13-19 Although the majority of streaming users access music 23.9 25% on free, ad-supported tiers, a significant proportion 21.8 than legal consumers 21.0 26.5% 20-24 (17.3%) now pay a monthly subscription according to Appearing to debunk the common belief that filesharers 20% 17.3 spend more on music than other consumers, Kantar Kantar Worldpanel. 16.8 22.4% 25-34 15.1 Worldpanel found that the average spend over a 15% 13.2 12-month period for professed filesharers was lower 15.7% 35-44 Four out of five people aware 10.3 than the spend of consumers who only use legal of streaming services 10% 10.0% 45-54 In 2004, the first UK download chart was launched services. Kantar Worldpanel’s respondents diarise their music purchases on an ongoing basis – there 5.3% 55-64 to reflect the changes in how fans were starting to buy 5% music and, as more consumers flocked to download 2 Kantar Worldpanel’s panel of 15,000 individuals were asked 2.7% 65+ stores, it was eventually integrated into the full singles 0% to answer a series of questions relating to digital music rundown. The UK’s first Official Streaming Chart – 13-24 25-34 35-44 45-54 55+ consumption in August 2012 and 12,184 panellists completed launched in May 2012 – is, for now, a standalone chart it. All answers were demographically weighted to be nationally Source: Kantar Worldpanel Digital Music Survey 2012 representative of the UK population. but is proof that streaming is of growing importance for both the record business and consumers. Source: Kantar Worldpanel (12m ended September 2012) 3 Data from Kantar Worldpanel shows the purchasing trends of 15,000 demographically representative individuals in the UK. BPI digital music nation 2013 DIGITAL MUSIC’S TIPPING POINT 18 / 19
Data from Kantar Worldpanel shows that four out of High awareness of streaming services new music as appealing whilst other factors included On a scale of 0-10, with 0 being not at all good value five individuals in the UK have heard of at least one the absence of adverts on premium subscriptions, for money and 10 being extremely good value, to what of the leading audio streaming services, with the model 68.8% Spotify 100% mobile portability and sharing playlists. extent do you think that paying to stream music worth close to £50m to labels, accounting for 15.2% represents good value for money? of their digital income. 63.8% Napster Streaming services prioritise music discovery 30% The move into downloading has helped pave the way 34.4% Last.fm The popularity as well as the immediacy of downloading is reflected in the charts each week with sales spikes 26 for consumers to migrate into streaming, especially as 25% 24 connected portable devices such as smartphones and 13.0% Deezer becoming quickly apparent after television performances tablets are helping shift consumers’ expectations about or when songs appear in adverts, helped in no small 20% 12.8% We7 part by music identification smartphone apps such all digital and entertainment content, not just music. 16 as Shazam and SoundHound which link through to 15% 11.7% Rdio digital retailers. Shazam, for example, has revealed Edinburgh most popular UK city for Spotify 11 11 80.6% Any of the above that around 9% of tagged tracks result in a purchase. 10% Spotify, the streaming service, now has 20m active Smartphone technology as well as 3G and 4G mobile users globally, of which 5m are paying subscribers. 7 Source: Kantar Worldpanel Digital Music Survey 2012 networks have helped enormously in harnessing such 5% The company also revealed at the start of December impulse purchases. 2012 that it has paid out over $500m to rightsholders 2 0 1 0% 10 20 30 since it launched. Social discovery is now a significant part of digital music 4 5 6 7 8 9 10 The most popular UK cities for Spotify and in August 2012 Facebook revealed that 62.2m Spotify’s own research reveals that per capita usage tracks have been shared 22bn times through its Open Source: YouGov SixthSense Music 2012 report of the service in the UK is highest in Edinburgh and Graph since September 2011. Meanwhile, the number Cardiff, with London being fourth. This shows that of playlists created on Spotify to date has now the reach and the appeal of streaming now extends surpassed 1bn and services such as ShareMyPlaylists Motivations for subscribing to music services across the country and is growing fast nationwide. have tapped into this trend. % subscribers Music fans rate streaming services very highly Rdio and the new Myspace also place social discovery 40% To access an unlimited music collection 100% 1 Edinburgh at the heart of their offerings and standalone services EMI Music’s Consumer Insight Department interviewed 36% To listen to music I already know such as This Is My Jam are driven entirely by social over 1,100 users of music subscription services in discovery and recommendation. Whilst some consumers September 2012. 35% To discover new music before I buy it may feel overwhelmed by choice, the role of playlists Customer satisfaction with the current range of and recommenders (DJs, journalists, pop stars) on 33% To use it on my phone services was extremely high, with 93% of users stating services are helping to make this easier through their satisfaction – or perhaps of more interest, only 7 Sheffield expert curation. 30% No advertisements 9 Nottingham 6% of users saying they were displeased with the 6 Leicester 24% Not to be limited by free music service restrictions service they were currently signed up to. 8 Coventry The findings were bolstered by the YouGov SixthSense 22% As a complete music experience 2 Cardiff 4 London Music 2012 report which showed that more than a 5 Bristol 22% To use it when not connected to the internet quarter of users would give streaming services full Southampton 3 10 Brighton marks for value for money with 73% giving them 20% To listen to music before it’s out for sale seven out of 10 or better. 17% To get access to friends’ playlists or share music For EMI respondents, the biggest draw was having Source: Spotify access to an unlimited music catalogue (40%) while 17% To subscribe to playlists just over a third (36%) cited being able to listen to music they already know as an important attraction. Source: EMI Insight Similarly, more than a third (35%) cited discovering BPI digital music nation 2013 DIGITAL MUSIC’S TIPPING POINT 20 / 21
“ Music ownership favoured over access Top 20 most streamed tracks In conversation with Do you think the future of the album could Music fans are experiencing choice and flexibility like January-October 2012 Paul Smernicki be a downloaded app? never before. With access to more than 20m tracks Director of Digital, I think the way people talk about apps is a bit of a Streams Sales Artist Title red herring. I think what we need to deliver is a great My focus would always online, subscription services are particularly appealing Universal Music UK be on the experience to music obsessives, who can hear all the new releases 1 1 Gotye Somebody That I Used To Know experience – either in the form of an app/desktop as opposed to the and delve deep into catalogue. But according to the 2 2 Carly Rae Jepsen Call Me Maybe application or a digital experience to take into a live digital product.” YouGov SixthSense Music 2012 report, the majority event. My focus would always be on the experience 3 3 Fun. We Are Young – feat. Janelle Monáe of fans (54%) still want to own downloaded music as opposed to the digital product. with only 9% saying they prefer access over ownership. 4 4 David Guetta Titanium – feat. Sia 5 5 Nicki Minaj Starships – Explicit Version Is the car the final frontier for digital This is partly a question of familiarity with the model, music? and reflects the high value that UK music fans say 6 7 Flo Rida Wild Ones – feat. Sia The car and the living room – neither have been they place on music ownership. But it also reflects 7 48 Rihanna We Found Love nailed. The Holy Grail is how to give someone a one advantage of the à la carte model that is often completely seamless musical experience that just 8 13 Alex Clare Too Close understated – the ability for consumers to pay for follows them around. Layering an experience on music only when they really want it. Research shows 9 6 Jessie J Domino How have you seen the industry change top of music is where we in the industry can be that most UK consumers are hesitant about taking 10 15 Train Drive By in the last 10 years? innovative and there is great music intelligence out on new contracts. The combination of these factors 11 32 Jay-Z Ni**as In Paris When I think about my job and the bits of the business there to help us to do so. I want to be able to tell means that the à la carte model is likely to appeal to I deal with every day, they didn’t even exist 10 years my car where I’m going and for it to devise a playlist 12 54 Drake Take Care a large number of UK music fans for a considerable ago. Things that seemed like a bolt-on not so long ago to last the journey based on my musical tastes. time. It may be that the hybrid approach, where 13 57 Ed Sheeran Drunk – such as mobile site optimisation or even iTunes and That’s the future that will take people to a whole streaming services also offer downloads, could be 14 10 Flo Rida Whistle certainly concepts like subscription models – are now new digital immersion level. an important handrail for music fans who are open not only part of our everyday language and business 15 23 David Guetta Turn Me On – feat. Nicki Minaj to experimenting with the access model. but amongst the most important areas of what we do. What’s the next big thing for 16 35 Coldplay Paradise It’s phenomenal. Overall, the next transition phase for the music industry the music industry? 17 101 Ed Sheeran The A Team will not be the move from physical to digital but rather I’d love to see a music service without a front end Do you think that music will become a wholly where you subscribe to the architecture that delivers the move from digital ownership (MP3s and other 18 68 Ed Sheeran Lego House digital business? digital files) to digital access (streaming from the cloud). 19 11 Rudimental Feel The Love – feat. John Newman the music. As an industry it is very hard for us to I think there will always be demand for a tangible look very far into the future but I think we should – Services like YouTube and SoundCloud (which now 20 66 Skrillex Bangarang – feat. Sirah product but that overall the demand for it will continue both for the near-future trends and the trends that has 180m users globally) are helping to push the idea to diminish. There are bits of our business that might Source: Spotify may be 10 years from now. of access-based music into the mainstream. It will be surprise people: we have a vinyl boxset store that does a slow and steady build, but these companies are The five most streamed tracks are exactly the really well and we have a direct-to-consumer store Listen to Paul’s thoughts on the future helping to normalise access to music this way and same as the top five sales hits in 2012 in the UK where we reissue great albums from our catalogue on of digital music at www.bpi.co.uk make that transition for consumers easier. Official Singles Chart. But beyond this there are vinyl. But, overall, I think the pendulum will continue interesting differences to note in how streaming to swing towards digital. compares to downloading. Artists with a younger fan base dominate the 20 most streamed tracks. Ed Sheeran’s audience, for example, is highly digitally engaged, following extensive digital marketing and social networking initiatives such as his crowd-sourced video for Ed Sheeran Give Me Love and his 4m followers on Twitter. This is reflected in the fact that he has three of the top 20 streams of the first ten months of 2012. BPI digital music nation 2013 DIGITAL MUSIC’S TIPPING POINT 22 / 23
THE CHALLENGE Piracy in the UK remains at a high level with 7m individuals visiting sites that BitTorrent and legal downloads compared January-June 2012 OF ILLEGAL FREE offer content illegally each month. Despite innovation in the online market for music, new services still have to compete with websites and services Legal that attract potential customers away downloads because they offer music illegally for free. 41% Data from UKOM/Nielsen – who measure actual website usage monthly – shows that around 7m individuals in the UK use at least one service where content is hosted illegally each month, from peer-to-peer (P2P) networks and cyberlockers to stream-ripping applications and unlicensed streaming services. Illegal locker access on the decline In recent months, some of the most popular services used for infringement have seen a significant drop BitTorrent in users, largely as a result of the shutdown of the downloads locker site Megaupload at the beginning of 2012. Before its closure, Megaupload had more users than any other locker site in the UK, averaging 1.3m each 59% month in 20114 and reportedly up to a staggering 50m per day around the world. In the wake of its closure, Filesonic discontinued its rewards programme and disabled the sharing functionality. As a result, user numbers drastically reduced from almost half a million in January to 216,000 the following month, dropping further to fewer than 100,000 in May5. The Swiss-based locker site RapidShare followed suit by slowing speed of access for its free tier users in a bid to hamper unlawful usage. Hulkshare, sold to Israeli investors in 2011, undertook a complete revamp of the site to become a legitimate music proposition for digital music fans. UKOM/Nielsen’s data shows that in the UK at least 1.5m people are still using locker services each month, down from 2.5m recorded in the latter part of 2011. 4,5 UKOM/Nielsen Source: Musicmetric / Official Charts Company BPI digital music nation 2013 THE CHALLENGE OF ILLEGAL FREE 24 / 25
P2P growth contained in 2012 Surveys show overwhelming support Government should take a stronger 345M BPI has sent more than 7m takedown BitTorrent and P2P remain the most popular methods for site blocking stance on piracy requests to Google of obtaining copyrighted material illegally, with around The prevention of access to sites hosting illegal content Research strongly suggests that there is an expectation Tracks illegally has some precedent in the UK in the actions against upon government to take a firmer stance on action 4m people in the UK using them each month6. In February, torrent indexer BTJunkie voluntarily Newzbin and The Pirate Bay. Support for this course downloaded via Bit Torrent in first half of 2012 against piracy. 1. Degban (Copyright protection 12,931,064 closed its services in response to the actions being of action is solid. company) • 60% of respondents to the AudienceNet survey7 239M taken against The Pirate Bay and Megaupload. Also in February, the High Court ordered UK ISPs to block • ver half (56%) of respondents to a 2012 O AudienceNet survey7 agreed that sites which believe government should prevent companies from advertising on sites that distribute music illegally, with 2. RIAA (Recording Industry 8,652,049 access to The Pirate Bay and from April 2012 the distribute music illegally without paying artists Tracks legally downloaded the same percentage agreeing that it should do more Association of America) blocks were implemented. According to UKOM/Nielsen should be blocked or closed down. via iTunes, Amazon and to support jobs in the creative sector by taking action data, usage of the site has plummeted by over 70% as 2% of filesharers agreed that the blocking of a 4 other licensed services to stop unauthorised downloading. 3. BPI (British Recorded 7,558,610 a result. In December, Pirate Party UK was forced to • in first half of 2012 Music Industry) Ltd remove its proxy giving access to The Pirate Bay. site would stop them acquiring infringing content8. • similar proportion (61%) feel government should do A more to educate the public about the law surrounding Source: Google Transparency Report 42% However other applications and services such as Kickass Torrents and Torrentz have picked up users. Show us the legal sites, say consumers illegal downloading. Search engines play an important role in directing BPI, in partnership with other creative sectors, is Filesharers agreed 345m tracks illegally downloaded via consumers towards online music sites. At present, that the blocking of a building a partnership with the internet advertising BitTorrent in first half of 2012 consumers encounter a confusing world of search site would stop them industry’s Digital Trading Standards Group, assisted Monitoring service MusicMetric’s first Digital Music results where blatantly unlicensed sites are often listed acquiring infringing by the National Fraud Intelligence Bureau (NFIB), to Index report estimated that over 43m downloads were much higher than trusted brands like Amazon and content encourage advertisers to stop promoting their goods made via BitTorrent alone in just the first six months iTunes. Consumers do not welcome this situation. and services on infringing sites. of 2012. Of these 78% were albums and 22% single tracks, equating to 345m tracks downloaded illegally via BitTorrent. Over the same period 91.7m tracks and • wo thirds (66%) of respondents in an AudienceNet T survey7 of 2,000 adults believe search engines should 70% BPI and IFPI already work with the City of London Police and the NFIB to ensure that payment providers, direct people to legitimate sites ahead of illegal ones. Reduction in UK Pirate including the major credit card companies, do not 14.7m albums were downloaded from iTunes, Amazon Bay users following and other licensed services, which equate to 239m • ore than two thirds (68%) of respondents to a M blocking order obtained support illegal sites by processing payments for them. tracks (using a ratio of one album to 10 tracks). Harris 2011 study agreed that search engines should by BPI make it harder to find websites that offer music Music Matters: helping promote legal services In other words, legally purchased tracks still represented illegally, with 63% of pirates concurring. With more than 70 legal digital music services for fans less than half the number of tracks downloaded in total in the UK to choose from, and a host of illegal sites from legal sites and BitTorrent – and this does not During 2012 BPI worked hard to remove illegal listings that can confuse them, it isn’t always easy for include all the tracks sourced illegally from locker sites, from Google’s search results, and to persuade Google consumers to keep up to date with the services that other P2P protocols, stream rippers, illegal paysites, to demote sites that are the subject of Digital Millenium are best for them. To help music buyers, BPI – in blogs and forums. Copyright Act (DMCA) notices. In August, Google partnership with artists, retailers, songwriters, record announced that it would do this. So far the impact labels and managers – launched Music Matters to Creating breathing space for legal services appears to be very limited, but BPI is working with highlight where music can be bought safely and legally Illegal downloading is holding back the digital growth Google to monitor the results and arguing that it must online. The Music Matters badge features on a host not just of music, but also of other creative sectors like do more to live up to the commitment it made. BPI’s of digital services to tell fans that the sites are authentic publishing, sport, TV and film. None of them can ignore Anti-Piracy Unit issues millions of notices to Google and, importantly, that musicians are paid when their the challenges of piracy. So creators and rights owners and infringing sites to request the takedown of music is purchased or streamed. Check out have developed a range of initiatives designed to members’ repertoire which is being hosted illegally. www.whymusicmatters.org reduce filesharing. With usage of unlawful services In 2012, BPI sent over seven million delisting notices so widespread, it might be assumed that action against and will work towards establishing partnerships with 6 UKOM/Nielsen such activity would not be widely supported by the other leading search engines in 2013. 7 AudienceNet Survey on Music Downloading, May 2012 8 EMR/Wiggin 2012 Digital Entertainment Survey general public. Research, however, contradicts this view. BPI digital music nation 2013 THE CHALLENGE OF ILLEGAL FREE 26 / 27
“ “ In Conversation with How important is 4G to digital developments? In Conversation with accessible across all platforms (PC, mobile, in the Ole Obermann I think that 4G is an opportunity. What we’re seeing Leanne Sharman living room via the TV and in the car). We will also SVP International Digital Business, now is that if you build a service that is compelling, VP and MD Digital Strategy and Business see more packages being added to broaden their Over the last 12 appeal and suit the listening habits of a wider Our focus is the Sony Music Entertainment it can win out against piracy. Once 4G really lines months our top 30 Development, EMEA – Warner Music Int. development of up with the right devices and we have an ecosystem audience. In the UK we can look to the launch active UK artists have long-term careers that works perfectly, I think it’s a massive provoked 1.8 billion of new interactive digital radio services. These will for our artists, which opportunity. With the music experience becoming online interactions offer a new means to access music and provide means building and more visual over time you need faster speeds for over online and social a fantastic platform to introduce fans to new tracks sustaining a real delivery of images, videos and other content. 4G media – that’s more and artists. Furthermore, as global digital players connection with allows that aspect of a digital music service to grow than the population launch in new countries we’ll see new territories their fans. and flourish. of China and USA becoming increasingly important music markets. In order to fully combined. harness the power Do you think the app could become There is no other How can the music industry take advantage of the numerous the album format of the future? business that can claim of faster connectivity (superfast broadband music and social I think that’s a good way to think about it but it this level of consumer and 4G)? media platforms at Where do you think the next growth wave engagement – music How have you seen the music industry change I’m really excited about 4G. It means faster access our disposal, we have comes down to defining what an app is over time. over the last 10 years? for digital music services will come from? is first and foremost and hopefully that means digital music will become integrated digital I think the experience of enjoying an album in the a passion and an expertise throughout Right now there are a few big themes that we see We have experienced a phenomenally exciting evolution more of a mass market offering. digital world should be really interactive with access incredibly powerful the company, from in the music industry. in the way people discover, access and listen to music. to lyrics, cover art, video content, and interviews medium to make long marketing and There have been a number of game changers in the What do you think the next big thing There is a huge opportunity for digital interactive radio with the artist – and if the app becomes the lasting audience promotion to business last ten years. Technology has continued to develop is for digital music? services. If you think historically about how people package to bring that all to the consumer then connections.” development and apace and today there are many devices that people I think that what is important today is what will be commercial. have consumed music in the past, about half of the the app becomes the album. Nick Gatfield, Sony Music UK Chief Executive. can use to listen to a large volume of music on the important tomorrow – and that is the access model population were proactive buyers of music. But the go. Simultaneously we have seen the successful Developing those How critical is social media to promoting and the evolution of bundled subscription services skills across the other half of the population listened to music in a development of new commercial music models, and selling music? within mobile operator plans. I’m also excited about entire organization passive way, mainly through radio. So I think that with streaming and download stores that offer people Social media is a very integral part of how we the roll-out of services to new territories as well as means we can create more personalised and interactive radio-type instant access to millions of songs – whether they just market and promote music now and in the future new models entering emerging markets. Plus I think more opportunities services represent a huge untapped area for us. want to listen to them once, create a streaming playlist – and creating awareness around an established offering music to a mass market audience at an than ever before, The mass distribution of music streaming services or purchase them to own. As a result, I think it is fair entry-level – be that via interactive radio or other delivering compelling artist who has new material out in the market or a is also just getting started. In my opinion, every to say that digital is at the forefront of everything we models in discussion today – will be where the consumer experiences developing artist who is phenomenal and we want and helping to fulfil connected device, broadband provider, and mobile do today in the music industry. We now have digital music industry is going. everyone to know about that artist, social media the potential of each carrier should give a user the option to have a experts who are involved in all aspects of our business will be a big part of the mix. individual act.” comprehensive music experience. We’ve seen this because it is vital that we continue to work with What lessons have we learnt and start to happen but it is really going to grow in the innovative new technology and services to ensure what advice can we give to the other Christian Tattersfield, To listen to the full interview with Ole, CEO Warner Music UK & next couple of years. consumers can enjoy a high quality music experience creative industries to help them on please visit www.bpi.co.uk their digital journey? Chairman Warner Bros. and connect with their favourite artists. International expansion is also a very big topic right The music industry has evolved at a significant pace now. We’ve never really had the retail infrastructure Where will the growth in digital services and it has been unbelievably important to keep on to sell our physical product in markets around the come from? top of technology, stay close to it and develop music world but with digital services you literally have a There will be the evolution of existing services. Access services in line with the capability of the latest billion people on some continents with a connected is, and will continue to be, an important consumption offerings. You need to understand your consumer device. And all of a sudden we can give them a model and we expect to see it grow in a few ways. and what they want, then try to put together music experience they would never have been able Current services will see an increased customer base services to meet that demand. to get before. when mobile operators and ISPs bundle them in with To listen to the full interview with Leanne, their offerings. They will also be developed to be please visit www.bpi.co.uk BPI digital music nation 2013 THE CHALLENGE OF ILLEGAL FREE 28 / 29
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