Music Catalogue and Streaming

When it comes to the music industry’s transition towards streaming, how the model has worked in the past requires a reconsideration of perspective. This is because throughout the business’s entire history, catalogue and copyright accounted for the majority of revenue, as breaking new artists was, and remains, an expensive endeavour very much in the VC model of investment, with a few large payoffs accounting for the overall cost. But where did that money to invest come from? It came from the established catalogues that could be relied on for continuous revenue, from classic albums to endless repacking of compilations. Now, as streaming strips out the prospect of these repacking opportunities, given that a subscriber simply has access to everything, this has very real consequences for businesses and their bottom line.

In the short term, UMG’s total catalogue revenue rose from $1.6 bn USD dollars in 2015 to $2.4bn in 2017, around a 53% spike. Meanwhile, the acquisitions of catalogue experienced a boom in recent years. But, these acquisitions have been made on the assumption that the future will resemble the past (a dangerous, dangerous thought), that younger audiences will naturally find their way back to older artists as previous ones have.

In the era of music scarcity, many were introduced to older music because of their parent’s record collections. Classic acts also enjoyed career renaissances due to general media scarcity, such as when The Monkees show re-ran in the eighties and facilitated a successful reunion tour. Now consider that kids are no longer growing up in that context, as not only do their parents not have any records in the house, they have access to everything, there is no limit of music in the house. They can go off and discover whatever they want. They have very little motivation to go back to catalogue. They are also growing up in the world where their attention is cannibalised by everything from social media to SVOD services and YouTube. Prior to the eighties, music used to be the only on-demand form of entertainment in the home, when TV was tied to a linear broadcast and home video and gaming systems were not yet mainstream. That’s not to say it does not hold the same emotional value, but it faces far great competition for its audience’s attention. Now that streaming directly monetises attention and consumption rather than sales, this is a crucial distinction for revenue.

The economics of the streaming value chain are also not kind to streaming. In 2003, Bruce Springsteen could release a new greatest hits album (despite the fact that one already existed from 1995), and it sold around 1.6m copies globally, generating his label Sony approximately $10.4 million dollars in revenue. If we look at Spotify, his five most streamed tracks in the history of the platform have been streamed a total of 456.5 million times, which equates to roughly 2.3 million dollars in revenue. Given that these are the very tracks that would have driven the success of compilations in the first place, you begin to see the bigger picture.

Catalogue is not dead, but rather its place in the music business needs a reappraisal. Reliable cash-cow catalogue will increasingly be phased out and while streaming has promised a far larger audience base, the trends are not kind to the assumption that those audiences will find their way to older artists or even, consume older music the way previous generations have.