State Champ Radio analysis
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The long-term potential of music streaming has had a growing influence on the price investors will pay for an artist or songwriter’s catalog. That’s according to a new paper titled How Streaming Has Impacted the Value of Music by Larry Miller, clinical professor and director of the music business program at New York University’s Steinhardt School of Culture, Education and Human Development.
Miller, with the help of graduate students Felipe Garrido and Matt Palermo, found that streaming revenues were positively correlated with the multiples paid for music catalogs. Here, the term multiple refers to the acquisition price as a multiple of net publisher share (NPS), a publishing catalog’s annual royalties; or net label share (NLS), a recording catalog’s annual royalties. From 2011 to 2021, the average catalog multiple increased from 8.6 to 20.7, according to data provided by Shot Tower Capital. In that time span, streaming went from virtually nothing to 65% of global recorded music revenue, according to IFPI. Miller found that 61.5% of the value of the average NPS multiple in 2021 came from streaming revenues paid to music publishers. By contrast, just 5% of the NPS multiple came from streaming in 2011.
Importantly, Miller found that investors’ expectations for future streaming growth were also positively correlated with NPS multiples. For those calculations, Miller and his team used MIDiA Research’s forecasts for global music publishing revenue from 2018 to 2021 and transaction data from Shot Tower Capital. When MIDiA’s forecast for four-year cumulative average growth rate was higher — due to heightened assumptions about the streaming market’s growth potential — the average NPS multiple was higher, too.
The correlation between expectations and valuations cuts to the heart of the surge in catalog investments over the last decade. Although acquisitions are usually discussed in terms of a simple multiple — upwards of 29.5 times NPS for Bob Dylan and 30 times NPS for Bruce Springsteen, but lower for the average artist — the purchase price reflects the buyers’ belief about the catalog’s ability to generate royalties in the coming years. In mathematical terms, a catalog’s valuation is the present value of expected future cash flows. Experts such as Citron Cooperman and FTI Consulting value catalogs using financial models that forecast future royalties based on songs’ historical performance and industry-wide growth trends.
Interest rates also impacted what investors were willing to pay for catalogs. Miller found that increases in U.S. Treasury Bond interest rates were negatively correlated with NPS multiples. In other words, when debt became more expensive, catalogs were worth less to buyers. Again, the value of a catalog is the sum of its expected future royalties discounted — divided by a discount rate — to a present value. If the cost of debt increases by two percentage points, the discount rate will increase by an equal amount. And the higher the discount rate, the lower the present value.
Miller is careful to point out that his analysis is “a look in the rear-view mirror” that shouldn’t be used to forecast future values. “But it is certainly useful to understand where we’ve come from,” he says. The paper was commissioned by the Digital Music Association (DiMA), a trade group that represents member companies Amazon, Apple Music, Google/YouTube, Spotify and Pandora. Miller says DiMA neither took part in the analysis nor had a role in writing the paper.
Not only has streaming created revenue growth for labels and publishers, the nature of streaming royalties — steady royalties from recurring subscription fees — has also made music more attractive to investors. To comfortably earn a return for investors, you need “predictability to the cash flow,” Denise Coletta, senior vp at City National Bank, told Miller. Compared to purchases of CDs and downloads, streaming delivers consistent royalties — even during a pandemic when some other segments of the music industry faltered. “Streaming has certainly led to much better transparency over the past 10 years, which has helped support the rationale associated with these multiples,” she added.
Music streaming services have had an undeniable impact on the music business over the last decade. As streaming boomed, record labels and publishers escaped the doldrums of the download era and now routinely post double-digit revenue growth. That momentum reignited investors’ interest in music as an asset class. In recent years, major financial players such as KKR, BlackRock and Blackstone have poured money into funds that purchase music catalogs as long-term investments — mostly because of streaming.
Streaming has also changed music’s life cycle in a way that’s attractive to investors. In the past, an album would make money quickly and fade quickly as fewer people made trips to the cash register. Now, the loss of streaming activity — called the decay rate — is much milder because streams represent repeated listening. That has allowed songs and albums to remain popular longer and changed the way labels market and promote new releases by putting less of a focus on the first few weeks of release.
Miller cites a 2017 article by Will Page, then Spotify’s director of economics, that argued the definition of catalog — a song or album 18 months or older — had become “antiquated” in the streaming era. Purchases tend to happen early in a song or album’s life cycle. On streaming platforms, however, songs can earn royalties more consistently and for longer periods. Page’s analysis showed that Imagine Dragons’ album Night Visions had 177% more streams in its first 18 months as a catalog title than during its 18 months as a current release. The album’s sales, on the other hand, fell 33% in the later 18-month period.
For this paper, Miller recreated Page’s work by comparing the performance of 500 “high-impacting albums” released in 2018 over two, 18-month periods using U.S. streaming data from Luminate. About 5% of those albums performed better in their second 18-month period than their first 18 months of release and 97 of the 500 titles declined less than 25% in the second 18-month period.
“The story here is we had been used to records peaking in the initial year of release,” says Miller. “It’s not just that 5.2% did better in the second 18 months. But the number of records that are declining, they are declining less than we had seen in previous years.”
Taylor Swift, in case you haven’t heard, is back. Her 10th studio album, Midnights, was released on Oct. 21 and moved 1.578 million album equivalents in its first week of release in the U.S. according to Luminate, the most since Adele’s 25 seven years ago. The album’s standard edition blanketed the Billboard Hot 100 in unprecedented fashion, occupying the chart’s entire top 10 positions. And now, she has officially announced the Eras Tour, playing stadiums in the U.S. throughout 2023.
Swift is no stranger to the stadium stage. Her last tour, 2018’s Reputation Stadium Tour, played 53 shows, earning $345.7 million and sold 2.9 million tickets, according to figures reported to Billboard Boxscore.
That was enough to make it the highest-grossing and most-attended tour of Swift’s career. She had leveled up from 2015’s The 1989 World Tour, which itself had bested The Red Tour (2013-14). From theaters to arenas to stadiums, and from smaller Midwest markets to global reach, each of Swift’s official five treks have out-grossed and out-sold the one before.
The Reputation Stadium Tour reached career-high status by staying true to its name, sticking to stadiums in all four continents that it played. Swift averaged more than 50,000 paid tickets in Asia, Australia, Europe and North America, doubling her previous high in Asia and quadrupling the nightly attendance from her previous run in Europe.
To do so, the stadium-branded tour played it smart. She played 53 shows worldwide, consolidated from the 80-plus dates on The 1989 World Tour and The Red Tour, forcing high(er) demand on an exclusive routing. In Europe, she stuck to three markets in the U.K., and in Asia only played two shows in Tokyo.
Still, Swift played 38 shows in the U.S., breaking her own record for the highest-grossing stateside tour of all time (the record has since been broken by Elton John). With an even more sparse calendar in 2023 so far, Swift will challenge herself to, once again, outdo herself.
The Eras Tour announced 27 stadium shows in the U.S. (Swift assured fans that international shows would be announced at a later date), beginning March 18 in Glendale, Arizona, and wrapping with an on Aug. 4-5 double-header in Inglewood, California. If Swift were to replicate Reputation’s $7 million nightly domestic average, the tour would earn $189.1 million and sell 1.47 million tickets.
But those figures are based on Reputation’s $128.67 average ticket price. In the time since that tour closed, platinum ticketing, dynamic pricing and inflation have changed the potential for sky-high ticket prices, especially for a stadium A-lister like Swift.
And while the initial routing for Eras is light, the time between its March kickoff and August finale is wide open. Swift is only scheduled to play one or two shows a week, leaving ample room for additional markets and, just as likely, additional shows in the cities she’s already announced. Depending on demand in the two and a half weeks between registration for Ticketmaster’s Verified Fan program and the tour’s general on-sale, Swift’s schedule could bulk up.
And why wouldn’t it? In the time since the Reputation Stadium Tour wrapped in 2018, she has topped the Billboard 200 with six albums and crowned the Hot 100 four times. She was nominated for the Grammy for album of the year three years in a row, winning in 2021 for Folklore. Between her latest record-breaking success with Midnights and the engagement surrounding the Taylor’s Version re-recordings of her older albums, Swift is setting the stage for the cumulative effect of her many eras on their titular tour.
Welcome to The Contenders, a midweek column that looks at artists aiming for the top of the Billboard charts, and the strategies behind their efforts. This week, for the upcoming chart dated Nov. 5: Taylor Swift’s Midnights laps the rest of 2022’s full-length releases in its first couple of days, while the Arctic Monkeys aim for their first top five entry on the chart and YoungBoy Never Broke Again plans his sixth (!!) top 20 album of 2022.
Taylor Swift, Midnights (Republic)
Soon after its Oct. 21 release, Taylor Swift’s Midnights was no longer competing with the rest of the albums released in the past week, or even in the past year — Billboard reported it as the first album of the 2020s to cruise past the 1 million-equivalent album units mark after just three full days. At this point, Swift’s main rival is her own history: The 1.3 million units it had moved as of Monday (Oct. 24) just passed her reputation and its 1.238 million first-week units moved back in Dec. 2017 for the biggest debut of the past half-decade. (After that, she’s getting into Adele territory.)
Swift pulled off this blockbuster bow by finding a happy medium in between the surprise-release strategy of her 2020 Folklore and Evermore sets and her more traditional rollouts of the 2010s. Though the album was announced months in advance (at August’s MTV Video Music Awards), no singles came out before Midnights did; instead, Swift gradually unveiled song titles and themes of the set, building up anticipation for the set while still keeping its actual sound under wraps. Then, when the 13 tracks finally debuted at once at (of course) midnight on Oct. 21, Swift also teased an additional surprise for the true insomniacs among the Swifties — which ended up being the album’s 3am Edition, a deluxe version with seven bonus cuts.
Swift also boosted her first-week numbers the old-fashioned way: by releasing tons of physical products. Midnights has already set the single-week record for vinyl copies sold in the modern era (since Luminate began tracking music sales in 1991) with over 500,000 records — more than most artists can now manufacture, let alone sell. Her sales are also boosted by a standard digital album, an iTunes-exclusive version with a bonus track, four standard CD and vinyl editions (each with a different cover, and different-colored records; the CDs are available in explicit and censored versions), a cassette tape, and even a Target-exclusive “Lavender” edition of the album on CD and colored-vinyl LP, with three bonus tracks on the CD. For good measure, she sold autographed versions of the four explicit CDs and the four vinyl LPs on her web store.
Arctic Monkeys, The Car (Domino)
In a universe without Swift, this week’s Billboard 200 talk might be about whether or not the Arctic Monkeys would finally score their first No. 1. The U.K. indie quartet, superstars in their home country for the better part of two decades, have claimed six straight No. 1s on the U.K. Official Charts without getting higher than No. 6 on the Billboard 200, with 2013’s A.M.. But the group has only grown in stateside popularity since that album’s release, with several tracks from both that set and their older catalog becoming streaming perennials after finding popularity on TikTok.
This week, the band releases its seventh album, The Car, preceded by the dreamy singles “There’d Better Be a Mirrorball” and “Body Paint.” Neither song has found the same streaming success as lusty old hits — “505,” from 2007’s Favourite Worst Nightmare, remains their lone entry on this week’s Rock Streaming Songs chart. But the album has received rave reviews, and the band is preparing for its biggest tour so far, including arena headlining dates in Chicago and Boston, and two nights at New York’s Forest Hills stadium.
YoungBoy Never Broke Again, Ma’ I Got a Family (Atlantic): Another week, another Billboard 200 contender from New Orleans rapper YoungBoy Never Broke Again. After hitting the chart’s top 20 with each of his first five full-length releases this year (including a collaborative set with DaBaby) – most recently with mixtape 3800 Degrees, which debuted at No. 12 just earlier this month – he’s now looking to go six for six with Ma’ I Got a Family. (Given the rapper’s recent decamping from Atlantic to Motown, some insiders have speculated that his particularly prolific release schedule of late has been at least partly motivated by contract fulfillment.)
If the market isn’t too crowded for another YoungBoy album, this one might get a warmer reception on streaming than his previous one. While 3800 Degrees ran just 13 tracks and featured no big-name guest stars, Family boasts 19 tracks and includes marquee features from Nicki Minaj and Yeat. It’s also hosted by DJ Drama in the style of his classic Gangsta Grillz mixtapes – a throwback framework for the 23-year-old MC that also helped propel Tyler, the Creator’s Call Me If You Get Lost set to No. 1 in 2021.
IN THE MIX
Jeezy & DJ Drama, SNOFALL (YJ/Def Jam): Speaking of DJ Drama – he’s had a busy week, also co-headlining the Snofall set with southern rap great and frequent collaborator Jeezy. The 17-track set features appearances by next-generation streaming stars Lil Durk, 42 Dugg and EST Gee.
Carly Rae Jepsen, The Loneliest Time (School Boy/Interscope): It was 10 years ago that Carly Rae Jepsen’s “Call Me Maybe” first swept the U.S., topping the Billboard Hot 100 and introducing a new karaoke standard to the masses. The Canadian singer-songwriter has found more modest crossover success in the years since, but remains a cult favorite among pop fans – a status re-confirmed with her well-received sixth album, The Loneliest Time, and advance singles “Western Wind” and “Beach House.”
Le Sserafim, Antifragile (Source) After making their EP debut in May with Fearless, Korean quintet Le Sserafim returns this October with sophomore EP Antifragile, which arrives with eight different varieties of CD packages box set (including randomized paper-good inserts like photocards and posters). The set’s title track has already made an international impact, debuting at No. 79 on Billlboard’s Global 200 listing this week.
Over the past two weeks, Ye — the artist and and entrepreneur formally known as Kanye West — has worn a “White Lives Matter” T-shirt, spread antisemitic conspiracy theories on a popular Revolt podcast and falsely blamed George Floyd’s death on fentanyl. That could cost him some fashion and branding deals – Adidas has said its partnership with the rapper is “under review.” So far, though, in the United States his music remains just as popular as it was on audio and video streaming services, although on terrestrial radio his daily spins and average daily audience were down about 21% since Meta and Twitter restricted his social accounts, according to Luminate.
West’s streaming numbers haven’t changed much over the last few weeks. For the seven days after Oct. 3, when West wore a “White Lives Matter” shirt at the Paris Fashion Week show for his Yeezy line, his catalog had an average daily streaming tally of 13.1 million in the U.S., according to Luminate, compared to 13 million in the seven days before that. A change like that — less than 1% — would seem to reflect the normal fluctuations of the streaming business.
West’s daily streaming numbers also stayed steady before and after the antisemitic tweets starting on Oct. 7, which resulted in restrictions being placed on his Instagram and Twitter accounts. In the week following the restrictions placed on West’s social accounts, his average daily on-demand audio and video streams in the U.S. was 13.1 million, just 3.5% lower than the previous week — a negligible difference that’s also best explained by normal fluctuations in streaming activity.
West’s radio airplay is a different story, however. There was a noticeable decline in the artist’s radio spins and audience size following Twitter and Meta’s decisions on Oct. 9 to restrict access to his social media accounts, leaving West’s controversial posts but preventing him from publishing additional posts or comments. West’s daily spins declined 21.1%, from 325 in the eight days preceding his social account restrictions to 258 in the eight days following them; and his average daily radio audience fell 21.4%. Representatives for iHeartMedia and Cumulus Media, two of the country’s largest radio companies, did not comment.
Last week’s radio audience was West’s lowest in more than two years — lower than levels seen before the radio promotion push for his 2021 album Donda, which sent the songs “Hurricane” (No. 6) and “Off the Grid” (No. 11) onto the Billboard Hot 100 chart — and lower than anything since a brief spike in airplay in June around the release of the third single from Donda 2, “True Love.”
Despite West getting skewered on late-night television and criticized by everybody from actress Jamie Lee Curtis to singer Ariana Grande, there is some evidence that West’s latest outbursts have spurred greater engagement online: his Twitter following grew by 182,000 on Oct. 8, to 31.28 million, according to Chartmetric, an online analytics platform that measures artists’ social and streaming activities. At the same time, West’s Chartmetric rank — an overall measure of fan engagement online — improved four spots to No. 30 in the past month (meaning only 29 artists rank higher). Based on that, “I would say consumers see controversy as a source of entertainment and not concern,” says Rutger Rosenborg, marketing manager at Chartmetric.
West’s streaming activity may just be on autopilot as a result of placement on playlists on music streaming platforms. As of Wednesday (Oct. 19), West’s music is featured on 1,270 and 1,951 in-house playlists at Spotify and Apple Music, respectively, according to Chartmetric. Additionally, West can be found on 1.3 million user-generated playlists on Spotify. (Not all of these playlists result in streams within the U.S., however.) Significant streaming activity also comes from personalized, algorithmically generated playlists such as Spotify’s Your Time Capsule. The only significant week-to-week changes in West’s streaming numbers come when he releases a new track or album.
Radio play depends more on human decision-making. Radio programmers remain powerful gatekeepers in an increasingly decentralized, automated world of streaming platforms less affected by the decisions of corporate executives under the influence of advertising clients. Country singer Morgan Wallen saw radio programmers’ power in February 2021 after a video surfaced online of him using a racist epithet. In the two weeks following the incident, weekly radio spins and audience dropped 95.7% and 97.2%, respectively, according to Luminate. At the same time, Wallen’s streaming numbers remained strong enough that Dangerous spent 10 straight weeks atop the Billboard 200 album chart.
Controversies tend to blow over eventually. Wallen’s radio spins recovered to pre-controversy levels within 15 months and in September Dangerous set a new record for longevity with 86 non-consecutive weeks in the top 10 of the Billboard 200. “Even if DSPs remove an artist from editorial playlists for a period of time, that doesn’t stop users from adding that artist to their own playlists,” Rosenborg says. “Once everything blows over, those artists are added back to editorial playlists by DSPs as well.”
Welcome to The Contenders, a midweek column that looks at artists aiming for the top of the Billboard charts, and the strategies behind their efforts. This week: Lil Baby aims for his second straight No. 1 on the Billboard 200 albums chart, while Red Hot Chili Peppers try to go two for two in 2022, and Backstreet Boys try to get ahead of the game with their first-ever Christmas set.
Lil Baby, It’s Only Me (Quality Control/Motown)
When his sophomore set My Turn debuted at No. 1 in March 2020 and reigned for five nonconsecutive weeks, it cemented Lil Baby as one of the pre-eminent rappers of the young decade. The ATL star hopes to continue rising with It’s Only Me, which has been preceded by a steady stream of singles — most don’t appear on the set, but the biggest one does: Billboard Hot 100 No. 14 hit “In a Minute.”
As with My Turn, which debuted with 261.6 million on-demand streams for its collected songs — at the time of its release, the highest total for any album that year — It’s Only Me is expected to dominate streaming services. The set includes a whopping 23 tracks, and high-profile guest appearances from Future, Young Thug, Pooh Shiesty and more. (Even without a new album last year, Lil Baby still finished at No. 8 on Billboard’s Year-End Streaming Songs Artists chart.)
Red Hot Chili Peppers, Return of the Dream Canteen (Warner)
The recent reunion of the Rock and Roll Hall of Famers with longtime guitarist John Frusciante led to a productivity overflow, in the form of two new albums. The first, April’s Unlimited Love, debuted atop the Billboard 200 with 97,500 equivalent album units, and spawned the year’s longest-running No. 1 on the Rock & Alternative Airplay chart with “Black Summer.”
Last Friday, RHCP returned with their second new album of 2022, Return of the Dream Canteen, another 75 minutes of melodic punk-funk. As with Unlimited Love, which sold a then-2022-high 38,500 copies on vinyl, Dream Canteen should see robust sales numbers powered by a dozen different-colored LP options, as well as four CDs (and a box set that includes a shirt). The set also boasts a Rock & Alternative Airplay No. 1 of its own in “Tippa My Tongue,” which has crowned the chart for three weeks and counting.
The 1975, Being Funny in a Foreign Language (Dirty Hit)
The Manchester alt-pop quartet has been one of the most consistently successful U.K. bands of the past decade on both sides of the pond. The group has topped the Official Charts in their home country with each of their first four albums, and made the Billboard 200’s top five with each of their last three – including the 2016 No. 1 I Like It When You Sleep, for You Are So Beautiful, Yet So Unaware of It. This month, they look to continue both streaks with the release of fifth studio set Being Funny in a Foreign Language, featuring co-production by pop-rock whisperer Jack Antonoff.
The group is off to a good start in the U.K., and three songs released in advance from the set have already reached the top 30 of Billboard’s Rock Songs chart in “Happiness,” “I’m in Love With You” and “All I Need to Hear.” Two advantages the band had with their past set won’t help them this time, though: 2020’s No. 4-peaking Notes on a Conditional Form came with a ticket bundle, which are no longer counted towards Billboard 200 consumption, and it also goosed its streaming totals with a 22-song track list, twice as many as the 11 featured on Being Funny.
IN THE MIX
Bailey Zimmerman, Leave the Light On (Warner Music Nashville): Few country breakout stories this year have excited as much as Bailey Zimmerman, who largely bypassed the Nashville machine to score three Hot 100 top 40 hits (“Fall in Love,” “Rock and a Hard Place” and “Where It Ends”) before he ever had a top 10 Country Airplay hit. All three of those TikTok-boosted streaming smashes are featured on Leave the Light On, Zimmerman’s nine-track debut EP.
Noah Kahan, Stick Season (Mercury/Republic): The indie-pop singer-songwriter has steadily built a cult fandom since signing to Republic a half-decade ago, which should culminate in his first Billboard 200-charting effort with this month’s folkier and more personal Stick Season. Credit the set’s title track, a breakout success on streaming and radio, and a career-best No. 11 hit for Kahan on the Rock Songs chart this August.
Backstreet Boys, A Very Backstreet Christmas (K-BAHN): The Boys-turned-men enter the seasonal music game this month with A Very Backstreet Christmas, featuring BSB covers of 10 holiday standards and a trio of group originals. Holiday music is often a reliable seller for catalog pop favorites like Backstreet, and the quintet has a streak to protect here: Each of their 10 Billboard 200-charting albums to date has made the top 10.
