State Champ Radio Subscriptions
Page: 2
How long will consumers keep spending $200 on concert tickets, $15 on a cocktail at the venue (and God knows what for parking) and $11 on a music subscription? Judging from recent comments by some executives, people may be dealing with inflation, but they will still pay to be entertained.
“After another quarter of record-breaking [gross order value], it is clear consumers continue to prioritize live events experiences,” said Vivid Seats CEO Stan Chia on the company’s Aug. 8 earnings call.
Investors, though, seem worried about the potential effects of millions of American student loan borrowers resuming payments this fall after years of pandemic-era forbearance. In over three years, the forbearance on student loan debt totaled about $185 billion that was spent elsewhere or saved, according to an estimate by Goldman Sachs. Asked by an analyst about the possibility that loan payments will put a crimp in concert spending, Live Nation president/CFO Joe Berchtold said the company doesn’t expect a problem. Live Nation’s analysis is that the positive impact of fans returning to live events after the pandemic “is about 10 times the impact of any potential headwind coming from the student loan payments needing to get made,” Berchtold said during the company’s July 27 earnings call.
Chia echoed Bechtold’s optimism. Vivid Seats sees “resiliency” in consumer demand and strong trends for live music, he said. To that point, Vivid Seats increased its guidance for 2023 for the second time this year and now expects marketplace gross order value (GOV) of $3.4 billion to $3.6 billion and revenues from $630 million to $650 million.
What’s more, Live Nation expects people won’t be shy about opening their wallets. Full-year concerts margin will increase in 2023 thanks to an “increase [in] the per-fan profitability” from on-site spending — things such as food and drink — and “containing to focus on the costs,” said Berchtold. Price-conscious consumers “are continuing to spend strongly,” he said, and Live Nation is seeing an increase in both the number of fans per show and per-head spending.
Eventbrite, which increased the mid-point of its 2023 revenue guidance from $323.5 million to $325 million, is finding people are still eager to do things in the real world after COVID-19 lockdowns moved much of their lives online. In an Aug. 3 earnings call, CEO Julia Hartz said the company’s improved outlook comes from “strong demand signals across the board, particularly for categories like music, film and media, food and drink, nightlife, performing and visual arts.” What’s more, Eventbrite is seeing “people really want to get out and connect with one another,” she added: “Singles and dating events are 50% up year over year. Independent singer-songwriter-hosted events were up 60%.”
German promoter CTS Eventim expects moderate growth in internet ticket volume and live entertainment revenue this year. And while CTS believes its future is clouded by unquantifiable effects of geopolitical security uncertainty, persistently high inflation and a potential economic stagnation or recession, the company said in its mid-year earnings report that “earnings figures should improve substantially compared with 2022.”
Consumer spending on music subscriptions also appears to be strong going into 2024. Spotify, which raised the price of its individual plan by $1 per month in the United States in July, expects to have 224 million subscribers by the end of September, after adding 15 million in the first half of the year. Its third quarter revenue guidance of 3.3 billion euros ($3.56 billion) would mark a nearly 9% gain from the prior-year period, although analysts surveyed by StreetAccount expected guidance of 3.4 billion euros ($3.67 billion). And its gross margin guidance of 26% would be a marked improvement from 25.2% and 24.1% in the first and second quarters, respectively.
While consumer spending continues unabated, brands’ spending on advertising — an important revenue stream for labels and publishers — is a different story. A soft advertising market has hurt everything from radio revenues to online advertising (though Live Nation’s advertising and sponsorship revenue has rebounded nicely from the pandemic and has seen no slowdown, according to Berchtold). iHeartMedia expects third-quarter revenue, excluding the impact of political advertising, to decline in the low-single digits, as July revenue was down about 5% year over year.
But radio advertising could rebound in the second half of the year, according to B Riley Securities analyst Daniel Day, and Cumulus Media’s better-than-expected second quarter earnings results were a positive sign. While iHeartMedia investors weren’t enthusiastic about the company’s second quarter earnings — its share price fell 17% the day earnings were announced and dropped another 6% through Thursday — the company remains optimistic. “While there was some softness in our larger advertisers, in Q2 our smaller advertisers remained resilient,” said iHeartMedia CEO Bob Pittman during the Aug. 8 earnings call. “And we saw a gradual improvement from our larger advertisers as well, which leads us to believe that we’ll continue to see improvements in the business through the remainder of the year.”
YouTube raised prices on the individual plans for both YouTube Premium and YouTube Music for new and current U.S.-based subscribers on Thursday (July 20), marking the first time YouTube Premium has increased prices for individual plans in the United States since launching in 2018. Subscribers to YouTube Premium will pay $13.99 per month, up from […]
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
If the 2010s were the decade that established streaming as the de facto way that most people enjoy music, the 2020s will be the decade the platforms’ royalty rates took a leap forward.
For much of streaming services’ existence, the industry has tried to gently balance the need to foster growth with the need to generate something close to subsistence-level income for creators and rights holders. If rights holders squeeze too tight, they could strangle the life out of the companies they depend on to carry them in a post-CD, post-download world. Too loose a grasp on streaming platforms would mean the spoils of technological disruption would remain with tech companies.
The process requires patience. With social media apps, licensing deals start small, with lump-sum payments rather than percent-of-revenue royalties while the fledgling platform builds a sustainable business model. Because licensing deals are renewed every three years, rights owners endure long waits to secure better terms that will result in more royalties. It will take a few cycles for a platform to generate meaningful royalty income for its label partners.
This year, there were numerous developments that point to better royalty rates in 2023 and beyond. They have different degrees of certainty, however. Higher subscription prices are sure to move the needle and result in higher payouts to artists and labels. Whether artists and labels will finally get paid for terrestrial radio play in 2023 is less certain, although the mood in Washington D.C. seems favorable. And with the authors of Chokepoint Capitalism, Cory Doctorow and Rebecca Giblin, currently making the media rounds, and the Federal Trade Commission cracking down on companies that take advantage of gig workers, the plight of creators in today’s digital economy is getting mainstream attention (my colleague Rob Levine brought attention to tech companies’ value destruction in his book, Free Ride, a decade ago).
Congressional Bill to Get Artists & Labels Paid for Radio Airplay Clears Critical House Vote
12/09/2022
Music subscription price increases
Artists have wanted a raise from streaming services for years. Part of the problem is how royalties are calculated — a pool of money is split according to the number of times the tracks were played. That puts album-oriented artists at a mathematical disadvantage to mainstream artists in popular genres like pop and hip-hop. Another common complaint is that streaming services have barely raised their subscription prices for more than a decade. With prices flat, the best way to improve streaming royalties is to attract more subscribers. Keeping subscription fees relatively affordable, especially when Netflix and other video streaming services routinely hiked their prices, ensured customer acquisition would continue. Affordable family plans, which cover up to six people for 50% more than an individual plan, helped attract customers and reduced churn — but didn’t help artist payouts. Finally, this year Amazon, Deezer, YouTube Premium (which includes YouTube Music) and Apple Music announced broad price increases to individual and family plans. Spotify has hinted it will follow with price hikes of its own in 2023. The financial impact could be massive: A modest increase of $1 per month for individual plans and $2 per month for family plans in mature markets — less in developing markets with lower prices — would easily generate many hundreds of millions of incremental subscription royalties, which totaled $12.3 billion in 2021, according to the IFPI.
A TikTok subscription service
TikTok doesn’t pay much in royalties, but it plays an outsized role in cultural trends — the app has over 1 billion active users and is especially popular with Gen Z consumers. That has changed the balance of power in music streaming. “The major streaming platforms are reacting to culture now rather than driving it,” Tatiana Cirisano, music industry analyst and consultant for MIDiA Research, recently told Billboard. In that light, news that TikTok is working to expand its Resso subscription service (it’s available only in Indonesia, Brazil and India) is a big deal. Currently, TikTok creates impressions and demand for music that has downstream effects on other platforms — see a TikTok video, listen to the entire track at Spotify, YouTube Music or Apple Music. But if TikTok owned both the short-form video platform and the subscription platform, it could better convert that initial interest into downstream listening while eroding the influence of the Spotifys and Apple Musics of the world. More importantly, a TikTok subscription service would help change TikTok’s status as a royalty underperformer.
Subscription streaming rates
Publishers and songwriters will get a slight raise in subscription streaming royalty rates over the next five years due to a settlement reached in August by the National Music Publishers’ Association, the Nashville Songwriters Association International and the Digital Media Association. The headline royalty rate will go from 15.1% of revenue in 2023 to 15.35% in 2027. That’s not a huge gain, but it’s an improvement. The settlement could help in other ways, too. Streaming services were able to get favorable terms for bundles and free trials that allow them to get more subscribers into the ecosystem. That would help songwriters and publishers by increasing the number of subscribers — the major driver in streaming royalty growth — as they enjoy modest annual increases in royalty rates.
Inflation adjustments to noninteractive streaming rates
Each year, the rate paid by noninteractive streaming platforms in the U.S. is adjusted to account for inflation over the previous year. In 2023, artists and labels will get a raise due to inflation rates that reached a 40-year high in 2022. (The rates increased 7.1% for subscription plays and 9.1% for ad-supported plays.) In years past, noninteractive streaming services such as Pandora were a more significant part of artists’ and labels’ incomes. That gave extra weight to the decisions of the Copyright Royalty Board and changes in the per-play streaming rates. Now, on-demand services like Spotify and YouTube dominate the streaming landscape and noninteractive webcasting has diminished in value and relevance. Still, Pandora’s ad-supported listening hours fell only 5% year over year in the third quarter of 2022 — to 2.75 billion — and it paid out $921 million in royalties in the first nine months of the year. Above all, a raise is a raise.
Terrestrial radio royalties
Legislation that would pay artists and labels for airplay on U.S. terrestrial radio was passed by the House Judiciary Committee on Wednesday (Dec. 7). With only a month left in the current Congress, Rep. Jim Jordan, ranking member of the House Judiciary Committee, said he’s confident the bill could make it through the next Congress (that could be 2023 or 2024). While this isn’t the first legislation to address the lack of a performance right, the AMFA arrives at a time when lawmakers — in D.C. and elsewhere — have taken an interest in creators’ ability to make a living in the streaming age. Outgoing House Judiciary Committee chair Jerry Nadler has shown concern about a “race to the bottom” in streaming royalties, for example, and U.K. lawmakers examined the equitableness of streaming royalties paid to artists in that market. Passage of an AMFA-like law, or a settlement with radio broadcasters, would be a huge coup for artists and labels who get only promotion from radio airplay while radio stations are obligated to pay songwriters and publishers. In fact, U.S. radio royalties would be two — not one — new stacks of money. That’s because the lack of a performance right for broadcast radio in the U.S. means European countries withhold royalty payments from American artists for performances on their soil, SoundExchange CEO Michael Huppe explained in a recent Billboard op-ed.
