The Ledger
For all the value derived from social media, artists and labels have yet to generate revenue directly from their activity on Facebook, Instagram and other platforms. In contrast, Weverse, a social media and e-commerce platform owned by South Korean company HYBE, changes up the typical social media dynamic by generating direct revenue from the fandom it facilitates.
This month, in an effort to generate even more revenue from superfans, Weverse introduced a digital membership tier that offers additional perks such as ad-free viewing, video downloads for offline access, high-quality streaming and language translation. The paid digital membership is separate from the fan clubs offered on the platform and Weverse’s own direct messaging feature that allows users — for a fee — to message their favorite artists.
“Digital membership, we believe, is the very first cornerstone of the future evolution” of the music business,” Weverse CEO Joon Choi tells Billboard. He adds that in the first two weeks that digital memberships were made available on the platform, 79 artists (out of 162 active artist communities on Weverse) have given fans the option of signing up for them.
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Weverse is an anomaly in social media: a platform with a small number of high-demand musicians rather than a large number of mostly unpopular artists. Launched in 2019, Weverse had 9.7 million monthly active users (MAUs) as of Sept. 30, according to HYBE’s latest financial results, down from 10.6 million a year earlier. The platform is a Swiss Army knife of a promotional vehicle. Artists not only post media content and updates but also conduct live-streams and respond — for a fee — to fans’ direct messages, while the platform additionally sells concert live streams, music and merchandise. And HYBE’s most popular artists can rack up amazing numbers on the platform: Earlier this week, BTS member Jung Kook set a Weverse record with 20.2 million real-time views of a 2.5-hour live broadcast in which he spoke to fans during a break from his military duty.
In recent months, Weverse expanded beyond K-pop artists by welcoming such Western, English-language stars as Ariana Grande and The Kid Laroi, hinting at possibilities that have record labels salivating. Goldman Sachs analysts have estimated that improved monetization of superfans — including new digital platforms, greater emphasis on vinyl buyers and higher-priced music subscription plans — could result in $3.3 billion of incremental revenue globally by 2030. Given the potential, it wasn’t surprising to hear both Warner Music Group CEO Robert Kyncl and Universal Music Group CEO Lucian Grainge express their interest in superfan products and experiences earlier this year. In September, UMG CFO Boyd Muir said the company was in “advanced talks” with Spotify about a high-priced superfan tier — something Chinese music streaming company Tencent Music Entertainment already launched with early success.
In the early days of its membership tier, Weverse is still figuring things out. “We are pioneering this field, so we see a lot of unknowns,” says Choi. For example, he says Weverse has heard from many labels that it should bundle the digital membership tier with fan clubs already offered by artists into something like a premium membership tier (of the 162 active artist communities on Weverse, 72 currently offer fan clubs). He adds that Weverse would not make the decision independently but is discussing it with labels. “Combining them together in the future, I think it’ll be stronger than what we offer right now,” says Choi.
The rollout of the membership tier hasn’t been without controversy, though. In October, an article at The Korea Herald quoted an email from Weverse to its partner record labels in which the company said participation in the membership tier is “mandatory for all artist communities hosted on Weverse.” The article also quoted a South Korean lawmaker who called on the country’s Fair Trade Commission to investigate Weverse’s “new forms of monopolistic practices and determine whether unfair treatment is occurring against affiliated companies using the platform.” Weverse says it has not been contacted or investigated by regulators.
Choi pushes back against the assertions in The Korea Herald, saying artists on the platform are not required to offer a subscription tier, in contrast with the email quoted by the newspaper. “That’s not mandatory,” he insists. In a separate statement to Billboard, Weverse said it “aims to roll out digital membership to all communities” but that the decision “is the choice of labels and artists” and, in any event, fans will still be able to use many existing Weverse services for free. Despite Weverse playing an integral role in the marketing and promotion of K-pop artists, Choi argues it doesn’t have enough market power to make such demands: “We are not in a dominant place where we can just present the policy and dictate our policy to the artist or labels however we want.”
Weverse has also received criticism for its revenue-sharing splits with labels, with The Korea Herald additionally citing an anonymous source as saying the company proposed a “disproportionate” share of the revenue ranging from 30% to 60%, leaving the artist and label with anywhere from 40% to 70%. Choi declined to comment on the business arrangements that determine how much subscription revenue Weverse keeps but noted the platform is investing money into the subscription tier to create features valuable to artists and their fans.
The pushback encountered by Weverse foreshadows the challenges platforms and labels will face as superfan platforms proliferate and the stakeholders wrangle over how the money will be shared. Labels and publishers have spent decades trying to get more value from streaming services, and short-form video apps like TikTok necessitated new conversations about how to compensate creators for the value they bring to the platform. As Choi says, “What we’re doing is basically creating a new value by connecting the artist and super fans in the same place.” In the process, HYBE has pioneered a new model that could become standard practice for artists and labels in the music business of the future.
A year ago, SiriusXM launched a new streaming app filled with original and licensed content from its satellite radio service and set the price at $9.99 — far below the roughly $16 average monthly revenue it takes in per satellite subscriber. The hope was that a relatively affordable price and an improved app would help SiriusXM reach younger consumers and expand beyond its core in-car satellite radio listeners.
The new app was “just the beginning,” CEO Jennifer Witz said at the time, adding that SiriusXM would “continue to iterate and develop our product offerings throughout the next year and beyond as we strive to deliver our subscribers the best listening experience on the go, in the car, and wherever they choose to tune in.” The company’s satellite radio business was built on vehicles. If you buy a new or used car, you’ll likely get a free SiriusXM trial that’s extremely effective at convincing people to subscribe once their trial is over. The new streaming app was intended to attract people who would listen outside of the car.
But selling the radio experience in a smartphone app didn’t go well. As it turns out, the streaming app hasn’t produced a good return on marketing spending, Witz said on Tuesday (Dec. 10). Appearing at the UBS Global Media and Communications Conference, the executive cited “slow progress” in turning free trials into long-term retention. As a result, SiriusXM has already cut back its marketing spend on the app and expects to have fewer streaming trials — and thus fewer subscribers — in the future. That was a worse assessment than what Witz delivered on SiriusXM’s Aug. 2 earnings call. At that time, when asked about conversion rates for the app, Witz said they had been “challenged” but maintained positivity, adding that there had been some “positive results” with first-time trial adopters and that the company was “confident” it could attract “a different audience” that will be “incremental” to the existing car-based business.
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Now, after its underwhelming experiment with the app, SiriusXM will, in Witz’s words, be “leaning into our strengths.” In other words, the company is putting its focus back on satellite radio and the in-automobile listening experience. In alignment with that strategy, the company also announced the departure of Joseph Inzerillo, the chief product and technology officer who played an instrumental role in the app’s launch.
For all the strengths of the app — curated stations, celebrity musician stations, a smorgasbord of audio programming — the company gave up its competitive advantage when it tried to compete outside of satellite radio and the automobile. After all, the company is the lone satellite radio operator and, given the cost and complexity of launching satellites into orbit, has the market to itself. But when leaving the safety of satellite, it’s hard to beat Spotify, Apple Music, YouTube and Amazon Music at their own game. These are streaming-native platforms built for consumers’ desire for interactivity, while SiriusXM’s app attempts to fit a one-way satellite radio experience into a two-way, interactive medium. In the end, paid radio turned out to be a tough sell to a generation that has grown up on on-demand streaming.
So, SiriusXM is going to focus on what it does best, and in-car listening gives the company a huge audience to work with. It currently has 33 million subscribers and, according to MusicWatch’s Russ Crupnick, reaches 65 million total listeners. In an email to Billboard, radio consultant Andy Meadows said he believes “SiriusXM is better suited to compete for those coveted in-car listeners so [Tuesday’s announcement] makes sense from that standpoint.” Crupnick also sees in-car listening as a point of strength for SiriusXM, pointing to the uniqueness of the SiriusXM product as a distinct advantage. “The ease of use, breadth of content, and curation position them as far superior to terrestrial radio, and in a different place than music streaming or podcasts,” he says.
Building on in-car satellite listening, the SiriusXM streaming app will become more of a complementary product. “There is real opportunity with 360L,” said Witz on Tuesday, referring to the company’s in-car platform that serves as a dual satellite radio/streaming product. Because 360L includes streaming, it allows SiriusXM to serve personalized — a.k.a. more lucrative — ads and provide more targeted — a.k.a. more expensive — ads for advertisers. Of the app, she said it can provide data that helps SiriusXM determine spends on programming that resonates with listeners, given that satellite receivers are a one-way technology that doesn’t provide granular insights into listening behaviors. Similar to 360L, the app can also provide targeted advertisements.
For customers, bundling satellite and streaming costs as low as $25 per month. That’s about double the cost of an individual Spotify subscription, but SiriusXM subscribers can withstand the price. According to Witz, platinum satellite subscriptions, which cost upward of $29 per month, account for “about a third” of the current subscriber base. And providing the best of satellite and streaming will help SiriusXM compete with a “newer breed of streaming products” on Americans’ car dashes, says Meadows. “Anything SiriusXM, and traditional radio for that matter, can do to look, sound and function better across all devices is in their best interest long term.”
If it seems like everybody is talking about Spotify Wrapped, the streaming service’s data-driven annual recap of listening habits, it’s because everybody is talking about Spotify Wrapped. That says a lot about its effectiveness and its value to the company.
The streaming platform’s personalized year-end recap is unmissable this time of year. Mashable began prepping its readers back on Nov. 19. A week later, Spotify heightened expectations by advising users to update the Spotify app to the latest, Wrapped-ready version. When Wrapped finally appeared on Wednesday (Dec. 4), there was an onslaught of media coverage. Billboard even got into the Wrapped coverage, revealing Chappell Roan’s top artists and songs on Spotify in 2024 (Ariana Grande and Heart’s “Barracuda,” respectively).
With so much media coverage, some of it is bound to carry a grousing, annoyed tone. “Hate your Spotify Wrapped?” Rolling Stone asked, “You’re not alone.” “Sorry, parents,” The Washington Post lamented, “it’s actually your kids’ Spotify Wrapped.” Vogue turned Wrapped into a frank self-examination in an article titled “I love Spotify Wrapped so much I hate it.” For people whose Spotify Wrapped “suck[ed],” Pocket-lint suggests ways to “fix it” in 2025. The Huffington Post’s compilation of the “funniest” tweets about Wrapped was filled with only mildly humorous complaints.
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In contrast, articles about Wrapped’s peers came and went without anything close to the same level of media hullabaloo. The annual recaps of Apple Music, Amazon Music and YouTube Music received basic coverage at mostly tech-oriented publications but didn’t elicit the kind of longwinded pop culture essays that Wrapped conjures up every year. Apple Music Replay received run-of-the-mill articles such as “Apple Music’s yearly recap is finally available in the app” at tech news site The Verge. When TechCrunch covered the launch of Amazon Music’s 2024 Delivered, the headline referred to it as Amazon’s “take on Spotify Wrapped” lest nobody know what they were talking about. YouTube Music Recap launched on Nov. 25 to little media coverage.
For its part, Spotify contributed to the media overload by building a 2024 Wrapped microsite and posting 10 Wrapped-related press releases on launch day. Wrapped itself introduced new innovations in 2024, including a personalized Wrapped podcast featuring two AI hosts and the Your Music Evolution Playlist, a personalized playlist that tracks a user’s different musical interests and phases throughout the year. Wrapped has become such an important event that Spotify hosted a pre-release press briefing that featured talks by executives across the company. As Glenn McDonald, a former Spotify software engineer and author of the book You Have Not Yet Heard Your Favourite Song: How Streaming Changed Music, told Billboard via email, “nothing else they do gets as much marketing/branding energy put into it.”
Wrapped especially shines in the awareness it attracts on social media. At the end of every Wrapped recap, Spotify offers personalized badges that flood X, Instagram and TikTok — the latter two benefitting from integrations announced in November that make it easier to share content. In this way, Wrapped turns its users into “active brand advocates on social media,” as one academic study put it. Or, as another paper phrased it, Spotify turns its users into “free labour” to help market its product. “For Spotify, it is 100% a brand-visibility moment,” says McDonald. “Social virality is the only metric the company cares about. The viral attention does help with user retention and reactivation, but the virality itself is the thing they’re measuring.”
More than an effective marketing ploy, Wrapped has turned into a competitive advantage in a business where standalone music streaming services desperately need one. A company has a competitive advantage when it creates more economic value than its competitors. Economic value is the difference between the perceived value of the product and the costs required to produce the product. Some brands are able to charge a premium because they have succeeded, through the quality of the product and the effectiveness of marketing, in convincing consumers their product is worth more. Food made with better ingredients commands a price premium, for example. Sometimes differences in perception of value come down to marketing. The difference between luxury clothing brands’ prices can be explained by amounts spent on splashy advertisements and celebrity endorsements, not just the cost of materials and labor.
Unlike streaming video-on-demand (SVOD) services, which attract viewers mainly through exclusive programming, music streaming platforms have — for the most part — the same content and must find other avenues to attract and retain customers. Amazon Music Unlimited, for example, is cheaper for members of Amazon Prime. Apple Music benefits from being part of the Apple entertainment ecosystem and Apple’s ownership of music identification app Shazam. YouTube Music gets its subscribers through YouTube, the most popular streaming app in the world. Spotify, a standalone company, can’t match Amazon’s low price, Apple’s omnipresence or YouTube’s ubiquity.
Instead, Spotify competes on product features it develops in-house. Launched in 2015, Discover Weekly, a personalized playlist filled with recently released tracks, was so popular that people who streamed their Discover Weekly playlists streamed twice as much as people who didn’t. A product that popular helps give Spotify an advantage over its larger competitors. Discover Weekly was launched the same year Apple launched Apple Music. Although many onlookers expected Apple would crush Spotify, Spotify has consistently maintained a sizable lead in market share, and innovation played an important role in holding off behemoths like Apple and Amazon. As Will Page, former Spotify chief economist, put it in his 2021 book Pivot, Discover Weekly “create[d] a moat to protect Spotify’s castle.”
Wrapped follows in Discover Weekly’s footsteps as a moat-building product innovation. The key is Spotify’s ability to get its listeners to talk about Wrapped. One study found that Spotify Wrapped was more effective than Apple Music Replay in users’ willingness to create user-generated content (i.e. share Wrapped on social media). That’s gold in a business where consumers can choose between a number of fairly identical substitutes with similar features. Anything that increases engagement and prevents users from leaving for Apple, Amazon or YouTube is valuable. In that sense, developing a product that becomes a part of the cultural zeitgeist, like Wrapped, is perhaps the biggest competitive advantage a streaming service can have.
In the last four months, two of the three major labels have seen their stock price punished for missing expectations of subscription growth — effectively sending the message that in 2024, delivering substantial revenue gains isn’t enough. In its fiscal fourth-quarter earnings on Thursday (Nov. 21), Warner Music Group (WMG) revealed streaming growth of 8.2%, which was below some analysts’ estimates — helping explain why the company’s share price fell 7.4% on Thursday and erased approximately $1.29 billion of market value. The same thing happened to Universal Music Group in July — albeit to a far greater extent — when its lower-than-expected second-quarter subscription growth led to a 24% drop in its share price despite total revenue climbing 8.7%.
To say analysts and investors place a great deal of attention on streaming growth is an understatement. During WMG’s earnings call on Thursday, six of the 10 questions from analysts concerned subscription revenue, including topics such as drivers of expected growth, the setting of wholesale rates and how streaming royalties are calculated and distributed. That’s because analysts — and the investors they speak to — know that platforms such as Spotify and YouTube are critical to record labels and publishers’ fortunes.
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Judging from their introductory remarks, WMG and UMG would rather talk about their companies’ global expansions. On Thursday, WMG CEO Robert Kyncl highlighted the company’s focus on India, a country of 1.4 billion that he called “more like a continent than a country.” Currently dominated by ad-supported streaming, India has the fifth-largest gross domestic product but ranks just 14th amongst recorded music markets. But Kyncl said he believes the country “will become an increasingly influential global force in the music business,” adding that WMG is “well positioned to keep taking market share” through acquisitions and partnerships. Meanwhile, during UMG’s latest earnings call on Oct. 31, CEO Lucian Grainge talked about acquisitions, partnerships and expansions in emerging markets such as China, Thailand and Nigeria.
Constantly pulled back to the topic of music subscriptions, Kyncl and WMG CFO Bryan Castellani attempted to quell any concerns that streaming growth is petering out, explaining how WMG intends to obtain high, single-digit subscription revenue growth even as that growth has been slowing. Relatively few Americans have a music streaming subscription, at least when compared to streaming video-on-demand (SVOD) options such as Netflix; during the call, Kyncl noted that subscription penetration in the U.S. is 30% while SVOD services are at 50%. “There’s a lot more to grow in United States for music,” he said.
Lately, though, the success of music streaming platforms has looked one-sided. The licensees, not the licensors, appear to be keeping most of the spoils of price increases and subscriber acquisitions. As one WMG analyst put it, the major labels’ content is a must-have for digital service providers (DSPs) such as Spotify, but “a lot of value has instead accrued to the DSPs” rather than content owners. At least by one measure, Spotify has reaped the benefits of price increases far more than major labels. Since Spotify announced its first U.S. price increase on July 23, 2023, its share price has risen 177%, compared to 3% for UMG and 4% for WMG.
To level the playing field and reap more of the benefits of subscription music’s popularity, WMG intends to tweak pricing — which it believes the labels will benefit from — to help drive continued subscription growth. For starters, the company expects improvements to come from the launch of a high-priced subscription tier for superfans that Spotify CEO Daniel Ek said in July could cost $17 or $18 per month. Kyncl and Castellani also pointed to changes in wholesale prices that would establish per-subscriber minimums to reduce the discounts given to family plans and other multi-user accounts. “With both subscriber growth and opportunities for wholesale price increases, the formula for streaming growth is strong and there’s plenty of room for acceleration,” said Kyncl.
The U.S. and other mature streaming markets will deliver subscription growth more immediately than emerging markets still dominated by ad-supported streaming. But over the long term, said WMG, high-growth, emerging markets like India have substantial potential. As Kyncl explained, WMG is betting on countries like India that have rising gross domestic product (GDP) because advertising spending will increase as GDP increases —and rising GDP will eventually translate to more subscribers. Again, Kyncl talked about closing the gap between music and TV; in India, he put the number of music subscribers at 15 million and the number of households with TVs at 100 million.
Streaming has shaped today’s music business. WMG and UMG would not have gone public had it not transformed a once-moribund industry. Investors wouldn’t have poured money into Hipgnosis Songs Fund and other investment funds were it not generating massive royalties for aging catalogs. And prominent institutional investors such as Blackstone and Pimco would not be so enthusiastic about music assets if streaming couldn’t open new markets around the world.
That strong enthusiasm has created high expectations, though, and labels’ mandate to deliver high, single-digit subscription growth is going to transform streaming in the years to come. Prices will be higher. Streaming services will launch high-priced superfan tiers. And if the labels have their way, ad-supported on-demand streaming would no longer be free. However things shake out, the majors seem confident they can deliver.
With all apologies to Charli XCX, the 2024 concert season should have been dubbed “VIP summer” for the amount of upselling done by U.S. amphitheaters.
At Live Nation amphitheaters, revenue from VIP clubs was up 19% and VIP ticket premium revenue for major festivals was up more than 20% in the third quarter. Earlier this year, VIP/premium offerings represented 9% of Live Nation’s overall amphitheater business but “should be 30% to 35%,” CEO Michael Rapino told investors in February.
Amphitheaters where Live Nation controls the food and beverage experiences have the potential to deliver more fan spending. Converting an area of grass into a VIP club provides 20% to 30% returns on investment, Rapino explained. At Northwell at Jones Beach Theater, for example, Live Nation took the 15,000-seat venue from no premium offerings to three premium tiers. Of the 40 U.S. amphitheaters in its portfolio, the company could “Jonesify” half of them, Rapino said during an investor call on Wednesday (Nov. 13).
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Diving headfirst into VIP pricing is sure to help Live Nation’s bottom line. The company believes premium offerings can add $200 million in adjusted operating income per year, according to its investor presentation. This year, VIP net per-fan spending will have grown at 20% annually since 2019, well ahead of overall net fan spending growth of 8% annually.
From exclusive lounges to fan meet-and-greets with artists, the concert business has been better than other music industry segments at filtering customers according to their willingness to pay. VIP status became standard practice at music festivals to separate the people who can afford a $400 ticket to camp in a grass field and those who can afford deluxe accommodations, food and beverage, and transportation. The year-old Sphere in Las Vegas takes customer segmentation to a new level: Tickets are relatively expensive for a single concert without considering travel and accommodation — which Live Nation bundles with Sphere tickets through Vibee, a destination experience company it founded in 2023.
It may be ahead of other music companies, but Live Nation is merely following practices familiar to companies such as airlines, which charge more for early boarding, and theme parks, where paying a premium allows you to spend less time standing in line for rides. Insurance companies offer multiple tiers of services that include add-ons such as “accident forgiveness.” Everywhere you look, there’s an expensive option that’s out of reach for most consumers but well worth the value to others.
The wave of upselling now extends to VIP tiers in music streaming. Last week, Tencent Music Entertainment (TME) announced it has 10 million Super VIP subscribers accounting for 8.4% of its 119 million subscribers. Super VIP, launched in the first quarter of 2022, provides such perks as better sound quality, priority access to music content and live event tickets. With a cost five times the normal subscription tier, Super VIP subscriptions helped TME’s average revenue per user increase 5% from the prior-year period. That success with VIP pricing is likely a harbinger of things to come. A single tier may not deliver the kind of profitability investors now demand.
“I think Spotify and the labels, long ago, realized this ‘one price for everybody’ thing gets these companies off the ground, but ultimately it’s not sustainable,” says pricing strategy consultant Rafi Mohammed, who espouses a strategy he calls “good-better-best” and encourages companies to create more valuable tiers of products and services for subsets of customers who are willing to pay extra. “If you’re a company and you’re not doing it, you’re making a mistake,” he says. “There are always going to be higher-end people who are willing to pay more for a more enhanced experience.”
With the current music streaming model relatively unchanged for two decades, music companies are increasingly engaging in the kind of customer segmentation taught in business schools. Companies that want to deliver strong, sustained growth are looking at ways to provide more valuable — and more expensive — experiences to those customers willing to pay for them.
Record labels are itching for a high-priced streaming subscription tier that would produce greater royalties. Spotify’s VIP tier — for lack of a better term — seems all but inevitable at this point. In September, Universal Music Group (UMG) COO (then CFO) Boyd Muir said the company was in “advanced talks” with the streamer for a high-priced tier that offers a better user experience than standard subscription plans. Spotify CEO Daniel Ek lifted the veil on a pending VIP plan in July, saying it would “probably” be priced at $17 or $18 per month and provide subscribers with “a lot more control, a lot higher quality across the board, and some other things that I’m not ready to talk about yet.”
UMG has said that internal market research shows 23% of subscribers would be willing to pay more for a VIP experience. But Will Page, Spotify’s former chief economist, isn’t sure Spotify is ready for a VIP tier. “It needs to walk before it can run towards a VIP platform,” he says.
Since the days of pre-Spotify subscription services such as Rhapsody, the basis $9.99 (in the U.S.) price was raised only recently but hasn’t kept pace with inflation. Spotify launched in the U.S. in 2011 and didn’t raise the individual premium price to $10.99 until 2023. Had the price kept pace with inflation, that $9.99 tier would have cost $13.50 by the time the price hike took effect. While video-on-demand streaming platforms such as Netflix have consistently raised prices over the years, music platforms like Spotify refrained, keeping their prices unchanged for fear higher prices would stunt their growth. “I would love to see the industry earn its stripes in showing pricing power before it goes to base two, which is market screening power,” says Page.
In the meantime, the music business has other ways to cater to VIPs, including a new slate of “superfan” platforms and vinyl records. Vinyl mimics a VIP strategy by upselling fans to an expensive physical item over low-value online streaming. And just as film studios use a so-called “windowing” strategy by releasing movies to theaters before streaming platforms, artists and labels are increasingly selling vinyl LPs ahead of their streaming street dates — a strategy that’s been largely absent in music since 2016. To Page, artists and labels are missing a big opportunity by not using vinyl to create a VIP release window.
“In America alone, vinyl is going to be a billion-dollar business,” says Page, “and the people who can sell it are the types of artists who would appeal to a VIP strategy.”
Peering over U.S. borders at the rest of the world, the recorded music business looks like the land of opportunity. The U.S. is certainly lucrative, but it’s also hyper-competitive. While the three major labels have locked up most of the States’ recorded music revenues — they distribute many indies, too — they command a far lower share internationally.
A new estimate of independent labels’ market share shows why major labels’ investments and acquisitions in foreign territories are so common. On an ownership basis, independent artists and labels had a 46.7% share of the global recorded music business in 2023, according to a new MIDiA Research report, with independent labels taking a 40.8% share while artist-direct distributors such as Ditto Music and TuneCore having a 5.9% share. (The data, collected through an online survey of independent labels, accounts for 93% of all global revenues.) That leaves 53.3% for the major labels.
The U.S. is considerably more concentrated. Independent labels and distributors had a 35.7% share of the U.S. market in 2023, according to Billboard’s analysis of Luminate data — 11 percentage points less than their global share — with the major labels owning the remaining 64.3%. That means that while independent artists and labels were behind the majority of the well over 100,000 new tracks that were being uploaded to digital service providers daily as of early 2023, they only accounted for a bit more than a third of revenue.
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The U.S. market gets even more concentrated when distribution, not just ownership, is measured. In the U.S., the major labels have an 84.3% distribution share through their ownership of music distributors Ingrooves (Universal Music Group), The Orchard (Sony Music), AWAL (Sony Music) and ADA (Warner Music Group), leaving independent labels and distributors with a 15.7% share. But MIDiA puts the independents’ global distribution share at 34.2% — 18.5 percentage points higher than their U.S. share.
Besides the availability of market share, companies are also investing outside of more familiar, Western countries because they’re chasing high growth rates. The U.S. is slowing and has settled into solid, high-single-digit annual improvements: 7.2% in 2023 and 5% in 2022 after a pandemic-related 41% surge in 2021, according to the IFPI’s data on global trade revenue.
Emerging music markets, on the other hand, are growing like weeds. Strong gains in some heavily populated countries led the U.S.’s share of global revenues to dip from 41.2% in 2021 to 38.6% in 2023. Over that time span, China’s share grew from 3.8% to 5.1% and Brazil’s share rose from 1.8% from 2.0%. In 2023 alone, Mexico grew 18% to $490 million, and India grew 15% to $357 million to overtake Spain as the world’s No. 14 market.
For majors and indies alike, the never-ending pursuit of market share is taking them across the globe. This year, Universal Music Group bought a majority stake in Nigerian record label Mavin Global and Outdustry, a record label and artist services provider that focuses on China, India and other emerging markets. Warner Music Group took a majority stake in Indian digital media and music company Divo. Believe acquired Turkish record label DMC and purchased Indian record label White Hill Music’s catalog and YouTube channel. In 2022, Sony Music acquired Brazilian independent music company Som Livre. A year earlier, Warner Music Group invested in Saudi Arabian independent label Rotana, building a presence in the Middle East-North Africa region where Reservoir Media has a partnership with Abu Dhabi-based PopArabia.
Streaming and social media have allowed independents to blossom around the world, creating a market “more diverse, fragmented, international, and regional than it has ever been,” wrote MIDiA’s Mark Mulligan. “It has resulted in a market that is characterized by both fragmentation and consolidation,” wrote Mulligan. “These opposing forces are shaping today’s market and will do so in the coming years.”
The music business is getting back to basics.
In a few short years, the major labels have gone from investing in and partnering with speculative tech startups to pouring money into regionally focused music companies across Asia, Africa and Latin America. After a brief flirtation with NFTs and live-streaming businesses, anything resembling a faddish technology seems to be out of favor, judging from the deals and partnerships they’ve been making lately. Instead, the majors are targeting old-school music companies that own catalogs and develop artists — and can benefit from the majors’ global network of distribution and other services.
In 2024 alone, the three majors — Universal Music Group, Sony Music Entertainment and Warner Music Group — have acquired or invested in 11 record labels, music catalogs and service providers in small or developing markets. The flurry of deals — there were even more in 2023 and preceding years — provides the majors with more content for their ever-increasing distribution pipeline and more international artists to take to Western markets.
Take UMG’s run of acquisitions and investments in 2024: the remaining stake of European indie label group [PIAS], the remaining stake in the catalog of Thai music company RS Group, a majority stake in Nigerian record label Mavin Global and the outright acquisition of Outdustry, a multi-faceted company with an artist- and label-services arm that focuses on China, India and other high-growth emerging markets. Outdustry will be a division of Virgin Music Group, UMG’s fast-growing distribution and artist services company that includes distributor Ingrooves Music Group and Integral, formerly the artist services division of [PIAS].
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UMG, in particular, is letting the world know about its intentions. On Thursday (Oct. 31), UMG CEO Lucian Grainge dedicated much of his earnings call opening statements to the company’s efforts to expand into potentially lucrative markets that merited little attention before legal streaming services replaced digital piracy. UMG plans to make “several other investments” before the end of the year, CFO Boyd Muir said during the earnings call. In total, he said, investment spending in the second half of the year will be 350 million to 400 million euros ($380 million to $434 million).
The focus on emerging markets and artist services is a noticeable change from a few years ago. When NFT prices soared and fans were stuck at home during the pandemic, the majors invested in blockchain, virtual reality and live-streaming startups. Today, as the majors face slowing streaming growth in mature markets and the needs of an increasing number of independent artists, they’re focused on building a global network of service providers with an eye on up-and-coming markets.
The focus on emerging markets goes beyond acquisitions. In September, UMG launched a new company, Universal Music Group Greater Bay Area, that will be based in Shenzhen, making “the first time a major music company has established a division in China’s Greater Bay Area, the world’s most populous urban area,” the company said.
Another development mentioned on UMG’s earnings call was GTS, a global talent services business in Latin America. In October, GTS became a standalone company separate from UMG’s record labels. “By separating from our local labels,” Grainge explained, “GTS will now be able to also offer its services to artists outside of the UMG family.”
Grainge and Muir painted a picture of a global business determined to expand outside of the mature markets they know best and build a presence in high-growth ones. UMG’s competitors — including independent Believe — are doing the same.
WMG has also had a busy year investing in traditional music companies. In March, WMG purchased a stake in India’s Global Music Junction (India’s The Economic Times reported it was a 26% stake) and launched Warner Music South Asia in April. Last year, the company took a majority stake in Divo, an Indian digital media and music company. Earlier this week, CEO Robert Kyncl told The Economic Times that China and India are the company’s top markets for expansion. “We’re already doing great in India, but it can be a much bigger part of our story,” Kyncl told the paper.
The majors continue to buy catalogs, of course. This year, Sony Music purchased Pink Floyd’s recorded music catalog (in addition to merchandising and name and likeness rights) and UMG bought a minority stake in Chord Music Partners, which holds the rights to over 60,000 songs. Expensive song catalogs give the majors rights to assets with long, productive lives. But given the enormous size of these companies, artist catalog acquisitions barely move the revenue needle. A legendary artist’s catalog might cost $200 million but generate a steady $10 million a year — a healthy sum but a pittance to a company with annual sales exceeding $12 billion.
Rather than pour money into just catalogs, the majors are buying entire companies and building new businesses with growth potential. As Morgan Stanley analysts wrote in an investor note about UMG on Thursday (Oct. 31), earlier acquisitions have had “a negligible effect on revenue and a small impact on profit growth.” But in the future, they are likely to be a more important driver of revenue growth, and Morgan Stanley expects UMG’s financial reports will break out their impact (e.g. reported revenue vs. organic revenue).
In buying regional music companies and building artist-services business, the majors are also taking a defensive measure. Independents such as Believe have been investing in local markets for years. In 2024 alone, Believe purchased the remaining stake in Turkish record label DMC and acquired Indian label White Hill Music’s music catalog and YouTube channel. Independent distributors such as UnitedMasters, Stem, Symphonic Distribution and Create Music Group have given artists a viable alternative to major label-owned systems. The majors are simply changing along with the market.
In 2012, UMG acquired the recorded music assets of EMI Music and later sold some pieces to WMG to satisfy antitrust regulators. Opposition to greater consolidation in the U.S. and Europe means it was probably the last acquisition of its size in those regions. (WMG’s brief flirtation with buying Believe in April and May quickly drew opposition from French indie labels.) There’s less opposition to more gradual growth taking place elsewhere in the world, though. The majors are continuing to expand, but they’re taking many small steps, not single EMI-sized leaps — and they’re doing it through old-fashioned music businesses.
The old saying that any publicity is good publicity isn’t always true in the music business. And this year, Sean “Diddy” Combs is proving that listeners and corporations alike have limits.
Near the end of 2023, Combs was enjoying the momentum of the September release of The Love Album: Off the Grid, which spent seven weeks on the Billboard 200 albums chart and peaked at No. 19 on the Sept. 30 chart week. Meanwhile, album single “Another One of Me” by Diddy, French Montana & The Weeknd featuring 21 Savage peaked at No. 87 on the Billboard Hot 100.
However, those numbers would start dropping quickly. In November, the Bad Boy Records founder was the subject of three separate lawsuits by an ex-girlfriend, Cassie, and two other people with various allegations of sexual and physical assault. While his weekly streams and radio plays — composed of various solo recordings under names including Diddy, Puff Daddy and P. Diddy — could be expected to experience some decay as the weeks passed after the album’s launch, the controversies arguably accelerated Combs’ downturn with listeners.
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When Combs stepped down as chairman of digital media company Revolt a week later, his streams fell 22%, while his radio spins fell 36%. Two weeks after that — when brands severed ties with Combs’ e-commerce company, Empower Global, and Hulu scrapped plans for a reality show involving Combs — his radio plays fell another 55%.
That’s not to say that being in the news always hurts an artist’s streaming numbers. After Combs was arrested on Sept. 16 after being indicted for allegedly running a federal sex trafficking and racketeering conspiracy, U.S. on-demand streams of Combs’ music jumped 37% in the week ended Oct. 3. That Combs’ music benefitted from negative publicity isn’t a surprise — heavy media coverage, whether due to a death or a high-profile lawsuit, tends to influence what listeners seek out on streaming platforms. But the post-arrest bump was short-lived. Three weeks after Combs entered the Metropolitan Detention Center in Brooklyn, his streaming numbers had fallen to pre-indictment levels.
Diddy
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Radio is a different story. While many listeners continued to stream Combs’ music, radio programmers, who risk losing advertisers by playing controversial artists, quickly abandoned Combs. In the first quarter of 2023, well before any public signs of impropriety, Combs’ music was getting played on U.S. radio anywhere from 800 to 1,000 times per week. But the March 25 FBI raids on Combs’ homes in Los Angeles and Miami coincided with a 27% drop in weekly radio spins. By the time a video of Combs assaulting Cassie in the hallway of a hotel surfaced at CNN in May, weekly spins of Combs’ songs were down to 352 — 94% below where they were when Cassie filed her lawsuit seven months earlier. By June, his weekly radio plays had dropped below 200.
Radio’s interest in Combs’ music reached a nadir soon after. The week after his arrest on Sept. 16, Combs’ weekly radio spins were down 25%, and radio programmers have largely refrained from playing his music ever since.
Combs’ experience at the hands of music streamers and radio stations echoes that of R&B singer R. Kelly a few years earlier. Long hounded by allegations of sexual abuse, Kelly managed to avoid accountability until the Washington Post ran a story titled “Star Treatment” that detailed how the music industry overlooked his deeds. In the wake of the article, Spotify and other streaming platforms decided in May 2018 to deemphasize Kelly’s tracks in algorithms and editorial playlists, and his average weekly U.S. on-demand streams dropped 10%. Radio programmers had an even bigger impact: Kelly’s weekly U.S. radio plays dropped 29% following the article’s publication.
Kelly’s arrest in February 2019 didn’t lead to an immediate drop in his streaming numbers; throughout 2019, his weekly on-demand streams consistently hovered around 15 million to 16 million. But radio programmers began abandoning him; by the time Kelly was arrested and charged by the state of Illinois in February, his weekly radio plays had already bottomed out at just over 100, down from about 2,000 a year earlier.
Over the next few years, streams of such songs as “I Believe I Can Fly” and “Ignition” would gradually and consistently decline. In 2020, Kelly’s tracks were doing roughly 9 million to 10 million streams per week. The next year, weekly streams fell to roughly 8 million, then 7 million.
Following a guilty verdict in September 2021, Kelly was given a 30-year prison sentence in June 2022. Like with Combs’ September 2024 arrest, media coverage of his sentence resulted in a small, single-digit gain in weekly streams, but the numbers showed a clear damage to his reputation. A week after the verdict, Kelly’s U.S. on-demand streams stood at 8.8 million per week — down 40% since the Washington Post article ran in 2018.
R. Kelly’s music seems to have reached a plateau, however, and interest in his catalog on streaming platforms has remained steady since his sentencing. Over two years later, Kelly’s weekly on-demand streams remain unchanged at roughly 9 million per week, though radio remains disinterested in playing his songs. This suggests that Diddy’s music could perform better online than at radio as his saga plays out.
Despite the music business nearing a decade of consistent annual growth, thousands of people have exited music companies in the last two years in the biggest wave of layoffs the industry has seen since the early 2000s. Spotify, Universal Music Group, Warner Music Group and BMG, to name just the biggest examples, have undergone organizational changes that restructured the companies and will collectively save them billions of dollars annually.
But the wave of layoffs of the ‘20s are vastly different than the cuts music companies made two decades earlier. The most obvious difference between then and now is the direction the industry was headed in the early ‘00s. From 1999, the year Napster introduced the world to peer-to-peer file-sharing, to 2003, the year Apple debuted the iTunes Music Store, U.S. recorded music revenues fell 18.5% from $14.6 billion to $11.9 billion, according to the RIAA. That’s a stark difference to the health of today’s business. In the last four years, the U.S. market has increased an astounding 54%.
The post-Napster years were “a matter of survival,” says Matt Pincus, co-founder/former CEO of music publisher SONGS, who at the time worked in EMI Music’s corporate development division. “That was a one-time elevator drop in the economics of the business caused by a technological innovation that fundamentally disrupted the way that people used our product.”
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The sudden arrival of both file-sharing applications and widespread internet access caused CD sales to plummet, creating a vicious cycle of layoffs, consolidation and more layoffs. Take EMI, which laid off 1,800 of its 8,000 staffers in 2002. Still reeling five years later, EMI was acquired by private equity firm Terra Firma in 2007. Terra Firma’s restructuring of EMI resulted in another 2,000 layoffs in 2008. As industry revenues continued to decline, Terra Firma was unable to keep up with its obligations to lenders. Citigroup ended up taking EMI and selling its parts to Universal Music Group and a Sony Corp.-led consortium, resulting in even more layoffs.
Continuously falling revenues created a need to cut expenses through consolidation. When labels acquired competitors or merged companies to help stop the financial bleeding, the elimination of redundant jobs created the desired cost savings. BMG laid off hundreds of staffers in 2003 when it acquired Zomba Music Group, for example, and another 50 people when it integrated J Records and RCA. The same year, UMG laid off 75 MCA employees as part of the label’s merger with Geffen Records.
Retail was being purged, too. In 2003 alone, at least 600 chain stores and 300 K-Mart stores — accounting for 5% of the prior year’s album sales — closed their doors, and Best Buy sold the 1,100-store Musicland chain to a leveraged buyout firm. Retail’s problems sent shockwaves through already struggling record labels. When Tower Records went out of business in 2006, Universal Music Group Distribution (UMGD) had to immediately lay off a dozen people, says Jim Urie, former president/CEO of UMGD.
It seemed like the job cuts would never end. When Universal Music Group cut 1,350 jobs — 11% of its workforce — in 2003, CEO Doug Morris was open to cutting more if necessary. “It depends on how fast the [digital] market gains traction and how fast the CD market continues to erode,” Morris told Billboard at the time. “If [one] doesn’t gain traction and the other erodes faster, we’ll keep trimming, because you have to run a company that way.”
Two decades later, the music industry is in a vastly better position. Many companies with solid revenue growth were still forced to reduce their staff, though, after over-hiring during the pandemic as digital platforms exploded in popularity. “People got drunk during COVID,” says one former major label executive. Digital businesses “started to have this burst,” he adds, “and we kind of caught a hangover across the business.”
Public companies — in music but also technology leaders such as Meta and Google — facing investor expectations opted to thin down. UMG, which went from an average of 8,800 full-time employees in 2020 to just under 10,000 in 2023, began laying off staff in March as part of a restructuring that will save an estimated $270 million annually. Likewise, Spotify ballooned from about 5,600 in 2020 to 8,360 in 2022 before laying off about 25% of its workforce in 2023.
Aside from the need to reduce bloat, recent layoffs reflect the normal course of business that sees companies constantly expanding, shrinking and re-tooling, says Pincus. “The music business goes through consolidation cycles where it becomes more fragmented, and then it consolidates, and then becomes more fragmented, and then it consolidates. We happen to be in a consolidation cycle at the moment. That’s the normal cyclical behavior of the industry. What was going on in the Napster time was not cyclical.”
Recent layoffs are also about positioning labels “to move forward,” says Urie, “and there are new skill sets involved.” Bob Morelli, former president of RED Distribution, agrees. “As technology has changed, [the business is more about] social media and targeted advertising,” he says. “And now with AI coming in, and it’s harder to get bigger tours, these companies are going to make staffing adjustments.” When Warner Music Group announced in 2023 it would cut 4% of its workforce, new CEO Robert Kyncl described the layoffs as necessary “in order to evolve” and position the company for “long-term success” by hiring for tech initiatives and “new skills for artist and songwriter development.”
Labels have also revamped how they discover new artists. The stereotypical A&R rep that scours clubs looking for the next big thing has been replaced — or at least augmented — by data experts. “Most of the A&R departments are more like a data analytics thing,” says David Macias, president of Thirty Tigers, an early adopter of the distribution and label services model. “They’re scrubbing data to find spikes that they can justify chasing.” The way labels and distributors pitch music to streaming services has also changed, Macias notes, from a people-focused process to one driven by automation. “How people find the music is going to have to do less and less with people with special relationships.”
The Atlantic Music Group restructuring may reside in a different category. “That seems like a house cleaning,” says Urie, “because they blew out a lot of people that are perfectly capable.” That’s a sign of a youth movement happening at the label, says another former executive, rather than a reaction to over-hiring or a natural business cycle. Elliot Grainge, the 30-year-old founder of the label 10K Projects, took the CEO role on Oct. 1. Longtime label leader Julie Greenwald announced her resignation five days after Grainge was named CEO. Atlantic ended up cutting roughly 150 jobs — many of them experienced executives with long tenures at the company.
Regardless of the era or business cycle, music executives — and the CFO making the strategic decisions — must answer the same questions, says Morelli. “What is my company going to look like? Are we going to go after developing artists? Are we going to go after legacy artists? Are we going to do a small amount? Are we going to win with volume? And how do you accommodate getting this message out to potential fans and consumers?”
The thousands of people laid off by music companies in recent years face better prospects than music professionals faced two decades ago. Back then, many executives and artists were still viable but needed the proper infrastructure around them, says Macias, who co-founded Thirty Tigers in 2002 after being laid off from Arista Nashville. Digital startups and the burgeoning digital distribution business gave some people a way to remain in music. But the post-Napster years were followed by another decade of industry contraction as downloads replaced CD sales.
If the majors aren’t hiring in 2024, the growing independent sector could provide a refuge for the recently unemployed. In recent years, investment in independent music companies has exploded as entrepreneurs in streaming, digital distribution and social media loosened the major labels’ grip on the industry. The current No. 1 song in America, Shaboozey’s “A Bar Song (Tipsy),” comes from an independent, EMPIRE.
“It’s going to be independent labels, like it always has been, that figure out the new way to get new records in the hands of an audience that doesn’t know they like it yet,” says Pincus.
News that Bytedance will shut down its 18-month old TikTok Music on-demand music streaming service might have come as a surprise to some people. After all, TikTok has over 1 billion monthly active users globally and singlehandedly redefined music discovery by turning generation of smartphone users onto music-based, short-form videos.
But TikTok Music’s demise was entirely predictable. Building a sustainable on-demand music streaming service is incredibly challenging. The digital music graveyard is littered with streaming products that didn’t last — remember Rdio, Boinc, Guvera, Turntable.fm or SpiralFrog? Not even a well-funded platform from a corporate giant is guaranteed of success. Sony’s Music Unlimited didn’t last. Nor did Microsoft’s Zune. Xiami, founded by Chinese e-commerce giant Alibaba, shut down in 2021 after 12 years.
Bytedance’s uphill road was made more difficult when it took on a different role with TikTok Music. TikTok was an insurgent that built itself without the typical constraints facing typical streaming services. The app created a new use case for music in the same way the download succeeded the CD and streaming succeeded the download. TikTok Music, on the other hand, was constrained by the licensing terms that govern on-demand services.
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As a result of those rules, Bytedance built something more like Spotify than TikTok because it didn’t have any other choice, says MIDiA Research’s Mark Mulligan. “TikTok Music had massive potential to be these so many things that didn’t look anything like any other [digital service provider],” he says. “But they still ended up having to make something that looked pretty much like any other streaming service.”
That TikTok Music resembled every other music streaming service was a problem, Mulligan argues, not a solution for a new market entrant. On-demand music has become a well-functioning utility like water service, he explains, but one that doesn’t build communities, drive fandom or create conversion — things TikTok does well and TikTok Music couldn’t. “We all really value the water that comes out of our taps, but we rarely go down to the local bar and talk to our friends about how great the water is that comes from taps,” says Mulligan.
These aren’t just any utility companies TikTok Music has been competing against. Market leader Spotify, with its $76 billion market capitalization, is far smaller than the next three companies, Apple, Google and Amazon. These four companies, and even smaller ones like them, have spent years pouring resources into building products and features that keep people listening to music, podcasts and, in the case of Spotify, audiobooks.
TikTok is great at creating engagement, too, but getting people to listen to full songs is different than feeding them a never-ending series of 15-second video clips, says Vickie Nauman, founder of CrossBorderWorks, a music tech and consulting and advisory firm. “You can’t necessarily translate that to something else.”
Things might be different if TikTok Music could differentiate itself on catalog by offering music not available on other music platforms. That’s how it works with on-demand video streaming. But global music services have, more or less, the same catalogs. Offering the world’s music has long been part of the music subscription service’s value proposition. So, music streaming services instead compete against one another on their user experiences.
On-demand services “had to make [the user experience] so elegant, so intuitive, and really, really customize it to consumers,” Nauman explains. In her experience, people underestimate the difficulty of creating a great product and executing the technology that underpins it. “It’s incredibly challenging,” she says. “Not only the user experience,” she continues, but the technology required to manage many tens of millions of tracks. “I think a lot of companies just really misperceive it.”
Changing consumer habits was always going to be a problem, too. It would be presumptuous to think anybody with a TikTok app would become a TikTok Music subscriber. Not every iPhone owner subscribes to Apple Music even though Apple offers a free trial to new iPhone owners and bundles the music service into a money-saving package, Apple One. Even though Alphabet owns both the Android operating system and YouTube, not every Android Phone owner subscribes to YouTube Music.
“To some extent, I’m not surprised” by TikTok Music’s failure, says MusicWatch principal Russ Crupnick. When MusicWatch surveyed American TikTok users about their interest in a standalone TikTok streaming service, the reaction was “surprisingly low” and “very lukewarm,” he says. (TikTok Music never launched in the U.S.) “Getting most people to switch [subscription services] at this point is a bit of a challenge. You’re more likely to get people to use multiple services.”
In the U.S., self-pay subscribers — not including free trials — have an overage of 2.3 music subscription services, according to MusicWatch. That includes Amazon Prime, which online shoppers buy mainly for free shipping, as well as satellite radio service SiriusXM. Asking people paying for multiple services to pay for one more music subscription plan is a tall order for a newcomer like TikTok Music. What’s more, MusicWatch found that Spotify ranks behind only Amazon Prime in terms of subscriber passion. When the economy gets rough, Spotify users are relatively unlikely to cancel their plans.
Zoom out and the demise of TikTok Music reveals something else about the music streaming market. In 2024, the number of global platforms may have reached a steady state and new entrants are unlikely to appear (and, like TikTok Music, any attempts will be unsuccessful). Experts who spoke with Billboard don’t foresee there being another company with both the funding and the stomach to take on the demands of licensing and administering rights for a huge amount of music.
“We’re at a fork in the road where all of these broad catalog licenses are kind of exhausted,” says Nauman. Gaming companies have the money but don’t need to license entire catalogs, she adds. Fitness companies that had licensed large catalogs now “want simpler solutions.”
If new entrants are going to find success, says Mulligan, it could be in “regional hubs” in which streaming services can license a smaller amount of local music and focus on markets where Western repertoire is less important. In China, for example, a market dominated by local music licensed by local rights owners, Tencent Music Entertainment has 117 million subscribers and Cloud Music had 44.1 million at the end of 2023 (the last figure the company made available). But regional services are being threatened by the bigger global companies. In some populous markets such as India and the Philippines, dominant Western companies have pushed aside local players.
In the end, Bytedance doesn’t need TikTok Music to be an influential force in music. Mulligan thinks it’s possible that the “majority” of music activity — not revenue — will happen on TikTok within three to five years. Younger people want to create, not just consume, he says, and TikTok could become a self-contained ecosystem that captures more of its users’ time — at the expense of the kind of on-demand streaming business that Bytedance is now abandoning.