for a while, universal music group Common Music Group (UMG) is prominently positioned to higher monetize superfans, a phase of music listeners keen to pay greater than others to attach with them via merchandise, unique music and different options Construct nearer relationships with favourite artists.
Talking at Capital Markets Day 2024 in London on Tuesday (September 17), Common Music Group’s prime brass laid out what it calls its superfan technique – each what the corporate has been doing and what it plans to do within the coming years. matter.
UMG believes superfans are key to conserving music trade income rising because the trade started to get well from the disastrous period of music piracy.
To date, income progress within the streaming period has been about scale—extra subscribers to streaming providers, leading to larger income for music corporations. However going ahead, UMG goals to get about half of its income progress from ARPU (common income per consumer) enhancements, in different phrases, a shift towards higher monetization of present music listeners slightly than merely including customers group.
That is to not say Common Music Group thinks music subscriptions have reached a saturation level: Firm executives have repeatedly made clear that there is nonetheless loads of potential for progress within the house. There are some 600 million There’s a rising variety of paid music subscribers in at this time’s world, and UMG expects this quantity to proceed to develop 1 billion By 2028 and already trying ahead to 2 billion Milestones for the approaching years.
However a one-size-fits-all music subscription mannequin means the music trade is losing cash, a actuality illustrated by UMG’s government vp, chief monetary officer and president of operations. Boyd Muir.
“Tremendous fan, probably the most ardent 20% arrive 30% Of all music listeners who’ve ever pushed over 70% recorded music spending,” Muir informed the Capital Markets Day viewers.
However at this time, with everybody paying the identical quantity for a streaming subscription, the income generated by music audiences has flatlined, Muir defined.
“As[UMG CEO and Chairman][UMG執行長兼董事長[UMGCEOandChairmanSir Lucian Grange]factors out that whereas superfans hearken to music for hours a day and informal followers just a few hours per week, streaming makes monetization equal for all followers,” he mentioned.
Or, within the phrases of UMG Government Vice President and Chief Digital Officer Michael Nash: “The simplicity of this mannequin, wherein all streaming media are equal, has led to points the place site visitors is prioritized over worth” – points equivalent to streaming media fraud and gaming on music streaming platforms.
This flat income mannequin is why within the age of music streaming, monetization per listener is “solely 50% Muir identified.
“Increasingly more companies are and can proceed to be direct-to-consumer.”
Michael Nash, Common Music Group
So what to do? For UMG, a key side of higher monetization for superfans is an rising concentrate on direct-to-consumer gross sales—in impact, an growth from the “wholesale” mannequin of promoting music via streaming retailers To UMG’s mannequin, artists promote music on to customers.
“We’re growing increasingly merchandise and experiences for our most passionate and engaged followers,” Nash mentioned, pointing to the next examples: billie eilishof listening party in theater this spring, and roll out beat the galaxyMusic Middle on UMG Gaming Platform Robloxgiving avid gamers the chance to just about work together with artists, e.g. Jungblud, Mae Stephens and boy cudi.
Many different UMG artists equivalent to olivia rodrigo, imagine a dragon, Post Malone and nicki minajhas been developed on Roblox.
Different efforts embody “a totally immersive 360-degree virtual rolling stones shopreplicating the band’s iconic flagship retailer on London’s Carnegie Avenue earlier this month,” Nash famous.
Nash made no point out of a few of the much less direct efforts UMG has been enterprise, equivalent to invest In Okay-pop big transferof Weaversis a superfan platform that has been busy increasing its largely Korean fan base into North America with assist from Common Music Group.
But all of it factors to a major growth of Common Music Group’s enterprise mannequin from one centered on promoting data to 1 centered on promoting artist-fan relationships.
“Increasingly more companies are and can proceed to be direct-to-consumer,” Nash mentioned.
He famous that UMG’s direct-to-consumer (DTC) income is rising at a compound annual progress price (CAGR) of 33%.
“The Tremendous Fan DTC alternative is greater than only a free, high-growth income alternative, it’s additionally a major aggressive benefit that will increase our enchantment to artists and provides us the flexibility to do extra for them than our rivals, ” Nash added.
UMG has quite a bit to say about its efforts to higher monetize its superfans. Listed here are another issues we realized from the Capital Markets Day presentation.
1) UMG is working with Spotify On the streaming platform’s new “tremendous premium” subscription tier
It has been rumored for over a yr, and some months in the past we lastly acquired affirmation: Spotify A brand new “ultra-premium” tier is being established.
The brand new tier might value approx. $5 The streaming platform’s CEO mentioned the month-to-month premium subscription, which prices greater than the default, is designed for “enormous music lovers who’re primarily on the lookout for extra flexibility in utilizing Spotify and the present music options on Spotify.” Daniel Ek, said earlier this summer.
We do not know precisely what this tier will embody (if nothing else, Excessive Constancy Audio appears to be a possible guess), however we now have phrase from UMG’s Nash that the corporate is working with Spotify on this New layer.
“We’re working intently collectively to develop a sequence of compelling new options that may improve the listener expertise and additional deepen artist-fan engagement,” Nash informed the Capital Markets Day viewers.
“We count on most streaming platforms to deploy ‘tremendous premium’ tiers, enhancing the subscriber expertise, bringing followers nearer to their favourite artists and considerably rising subscription income.”
Michael Nash, Common Music Group
Like Ek, Nash did not present particulars concerning the options, however he did level to a different streaming service’s efforts to higher monetize tremendous followers: Chinese language platforms Tencent Music Leisure (TME)’s “Tremendous VIP” degree, The cost is five times the original As a recurring paid subscription.
Within the phrases of TME CEO, this degree comes with Liang Ross – “Complete on-line and offline perks equivalent to precedence entry to digital albums and… ticket bookings for dwell music occasions, together with our TMEA [Tencent Music Entertainment Awards]”.
Nash mentioned TME’s Tremendous VIP tier is “one other thrilling instance of how product innovation can considerably enhance buyer worth.”
“Adoption is already sturdy and we imagine it has crossed double digits as a proportion of its consumer base. We count on most streaming platforms to deploy ‘Extremely Premium’ tiers, enhancing the subscriber expertise and bringing followers nearer to their favourite artists , and considerably enhance subscription income.
2) UMG needs to see a extra segmented music streaming buyer base
The “tremendous premium” tier is nice, however is there room for additional segmentation of the music streaming consumer base? UMG’s Nash definitely thinks so, arguing that the video streaming market holds many classes for music streaming providers on the right way to higher monetize their buyer base.
“Netflix Utilizing three fee tiers to phase the market and seize extra customers’ willingness to pay whereas successfully fixing the account sharing downside considerably expands the consumer base,” mentioned Nash.
Within the US, Netflix gives $6.99– Month-to-month ad-included “Normal with Advertisements” plan, providing 1080p HD streaming on two units concurrently; one $15.49– a month-to-month “Normal” plan with the identical options because the decrease tiers however no adverts; and a $22.99– Month-to-month “Premium” plan with no adverts, 2160p Extremely HD streaming, and the flexibility to stream on six units concurrently.
“The common U.S. family spends greater than 4 occasions extra on SVOD than music subscriptions, suggesting there may be appreciable room for us to higher monetize music customers going ahead.”
Michael Nash, Common Music Group
Nash believes that this not solely exhibits that music streaming will be additional segmented, however that the success of video streaming in constructing a buyer base signifies that music streaming has a lot of potential consumer progress sooner or later.
Video streaming “has surpassed 1 billion Particular person paid subscribers. This isn’t a subscription plan for SVOD [subscription video on demand] Subscribers i.e. 1 billion Particular person paying subscribers,” he mentioned. “Its progress price is predicted to proceed its lead in music subscriptions via the top of the last decade.”
Nash added: “The common U.S. family spends greater than 4 occasions extra on SVOD than music subscriptions, which exhibits there may be appreciable room to higher monetize music customers.”
3) Don’t “overreact” to fluctuations in income progress
Because the driving pressure behind UMG’s income progress shifts from streaming consumer base progress to ARPU progress, and expands from music streaming royalties to direct interactions with customers, the corporate expects income progress to “fluctuate.”
“We count on there can be durations of acceleration and deceleration alongside the best way, so we encourage everybody to not overreact to the gentle swings within the cycle,” Muir informed the Capital Markets Day viewers.
This seems to be a response, at the least partly, to the sharp plunge in shares of Common Music Group (UMG) following its newest quarterly earnings report. 6% annual enhance Subscription income progress – properly beneath analysts’ expectations for double-digit progress.
Forward of Capital Markets Day presentation, UMG Issue new profit guidanceexhibiting the projected subscription income CAGR of 8%–10%the compound annual progress price of whole income is 7+% From now to 2028.world music enterprise
