Should The Music Industry Follow The Video Game Industry?

Market Trends:

Universal Studios Brings Record Online Streaming Revenue At Theaters’ Expense

As movie theaters continue to remain closed in the midst of COVID-19, Universal Pictures made the risky decision to not postpone their opening of the Trolls sequel, “Trolls World Tour” and instead distributed the film online. By teaming up with streaming platforms like Apple TV, the movie ended up being a tremendous success, bringing over $100 million in rentals within three weeks (more revenue that the original “Trolls” did in five months in theaters). This success suggests that digital streaming and releases may become a new normal among production companies operating in a post-COVID-19 entertainment industry. 

Spotify’s Premium User Base Increased By 6M In Q1 2020/ What This Means For Streaming

Despite music streaming being down at the start of COVID-19 (see Bumper Bites 03/30 article), Spotify’s earnings call reported a 6 million increase in subscribers from last quarter, an optimistic number in Spotify’s pre-COVID-19 forecast. Additionally, a Spotify representative further clarified that it was hard hit markets like Italy and Spain that drove down streaming numbers and daily active users, but have since seen rebounded in those markets. The representative also discussed overall consumer behavior trends, where “listening time around activities like cooking, doing chores, family time, and relaxing at home have each been up double digits over the past few weeks.” These statements suggest that the digital streaming market is still maintaining its growth despite current market conditions.

Streaming Leading Australian Music Industry Success 

The Australian record business experienced its 5th consecutive year of growth in 2019 with streaming as the main driver. Total annual industry revenue increased by 5.5% year-over-year to A$555 million ($350 million), with streaming accounting for A$455 million ($280 million) or 80% of the overall market. With 18% year-over-year growth, streaming should continue to grow as an area of significant focus for Australian artists. With a properly executed strategy, artists can also capitalize on the expansion of on-demand streaming services in these foreign markets (e.g. Australia, Latin America, Australia, Asia) to bolster plays and brand awareness.

Big Winners:

Artists X Video Games

Consumers are getting bored with the inundation of “at home” living room concerts. Some artists have gone outside the box to collaborate with video games and appeal to where their fans are now. The beauty is any level of artist can do this. Here are a couple of our favorites:

Travis Scott

Collaborated with Epic Games’ “Fortnite” to create a 10-minute preset virtual concert that drew in over 12 million concurrent viewers, making it the largest in-game gathering ever. The concert promoted his new song, “Scotts”, which got 7.45M plays in the first 24 hours, currently #1 song.

100 gecs

Unofficial collaboration with “Minecraft” to create a virtual concert and live streamed their DJ set.

Market Shifts:

Proposal To Restructure The Music Industry Like Epic Games

Tim Ingham, contributor for “Rolling Stone” pointed out three aspects of Epic Games Store (video game company known for “Fortnite”) that the music industry should adopt. Below is Epic Games’ model, the Music Industry’s current model, and the takeaways of the proposed change.

1. Epic Games Store revenue splits between developer and store are 88|12 respectively

Music Industry: Digital Service Providers or “DSP” (e.g. Spotify and Apple Music) split between artist and DSP is 70|30 respectively

Takeaway: More $$$ for creators

2. Influencers get a minimum 5% revenue share of any consequent sales on Epic Games Store.

Music Industry: No current revenue share agreement for music influencers on platforms like Tik-Tok, although paid promotion/ brand partnerships exist

Takeaway: Influencers are properly compensated, are incentivized by production results

3. Epic Games licenses out “Unreal Engine,” a video game building block for developers in exchange for a 5% licensing charge

Music Industry: Music production software is a significant upfront cost for artists, no licensing percentage agreement

Takeaway: Creators have lower barriers to entry for music production software, revenues are split based on contributors to the production of the song.

Success, You're in!

Bumper Bites newsletters reflect the opinions of only the authors who are associated persons of Stampede Securities, Inc. They are meant for informational purposes only, are not intended to serve as a recommendation to buy or sell any security and are not an offer or sale of a security. They are also not research reports and are not intended to serve as the basis for any investment decision. Any third-party information provided therein does not reflect the views of Stampede Securities Inc. Stampede Securities, Inc. is a funding portal (“Bumper Collective”) registered with the Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: