Amazon Music: From Dark Horse to Thoroughbred

Neatly ahead of Spotify’s Q4 earnings, Amazon has taken the rare step of announcing subscriber metrics for Amazon Music (inclusive of Prime Music and Music Unlimited). Amazon Music closed 2019 with 55 million ‘customers’ across free and paid. Based on our Q2 2019 numbers for Amazon and the fact that Amazon’s free tier was only rolled out in late 2019 across a few markets, MIDiA estimates Amazon Music’s actual subscriber number to be 50 million. This implies a subscriber growth of 16 million on 2018. Make no mistake, this is a really strong performance. From a bit-part player in 2015 and 2016, Amazon Music is now firmly established in streaming’s leading pack and looks set to overtake Apple Music in 2020. What’s more, unlike Apple and Spotify, Amazon’s wider business is not a top-tier player in dozens of countries, so Amazon Music’s geographic footprint is uneven – making its global figure even more impressive. Indeed, underneath this headline figure Amazon is the number two player in some of the world’s biggest music markets. Amazon is now in the big league.

amazon music 55 million users 50 millionn subscribers midia research

Since Q4 2016, Spotify has averaged 34.8% global music subscriber market share, meaning that despite fierce competition it has managed to stay ahead of the pack, actually increasing share slightly from 34.2% to 35.3%. Amazon’s success is in some respects even more impressive. In Q4 2015 Amazon Music’s subscriber base was just 18% of Spotify’s. By Q4 2019 (assuming Spotify hit the 124 million that MIDiA predicted for Q4 2019) Amazon’s 55 million subscribers represented 40% of Spotify’s – more than doubling its relative scale.

However, the DSP that should be paying most attention is Apple Music. Over the same period Amazon Music went from 49% of Apple’s subscriber base to 82%. At this rate Amazon could trump Apple for second place in 2020. It has already done so in a number of major music markets, including Germany, the UK and Japan – three of the world’s top four recorded music markets.

Extending the market

Amazon is often competing around, rather than with, Spotify and Apple. The combination of Prime Music and Echo / Alexa means that Amazon is extending the addressable market for streaming by unlocking older, higher-income households that do not fit the young, mobile-first demographic mold that the streaming market generally trades upon. Ellie Goulding’s Amazon exclusive ‘River’ claiming the UK Christmas number one spot illustrates that this under-served segment is far from a niche. Of course, Amazon is now also competing for the younger, mobile-centric consumer – Music Unlimited grew by more than 50% in 2019 – but, along with its new ad-supported and HD tiers, Amazon is pursuing a segmented strategy that is pushing beyond its older Prime Music beachhead.

Amazon Music’s success trades heavily on Amazon’s overall brand reach and existing customer relationships, so its global brand reach will always be less evenly distributed than Apple and Spotify’s. However, throughout 2018 and 2019 Amazon has been assertively building its reach in non-core markets through music and video. Traditionally Amazon has been a retailer first and a content brand second. Now, in newer markets across the globe, Amazon is building a reputation as a digital content provider first and retailer second. Though Amazon is clearly going to remain a retailer first globally, streaming is proving to be a powerful tool for establishing the company in markets that would have previously taken years and hundreds of millions of dollars to set up as fully functioning e-commerce markets.

While rightsholders will have well-grounded concerns about Amazon’s corporate objectives of using content to help sell consumer products, what is now undeniable is that Amazon Music and Video are both top-tier content services. Back in 2017 we suggested that the dark horse of Amazon was emerging from the shadows; now it is clear to see it is a thoroughbred in its own right.

Spotify AND Apple Lead Podcasts – It’s All Down to How You Measure It

midia podcast tracker q4 2020The podcast platform data from MIDiA’s Q4 tracker is in. These are the high-level findings:

  • Apple still leads overall: A recent report showed that Spotify has become the leading podcast platform in the US. MIDiA’s Q4 Tracker data shows that among regular podcast users, Spotify is very nearly but not quite the leading platform in the US, just trailing Apple’s podcast app – though the difference is so small that it could be within margin of survey error. However, when Apple Music is factored into the equation, Apple remains the leading platform.
  • Spotify the leading single platform: In terms of single platforms – i.e. considering Apple Music and Apple’s podcast apps separately – Spotify has quickly established a leading position across all markets surveyed except the US. Spotify is betting big on podcasts, but this bet is as defensive as it is offensive. Spotify knows that its users over index for podcasts – 28% use them weekly, compared to 15% of overall consumers. If it did not go big with podcasts it was always at risk of losing share of ear as podcasts grew, in the same way Amazon lost CD buyers to Apple’s iTunes. It has taken Amazon years to start winning back the spend of its music consumers, but it could tolerate that inconvenience as it makes most of its money elsewhere. Spotify has no such luxury.
  • National broadcasters faring well: Radio broadcasters lost their younger music audiences to streaming. They were not going to sit back and let streaming services then go and steal their older, spoken word audiences without a fight. In many respects, radio broadcasters have a greater chance of being power players in podcasts because their decades of programming expertise will take time for streaming services to learn. With music, they were sitting on the shoulders of a decade of experience learned by Apple’s iTunes. The three national broadcaster apps we tracked (BBC Sounds, NPR One, CCBC Listen) had mixed fortunes, but all have solid adoption. None more so than BBC Sounds, which is the second-most widely used single platform in the UK – a testament to the BBC’s sometimes controversial Sounds strategy. However, one major factor is that broadcaster podcast app users are much older than streaming service podcast users, and indeed of dedicated apps like Acast and Stitcher. This shows that broadcasters are doing a good job of bringing their older audiences over to podcasts but are not yet making podcasts an entry point for younger users lost to streaming.

These findings come from MIDiA’s quarterly tracker survey and will be presented in much more detail in MIDiA’s forthcoming ‘Podcast Platforms’ report.

If you are not already a MIDiA client and would like to learn more about how to get access to MIDiA’s research, data and analysis, then email [email protected]

The Meta Trends that Will Shape the 2020s

MIDiA Predictions 2020CES, the big annual consumer tech show, is underway in Las Vegas. Unlike in most previous years, there has been little in the way of big new announcements. This is in large part because we are reaching a degree of maturity in the consumer landscape, with big new developments being replaced by smaller, sustaining innovations. Nowhere is this better seen than in smartphones, where manufacturers try to convince consumers that tweaks to the camera represent genuine paradigm shifts worthy of buying a new handset. The same applies to streaming music, where the leading Western services have seen little in the way of substantive change. Yet a slowdown in consumer tech innovation often paves the way for an acceleration in business and cultural change, as the companies and creators begin to grasp and respond to the real potential of the technology at their fingertips. At the start of the millennium’s third decade, this is where the digital content marketplaces stand. Here are MIDiA’s predictions for the meta trends that will shape content and media in the 2020s:

  • Attention saturation: MIDiA’s big call over the last few years has been that the attention economy will peak. This has now happened. As we enter the third decade of the 21st century, this unintended consequence of the digital content economy is entering its next phase. We are now in the era of attention saturation, where every new consumption minute gained comes at the cost of consumption time elsewhere. Mobile games were hit first, and audio will be next, with radio already losing audience share in the audio arena. Attention saturation was always going to be an inevitability. The important question is not why this is happening, but what will come next and what the right strategies are for surviving and thriving in this post-peak world. Measuring sentiment – rather than purely time and money spent – will emerge as the methodology for measuring success in the era of attention saturation.
  • Vertical integration: As we announced in our 2019 predictions report, the tech majors are doubling down on services, e.g. Apple (a whole suite of subscriptions), Google (YouTube Music, YouTube Premium), Amazon (IMDb TV, ad-supported music and Amazon Music HD). Part of this trend in the longer term will be big tech companies acquiring media assets. We saw this start in 2019 with Tencent’s stake in Universal Music, as well as music publishing companies expanding their stacks (e.g. Downtown Music Holdings acquiring CD Baby parent AVL). Watch for record labels, sports leagues, TV networks and games publishers getting snapped up for true vertical integration.
  • Social video will eat the world: Four years ago, MIDiA argued that video was eating the world. Now social video is eating the world. Video is becoming the omnipotent format through which we communicate, consume and share. Captioning looked like it was heralding a new era of silent cinema, but it was in fact a trojan horse – a means of enabling us to fit extra video consumption into our wider consumption patterns. Over time, though, sound has become more important and with the increased tolerance of video we are now far more willing to unmute. Nowhere is this better seen than Instagram and TikTok. Audio is the victim in that equation.
  • User-modified content: Back in 2009 DJ Spooky claimed that the 21st century was going to be ‘the era of mass cus­tomisa­tion’. Ten years on this is starting to come to pass. Progressively more of what we consume has reached us after being adapted by someone else, whether that be personal recommendations, likes or comments. Additionally, more of the content we view has been modified, such as memes, captioned photos, Instagram photos, and TikToks. 2020 will be see the rise of user-modified content (UMC) with more audiences leaning forward and taking ownership of the content they view. The lean-forward shift will accelerate in 2020.
  • Engagement clusters: The first phase of the consumer web was shaped by internet portals such as AOL and Yahoo – these were windows onto the digital world. Today, Facebook, Twitter and TikTok perform a similar role for slices of the digital world – the 21st century portals. Audiences are now fragmented across multiple apps and destinations. Smart – and typically big – companies are therefore building engagement clusters. Sometimes these are ecosystems (e.g. Apple, Amazon), but in other instances they are collections of content experiences, e.g. Disney+, Hulu, ESPN+. More clusters will emerge in 2020. An early move could be Apple adding Arcade to its Apple Music / Apple TV+ student bundle.
  • The abundance paradox and the discovery crisis: Content companies have responded to the attention boom by over-supplying content, resulting in a growing tyranny of choice. We spend so much time trying to find content through the clutter that we either do not find enough new content or have less time to consume. Additionally, we simply experience a lot of new content, flying past us in content feeds and curated playlists, rather than actually discovering it. The emerging abundance overload is the entertainment equivalent of feeling nauseous from eating or drinking too much. 2020 will see this trend accelerate, with slowing and even declining user numbers for incumbents in mature markets.

This analysis is taken from MIDiA’s report 20/20 Vision | MIDiA Research Predictions 2020.

The report includes predictions across music, video, games and sports. Why should you read it? Well, we had an 83% success rate for our 2019 predictions report, including:

  • Apple makes privacy a product; music catalogue acquisitions will accelerate; one more really big merger and acquisition (Sprint / T-Mobile); virtual collective experience (Marshmello / Fortnite); Netflix will lose market share; DAZN will dominate US boxing; tech majors will disrupt gaming (Aracde and Stadia); Spotify will launch a major news podcast (El Primer Café).

If you are not already a MIDiA client and would like to learn more about how to get access to MIDiA’s research, data and analysis, then email [email protected]

Ellie Goulding and Billie Eilish Are Streaming’s New Normal

Less than a week into the new decade and we already have the first indications that the streaming rulebook continues to be rewritten faster than the ink can dry on its last entry. Three separate articles, on the surface unrelated, when stitched together create the outline of a new streaming narrative that while firmly rooted in recent developments represents an entirely new chapter for the music industry:

  1. Ellie Goulding’s ‘River’ was the UK Christmas number one despite being an Amazon exclusive
  2. Jimmy Iovine claims Drake and Billie Eilish each have more streams than the entirety of the 1980s
  3. UK streaming revenue growth slowed, adding £191 million in 2019 compared to £210 million in 2019

Fusing consumption and retail

Streaming’s impact is both commercial and cultural, in large part because it fuses what used to be retail and radio. Like some kind of musical nuclear fusion, it smashes discovery and consumption together to create a chain reaction with explosive implications. In the old world, repeated radio spins drove awareness and then sales. In streaming environments, lean-back streams are simultaneously radio-like listens and sales. The distinction does not matter for streaming services – they are focused on user acquisition, engagement and retention, but for labels it challenges the very premise of what marketing campaigns are meant to achieve. It is in this environment that today’s streaming stars are made.

‘More of more’

With streaming services lacking any meaningful way to differentiate, they are forced to compete on who can deliver their users’ the most new music to drive the most listening. This strategic imperative of ‘more of more’ is at direct odds with the objective of any label campaign, which is inherently about ‘more of less’, i.e. listen to this song more instead of more songs. The net result is vast amounts of streams spread widely, but also an environment in which hits become megahits. The songs that get traction experience a domino effect of successive algorithmic decisions, rapidly pushing songs with buzz to a progressively wider number of playlists and users. In the old world this would have been radio airplay success; now it is just volume of streams.

Catalogue Darwinism

Because of the focus on new, streaming-era artists end up with far bigger streaming volumes than older artists that were ‘bigger’ in their respective eras, but an afterthought in the streaming era. Hence, Drake and Billie Eilish being bigger than the entirety of the 1980s. Back in mid-2018 MIDiA published a report predicting that music catalogue was going to decline. We faced a lot of opposition then but now we are beginning to see that catalogue is indeed undergoing a fundamental change. For deep, legacy catalogue, streaming dynamics are stripping out the long tail and boiling down entire decades to a handful of tracks. Think of it this way: if 10% of the artists released in the 1980s were ‘successful’ at the time, and 10% of those were successful enough for their music to still be listened to now, and that the songs that are still listened to are 10% of these artists’ entire 1980s output, then you end up with 0.1% of the music from the 1980s being streamed at any meaningful scale now. Added to that, new music gets pushed to more lean-back playlists so is listened to more times. The multiplier effect for new music acts as a divider for older music. As an illustration, 40 music videos on YouTube have more than one billion views but in October 2019 Guns ‘n Roses ‘Sweet Child o’ Mine’ was the only one from the 1980s that had a billion views.

If you own the rights to those catalogue gems then the value of that asset is arguably higher now than ever before, because it has won the Darwinian game of catalogue evolution. But the rest fall by the wayside.

Ellie Goulding: niche mainstream

So, the current dynamics of streaming programming favour new versus old. It may not always be so, but this is where we are right now. These same dynamics can then be used to create hits – demand creation, if you like. This is where Ellie Goulding comes in. Goulding’s Joni Mitchell cover ‘River’ was an Amazon exclusive yet became the overall UK number one in large part because Amazon ensured it was on just about every holiday-themed playlist. Every time someone asked Alexa to play Christmas music, ‘River’ soon found its way there. Because Echo listening skews so heavily lean-back, ‘River’ simply became part of the sonic festive wallpaper, much in the same way ‘All I Want for Christmas’ did on radio. Just like with radio, lean-back listeners are unlikely to stop whatever else they are doing in order to change the track. Because streaming economics do not differentiate with lean-back and lean-forward listening, passive listening is just as valuable as active listening. Radio has become as valuable as retail but is much easier to manipulate.

The other crucial aspect of this is that Amazon has shown that you only need to find and activate a small slice of the mainstream to have a mainstream hit. As MIDiA first said last year, niche is the new mainstream.

At the start of this post I stated that streaming’s effects are both cultural and commercial. The commercial backdrop to all of these consumption and programming shifts is that the rate of revenue growth is beginning to slow (not just in percentage terms – that is a natural effect of markets getting bigger) but also in absolute terms. Early last year we predicted that streaming growth would start to slow towards the end of 2019 in developed markets and the ERA figures for the UK are the first evidence of this shift. Globally, growth will be sustained by emerging and mid-tier markets, but in markets like the UK and US, growth is peaking. The significance is that the conflation of radio and retail does not matter so much when everything is growing. When growth slows, however, quirks of the market can become business challenges. The ROI of throwing money at campaigns to cut through the audio clutter becomes problematic when the promise of the pie getting ever bigger begins to wane.

All of these things are of course simply part of a maturing and changing market. Nevertheless, the marketing strategies currently employed have been developed in an environment of growth abundance. The challenge for streaming’s next chapter is finding the new rules that are more ROI focused but can still play to streaming’s consumption strengths. Delineating different rates for lean-forward and lean-back streams feels like a logical place to start, but more evolution will need to follow – each iteration of which will trigger its own waves of unintended consequences. Exciting times.