RADIO PLUGGING IS DEAD! LONG LIVE DSPlugging!

The music business gradually became the multiple rights business. Music became secondary and merely an ancillary (loss leading) arm for more lucrative brand-rights exploitation activities. In an era when technology liberalised and demystified the art of music making (as well as its distribution and consumption), music content exploded, and by the simple laws of economics lost more and more of its traditionally inherent value. Revenues from recorded music crashed by over 50% between their 1999 peak and 2014.

It now seems the pendulum is swinging back. With streaming continuing its march toward the summit of music consumption formats, coupled with the looming changes in the legal and regulatory landscape of the major markets, the music business is again becoming more about the music itself — or at least as much as all the ancillary (brand related) revenue streams that have since occupied a much more prominent role in the economics of the business over the last decade. Normalization of the multiple rights structure in agreements between music companies and their artists sufficiently highlights this point — about which more can be read here.

Music promotion, by extension, has also had to evolve due to the new consumption trends. Whereas radio, the now dying medium, was so important to the promotion of new music that labels were willing to (unofficially) pay — and actually budgeted — for airplay, targeted digital marketing and placement of music on the retail sites where music is consumed is the new game. Today’s music companies now focus their marketing and promotional spend on the virtual real estate (i.e the landing pages and key playlists) of the leading digital retail platforms. Labels used to pay huge sums (anything from $50k — $150k for independents and $500k — $2m for majors) to promote an album release with 2 or 3 singles. In Nigeria, anything from N3.5 — N10m+ (i.e. $10k — $40k) per release, excluding video production costs, is the typical range of promotional budgets.

With traditional radio, the returns on these “promotional/marketing expenses” were at best indirect and intangible for the most part, and at worst a complete waste of significant resources (given that a typical label releases at least 3 recordings a year if not more ); although this is the gamble labels were willing to take in the hope of having a hit on their hands which they would then monetize the life out of, primarily through CD (album) sales.

However, ‘awareness’ about a song cannot be touched, eaten, drank, or more importantly, banked. Over the last decade and half (i.e. during “the decline”), the only tangible returns that would have made their way back to the owners of music rights from radio plugging campaigns were (in many cases) relatively meagre royalty checks from the PRO’s. Of course it must be noted that having a song play-listed on national/syndicated radio in certain jurisdictions (like the UK) can and does result in a not insignificant amount of revenue; however, given the struggles radio as a medium is generally facing globally (as a result of fierce competition from both interactive and non-interactive streaming) — save for in some particularly underdeveloped emerging markets — the commercial benefits of this promotional channel will only further decline over the long term.

In the modern paradigm, i.e the era of paid/ad-supported downloads, offline tethering, digital lockers and above all streaming, the radio-inspired principles of curating the listening experience — as embodied in the playlist format — are combined with an interactive and retail element. These last two factors have supported the case for music companies increasingly partnering with digital platforms. Promoting and or strategically displaying/play-listing music on digital platforms makes more economic sense than getting a song play-listed on radio, and is increasingly becoming the norm. Imagine the earlier mentioned radio plugging/promo budgets being steered towards millions of guaranteed potential customers in the very place they consume the product.

This is the key benefit of leveraging marketing activities on these platforms. Promotional/marketing messages would be communicated to people that actually pay to consume or access music, not just people that fall in a particular target demographic of which usually only a portion are ever potential paying customers (mainly die hard fans). Users on these platforms — regardless of their genre preferences — are the exact target demography given that they are willing and able to actually buy music (or pay to access it). Even free users still present a source of revenue from their consumption, albeit a small one.

Secondly, with increasing data collection, management and analytics — specifically of numbers/sources of streams, purchases, play-listing and other interactions with the music — it is possible to increasingly measure the utility of promotional spending and thus theoretically get a better bang for one’s buck through data driven reviews and analyses of campaigns. Even music videos, traditionally in and of themselves marketing and promotional tools for sound recordings, are now potential revenue generating assets in their own right, and that would equally benefit from intelligent digital promotion/ad-spend.

Label/artist spending models need to adapt to these new realities. Music recordings themselves again have the possibility of contributing significant earnings to the top and bottom lines of rights owners, when marketing and (more importantly) promotional budgets are creatively and strategically deployed. Additionally, this pool of potential revenue will only increase over time due to both increasing user numbers (resulting from emerging market growth prospects) and an increasing revenue base (resulting from legislative and regulatory changes in the US and EU that will hold platforms like YouTube — which currently pays less than $1 for each of the 1b+ users compared to Spotify’s $20 for their 100m users — to greater account for user generated content containing copyright works on their platforms, amongst other changes).

Downloads (and now streams), albeit based on generally quite low rates, have revived the recorded music industry and the ancillary music publishing industry — in the US and EU particularly — by increasingly offsetting the huge losses of revenue ($26b+ down to $14b) caused by the decline/death of the CD golden era. In Nigeria, digital consumption surpassed CD consumption almost three years ago, but there is no corresponding significant decline in revenue as there has been in the advanced markets. This is due to a number of reasons, such as: the parity between CD prices and download/streaming subscription prices; the huge amount of revenue that has traditionally been lost due to piracy even during our CD era; and Nigeria’s growing population size and (less) growing per capita income. It is estimated that Nigeria’s recorded music revenues will see an average year on year growth rate of 3–5% over the next few years from its current $65m+ estimate. It is possible that this growth will be even larger if the necessary broadband infrastructure is rolled out in a timely and efficient manner, thereby increasing penetration breadth and depth across the entire country.

With growing user bases and an average gross revenue rate of around 65% (of retail price) per download and (a currently minuscule) average — blended (subscription+ad-supported) — rate of $0.0005 per stream, music rights owners globally, Nigeria included, are (and ought to be) becoming increasingly focused on the promotional and marketing potentials of the major digital platforms across various territories. As a side note, Nigeria is only just seeing the commencement of private licensing/collection activities by copyright owners in relation to domestic ad-supported music streaming sites which will likely soon become public/collective activities at the CMO level.

Despite the still large quotient of “free users”, global subscription revenue is growing steadily meaning that the necessary mental shift away from accessing music for free is gradually taking place. With the increasing population of diaspora Nigerians coupled with their corresponding increase influence over popular culture around the world these global stats are definitely relevant to Nigerian music (and other) rights holders. Additionally the digital platforms are looking for more creative (and direct) partnerships with artists and songwriters to reduce their huge costs of content acquisition and to leverage on these relationships to develop strategies to better market these assets to drive up subscribers numbers and user engagement.

Major artists can leverage on their popularity by being able to more or less guarantee an increase in traffic, and even possibly subscribers, from strategic promotional partnerships with digital platforms — particularly for major releases (as evidenced by the success of Drake’s recent “Scorpion” campaign, which is estimated to have generated over $100m in revenue on just two of the major streaming platforms). Plus, and arguably more importantly, independent artists are able to find an additional means of seeing tangible benefits from digital marketing campaigns on these platforms, through direct returns in the form of increased user interaction with their music, and by extension more revenues. Opportunities abound when strategic thinking is engaged in how music assets are deployed. It has already been shown that smart/creative playlist targeting can generate significant amounts of revenue on Spotify with production companies creating music — allegedly for Spotify insiders — for placement in mood/ambience playlists with large followings, resulting in a lot of plays (and by extension revenue) on a quarterly basis.

Here in Nigeria major content aggregators are seeing anywhere from N3m — N5m per quarter in total from a cross-section of digital platforms for subscription revenue shares, streaming royalties and download sales revenue. A lot of the time this is from minimal to no promotion or marketing spend, just legacy music that is to a large extent evergreen coupled with a large varied catalogue. Also, these revenues do not include any contribution from (domestic) ad-supported streaming platforms— that generate a significant amount of ad revenue for the platform operators. On top of all this is the imminent commencement of big tech’s focus on Africa, which will not only present more targeted marketing and promotional opportunities but also another source of potential revenue for use of sound recordings and songs in user generated content. So it may be time that rights holders begin to understand and harness the opportunities in deploying resources towards strategic marketing and promotion relationships with digital platforms and rely less on the reliable radio plugging and promo expenditures.

Radio plugging seems to be dead. Long live DSPlugging!