1. Streaming’s New Normal Mark Mulligan 20th September 2017

3. Who’s Winning In Streaming YouTube (Trust Gap?) What’s Next?
Setting The Scene
Who’s Winning In Streaming
YouTube (Trust Gap?)
What’s Next?

4. Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next?
Setting The Scene
Who’s Winning In Streaming?
YouTube (Trust Gap?)
What’s Next?

6. LABEL REVENUE

7. CONSOLIDATION

8. THE IPO CLOCK IS TICKING

9. It’s time to stop think of Millennials as being one generation
GENERATION Z
It’s time to stop think of Millennials as being one generation
Millennials born on or after 2000 have dramatically different worldviews and behaviours than those born before

10. DIGITAL IMMIGRANT APPS
Digital Immigrants made apps for millennials but were involuntarily bound by analogue world reference points. Most of these apps were iterations of previous digital experiences.

11. DIGITALLY NATIVE APPS
A new generation of apps built by older millennials for younger millennials. Shorn of analogue reference points these apps rewrite the rules and look unlike much that has come before

12. The Social Media Landscape Is Shifting
Weekly Active Users Of Selected Social Apps, Q To Q2 2017
% of all consumers
Source: MIDiA Research Brand Tracker (06/17), US, Canada, Australia and UK n = 2,250

13. Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next?
Setting The Scene
Who’s Winning In Streaming?
YouTube (Trust Gap?)
What’s Next?

15. MAJOR LABELS
Major label recorded music revenue grew by 3% in 2016
Major label streaming grew by 56%
Major publisher revenue grew by 3%
Streaming overtook physical as the main major label revenue source in Q1 17….
….which means physical was still the largest single revenue driver in 2016 (blame Germany and Japan)
Consolidated hold on indie distribution
Embraced / co-opted label services

16. The Major’s Domination Of Recorded Music Does Not Translate To Music Publishing
Global Record Label And Music Publisher Market Share By Company, 2016

17. Amazon Has Fast Become The 3rd Largest Music Subscription Service Globally
Global Streaming Music Subscribers, June 2017
158.4 million subscribers globally
35% of Prime subscribers are Prime Music users
Note: Figures are in millions and refer to commercially active subscriptions
Source: MIDiA Research and company reports

18. Spotify And YouTube Lead An Otherwise Fragmented Streaming Field
Weekly Active Users Of Selected Music Apps, Q To Q2 2017
% of all consumers
Source: MIDiA Research Brand Tracker (06/17), US, Canada, Australia and UK n = 2,250

19. YouTube’s Music Dominance Is Far Less Pronounced In Germany
Weekly Active Users Of Selected Music Apps April 2017, Germany And All Country Average
% of all consumers
Source: MIDiA Research Consumer (04/17), US, Brazil, Japan, UK, Germany, Sweden n=3,500

20. Something Really Interesting Is Happening Among UK Teens: Spotify Has Overtaken YouTube For Music
Weekly Use Of Music Apps By UK Teens Compared To All Users Average, December 2016
% of segment
Source: MIDiA Research Consumer Survey 12/16 (UK Only)

21. Streaming Music Value Chain: Detailed
Industry Value Chain For Streaming Music (Subscriptions)
Record labels
60% revenue share
UMG, WMG, SME, Beggars, Glassnote
Publishers
Rights Bodies
10%
PRS, ASCAP, Sony/ATV
Music service
20-30% share
<5% operating margin
Spotify, Deezer, Rhapsody, Amazon
White Label
7 Digital, Medianet, MusicQubed
App stores
Up to 30% revenue share
Apple, Google
Amazon, Apple, Google
Distributors The Orchard, Ditto, TuneCore
Self released artist
RIGHTS
INFRASTRUCTURE
DISTRIBUTION
CATEGORY
Licensed usage of multiple types of music rights licenses required for digital use
Bandwidth, operations, development, marketing
Payment / billing, app retail
DETAIL
STAKEHOLDERS
New model rights companies including label services (Essential), next gen publishing (Kobalt)
New model rights companies including label services (Essential), next gen publishing (Kobalt)
DISRUPTION
SHIFTS
Labels launching services
Services becoming labels
Services bypassing app stores
Services reducing rates

24. Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next?
Setting The Scene
Who’s Winning In Streaming?
YouTube (Trust Gap?)
What’s Next?

25. YouTube Does Not Exist In A Vacuum But Is Instead A Deeply Intertwined Part Of Streaming Music Consumption
Overlap Of Key Streaming Music Consumer Segments, April 2017
Subscribers only: 2%
Subscribers total: 12%
Subscribers & YouTube music: 4%
Free streaming & subscribers: 6%
YouTube music total: 44%
Free streaming total: 32%
YouTube music only: 18%
Free streaming & YouTube: 19%
Free streaming only: 8%
Note: bubble sizes are illustrative
MIDiA Research Consumer Survey 04/17 (US, Brazil, Japan, UK, Germany and Sweden) n=3,250

26. YouTube Fills Gaps In The Streaming Landscape That No Other Service Does
Key Behaviours Of Free And Paid Streaming Music Users, April 2017
YouTube behaviour
% segment
MIDiA Research Consumer Survey 04/17 (US, Brazil, Japan, UK, Germany and Sweden) n=3,250

27. Does YouTube Have A Piracy Problem?
TV Networks
Record Labels
Record labels upload music to YouTube. Result?
All music is on YouTube. Labels say they have a YouTube piracy problem
TV networks do not put TV shows on YouTube. Result?
No TV shows on YouTube.
No YouTube piracy problem

28. Does YouTube Have A Payouts Problem?
$295 million
$1,000
Rights holder ad revenue
$0.34
$0.07
Rights holder Ad user ARPU (monthly)
$0.003
$0.001
Per stream rate

29. Latin America Is Driving YouTube’s Music Renaissance

30. Consumption Of Music Videos On YouTube And Vevo Is Accelerating At Pace
Days To Reach 1 Billion YouTube Streams
Fastest Spanish language to 1 billion
Fastest to reach 2 billion streams
First music video to reach 1 billion
Days to reach 2 billion views
515
684
394
Days To Reach 1 Billion Streams
620
Source: MIDiA Research / YouTube

31. YouTube’s Audience Is Growing In Size, And Also In Terms Of Music Video Views Per User For Its Biggest Hits
Total YouTube Users And Streams Per Month Per YouTube User For Music Videos To Reach 1 Billion Views
YouTube Users (millions)
Streams Per Month Per YouTube Users For 1 Bn View Videos
Source: YouTube / MIDiA Research

32. Despacito: The Gift That Keeps Giving
Evolution Of Streams Of Despacito On YouTube And Vevo – April 2017 To September 2017 (All Figures In Billions)
Monthly streams 1
0.5
1.6
1.4
Total streams (billions)
Source: MIDiA Research / YouTube

33. Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next?
Setting The Scene
Who’s Winning In Streaming?
YouTube (Trust Gap?)
What’s Next?

34. Outside Of Emerging Markets, More Than Two Thirds Of The 9
Outside Of Emerging Markets, More Than Two Thirds Of The 9.99 Streaming Music Opportunity Has Already Been Tapped
Existing 9.99 Streaming Music Subscribers And Additional Addressable Base For 9.99 Subscriptions
69%
37%
74%
53%
63%
70%
94%
68%
Tapped market
% of all consumers
Source: MIDiA Research consumer survey 3/16 (US, Brazil, Australia, UK, Sweden and France
Note: Germany data is 04/17

35. PRICING
9.99 caps the spending of the most valuable music buyers (just 7% of Swedes spend more than $10 on music, 17% in the US)
But it is also too expensive for even the super mainstream (which is why the $1 for 3 months offer has been so key to growth
Mid tier is really hard to make work though (it’s a hard sell with terrible margins)
Niche subscriptions, PAYG bundles and pay-TV bundles may square the circle

36. Streaming Will Become The Majority Of Recorded Music Revenue By Early 2019
Streaming Music Revenue And As Share Of Total Recorded Music Revenue, , Global
Streaming as % total revenue
Streaming revenue (billions USD)
Note: All values are retail and inclusive of sales tax (where applicable) except ad supported streaming which are label and publisher & PRO trade revenues only
Source: MIDiA Research Music Model (05/17)

37. For A Long Time, New Technology Looks More Like Yesterday Than It Does Tomorrow

38. Spotify (And Other Streaming Services) Have Data Foundations For Full Stack Music Platforms
Music Functions And Revenue Streams That Spotify Could Implement
Label services
A&R / Discovery
Music publishing
Data / payments
Merch / tickets
Promotion / marketing

40. Are We Nearing Peak Attention?
Selected Games Activity, Q To Q2 2017
% of all consumers
Source: MIDiA Research Brand Tracker (06/17), US, Canada, Australia and UK n = 2,250

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Contact: Mark Mulligan Phone: +44 (0)
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