Believe it or not, the three major label bosses pictured above are intense rivals.
When they sit down with MBW, Jonas Siljemark (Warner), Per Sundin (Universal) and Mark Dennis (Sony) are uncommonly cordial to one another – friendly, even.
Perhaps that’s because these Swedish music biz honchos are all laser-focused on the same thing: letting the good times roll.
Or perhaps it’s because they’ve all shared serious professional strife – and remember how it feels to nearly lose everything.
From 2000-2008, Sweden’s annual recorded music income was slashed in half by rampant piracy – down from 1.6bn SEK ($190m) to just 800m SEK ($95m).
That meant mass lay-offs and deep spending cuts in A&R, but also a cultural backlash against record labels – a backlash, even, against the mere suggestion that piracy was morally wrong.
But then, the light: Spotify rode into town, bolstered by the legal punishment of The Pirate Bay’s founders and a re-education of Swedish consumers about copyright.
Sweden flourished: today Universal, Sony and Warner’s Stockholm HQs are the envy (and focus) of their worldwide parents.
Siljemark, Sundin and Dennis are kings of a booming industry.
With CD and download on their last legs in Sweden, piracy subdued and streaming exploding, their future is not one beset by decline.
It’s lent each of them an unusual executive fearlessness.
Perfect.
MBW fired topical industry questions to Sundin, Dennis and Siljemark on stage at the brilliant Way Out West conference in Gothenburg the other week.
The resultant interview was not your typical major label Q&A.
As you can read in the highlights below, all three offered forthright and personal opinions on everything from Spotify to Apple, EMI, freemium, YouTube, streaming exclusives and the health of the CD…
The recovery of the Swedish music industry fascinates the global business, but we don’t tend to dwell on the dark times. Can you paint a picture of how bad things got for you as record company execs?
Per (Universal): From 2000 – 2008, it was a disaster. Kids coming into the industry now think it’s happy days, but that was a truly terrible time. I fired over 250 people. No-one [outside music] really cared.
They were dark days: we’d be invited to dinner somewhere and my wife would say to me: “Don’t tell anyone what you do for a living.”
She knew if I did someone would say: “So you work in the music business? That’s tough.”; “Why?”; “Because we don’t buy music anymore.”; “Why?”; “Because we download it.”; “So you steal it…”
And then a big fight.
“I fired over 250 people. My wife used to ask me not to tell people what I did for a living…”
Per Sundin, Universal
In 2006, there was an election in Sweden and the Prime Minister and his opponent were both asked the question: “What do you think about downloading?” They both said it should be allowed for “personal usage”.
That was terrible. Their point was that you can’t criminalise the whole youth generation.
But then in 2009, we had The Pirate Bay trial and verdict; we had the [anti-piracy] enforcement directive implemented; and we had Spotify, which launched in October 2008. It was the perfect storm.
Thanks to that – especially Spotify, I would say – we were taken out of the dark times. We went from bad boys to something much better.
Jonas (Warner): In 2002 I had a feeling that something wasn’t right.
The market value was stable, but something was missing. That continued into 2003 [when Siljemark joined Warner].
“in The tabloids in sweden, there was a sense that it was okay to steal music.”
Jonas Siljemark, Warner
Then the drop came. Until 2008, it was really dark.
We did a lot of restructuring, we had to watch our spending, look at our overhead costs. We had to manage an increasingly tight business, while looking for all new opportunities.
There was a lot of debate in the media. In the tabloids in Sweden and to a lesser degree the serious press, there was a sense that it was okay to steal music.
Are you comfortable with the freemium-to-premium conversion that we’re currently seeing worldwide on Spotify?
Per (Universal): I think the freemium version of Spotify is maybe too good, but I think Spotify is trying everything they can to get offers and bundle packages to [drive] subscriptions.
From what I can see, it’s going well but of course people want it to go faster because the other revenues [CD and download] are going down.
“There’s decline to come on Cd and download in major markets and everyone is panicking about that, looking at quarterly results.”
Per Sundin, Universal
In terms of what’s going to happen in the future, the good thing was that Apple started at €9.99/£9.99/$9.99. That was, phew, thank God.
In the future, Spotify will evolve, and we see Apple Music get better every day right now.
Mark (Sony): There needs to be a little bit of patience on a worldwide level. Sweden and the Nordics are fairly mature markets – although there’s still room for growth.
There are more people paying for Spotify in Sweden than are [using it but] not paying for it. There’s no reason why that shouldn’t be the case elsewhere.
Per (Universal): We have to be patient. That’s my position – I don’t speak for Universal as a big company.
The US and UK haven’t really seen a big market decline yet like we did in Scandinavia and in Holland.
When the physical market is going away and the iTunes/download market is suffering [from streaming] everyone gets nervous.
“I don’t think streaming is the end solution for music distribution. It will be something we have no clue about today.”
Jonas Siljemark, Warner
In the three biggest markets in the world – US, Japan and Germany – physical remains the biggest format. So there’s decline to come, and everyone is panicking about that – looking at [their] quarterly or yearly results.
Things will change. It’s going to move faster than some people even in my organisation think, and we have to be patient. There will be bumps and obstacles on the way.
But in the end I’m very positive about what will happen in the near future.
Jonas (Warner): I don’t think streaming is the end solution for distribution of music.
In 10 years’ time, there will be something totally different that we have no clue about today – a chip [in my neck] might control the whole recorded music catalogue in the world!
I’m fascinated about this company which tracks your eyes’ movement on your PC. If someone told me that ten years ago, I’d have said: ‘Ah, forget it. That’s mission impossible.’
I want to give all three of you the right to reply to something. Earlier this year, a letter was issued in Sweden calling into question the percentage of streaming revenues held by the major labels, and the small amount passed to publishers and songwriters. The songwriters’ letter said that the majors didn’t deserve their percentage of payouts – 70%+ – because of the ‘drastically reduced costs’ of the digital age.
Per (Universal): First of all, the MD of [collection society] STIM replied to that letter and said it was crazy because it had done a deal with [Spotify] which it thought was really competitive.
There’s a lot of people asking for more money everywhere. I’m really proud to say that [label A&R] is the driving force of breaking new artists.
But in the big pie of the true music industry, 50% of it is actually live [revenue]. And most of us in record companies see zero income from that, even though we build artist brands.
“I’m upset when I hear people complain about record company ‘greed’… If there’s more money coming in, everyone’s going to have a bigger piece of the pie.”
Per Sundin, Universal
So I’m upset when I hear people complaining about ‘greed’.
We try to be as transparent as possible and do our best to help artists. We are most happy when our artists are successful, earning money and travelling around the world.
Previously where it’s always been songwriters and producers of Sweden, now we see our artists having top ten hits in the US, in Kenya, Vietnam, Germany, UK… everywhere. In the end, if there’s a lot of money coming in, everyone’s going to have a bigger piece of the pie.
Jonas (Warner): Everybody wants 70% of the pie, but when you’ve got five parties who want 70% each, it doesn’t work.
In terms of our relationship with our artists, we’re compensating them on an individual basis.
Per (Universal): The songwriters, the producers and the artists who complain most about streaming are the ones who have been suffering from a new model that I would say is very democratic.
If you have a stream, you get a tick. Previously, if you bought an album of an artist, listened to one song and put it aside, the songwriters and producers of the album would have got a share of the [total sale price].
It’s a debate whether this is a good or bad thing, but it’s the reality: today, it’s the hits that get the most money.
“The songwriters, producers and artists who complain most about streaming are those suffering from a new model that’s very democratic.”
Per Sundin, Universal
Maybe that’s unfair, but it’s the system we’re working with right now. So instead of complaining and being uniformed, it’s very important that if you want to play the game, you have to understand the rules.
We are paying out more money with royalties as Universal Sweden to artists than we have ever done before.
Jonas (Warner): It’s the same for Warner Sweden as well.
Mark (Sony): I think we’re all in the same position. Compared to the previous distribution model, a lot less money is staying with the labels. More is being paid out to pretty much all of the other rights-holders.
The balance has got to a good place, but there needs to be a system that continues to ensure that we can invest in new music – we [the labels] are still the ones primarily investing in new artists.
Here’s what the growth in the [Swedish] market has done at Sony, and I’m sure its the same with these other guys: we’ve tripled our A&R investment over the past five years.
“We are paying out more money in royalties to artists as universal sweden than we have ever done before.”
Per Sundin, Universal
That has to be a good thing for the whole industry.
There’s been more than 10 Swedish singles selling over 10m worldwide over the past three years. In the ten years prior to that, there was one or two.
So something’s working. The money that’s coming into the industry is being reinvested, ensuring that Swedish artists actually have a better chance of reaching an audience outside the borders of this territory.
So the popularity of streaming here is having a direct impact on the amount you invest in A&R, which in turn is having a direct impact on the success of Swedish artists in the US and elsewhere?
Per (Universal): I’ve been in the music industry 20 years, and a year-and-a-half ago I said to my team, “Let’s celebrate like hell.” We sold 5m albums and 30m singles with Avicii.
We knew it wasn’t going to happen again – it was a once-in-a-lifetime experience.
Then a year later, Tove Lo’s Habits (Stay Hi) was No.3 on the Billboard Hot 100. She’s sold 1m albums just in the US. It’s amazing. The world is opening up.
Suddenly everyone’s flying to Stockholm to try and find the new act that will be successful in the US.
They even work with acts like [Sony star] Tove Stryke, just because her name is also Tove… [crowd laughs].
A recent Buzzfeed article flouted the idea of Dr Dre’s Compton as an Apple Music ‘exclusive’ by reminding people they could get it on torrent sites – even explaining an easy way to do so. Do we have to be wary of piracy’s return, especially when exclusive deals are getting signed with streaming services?
Per (Universal): We will see piracy in the future.
The pirate site owners will get smarter and find ways around [restrictions]. If we close down one, another will pop up.
“I think the exclusivity streaming deals are dangerous.”
Per sundin, Universal
That’s a fact of life. We have to help legal services, Spotify and others, be better.
I think the exclusivity thing is dangerous – that’s my personal opinion. Hopefully we won’t see it so much.
That’s difficult for you: on the one hand it’s very tempting if Apple come along and say, hey, we’re going to put your artist front and centre of our service…
Per (Universal): It’s exactly what happened in the US with physical product. Best Buy said, we’re going to buy 2m AC/DC albums, and it was: “Wow, 2m albums.”
But eventually when you looked at the real record stores, the Towers that closed and others, you’re killing the people who feed you.
Mark (Sony): It’s the wrong thing, without a doubt. People who believe that exclusives are going to bring the market forward are the most naive people in the world.
We have to learn from what’s happened in the past: when people haven’t been able to consume music in the way they want, they turn to piracy. We’re just not learning!
So when there’s exclusives with specific players in the US, it’s ridiculous. It will harm artists and it will harm the industry. I’m completely convinced.
“Streaming exclusives are ridiculous. It will harm artists and it will harm the industry.”
Mark Dennis, Sony Music
People will not change their service just for one record. It’s not going to happen. People aren’t leaving Spotify because Taylor Swift’s not there.
We’ve got to be realistic. What will move the market forward is having content across all platforms, giving the consumer the ability to make their decision and use great products.
Jonas (Warner): I agree with my colleagues here. Exclusives in the short-run might be good for marketing purposes, but for the whole industry, especially in the streaming environment, you won’t change subscription [behaviour].
Let’s talk about ‘legal’ free music. It’s a big problem: across YouTube and SoundCloud alone, there’s around 1.3bn users. A tiny percentage of that, 41m, are paying for subscription streaming services. Yet the free platforms are paying out significantly less than these subscribers. Can you solve the free problem – the YouTube problem?
Jonas (Warner): It has to be solved. It’s possible. YouTube have a huge opportunity to increase the revenue for everybody.
At the end of the day we work for our artists – and then maybe our shareholders and ourselves. If our artists don’t make money, we have a problem.
We have to stop looking at YouTube as a promo platform, and start looking at YouTube as a business partner that we want to make money with.
Mark (Sony): Everyone agrees YouTube is a fantastic platform for leveraging content and reaching out to people, but at the moment there’s not enough value coming back to rights-holders.
I hope we can solve that, and we shouldn’t just look at YouTube; there’s going to be a number of developments within video in the next couple of years that will hopefully bring the market into a better place.
Interestingly, if you look at Sweden, the ‘free problem’ really isn’t there to the same extent. The number of people [listening to music on] YouTube and SoundCloud is not even comparable with the volume of streams on services like Spotify.
“Interestingly, in Sweden the number of people listening to music on YouTube doesn’t compare to the volume of streams on Spotify.”
Mark Dennis, Sony
The problem is much more accentuated in other territories like the UK and US. But a lot of it is about education. The biggest problem for streaming worldwide is that most people don’t know what it is.
For us in Sweden, that sounds ridiculous because it’s become such a household thing. But in the US, most people don’t know the difference between Pandora and Spotify. Most people don’t know the difference between iTunes and Pandora!
The reason why free isn’t such a problem in Sweden is because people realise there are other options: YouTube is not a great experience for listening to music. That’s not what it was initially designed for.
SoundCloud is a great platform for spreading content on a piece-by-piece basis, but it’s not a great platform for general consumption of music.
People in Sweden are so well versed in Spotify and other streaming services that the traffic is going that way. Long-term, that’s the way to solve the issue: educate people about other services which are going to give them a better experience.
When Universal acquired EMI we heard lots of fears – from the indies and to a lesser extent from Sony – that UMG would become a ‘super major’; that they would dominate deal-making and be untouchable. Is that the way it’s played out? Is Universal untouchable?
Mark (Sony): No, they’re losing share, so… [crowd laughs]. I understand that ahead of the deal, the concern was justified. But these things take time to level out.
We saw with the merger of Sony and BMG in 2003 that one and one rarely makes two in this world [in terms of market share].
“I don’t think the market share changes since universal bought emi have been as drastic as people expected.”
Mark Dennis, Sony
I don’t think the [post-EMI] changes have been as drastic as people expected.
We’re at an interesting time where the three majors, at least in Sweden, have probably never been as close together in terms of market share and what else they’re doing. And that’s making us all better because there’s a really healthy competition in what we’re doing.
Outside of that, there’s great independents, especially in terms of A&R. We have a really healthy market at the moment.
Let’s go back to streaming payments to artists. Mark, are you comfortable with what your organisation is paying artists from streaming services?
Mark (Sony): Yeah. I mean, I’m always hoping to pay more to the artists and that has to be our No.1 goal: delivering more value to the artists we work with for their content.
What’s being paid out in terms of streaming revenues to artists has drastically increased over the past five years. I’m confident we’re doing all we can to ensure the balance is moving in the right direction.
“What we’re paying out in streaming revenues to artists has drastically increased in the past five years.”
Mark Dennis, Sony Music
What’s coming into us from streaming services? It’s really hard to change that from what it is at the moment because the deciding factor is going to be the consumer price – and that’s settled on this €10 level.
I’m sure we’re all very hopeful that in the years to come, that price can move up or we can find ways of getting other levels in there that will increase the [revenue per user].
Apple Music time: what effect is it going to have on Spotify and on the acceleration of the global music industry?
Mark (Sony): It’s too early to say. Until we get past the initial three-month window, everyone’s in the blind.
It doesn’t matter how many people sign up – it’s about what comes out the other end.
The most important thing for the global industry is that people become aware of what streaming is and streaming products.
In that sense it has to be a positive thing that such a major player has come into the market hopefully ready to tell that story to consumers. It’s also positive that Spotify has a strong competitor who’ll force them to raise their level.
Per (Universal): I feel very optimistic. As Mark says, the good thing is that people are talking about streaming in markets where they’ve never heard of it before.
I think Apple is off to an okay start; there are a lot of things they can do better and I see them developing everyday.
We’ve learned to use playlists in the Spotify world much more than Apple allow us to today but they will get better – I’m sure about that. I love Beats 1, I think it’s a great vehicle that they’re doing really well.
Spotify needs competitors – it’s almost too big in Sweden – it’s healthy for everyone.
In the first half of 2015, streaming claimed 84% of income in Sweden. Just 11% came from CD. What does this mean for the future of the album?
Mark (Sony): That’s not an easy question to answer, to be quite honest. This is one of the psychological issues we have to deal with in the next couple years.
Streaming trends away from the album product and more towards a song-by-song basis. That’s the way people are listening.
We’ve stuck with the album as a format for historical reasons; everyone who works in music of a certain age feels there’s something fairly holy about the album format. But I think we need to be realistic: consumers decided what happened over the past ten years. It wasn’t us.
“streaming trends away from the album… consumers decided what happened in the past ten years. It wasn’t us.”
Mark Dennis, Sony
So you have to respect the way consumers are listening to music and try to adapt both ourselves, artists and other creators to move in the right direction.
There’s an importance in getting consumers to listen to more from an artist in order to create long-term relationships with fans – and that means ‘bodies of work’, whether and album or similar, are still going to be important.
They’re important for us in terms of breaking an artist, rather than a song. And for our long-term well being, breaking artists and supporting careers is more important than breaking songs. I hope we will find ways of getting people to consume more from single artists.
Jonas (Warner): Taking a historic view on it, the ’50s and the ’60s was a single-driven era. But in the ’70s people wanted to dig deeper with the album.
Per (Universal): The key thing here is that when everyone can release anything, they do it: the volume of releases coming out today is fucking enormous.
The album will continue and be super-important, but for just a few artists. And when they drop their big album – Adele, for example – it will be huge. Or Drake, or Taylor Swift.
I still believe in the album, but it will be for artists who have some length in their career.
What about the CD itself. Is it close to death in Sweden?
Per (Universal): Yes. Vinyl will continue to live but I think the CD is really going down.
Jonas (Warner): It depends what timeframe you’re looking at. In the next couple of years, there is room for physical product here, both vinyl and CD.
“The CD iS over, gone.”
Per Sundin, Universal
Per (Universal): The CD itself? No. It’s gone. It’s going away. People are giving away their CD players. But the physical product will stay, it will just find a new way, something else. Maybe canvas, pictures, merchandise – that will all evolve. But the CD? It’s over.
Mark (Sony): What will hasten its death in the next two or three years is a lack of players. You can barely buy a car now with a CD player in it here. Electronic manufacturers won’t continue making them if the demand is falling.Music Business Worldwide
