Will Page on streaming pricing, music’s revenue ‘pie’ – and why the global record industry is more local than ever

Welcome to the latest episode of the Music Business Worldwide Podcast. The MBW Podcast is supported by Voly Music. 

On the latest Music Business Worldwide podcast, one of the industry’s sharpest minds, Will Page, joins MBW founder Tim Ingham in conversation (listen above).

Together they cover a range of topics including pricing, streaming, royalties – and why the global music industry is actually more local than ever.

Page is the ex-Chief Economist of both Spotify and UK collection society PRS For Music.

These days he’s a consultant and author of the book Tarzan Economics (aka Pivot), which presents compelling principles for business owners facing uncertain and disruptive times.

Page is also the co-author of a new paper published by the London School of Economics and Political Science that focuses on the ‘Glocalization’ of music.

In other words, music has never been more global as an industry, yet when you dig into the most popular tracks in individual markets, they have a decidedly local feel.

Listen to the full interview above, or read an abridged and edited summary of key elements of the discussion below…

We’ve seen ‘Glocalization’ in markets such as Italy, where the top tracks of a given year are often ALL (OR NEARLY ALL) DOMESTIC. The big question to ask about music’s ‘Glocalization’, then: Why is this happening? And why is it happening in an increasing number of markets, especially across Europe?

Well, an economist could give a standard economist answer here, which is to look at supply and demand. But it’s really for the sociologists, the anthropologists, the industry executives down on the ground to add flavor to this.

Here’s my best stab at [explaining] the forces of supply: back when [recorded music] was a CD market, you had prohibitive costs of manufacturing and distributing CDs, and that may have favored global stars over local ones. Now those costs have disappeared; anyone can make music, anyone can get it onto platforms. Maybe that allows for [more] local investment.

It’s early in the day as we record this podcast, Tim, but if we go to alcohol for a second, there might be a parable. We used to have global breweries, now we have local craft beers, because the cost of manufacturing and distribution has fallen.

Let’s also think about data science: in the past, record labels would look at their radio plays three months after the event. Now you’ve got data science showing what’s been actually consumed right now, and that [information may lead to record company investment] going more local.

“Rather than trusting linear radio and TV shows to tell them what they want, European streamers are now choosing what they want, which more often than not is local artists performing in their local mother tongue.”

Another thing on the supply side is the way that global record labels, large and small, will have their global priority lists.

We did a couple of studies here. Every month, there are maybe 10 songs that are prioritized by [a record company’s] global headquarters for local marketing. But when we looked across these 10 songs – or these 120 songs across the calendar year – we could only count 8, 10, or 12 different artists.

In a world where we’re seeing 100,000 songs a day being on-boarded to streaming [platforms], that’s not a lot of [bandwidth] to, over the course of a year, try and break these 8/10/12 artists. Especially because, every week, the local offices of Universal in Germany, or Sony Music in Spain, or Warner in Sweden are going to have local bands knocking at their door, wanting local support.

One very blunt factor here: it used to be that linear broadcast and radio told you that you were going to listen to this song, at this time, on this breakfast show. Now we’ve all been empowered to choose by streaming – as you’ve documented over the years in Music Business Worldwide.

Rather than trusting linear radio and TV shows to tell them what they want, European streamers are now choosing what they want, which more often than not is local artists performing in their local mother tongue.

What does this mean for the blockbuster global music business? Is it a threat?

I think it casts a cloud.

I was looking at headcount at record labels in local [markets] over the past five, seven years – and headcount at these offices has doubled. That hasn’t happened at the global headquarters; [headcount at these HQs] has grown, but it hasn’t doubled.

So we’re seeing devolution, at label level, of power moving away from global headquarters down to local offices to match this localized trend.

“How do those British/American/Canadian acts get on festival bills in these European markets, which have experienced this effect of glocalization? It’s a big cloud that hangs over the industry’s head [in traditionally powerful markets] now.”

It gets quite interesting when you factor in the competitive advantage that [artists from] Britain, America, and Canada used to have by performing in the English language, because I don’t think that’s holding sway anymore.

Let’s say you’re a German festival promoter, and you can fill your bill this summer with German bands performing in German language – great.

But what if I’m a big US, UK, or Canadian act who wants a million dollars to headline your festival? You’d be right to turn around and say to me, ‘I can’t generate any more value by your appearance; I’ve sold all my tickets, I’ve filled my festival. How about you pay me to get on the bill?’

Twenty years ago, the German charts were just a carbon copy of British and American culture. Today, they’re all German acts.

So how do those British/American/Canadian acts get on festival bills in these European markets, which have experienced this effect of glocalization?

It’s not necessarily a bad news story – maybe [the aforementioned nations] – just had it too easy in the past. But times have definitely changed.

One thing that we should definitely address is the impact of hip-hop around the world. That genre’s story for so long, and understandably, was all about the USA, where streaming finally reflected hip-hop’s true popularity and its dominance of the market. The next step that many people expected to see was the largest North American hip-hop superstars would dominate multiple markets globally. That started to happen a few years back. But now, if I look around the European nations – the UK included– it’s actually local language hip-hop that seems to be most prevalent in many of those end-of-year charts.

It’s interesting. Take Poland, for example. The Top 10 [acts there today] are Polish, the Top 40 is pretty much all Polish – but they’re Polish acts doing hip-hop, which is an American genre.

So we’ve seen the localization of the [artists], but the globalization of the genre itself. How do you figure that out?

“If you look at the hip-hop artists that came out of America last year, they didn’t hit their [expected global] numbers – that’s well known.”

Going back to your earlier question, this poses some thorny issues for the Canadian/US/English markets.

If you look at the hip-hop artists that came out of America last year, they didn’t hit their [expected global] numbers – that’s well known.

So these are big releases, with big marketing pushes, but they’re not quite making it on the global stage because the genre is traveling, but the acts aren’t.

I can’t have you on this podcast without asking you about a couple of other topics. One is streaming pricing – including the addiction at your former employer, Spotify, to that $9.99 monthly price point! What’s your observation?

I could chew your ear off till next Tuesday about my issues with pricing.

I always like to stress this point: on December 3, 2001, that’s just after 9/11, [music streaming service] Rhapsody got its $9.99-per-month license on the basis that it mirrored the cost of a Blockbuster video rental card.

I’m currently podcasting with MBW in mid-2023, and have a look around: Whether Pound Sterling, Euro, or US Dollar, the standalone organic [music streaming subscription] price remains at $9.99.

I’m just flabbergasted that we seem to have offered more and more but, in real terms, charged less than less for it.

“I’m just flabbergasted that we seem to have offered more and more but, in real terms, charged less than less for it.”

I’ve coined this term ‘herbivores’ and ‘carnivores’: We’ve not only had 20 years of $9.99, but 20 years of herbivore behavior – where all the streaming services are growing, and they’re not invading each other’s patch.

That will change when we hit saturation point [of music subscription growth in large markets] and I’m seeing signals that it is happening now. That’s when we go from ‘herbivores’ to ‘carnivores’ – where the only way I can grow my business is by stealing some of Tim’s customers.

We’ve got to have an intelligent discussion now about what that chapter might look like. We’ve never had it before, and we’re in uncharted waters.

You could have [in the ‘carnivore’ world] what telcos typically do, which is to compete on price – so [music streaming] price could actually go down as opposed to up. Or you could compete on features.

Apple Music, to their credit, rolled out Spatial Audio; I’m a big appreciator of it. If you haven’t listened to Rocket Man by Elton John in Spatial Audio, you’re missing something very special.

So you’re seeing upward competition on price based on features there. But equally, it could go the other way.

For all my rants about $9.99, it could get worse [with prices going down, not up] as the ‘herbivores’ turn into ‘carnivores’, and the competition kicks in.

Just to be very anecdotal here, I started off paying Netflix at $7.99 [a month]. I checked my bank statement this morning: it’s now $15.99. And I’m watching it less. Explain that!

They’ve doubled the price, but my consumption has halved… and I’m happy with the proposition. So I do think music’s missed a trick.

Let’s talk royalty models: Sir Lucian Grange kicked off 2023 with a big story, saying Universal Music Group wants streaming payouts to move towards an ‘artist-centric’ model and away from the dominant ‘pro rata’ model. We don’t 100% know what ‘artist-centric’ is yet. But ultimately it looks like it may borrow some elements of ‘user-centric’ and also may incorporate some elements of upselling consumers into additional-cost premium tiers. Where do you sit? What’s the logical and best next step for both music rightsholders and streaming services to take?

This one’s going to run and run and I’ve been deep in the weeds of just about every new model. There are a couple of really big points to make.

Remind yourself that the collecting societies – 100-year-old startups like ASCAP or BMI – have never, ever treated music like it all has the same value. That’s really important.

When ASCAP was founded, they had two distribution pots: one for classical music, and one for music they didn’t deem to be classical. They made that distinction way back then.

They didn’t have data scientists or software developers – I still don’t think they have data scientists and software developers now!

“The challenge that we’re now facing is the tension of introducing capitalism, to communism. How do we nudge the industry away from what is communism – where every song is worth the same?”

We’ve had 22 years of $9.99 money coming in [each month in music streaming], and 22 years of ‘pro rata’, where every song is worth the same.

I think the challenge that we’re now facing is the tension of introducing capitalism, to communism. How do we nudge the industry away from what is communism – where every song is worth the same?

You’re seeing aspects of it: [Spotify’s] Discovery Mode is an interesting rabbit hole you could explore on a future podcast [whereby some songs are paid less than others].

What of the ‘user-centric’ or ‘artist-centric’ or ‘artist growth’ models? My biggest worry is that [changing to one of them] could collapse the royalty accounting systems at DSPs.

There’s also a contractual headache there: how do we negotiate all these [artist/rightsholder] contracts? And there’s an auditing headache: How do you know that $40,000 check was really $40,000?

My main concern is already here: [the royalty structure buckling under the] pressure, on the supply side, from the explosion in AI music being released. How do you solve that?

What do you propose?

I’ve come up with a ‘fourth way’ and I thought we could quickly sow a seed.

Since the 1980s, when the BBC pays [UK collection societies] PPL and PRS for playing songs by Queen, they’ll pay twice for Bohemian Rhapsody [versus] what they pay for You’re My Best Friend. Why? Because Bohemian Rhapsody lasts twice as long.

Is there a role for [track] duration in the royalty calculation model? And could that help us deviate from the ‘pro rata’ model in a safe and harmless way?

My four-in-the-morning-scribble-down-your-thoughts moment was, rather than measure time of consumption, or time of track, what about a threshold on completion?

Songs that are completed in their entirety are worth more than songs that are incomplete or skipped halfway through. There’s good economics to justify this.

We’re competing for attention; if you write a really great song, I should be there for the whole journey, so let’s reward you for writing a great song and [achieving that].

“They said: ‘It’s TikTok mate. Nobody listens to full songs anymore.’ I dropped my pint glass, which as a Scotsman is rare.”

The original inspiration for this idea of ‘let’s value duration more in terms of completion and penalize lack of duration or incompletion’ was a wedding I went to.

When I go to weddings, I wear my kilt, that’s a great thing, and I say hi to the bride and groom, then I drift off and speak to the band.

So this band plays Celebration by Kool & The Gang for the bride and groom, they knock out another tune for the parents to join. And then they do a 2-hour-15-minute medley.

They’re amazing – the band are tight. But afterwards, I asked them: ‘What are you doing a 2-hour-15-minute medley for?’ And they said: ‘It’s TikTok mate. Nobody listens to full songs anymore.’

I dropped my pint glass, which as a Scotsman is rare. But I was just like, What did you say?!

This is what’s happening to attention spans; we just want snippets of songs.

Maybe, by factoring in duration and song completion, we could take this industry forward and start to depart from the ‘pro rata’ model. It’s served us well for 22 years, but it’s clearly creaking under the strain.