Google’s entrance into the music streaming market would provide the music industry with “arguably the biggest funnel we can have” with regards to turning music consumers onto legal licensed services, says Francis Keeling, Universal Music’s global head of digital business.
Speaking at today's launch of IFPI’s annual Digital Music Report, which took place at the international trade body’s London headquarters Feb. 26, Keeling welcomed numerous reports that Google is in the process of negotiating licensing fees for a music streaming service akin to Spotify and Deezer.
“We talk about subscription [services and] the need to have a funnel,” Keeling told guests and invited media at the Digital Music Report launch. “With the likes of Spotify and Deezer and Rdio and other subscription services, we work with them to give consumers a free experience because we know that we need to change behavior. By giving a free experience to legal services we can change behavior and then encourage consumers to subscribe.”
He continued: “Google, with its hundreds of millions of users through search, and YouTube with more than 800 million users [per month], arguably is the biggest funnel we can have. Clearly, if we can get consumers into a legal funnel through that route and encourage them into subscription that would have a very positive impact on the business.”
While declining to discuss any specific details regarding Google’s mooted launch into the streaming market, Keeling had no such reservations in declaring 2013 “the year of curation” -- a reference to the growing trend for services such as Spotify and Deezer to incorporate social media tools at the heart of their platforms.
“Music tastes are complex and ever-changing,” he continued. “Fans want trusted recommendations of new artists, new records or, as we're seeing increasingly, new playlists. A simple search bar or a chart just isn’t enough. Social features and networks such as Facebook and Twitter are driving so much music consumption, but also we’re seeing services develop social features into [music] services themselves. Music continues to drive the digital space.”
Keeling’s last point was echoed by Edgar Berger, president and CEO, International, Sony Music Entertainment, who also spoke at the report launch. “Music is really the energy of the digital age, driving innovation and growth and leading to new services and devices,” Berger said. “What is a smart phone without music? Maybe just half the fun. YouTube without music videos? Maybe just half the views. Social media without music artists? Half as interesting,” he continued.
Berger also detailed the 8 leading music markets which experienced growth in 2012: Australia, India, Japan, Sweden, Norway, Canada, Brazil and Mexico. “Growth rates range from 4% in Japan to 13% in Sweden, where we have seen the highest revenue since 2005,” he added. “Now with the recovery of music markets we can, of course, invest more into artist repertoire. In some counties we have doubled our A&R spend for the last four years as these markets have recovered.”
“Globally, we are spending as an industry $4.5 billion on artist development and we are happy to increase that [sum] as markets pick up,” Berger continued. “Those developments give us great reasons to believe that our strategy has prevailed -- our strategy being to develop great artists and to license music to as many music services as we possibly can do provided they give a fair share to the artists and to the right holders.”
Although IFPI’s 2013 Digital Music Report was, somewhat unsurprisingly, focused on the digital music economy, it also contained some interesting data in regards to the physical market. According to IFPI, global physical format sales declined from 61% in 2011 to an estimated 58% in 2012. However, in Japan, CD and DVD sales posted strong increases (sales numbers or percentages were not provided). While in South Korea physical sales are expected to rise for the third consecutive year, with IFPI crediting K-Pop fans who want high-quality physical formats and deluxe box sets, with driving the format's sustained popularity.