Live Music Streaming Opportunity Valuation

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Transcript of Live Music Streaming Opportunity Valuation

  • 1brand investment and activation of live music & streaming platforms

    mauro cellore

    managing partner, mc[co] labs

  • 2To offer a strategic perspective on the live music streaming opportunity for brand marketers

    considering an investment and activation of live music properties.

    To provide an overview on the key drivers responsible to drive marketing ROI from the investment in live music content platforms.

    To present a point of view on the evolution of music-related content marketing initiatives, as live experiences, artist engagement models and

    content distribution fuse into multi-platform business models.

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    22

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  • 3The ~$13B U.S. music industry is projected to grow at a 3% CAGR over the next four years, primarily driven by live music (sponsorships/tickets) and online streaming (audio and video). Live music and online streaming counterbalance declining physical retail and flat digital download revenues. The music industry still profiles as superstar economy, with highly concentrated demand patterns (
  • 4Scale for brand marketers, however, appears to be elusive, underscoring business model challenges, distribution fragmentation, clutter and creative challenges inherent with the streaming model. Consumer demand appears to be capped at 30-40M engaged digital viewers Intention behind live streaming still anchored on a content repurposing strategic driver. Content repurposing still lacks a compelling value proposition against the live experience.

    However, live music streaming can have a place in a cross-platform music investment model for marketers with meaningful budgets and a clear music strategy. Highly engaged fan base around music and music artists. Possible direct-to-consumer distribution channel for music artists. Integration opportunities with live music experience and other music assets.

    To date Brand investments in live streaming has faced ROI challenges, driven by misaligned distribution models/partnerships, poor targeting and inefficient/sub scale resource allocation.

    Live music ROIs can be improved by working on the creative, strategic and financial side of the investment, defining value-add creative initiatives on top of the live streaming platform, integrating live music sponsorships and artist collaborations and using cutting edge techniques for sizing and matching audience metrics with investment deployment.

    Those initiatives require the augmentation of traditional marketing approaches with a dual creative/strategic skill set to lead opportunity assessment, partnership architecture design, artist deals and collaboration opportunities.

    (contd)

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  • 5music landscape

    brand investment in music

    live streaming

    mc[co] labs

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  • 6u.s. music market (2013-2018, US$B)

    4%

    33%

    cagr 2008-2013

    cagr 2013-2018

    100%

    80%

    60%

    40%

    20%

    0%

    -3%

    20%

    2013 2018

    Note: Digital streaming and subscriptions ($1.44B) encompass on-demand streaming ($220M), SoundExchange distributions ($590M, mainly from Pandora), and paid subscriptions such as Spotify ($628M), fastest growing segment with 40% growth last year; Digital downloads are 57% singles and 43% albums; Music synch and ringtones is a sixth category at ~$300M with limited growth.Sources: Pollstar and Mintel (tickets), IEG (music sponsorships), Billboard, RIAA, IFPI, MC[CO] Labs elaboration and forecasts

    13.1

    2.8

    1.4

    2.5

    1.3

    15.2

    2.5

    3.6

    1.3

    1.6

    digital downloads

    digital streaming and subscriptions

    physical sales

    live music sponsorships

    concert tickets

    -16%

    4%

    3%

    -12%

    5%

    4%

    6

  • 7profitabilitymusic segment consumption trends key players

    Digital Downloads

    Digital Streaming and Subscriptions

    Physical Sales

    Live Music Sponsorships

    Concert Tickets

    1-2%

    Largely unprofitable

    -3-1%

    10-12%

    7-9%

    Maturing market with first signs of plateau/slight decline in 2014 despite projected growth. Decline in single track purchases accelerated compared to albums.

    High-growth segment includes on-demand streaming (e.g.,live streaming) and subscription services. Scale/ongoing investment required to maintain consumer interest. Most valuable download buyers are fueling recent growth by switching to subscriptions.

    Continued decline amid decreasing consumer interest and lower profit margins compared to digital.

    Growth accelerating as consumers continue to place value on live music experiences, including concerts and festivals. Sponsorships now a critical revenue stream for promoters and increasingly valuable touch-point for brands involved.

    Minor year-to-year fluctuations in ticket sales have been offset by a steady increase in ticket prices. Consumer demand for top artists has created a megastar economy in which top 1% of artists drive 70% of revenues. 7

  • 8music artist concentration(2012, ww share of revenues)

    100%

    90%

    80%

    70%

    60%

    50%

    40%

    30%

    20%

    10%

    0%

    93%

    75%

    25%

    share of artists share of revenue

    Limited scale in long tail

    Challenged discovery economics

    Power concentrated among mega artists and top labels

    Increasing A&R talent costs

    implications

    7%

    Notwithstanding recent technological advances and consumer adoption,the fundamentals of the music super-economy remain unchanged.

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  • 9music landscape

    brand investment in music

    live streaming

    mc[co] labs

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  • 10

    production

    digital streaming

    live music

    promotional marketing

    1

    2

    3

    4

    5ventures/artistcollaborations "Record label model

    Sourcing Recording Marketing and distribution

    Audio/radio model Curation Live music streaming

    Tickets Sponsorships

    Media buys Content sponsorship

    10

  • 11

    70

    60

    50

    40

    30

    20

    10

    0

    production (record label model)

    digital streaming (at scale)

    promotional/marketing

    Note: brand marketing music initiatives are defined as investments from major corporate sponsors (either sponsorships, production, or promotion) aligning their brand name and resources against a music program, platform or talent.Source: MC[CO] Labs elaboration based on IEG, AdWeek and Billboard data

    ventures / artistcollaborations

    live music

    brand marketing investment initiatives in music properties(# of initiatives, 2012-2013)

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  • 12

    60

    50

    40

    30

    20

    10

    0

    2011 2012 2013

    Key Insights Average scale investment in music sponsorship is increasing and surpassing the $50M mark for top spenders in 2013.

    Live music sponsorship spending is largely driven by EOS ticketing programs and associated live activations across the Auto, Financial Services and Beverage categories. Nike is the main music sponsor at scale outside of those leading categories.

    Live streaming is being pursued by a minority of large spenders, with budget allocations to digital streaming activation being normally in the 15-20% range.

    Live streaming is today still viewed as an extension of the live experience sponsorship with deal structures requiring marketing commitments to drive viewership and engagement on the branded content(*) Top spenders include companies such as Pepsi, Coca Cola, Toyota, American Express, CITI, Chase, Master Card,

    Heineken

    Note: Sponsorship spend by the top spenders above represents ~34% of total North American sponsorship spend in 2013.Source: MC[CO] elaborations based on IEG, Billboard, AdAge data corroborated with internal spending database and expert interviews

    average annual music sponsorship spend by top 10 spenders (2011- 2013, US$M)

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  • 13

    music landscape

    brand investment in music

    live streaming

    mc[co] labs

    13

  • 14

    Digital music is slowing down its growth and shifting platform mix, with music and ad models emerging as key contributors behind downloads.

    from: download economy

    almost entirely download based

    ownership driven

    drm dependent

    simple platform

    aggregation driven

    to: streaming economy

    downloads and streaming

    cloud based

    more fluid drm systems

    complex, intelligent platforms

    access driven

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  • 15

    140

    120

    100

    80

    60

    40

    20

    0

    Streaming volumes are overwhelming compared to digital units sold; however per unit monetization clearly favors DTO (1$ per unit avg. vs. 0.005S/unit stream)

    on demand streams digital units sold

    1.5b

    118b

    on demand streams vs. digital music units sold (In B units, worldwide 2013)

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  • 16

    streaming music breakdown(2013est, ww share of viewership and revenues)

    100%

    90%

    80%

    70%

    60%

    50%

    40%

    30%

    20%

    10%

    0%

    $173B $1.4B

    87%

    share of streams/views

    share of revenue

    68%

    Key Insights The fast-growing audio/music video streaming segment drove ~$1.4B in revenue in 2013, with 90% of revenue coming from audio streaming services such as Pandora and Spotify.

    Growth in video viewership is driven mainly by Vevo, which is the only music vi