It goes without saying that the current Covid19 pandemic has had an astronomical effect-world over, resulting unfortunately in tragedy for many. It is fair to say that it has impacted each and every one of us on some level! A word which I would use to sum the pandemic up would be LOSS.
For some this is the loss of a loved one at this time, to others it might be the loss of independence due to restrictions and for many its the loss of employment due to many businesses being forced to close their doors permanently. It is without question a very sad and uncertain time.
One area which has been gravely effected is the Music industry! Venues have closed, concerts have been cancelled and it appears that the world has fallen into a deathly silence. It is only at such an unprecedented time that we have actually realised just how much we depend financially on the Music Industry. The loss due to Covid19 is far greater than that of the many great musicians who have been left without work. This “forced silence” has had a domino effect on our Economy in many ways including the following:
1. Sales and streaming
In the wake of the pandemic, physical sales, which represent a quarter of recorded music revenues, are down by about one-third – unsurprising given the closure of retail stores – while digital sales have fallen around 11%. This aligns with general falls in discretionary spending.
Evidence also shows that the way people listen to music is changing in light of coronavirus. In China, Tencent Music Entertainment (TME) reported changes to listening behaviour during the pandemic, with more consumers using home applications on TVs and smart devices.
While there was some impact on our social entertainment services, we have started to see a moderate recovery recently. In the first quarter of 2020, online music subscription revenues increased by 70.0% year-over-year. The number of online music-paying users reached 42.7 million, a year-over-year increase of 50.4%. Tsai Chun Pan, Group Vice President, TME Content Cooperation Department.
Spotify, which also added subscribers during the first quarter of this year, has likewise noted the change in consumers’ routines, saying that daily habits are now reflective of weekend consumption, as well as relaxing genres rising in popularity.
In terms of the amount of music consumed, initial data showed a reduction in streaming of 7-9% in some markets – though this appears to have recovered. At the same time, on-demand music video streams have increased. The reasons are linked to a change in behaviours: the pandemic has intensified peoples’ focus on news media (especially TV), while fewer commuting journeys and the gym closures have shifted listening to different parts of the day.
2. Advertising spend
The music industry is also subject to reductions in advertising spending that are happening worldwide. A survey by the Interactive Advertising Bureau shows that around a quarter of media buyers and brands have paused all advertising for the first half of 2020, and a further 46% have reduced spending. This, combined with an approximate one-third reduction in digital ad spending, will affect ad-supported music channels – and therefore both total industry revenue and individual income for artists. Spotify announced that it missed its first quarter advertising targets in light of changes to ad budgets.
On the distribution side, there is a growing list of artists delaying releases to later in the year. In part this is due to the inability to use tours to promote new albums, and live music in general has been dramatically affected. An extensive list of major concerts and events have been cancelled.
As long as bans on large gatherings continue, live performance revenue is almost zero – effectively cutting the industry’s total revenue in half. Ticket and merchandise sales aside, a six-month shutdown is estimated to cost the industry more than $10bn in sponsorships, with longer delays being even more devastating.
In addition, the post-pandemic outlook appears challenging and growth forecasts for live music are expected to be revised significantly. Rebuilding consumer confidence in the sector will be difficult: one survey shows that, without a proven vaccine, less than half of US consumers plan to go to concerts, movies, sports events and amusement parks when they reopen. This will affect artists hugely – they generate around 75% of their income from live shows, even as data shows that a growing share of live music revenue goes to the top 1% of performers (60% in 2019, versus 26% in 1982).