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NEAR TRUTHS BY I.B. BAD

The Guy With the Most TEA; the Loaded Class of 2014; the Streaming Conundrum
FAST-FORWARD/REWIND: The contest for TEA marketshare honors looks like it could go down to the wire this year. It’s worth noting that the majors are now primarily focused on the TEA metric, which gives equal value to an album, an EP and 10 tracks—each equals one unit. Thus, Meghan Trainor’s four-song EP and Sam Smith’s 14-track deluxe album both count as one. Monte Lipman’s Republic, the current leader in TEA marketshare with 8%, will get a healthy bump from Taylor Swift’s spectacular first week. Steve Barnett’s resurgent CMG is a close second with 7.8%, and Rob Stringer’s Columbia is #3 with 7.2%, but the label boasts a loaded late-year release schedule with One Direction (current forecast in the 500-600k range), AC/DC (250-350k) and a lavishly expanded repackage of Beyoncé’s self-titled LP. The competition won’t be decided until December, but the real intrigue involves the probable battle for second place between Stringer and Barnett, fellow Brits, former colleagues and longtime friends, but fiercely competitive. Barnett is enjoying a career year, having broken 2014’s two biggest new acts in Sam Smith and 5 Seconds of Summer.
 

The third-biggest breakthrough, Iggy Azalea (like Smith and 5SOS a UMG U.K. signing), is on Steve BartelsDef Jam. Bartels is also having success with two other rookies, August Alsina and Jhené Aiko. L.A. Reid’s Epic has also broken three new acts: pop duo A Great Big World, South African sibling rock group KONGOS and solo pop artist Meghan Trainor, making them major factors in Epic’s turnaround. But no label has successfully developed more new artists than John Janick’s Interscope, which has shepherded rapper ScHoolboy Q and crooner Aloe Blacc, as well as a pair of U.K.-based outfits in pop/rockers The 1975 and electronic brother duo Disclosure. Interestingly, all of the above acts were broken in the traditional manner, through radio. This bumper crop of breakout newcomers (listed in the graphic below) may be the most encouraging development the business has experienced in recent years. They’re also providing the Grammys with a wealth of viable new talent.
 

VALUE ADDED: Last week we asked how much Swift’s next deal will be worth. The question now is, how much more will that deal be worth following Swift’s best-ever debut of 1.31m? Various high-ranking label execs say the most they could possibly pay for an available superstar is $7.5m per album, Adele excepted, so that would appear to be the over/under for Swift. While the bargaining power of her attorney, Mike Milom, has presumably been further ratcheted upward by her staggering sales week, the other side of the coin is that North America accounts for 80% of Swift’s total sales, unlike Adele, whose 21 was massive in practically every territory. Swift did manage to break big in the U.K. despite being labeled a country act—and as a genre country simply doesn’t travel well. Indeed, the only two country albums in the Top 200 of the iTunes U.K. Store at presstime are Swift’s last two releases. While her limited international success decreases Swift’s value, 1989 could be the record that finally makes her a worldwide star because it is so undeniably not country.

PADDLING UPSTREAM: The strategy of holding back high-profile albums from Spotify during their first week of release—or altogether—in an attempt to maximize sales seemed to be gaining momentum even before Swift held back 1989 and subsequently pulled her entire catalog. Coldplay has followed this first-week approach, Beyoncé is represented by just a handful of tracks and The Black Keys have vehemently refused to play ball with the service altogether.

The biggest conundrum the business must work out has to do with what the deals with Google, Spotify, Apple, SoundCloud and other licensers of content will look like moving forward. The problem is that the conversion from free to paid is less than expected, while the decline in downloads is greater than expected. The rates for Spotify’s free tier are paltry compared to the subscription tier, and the business models of the other streaming services reflect this same dichotomy. Free streaming is simply not throwing off enough revenue to offset the declines in downloading; in short, the free model is simply not working, and Spotify in particular isn’t having much success in converting users to subscribers.

Spotify, SoundCloud and the other services can’t exist without Universal, Sony and WMG. When the labels forge new deals with these services, much as they managed to force Apple to raise the download price from 99 cents to $1.29, that’s when the game will be won or lost. One way or another, the users of content must find a way to significantly increase revenue to the rights holders.

NAMES IN THE RUMOR MILL: Richard Griffiths, Jonathan Dickins, Sarah Stennett, Nick Raphael and David Joseph.
 
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