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There has been recent chatter about the ‘worth’ of music (not something that can really be valued, save by people who know the price of everything and the value of nothing).
Here is my thread on this...
Here is my thread on this...
Whilst I should try and avoid questions like this – I really do enjoy the mental gymnastics of trying to estimate these things.
The bear argument is that if supply for music increases exponentially and consumption increases arithmetically then the value of music must decrease.
My economist friends will recognise this line of thinking from that defunct economist Malthus who predicted that we would all be eating Soylent green by now.
I intend to show that this argument is flawed:
One: musical supply does not increase exponentially
Two: consumption has in fact increased at a faster rate than supply
Three: The utility of music has increased
Four: Value is not measure in revenues but discounted cash flows
One: musical supply does not increase exponentially
Two: consumption has in fact increased at a faster rate than supply
Three: The utility of music has increased
Four: Value is not measure in revenues but discounted cash flows
Conclusion: The value of music has increased; but this value has been hoarded by the labels, the streamers, and the 1% of the 1% of performers.
POINT ONE:
Revenue growth for musical instruments has been 6.5% CAGR since 2012
Revenue growth for musical instruments has been 6.5% CAGR since 2012
Focusrite (I am short on accounting grounds…) revenue has grown under 20% CAGR. This is not organic growth, it includes acquisitions.
The point here is that in the long run growth in new music can not be greater than the supply of instruments/gear.
(Hoho yes, I see the pun)
(Hoho yes, I see the pun)
But what about the back catalogue? New music competes with old music?
Gracenote reckons there are maybe 100m songs recorded.
For that to grow at 4% you would need 4m songs a year to be recorded,
There are 187k musicians in the USA. So maybe there are 2m musicians worldwide (with access to instruments, internet etc…
For that to grow at 4% you would need 4m songs a year to be recorded,
There are 187k musicians in the USA. So maybe there are 2m musicians worldwide (with access to instruments, internet etc…
see:
https://jonathanjaeger.com/there-are-97-million-songs-in-the-world-so-wh
https://musically.com/2019/12/06/spotify-wrapped-2019-sparks-new-discussion-about-artist-income/
https://jonathanjaeger.com/there-are-97-million-songs-in-the-world-so-wh
https://musically.com/2019/12/06/spotify-wrapped-2019-sparks-new-discussion-about-artist-income/
However maybe only a quarter are recording their own compositions. Thus, there are 500m musicians recording their own compositions in any year?
So to grow the total music catalogue by more than 4% they need to be writing more than 8 songs a year.
This is may be about right, but it is hard to see that figure being significantly more.
Hence I can assume growth in supply of around 5-10%
This is may be about right, but it is hard to see that figure being significantly more.
Hence I can assume growth in supply of around 5-10%
Point Two:
Demand for music has WAY outstripped that.
Demand for music has WAY outstripped that.
Ways in which demand has increase
1.Listen to more music
2.Listen on iphones, smart speakers, etc…
3.Listen more as we consume more complementary media
There is music on the television; there is music on computer games.
1.Listen to more music
2.Listen on iphones, smart speakers, etc…
3.Listen more as we consume more complementary media
There is music on the television; there is music on computer games.
Personal device sales have exploded. Just look at how many people have a smart phone compared with how many had a Walkman…. That’s CAGR of 14%
Look at amazon dot sales…. Alexa/Smart speaker sales have grown exponentially
The point is that the number of musical devices has grown; but also, we consume more with what we have.
How many people listened to music on their daily commute 20 years ago; how many families would regularly put a record on for supper (as opposed to saying “hey alexa”), how many people wear headphone in the office ?
POINT THREE:
The Utility of Music has increased.
I agree that this is a contentious and maybe weaker argument, however…..
As we consume more television, computer games, adverts, etc…. we are consuming more music. Think fo the last film NOT to have music?
The Utility of Music has increased.
I agree that this is a contentious and maybe weaker argument, however…..
As we consume more television, computer games, adverts, etc…. we are consuming more music. Think fo the last film NOT to have music?
The music and the movie combine to create something greater than merely the sum of the parts.
The more this happens the more value MUST be created.
The more this happens the more value MUST be created.
POINT FOUR:
Its about profit dummy. Well actually about the future discounted cash flows.
The point is simply that even if the revenue per song decreases, the profit per song can still increase of the costs are reduced at a greater rate.
Its about profit dummy. Well actually about the future discounted cash flows.
The point is simply that even if the revenue per song decreases, the profit per song can still increase of the costs are reduced at a greater rate.
How has this happened:
I am currently lusting after a Universal Audio Apollo 4x, a Townsend Labs mic, and the Putnam collection plugin. And also the Neve plugins....
This is pretty pricy gear. And may cost over £10k (don’t tell my wife)
I am currently lusting after a Universal Audio Apollo 4x, a Townsend Labs mic, and the Putnam collection plugin. And also the Neve plugins....
This is pretty pricy gear. And may cost over £10k (don’t tell my wife)
See here:
This is maybe 99% of the cost of the original hardware that it is modelled on. I bet you a dollar that 99 out of 100 fintwits could not tell the difference!
So yes revenue per artist may have gone down; although I am not sure that demand per artist has. Musicians are still not getting more money? How come? Where has it gone?
Why are friends of mine struggling to make ends meet?
So granted music revenues are still not past their peak in 2001:
Yet consumption has gone up?
Well we know that consumers are getting an AWESOME deal. They get over 50m songs for a tenner a month.
Well we know that consumers are getting an AWESOME deal. They get over 50m songs for a tenner a month.
Actually its WAY less than a tenner because of family deals, student deals, and concessions to Vodafone etc…
But revenues are almost where they were in 2001 off greater consumption. And musicians are getting screwed. So who else is there?
The three major labels made around 2bn of profit last year.
I am an investor, and a short seller. There is nothing wrong with profit
However rent-seeking behaviour is not something to be applauded.
I am an investor, and a short seller. There is nothing wrong with profit
However rent-seeking behaviour is not something to be applauded.
Furthermore I am first and foremost a musician (in my heart if not my wallet)
And here is the thing: is musicians are suffering - so too is music.
But that is a whole other thread….
And here is the thing: is musicians are suffering - so too is music.
But that is a whole other thread….
Summary:
The value of music is increasing.
The consumers are benefitting
The labels and streamers are hoarding the wealth
Musicians are suffering
SOMETHING Must be done
Soon
The value of music is increasing.
The consumers are benefitting
The labels and streamers are hoarding the wealth
Musicians are suffering
SOMETHING Must be done
Soon
phew.... Rant over
#brokenrecord
@MrTomGray
@crispinhunt
@thenitinsawhney
@PRSFoundation
@WeAreTheMU
@IvorsAcademy
@JericoShaw
#brokenrecord
@MrTomGray
@crispinhunt
@thenitinsawhney
@PRSFoundation
@WeAreTheMU
@IvorsAcademy
@JericoShaw
