The global music business in the 2020s 🔮

In this post I’d like to highlight one of my favourite newsletters, Exponential View by Azeem Azhar, look at his predictions for the next 10 years and how they apply to the music business.

Azhar’s 10 forecasts are as follows:

• Climate change will be the dominant narrative
• Our geopolitics will continue to fragment and this will result in more conflict
• In what we have generally thought of as the West, we’ll rethink the shape and purpose of our economies
• We’ll see the rise of new digital commons, economic institutions that are neither public- nor private- sector
• World trade will face a troika of headwinds
• Cities will become relatively more important
• We’ll eat far less meat
• The big tech companies, particularly Facebook, Google and Amazon, will work aggressively to increase their footprint
• AI will be everywhere
• During the 2020s there will be a generational shift

Quite a lot to unpack. Let’s dig in.

Music x Climate Change 🌬️

Azhar mentions cheap renewables, smart entrepreneurs and net zero targets becoming enshrined in law in the EU and UK. The Supreme Court of The Netherlands recently required the government to slash carbon emissions by 25% of 1990 levels by the end of 2020.

Through initiatives like Music Declares Emergency, it has become visible that there is a broad willingness and desire in the music business to do better in terms of greenhouse gas emissions, waste, circularity, and general sustainability. As various organisations in music set up comissions related to sustainability, 2020 will bring wide cross-industry discussions and exchange on this topic, including pilot projects, and other initiatives.

By 2021, the topic of sustainability in music will be ‘the new normal’ and instead of a niche subject, I expect it will be a discussion point at every industry conference.

(In case you missed it, I recently launched MUSIC x GREEN as a directory to help gather and organise all information related to this topic)

Music x Geopolitics 🗺️

The growing economies of China and India, the rise of African economies, a post-Brexit world, and what about Russia? The 20s are going to be complicated.

While it’s hard to make predictions, an annecdote may shed light on the type of complications to expect.

A few years ago, I lived in Moscow where I headed up product for Zvooq, a music streaming service. At some point Spotify started negotiating with local music services and telcos and hired local staff. Months went by and we heard rumours Spotify was having trouble getting everything in place from their usual playbook for launching in new countries (major components at that time: majority of local content, plus a bundling deal with a top telco). Then the annexation of Crimea and the war in eastern Ukraine happened, sanctions followed. There was talk of cutting Russia off from global banking by blocking Russia from the SWIFT transaction system. In the midst of all of that, Spotify decided to cease operations. The exact reasons are unclear, but the geopolitical complications may have been the straw that broke the camel’s back. Too much risk. (To date Spotify still hasn’t launched in Russia, although there are signs that a launch is imminent)

What may further complicate things for the streaming dominated music industry is the fracturing of the internet into “four, or more, internets”. There is the classical Sillicon Valley model of an open internet with which we’re all familiar. In the EU, we’ve seen increased assertiveness from governments and courts in regulating the internet, whether that’s about the ‘right to be forgotten’, GDPR, and aspects like article 11 and 13. There is the Chinese internet – based on the promotion of its own tech giants operating within its tightly controlled environment. Russia has recently been experimenting with cutting itself off from the global internet and is claiming a successful trial.

To make things more complicated, many of the major music companies have geographically complex ownerships. Most recently, Chinese tech giant Tencent acquired a 10% stake in Universal Music (see chart by Cherie Hu).

Last thing I want to highlight before moving on: streaming in India is growing at a very rapid pace. Gaana announced 125 million monthly active users, Spotify is at 2 million users, and YouTube and YouTube Music Premium count 800,000 subscribers. Meanwhile the Chinese ByteDance, mother company of TikTok, is testing its own streaming service called Resso out in India.

Music x Mission-Driven States ⏩

Azhar imagines states to take a more active role in directing investments in tech and shaping our societies. He expects a departure from the economic Friedman doctrine, and for states to apply more action towards giving our economies a clearer purpose. As defined by Marianna Mazzucato:

“Rather than focusing on particular sectors – as in traditional industrial policy – mission-oriented policy focuses on problem-specific societal challenges, which many different sectors interact to solve. The focus on problems, and new types of collaborations between public and private actors to solve them, creates the potential for greater spillovers than a sectoral approach. It was this approach that put a man on the moon, and lay behind the creation of the Internet and entire new sectors like biotechnology, nanotechnology, and the emerging green technology revolution. It is not enough to fix market and system failures: policy-makers need to be more future focused, creating and shaping new markets.”

Expect innovation in the problem areas addressed in the other 9 points here. Music will be on the sidelines initially, but the impact of the innovations (e.g. around AI) may end up redefining our industry – much in the same way as the internet eventually did.

Music x Digital Commons ⛓️

The last years have seen a lot of discussion about platform economy and privacy. Think the Facebook / Cambridge Analytica scandal, think of leaks of user data, and think of the rise of AI which makes people’s data more valuable (and vulnerable to exploitation).

A proposed concept is the ‘data trust’ – a mechanism, organisation, or legal structure, that stores data and provides rule based interoperability with platforms. This trust should specialise in data governance for maximum public benefit.

In other words, we may be moving away from the current platform-driven reality of the web (2.0), towards something where individual users have more control and security. This would impact any company heavily relying on training algorithms with user data – such as ones that heavily rely on serving ads (Facebook, Google / YouTube, Spotify).

It may also create more transparency around who’s involved with the music, as envisioned in Imogen Heap’s Mycelia initiative, which is supported by IHAN – a promising fair data economy project of Finnish innovation fund Sitra.

Music x Global Headwinds 📦

Azhar highlights the falling global trade-to-GDP ratio, a trend that is already occurring. At the end of the decade, we’ll see a lower trade in raw materials and manufactures relative to GDP than current. I’m struggling to connect this to music, to be honest. It could be that more of our GDP comes from services rather than physical goods. Someone with more knowledge of this topic than I: please fill me in. If you write an article, I’m happy to share it in the next newsletter.

Music x Cities 🌆

Continued urbanisation will bring more challenges, but also great opportunities. What comes to mind is the Music Cities initiative by Sound Diplomacy. Besides regular events about the importance of thriving local music scenes, they work together with local governments to develop local music infrastructure.

As certain population centers get more expensive, we see young talent choosing to settle in places other than Sillicon Valley, New York, London, etc. As someone living in Berlin, it’s obvious that music can play a crucial role in attracting unique talent to a city. Should we anticipate cities investing more in this space? I think so.

Music x Meat 🍖

A trend mostly unrelated to the music business, although it’s worth pointing out that music festivals are often used to trial new types of food, from seaweed burgers to insects.

Music x Big Tech 🌐

“By 2030, a complex patchwork of settlements in different geographies will govern the behaviours of [Facebook, Google, and Amazon].” Leading up to that, Azhar expects these firms to agressively hoover up data and move into new arenas. Google is firmly established in the entertainment space through YouTube, Amazon has a good foothold in music streaming due to its Alexa devices, and Facebook is crucial for many reasons – to pick one, it owns two of the most important platforms for artists to connect to their fans (Facebook and Instagram).

I expect these companies to double down on this space, as well as invest in new forms of AI driven music, as they have less of a stake in the traditional songwriter / performer type music than many of the players in the music business. While the music industry will be careful not to cannabilize itself with this new form of entertainment, I expect outside forces to play a very disruptive role. For them, the value in music as we know it lies with the personalities it produces, less so with the way the music actually comes about. Which brings us to the next topic.

Music x AI 🧠

“Our computers will use machine vision, listening, path planning and robotics to build an increasingly accurate digital twin of the real world, and bringing smart, adaptive products into the real world.”

Last decade was the decade of the smartphone. Next decade will be the decade of augmented and mixed reality. With that, we’ll see a third generation of digital music.

It’s important that you think of all these things in combined contexts: Google Glass without smart environments and AI was just creepy and not that useful. Since the launch of Google Glass in 2014, the number of connected ‘Internet of Things’ devices has doubled to around 27 billion. By 2025 that number is expected to be somewhere around 75 billion.

That’s the context in which the next phase of digital music will play out. We’ll see a great convergence bringing together trends in AI, gaming, esports, entertainment, augmented, mixed, and virtual reality, and smart environments through the Internet of Things.

Music x Generational Shift 🚸

People who have spent their college years and careers online will move into global leadership. We’ll see a lot of the world’s influence fall into the hands of people who can be described as digital natives. This will affect policy, which affects the music industry broadly.

“The agitators and the creators of our economy for the next decade are between 15 and 25 now.”

Luckily, this is something the business has mastered over many decades.

The bigger question, looking at all of the above is: is the music industry ready to disrupt itself?

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