This guest article by Utopia Music originally posted on Medium

The year was 1992 and grunge was the biggest trend in US rock music as bands like Nirvana and Alice in Chains dominated the album charts. It would seem like a particularly unusual time to sign a college rock band consisting of four ordinary-looking guys whose style and demeanor were the antithesis of the grunge aesthetic. Yet this was the year that Atlantic Records signed Hootie and the Blowfish, whose debut album went on to sell millions of copies globally.

But this was not a lucky punch made solely on the basis of the gut instinct of an A&R man. In fact, Hootie and the Blowfish was one of the first examples of how data would transform the music industry. An assistant at a recently created research arm of Atlantic noticed that the then unsigned band was outselling many major acts in stores in South Carolina. Although some of the record executives at the label didn’t particularly like the band, Hootie was eventually signed anyway, partially on the basis of this sales data. The resulting album, Cracked Rear View, went on to achieve 7 million sales in the US alone, making it one of the top selling albums of the ‘90s.

Golden ears

This case was symbolic of a wider cultural shift in the industry. Like any art form, music is intrinsically subjective, so it is hardly surprising than for many years the music business was built on a belief in the abilities of mysterious, Svengali-like figures such as Phil Spector and Brian Epstein. Successful A&R men and producers were often lauded for having “golden ears” — being able to hear a potential hit song where others couldn’t. In addition, as the music industry was heavily siloed into discrete functions such as talent management, promotion, publishing and royalty collection, it was difficult to obtain reliable aggregate data. Thus, more often than not, record executives relied on hunches and intuition rather than hard data when making decisions.

The album is dead, long live the single

Now that music consumption is predominantly digital, data has come to the fore — and the consequences are far reaching. In the past three years, streaming services like Spotify have grown to become the largest source of revenue in the business. In some respects, this is nothing new: from vinyl, to cassette, to CD and MP3 — music formats have frequently changed over the past 50 years. However, the move to music streaming is the first time that a change in distribution has fundamentally altered the listening habits of consumers, and the relationship between artists and their fans.

Prior to the digital age, the album served as the fundamental economic unit of music consumption. Record labels typically tried to use hit singles and radio play as a way to drive album sales, which was the industry’s biggest source of revenue. In the year 2000, for example, the US music industry earned 1% of its revenue from CD singles and 92.3% from CD albums.

Fast forward 30 years and the landscape of the music industry has been inexorably altered. Streaming now accounts for 65% of revenue — and most of this consumption is of individual songs rather than entire albums. On Spotify for example, 68% of user listening time is spent on various kinds of playlists, while recent research suggests that only 16% of adults now listen to an album on a monthly basis.

Many casual music listeners open an app, select a song to begin with, and let an algorithm fill the rest of the play queue. Others simply tap a playlist like “summer acoustic” or “poolside disco” and outsource the job of developing a taste in music to someone else.

Smoothing the peaks and troughs of revenue

These changes have also had a big effect on revenue and cash flow in the industry. In the days of physical releases, people went into record shops and bought albums, usually soon after the album was released. As a result, the majority of revenue was earned in the year of the release, followed by a more fallow period until the next album.

In the age of streaming, this revenue tends to be spread out over a longer time horizon of 5 years or more, so it is crucial for artists to keep releasing singles, and to stay in the news by playing live shows, and engaging fans on social media.

Tricks of the trade

Labels are using some innovative approaches to adapt to this new economic landscape. The most obvious change is that many artists are now releasing more singles than ever before. Previously, the longstanding tradition was to release one single before an album’s release to generate hype and second single to coincide with the launch. Now, artists like Cardi B and Taylor Swift are putting out four singles before the album hits the market.

In the streaming economy, artists are competing for music listeners’ time and attention rather than for their wallets and a steady flow of singles with accompanying YouTube videos helps to keep them front and centre of their fan’s minds. Some artists also use these singles as trial balloons to determine which songs are gaining traction among their target audience and should be promoted with additional marketing investment. Passionfruit by Canadian hip-hop artist Drake was not originally conceived as a single, but after the track went viral online, the decision was taken to release it.

The dreaded skiprate

A new term has entered the lexicon of every commercially savvy songwriter — “skip rate”. In order for a song to be counted for royalty purposes, the listener needs to listen to at least 30 seconds of the track before pressing “next”. In this respect, Tom Petty and the Heartbreakers’ reputed mantra of “don’t bore us, get to the chorus” seems prescient. If you want the majority of average listeners to get past the 30-second mark, this means no more long intros à la Dire Straits Money for Nothing. The skip rate is also the reason why most albums these days are front-loaded with all the catchy singles at the beginning.

Of course, most artists probably already had an inkling that they might be straining the patience of some of their listeners with an 8-minute chamber orchestra intro before the rock song kicks in, but now that this impatience is exactly quantified by the skiprate, there is nowhere to hide. This is also bad news for high-concept music video directors: those 11-minute epic mini films popular in the ’80s and ’90s — the data shows they are bad for the skip rate on YouTube.

But some of the more old-school musicians out there have found innovative ways to adapt. For example, US slack-rocker Kurt Vile would probably not fall under anyone’s definition of a typical YouTuber. However, his record label took the decision to rent accommodation for him to hang out with musical friends and produce a steady stream of YouTube videos for a few weeks to promote his latest album.

The missing link — royalty payments

Given that data has so profoundly affected many aspects of the music industry, it may come as a surprise that one aspect is still stuck in the analogue age: royalty payments. As discussed in our previous blog, Performing Rights Organizations (PROs) are tasked with tracking down what music is being played and collecting royalties for it. But in many cases, actual royalty payouts are still based on estimates, averages, and a legal maze of contractual relationships between the various stakeholders such as performers, labels, publishers and songwriters. At Utopia Music, we aim to provide the missing link — by replacing legal contracts with smart contracts and digitally monitoring what music is being played, we will help build a music industry that is fit for purpose in the digital age.

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