Disruptive tech in the music industry: opportunities abound

The sharp rise of illegal file-sharing websites in the early 2000s showed how technology can quickly threaten an industry – and highlighted how slow the music industry was to adapt. Now that challenge has gradually been brought under control through the work of organisations such as the IFPI with the support of the courts, and disruptive tech is widely proving to be a source for good. Key participants in the music industry, including artists and labels, are benefiting from new tech – which is also stimulating rising demand for music as consumers start to enjoy it in new ways.

According to the UK’s Entertainment Retailers’ Association (ERA), British consumers spent just over £1.2bn on recorded music in 2017, up 9.6% on the year before. Streaming is the latest technology driving this growth.  ERA also found that British consumers spent £577.1m on streaming subscriptions in 2017, up 41.9% on 2016, while physical sales fell by 3.4% and downloads dropped by 23.1%. It isn’t only established giants such as Spotify and Apple that are supporting the growth of music streaming. The emergence of white label service providers such as 7digital is enabling other brands (such as HMV and Samsung) to benefit from their ready-made streaming and download platforms and licensed status.
 

The emergence of AI

Streaming enables consumers to enjoy music more easily, particularly with the increasing home penetration of smart speakers such as the Amazon Echo, Google Home and Apple HomePod. So too does the increasing use of data, machine learning and artificial intelligence (AI) by streaming platforms. The likes of Spotify and Apple are essentially data-driven companies – gathering data on the profile of listeners, where they listen, what they listen to and on what devices. This creates opportunities for suggesting new music that individual subscribers may enjoy (e.g. Spotify’s Discover Weekly and Release Radar) and for marketing goods and services to them on a targeted basis. When artists and labels are given access to this data, they can gain a better understanding of who is consuming their music, where they are based and the tracks they love the best – helping to engage more effectively with their lucrative fan base.

The value that companies such as Apple and Spotify place on AI is demonstrated by their recent M&A activity. In 2017, for example, Spotify’s acquisitions included French AI startup Niland, whose expertise enables better searches and user recommendations, MightyTV, a content recommendation service and Sonalytic, an audio detection startup. Recruitment of individual AI experts has also become a priority.

As well as improving streaming services, AI is having an impact on the creation of original music. For example, London-based startup Jukedeck has developed neural network machine-learning AI that reads music and learns what notes and chord combinations work well together. The founders don’t claim to be trying to replace musicians, but to be making music and composition more accessible.
 

Blockchain and other innovations

New tech in the form of blockchain has also been creating a buzz in the music industry for some time. Although it could have a number of uses, royalty tracking and rights protection are the most obvious. For example, blockchain startup Mediachain Labs was another Spotify acquisition in 2017 and will help to link the tracks that users stream with licensing agreements. Blockchain could also potentially be used to support smart contracts and the wider sharing of music.

Companies such as Audio Network have meanwhile created extensive music libraries with sophisticated search functions and clear, accessible licensing processes. In this way creators can be rewarded for making music easily available to users – whether they be professionals looking for a TV soundtrack or amateurs wanting backing music for a YouTube graduation video.  In addition, aspiring music stars no longer have to rely on grabbing a label’s attention. Online music distribution companies such as Ditto Music enable artists to share their work with leading digital music stores including iTunes, Google Play, Amazon and Spotify – and so potentially to launch highly successful careers.

Innovation in the wider entertainment sector could also have a knock-on impact for the music industry. We’re already seeing the development of holograms to bring former legends back to the stage – or even living legends into our homes or on our desks. For example, live entertainment company BASE Entertainment took its hologram of Roy Orbison on tour across the UK and Ireland in April 2018, with the legendary singer “performing” on stage accompanied by a live orchestra. We’re also seeing investment in new entertainment venues that use technology to create immersive experiences for audiences, as with the proposed Sphere which the Madison Square Garden Company wants to build in East London. Such developments only serve to make experiencing music even more exciting for consumers, potentially building even more loyal fans for innovative artists.
 

New challenges inspire new solutions

New tech always brings challenges – and potential threats. For example, as streaming has developed, so too has stream-ripping as the latest form of music piracy. However, tech solutions are constantly being developed to combat threats, such as the creation of more sophisticated web-based crawling technologies to hunt down links to pirated content. Wider problems also persist with licensing and revenue returns to rights holders from online video sites (the so-called value gap) which may take longer to address.

In today’s world, the ongoing disruption of the music industry is now actively encouraged through events like the BPI Innovation Hub, which seeks to match innovative tech businesses with record labels and music companies looking for creative technology solutions to help maximise commercial opportunities. The direct listing of Spotify in early April 2018 should also help fuel the growing interest in music-related tech start-ups. 

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