Streaming’s New Normal Mark Mulligan 20th September 2017 http://midiaresearch.com

Who’s Winning In Streaming YouTube (Trust Gap?) What’s Next? Setting The Scene Who’s Winning In Streaming YouTube (Trust Gap?) What’s Next? http://midiaresearch.com

Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? Setting The Scene Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? http://midiaresearch.com

LABEL REVENUE

CONSOLIDATION

THE IPO CLOCK IS TICKING

It’s time to stop think of Millennials as being one generation GENERATION Z It’s time to stop think of Millennials as being one generation Millennials born on or after 2000 have dramatically different worldviews and behaviours than those born before

DIGITAL IMMIGRANT APPS Digital Immigrants made apps for millennials but were involuntarily bound by analogue world reference points. Most of these apps were iterations of previous digital experiences.

DIGITALLY NATIVE APPS A new generation of apps built by older millennials for younger millennials. Shorn of analogue reference points these apps rewrite the rules and look unlike much that has come before

The Social Media Landscape Is Shifting Weekly Active Users Of Selected Social Apps, Q4 2016 To Q2 2017 % of all consumers Source: MIDiA Research Brand Tracker (06/17), US, Canada, Australia and UK n = 2,250

Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? Setting The Scene Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? http://midiaresearch.com

MAJOR LABELS Major label recorded music revenue grew by 3% in 2016 Major label streaming grew by 56% Major publisher revenue grew by 3% Streaming overtook physical as the main major label revenue source in Q1 17…. ….which means physical was still the largest single revenue driver in 2016 (blame Germany and Japan) Consolidated hold on indie distribution Embraced / co-opted label services

The Major’s Domination Of Recorded Music Does Not Translate To Music Publishing Global Record Label And Music Publisher Market Share By Company, 2016

Amazon Has Fast Become The 3rd Largest Music Subscription Service Globally Global Streaming Music Subscribers, June 2017 158.4 million subscribers globally 35% of Prime subscribers are Prime Music users Note: Figures are in millions and refer to commercially active subscriptions Source: MIDiA Research and company reports

Spotify And YouTube Lead An Otherwise Fragmented Streaming Field Weekly Active Users Of Selected Music Apps, Q4 2016 To Q2 2017 % of all consumers Source: MIDiA Research Brand Tracker (06/17), US, Canada, Australia and UK n = 2,250

YouTube’s Music Dominance Is Far Less Pronounced In Germany Weekly Active Users Of Selected Music Apps April 2017, Germany And All Country Average % of all consumers Source: MIDiA Research Consumer (04/17), US, Brazil, Japan, UK, Germany, Sweden n=3,500

Something Really Interesting Is Happening Among UK Teens: Spotify Has Overtaken YouTube For Music Weekly Use Of Music Apps By UK Teens Compared To All Users Average, December 2016 % of segment Source: MIDiA Research Consumer Survey 12/16 (UK Only)

Streaming Music Value Chain: Detailed Industry Value Chain For Streaming Music (Subscriptions) Record labels 60% revenue share UMG, WMG, SME, Beggars, Glassnote Publishers Rights Bodies 10% PRS, ASCAP, Sony/ATV Music service 20-30% share <5% operating margin Spotify, Deezer, Rhapsody, Amazon White Label 7 Digital, Medianet, MusicQubed App stores Up to 30% revenue share Apple, Google Amazon, Apple, Google Distributors The Orchard, Ditto, TuneCore Self released artist RIGHTS INFRASTRUCTURE DISTRIBUTION CATEGORY Licensed usage of multiple types of music rights licenses required for digital use Bandwidth, operations, development, marketing Payment / billing, app retail DETAIL STAKEHOLDERS New model rights companies including label services (Essential), next gen publishing (Kobalt) New model rights companies including label services (Essential), next gen publishing (Kobalt) DISRUPTION SHIFTS Labels launching services Services becoming labels Services bypassing app stores Services reducing rates

Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? Setting The Scene Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? http://midiaresearch.com

YouTube Does Not Exist In A Vacuum But Is Instead A Deeply Intertwined Part Of Streaming Music Consumption Overlap Of Key Streaming Music Consumer Segments, April 2017 Subscribers only: 2% Subscribers total: 12% Subscribers & YouTube music: 4% Free streaming & subscribers: 6% YouTube music total: 44% Free streaming total: 32% YouTube music only: 18% Free streaming & YouTube: 19% Free streaming only: 8% Note: bubble sizes are illustrative MIDiA Research Consumer Survey 04/17 (US, Brazil, Japan, UK, Germany and Sweden) n=3,250

YouTube Fills Gaps In The Streaming Landscape That No Other Service Does Key Behaviours Of Free And Paid Streaming Music Users, April 2017 YouTube behaviour % segment MIDiA Research Consumer Survey 04/17 (US, Brazil, Japan, UK, Germany and Sweden) n=3,250

Does YouTube Have A Piracy Problem? TV Networks Record Labels Record labels upload music to YouTube. Result? All music is on YouTube. Labels say they have a YouTube piracy problem TV networks do not put TV shows on YouTube. Result? No TV shows on YouTube. No YouTube piracy problem

Does YouTube Have A Payouts Problem? $295 million $1,000 Rights holder ad revenue $0.34 $0.07 Rights holder Ad user ARPU (monthly) $0.003 $0.001 Per stream rate

Latin America Is Driving YouTube’s Music Renaissance

Consumption Of Music Videos On YouTube And Vevo Is Accelerating At Pace Days To Reach 1 Billion YouTube Streams Fastest Spanish language to 1 billion Fastest to reach 2 billion streams First music video to reach 1 billion Days to reach 2 billion views 515 684 394 Days To Reach 1 Billion Streams 620 Source: MIDiA Research / YouTube

YouTube’s Audience Is Growing In Size, And Also In Terms Of Music Video Views Per User For Its Biggest Hits Total YouTube Users And Streams Per Month Per YouTube User For Music Videos To Reach 1 Billion Views YouTube Users (millions) Streams Per Month Per YouTube Users For 1 Bn View Videos Source: YouTube / MIDiA Research

Despacito: The Gift That Keeps Giving Evolution Of Streams Of Despacito On YouTube And Vevo – April 2017 To September 2017 (All Figures In Billions) Monthly streams 1 0.5 1.6 1.4 Total streams (billions) Source: MIDiA Research / YouTube

Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? Setting The Scene Who’s Winning In Streaming? YouTube (Trust Gap?) What’s Next? http://midiaresearch.com

Outside Of Emerging Markets, More Than Two Thirds Of The 9 Outside Of Emerging Markets, More Than Two Thirds Of The 9.99 Streaming Music Opportunity Has Already Been Tapped Existing 9.99 Streaming Music Subscribers And Additional Addressable Base For 9.99 Subscriptions 69% 37% 74% 53% 63% 70% 94% 68% Tapped market % of all consumers Source: MIDiA Research consumer survey 3/16 (US, Brazil, Australia, UK, Sweden and France Note: Germany data is 04/17

PRICING 9.99 caps the spending of the most valuable music buyers (just 7% of Swedes spend more than $10 on music, 17% in the US) But it is also too expensive for even the super mainstream (which is why the $1 for 3 months offer has been so key to growth Mid tier is really hard to make work though (it’s a hard sell with terrible margins) Niche subscriptions, PAYG bundles and pay-TV bundles may square the circle

Streaming Will Become The Majority Of Recorded Music Revenue By Early 2019 Streaming Music Revenue And As Share Of Total Recorded Music Revenue, 2008-2025, Global Streaming as % total revenue Streaming revenue (billions USD) Note: All values are retail and inclusive of sales tax (where applicable) except ad supported streaming which are label and publisher & PRO trade revenues only Source: MIDiA Research Music Model (05/17)

For A Long Time, New Technology Looks More Like Yesterday Than It Does Tomorrow

Spotify (And Other Streaming Services) Have Data Foundations For Full Stack Music Platforms Music Functions And Revenue Streams That Spotify Could Implement Label services A&R / Discovery Music publishing Data / payments Merch / tickets Promotion / marketing

Are We Nearing Peak Attention? Selected Games Activity, Q4 2016 To Q2 2017 % of all consumers Source: MIDiA Research Brand Tracker (06/17), US, Canada, Australia and UK n = 2,250

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