Composium Digest: Community building
№37 | Anouk Dyussembayeva | July 26, 2022
Composium Digest is a newsletter-only addition delivered once a week. Get overviews of interesting stories happening in the music industry, stay informed of various opportunities music startups and companies offer and catch up on some of the Composium articles you might have missed.
Maybe moving local is the answer for Netflix?
The road has been bumpy for Netflix within the past few months. The streamer got a lot of attention back when it announced its Q1 results — the subscriber growth chart was flattening and so was the revenue.
Netflix saw a potential solution in implementing ads and making people pay for password sharing. “Stranger Things” has also been performing really well — it’s the TV show of the year. However, the top 10 Netflix shows have dropped in view numbers and people are still canceling their subscriptions. There are also more and more players trying to get a piece of the pie, making it harder for Netflix to retain its market position.
According to Bloomberg, the streamer has been discussing things like syndicating its older shows to broadcast networks or putting its movies in theaters, but none of these will likely help Netflix earn additional revenue in the near future.
I think Netflix needs to remind itself of its roots. Netflix has, undoubtedly, been the king of original content, which is a big part of why it has gotten to where it is. With businesses slowly turning towards hyper-local communities — that is the future of content, you’ve heard it here first — the company should search for more local content. This way, it will appeal to more users demographically and culturally, while also discovering new talent.
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Hipgnosis fiscal year revenue rose by 24.7%
While we’ve seen investment tycoons purchasing music catalogs before (Taylor Swift's master rights, Bob Dylan's song catalog, among others), the past two years have offered even more opportunities for investment firms. The pandemic left many unable to tour and look for new sources of income, thus being more open to selling their music. The prices have also dropped.
Hipgnosis has been buying out catalogs unlike any other firm, now boasting a portfolio of 65413 songs from artists like Neil Young, Jimmy Iovine, Red Hot Chili Peppers, and Shakira. The collection is currently valued at around $2.7 billion.
Music has remained a lucrative investment despite rising inflation. Since the mechanical songwriter and publisher royalties jumped from 10.5% to 15.1% by Copyright Royalty Board’s vote, investors are seeing an even bigger ROI.
Spotify acquires Heardle
Originally inspired by Wordle, Heardle is a trivia game where players need to guess a song from a few opening notes. No matter whether they have the correct answer or not, it also allows users to listen to the entire song, making it also a music discovery tool.
That caught Spotify’s attention, with the Swedish streamer announcing that the game is available to its listeners in the UK, US, Canada, New Zealand, Australia, and Ireland.
This recent addition to the Spotify ecosystem is a step forward in cultivating “interactive experiences” for its platform, aimed at enhancing music discovery and the artist-fan relationship.
Given that all platforms are fighting for customer attention and the hours that users spend on the app has become an important KPI, games are a seamless and engaging way to keep people on the app for longer.
Disney is doing community building… quite literally
Disney is taking community building to a whole new level — it’s constructing residences for its superfans.
Imagine having your customers live in the space you built and designed — they’re essentially interacting with your products 24/7, making it unbelievably easy to offer them new consumer experiences and more products. This is also a smart move because Disney can now bring its community even closer together offline while also adding online elements.
Now, imagine if Spotify starts building its own studios for artists? Or venues? This would allow the company to expand and further embed itself along the different parts of the music industry chain.
SPACs are back
And we have another music company going public via SPAC: Alliance Entertainment, one of the largest wholesalers globally, is merging with Adara Acquisition Corp to list on the NYSE.
What is a SPAC exactly? There was a lot of hype around the special purpose acquisition companies, with Morning Brew dubbing them to be “the Silly Bandz of 2020” and Nasdaq calling 2020 the year of SPAC IPOs — even for the music industry, everyone from Anghami and Deezer to UMG and Jay Z was jumping on the train.
Essentially, SPACs solely exist so that businesses can team up with them to go public. The reason why these companies are so attractive is that since they’re already on the stock exchange, the whole process of going public becomes easier, cheaper, and faster in comparison to having a traditional IPO.
To note, Alliance houses more than 485,000 entertainment products from the likes of Disney, Microsoft, Sega, Sony Pictures, Warner Music, and Nintendo, among others. It also runs a very successful e-commerce business, which makes going public a logical next step in the company’s development. Through this merging, the new company’s proforma equity value will be around $480 million.
TikTok is rolling out an album
Not on its own, though — the ByteDance child is teaming up with Warner Classic to release “TikTok Classics — Memes & Viral Hits,” with the first tracks set to be put out on July 8.
This is yet another move TikTok has done venturing into the music industry. It’s not a secret that the video-sharing platform is influencing how music is consumed more than any music platform. From launching SoundOn, updating its music streaming service in China, to testing a sound editing app Mawf within the past few months, it really is making the major players sweat and work harder in order to keep their spots. The music industry is shifting, with more and more traditionally non-music players innovating and disrupting the market.