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winners and losers

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Merry Christmas Eve! This is our last episode and memo of 2024 and we had to do it right. Here are our winners and losers of the year.

We each picked one winner and one loser in five categories: streaming, record label, artist, live music, and M&A. We also picked our comeback players of the year and snuck in a few honorable mentions. We didn’t get scientific, there were no rubrics. But there were plenty of strong opinions!

You can listen to me and Zack O’Malley Greenburg discuss our lists here (Part 1 & Part 2). You can also read Zack’s highlights here. Below, you can read more about my pick for the loser in streaming— the premium-only, ad-free music streaming services.

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Winners and Losers of 2024

This was the year that Universal Music Group said the quiet part out loud about which streaming platforms have grown faster than others.

Here’s UMG’s EVP chief financial officer Boyd Muir during the company’s Q2 earnings call:

"While Spotify, YouTube, and many regional and local platforms have continued to exhibit healthy growth in subscribers, other large partners who have been less successful in driving global adoption have seen a slowdown in new subscriber additions.”

He didn’t call out Apple Music and Amazon Music by name, but he didn’t need to. We knew. The DSPs run by the big tech giants have been surpassed by Spotify, the standalone streaming platform, and YouTube, the second-largest search engine.

There are a handful of factors that led to this. Apple and Amazon are companies whose core products largely serve the U.S. and the Western world. The focus on those regions made it tougher for their non-core products like music streaming to gain traction in every corner of the world. Also, both Apple and Amazon were still invested in digital downloads by the time Spotify launched. Plus, there may be a dash of founder mode with Spotify’s Daniel Ek building this company from the ground up.

But the less discussed and likely more impactful reason is the differences in the business model. Spotify and YouTube both have free ad-supported and paid tiers. Meanwhile, Apple Music and Amazon Music are premium-only music streaming services with paid tiers.

To be clear, this is not a pitch for premium-only services to create an ad-supported tier. Major label executives are understandably frustrated by the lower payouts received from free ad-supported music listening. Sony Music CEO Rob Stringer has called for a switch to an ad-supported tier that’s paid but priced cheaper than the premium-only ad-free tiers. But it’s hard to ignore how those free ad-supported tiers have converted free users to paid users.

If Spotify and YouTube changed their free tiers to a paid-but-cheaper-discounted tier, there could be downsides. Would the switch to paid-only slow down premium subscriber growth? Would enough free users convert to the free tier to offset the losses from ad revenue? Would the proposed pivot away from freemium be a net positive for the labels or a net negative?

This is not the same as Netflix’s new ad-supported tier that’s priced cheaper than its standard tier. Netflix content was never free to access. In music though, the majority of people who stream music worldwide use ad-supported tiers. Is that fair? Maybe not. But regardless of fairness to artists and rights holders, that’s the reality.

I assume that many cost-benefit analysis tests and market research have been done internally to estimate the impact of a potential change. That said, it’s hard to know how consumers will respond unless it’s live.

Also, the free tiers may “give away” an all-you-can-eat buffet of music that only costs a few minutes of a listener’s attention (or fewer if the YouTube ad is skippable), but would music piracy rise in their absence?

We’re only a generation removed from music lovers who would rather download songs full of viruses from LimeWire that would destroy their $1000 computer instead of spending $10 on an album.

These are some of the many challenges that exist for all premium-only music services, not just Apple Music or Amazon Music. It may feel like the music is still being given away and should be priced how other forms of media are priced. But based on the current landscape, the alternative may lead to unintended outcomes.

CHARTMETRIC STAT OF THE WEEK

In our winners and losers episode, Zack and I talked about how popular Kendrick Lamar was on Apple Music this year. Well, “luther,” his new song off the GNX album, was the #3 song on Apple Music’s Daily Top 100 Global on December 21. Meanwhile, that same song is #13 on Spotify’s Global Top 50.

Thanks again for reading and listening to Trapital this year! If you have some time over the next few weeks, you should check out some of our most popular episodes that you may have missed:

• Will TikTok Become Too Big to Ban?
• Why Penske Bought All the Media Companies
• Arena Tours: Art and Science of Sold Out Shows
• Why Top Artists Stick With Major Labels
• The Generative AI Music Sweepstakes
• Inside KKR’s Investments in Music
• Do Music Festivals Have a Superstar Problem?
• The Business Behind the Grammys
• Who Wins When There’s More Music Than Ever?

Happy holidays! We’ll be back on January 6.

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Dan Runcie
Founder of Trapital

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