The Most Important Music Business Trends Of 2016 [Bas Grasmayer]

This week as part of his Projecting Trends series, Bas Grasmayer looks back on some of the most import music industry trends of 2016, including blockchain tech, virtual reality, streaming exclusives, and bots.

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Guest post by Bas Grasmayer from the SynchblogWhat a rollercoaster 2016 has been. Without even considering the passing away of so many legends, it was an important year for the music business. 2016 was filled of optimism and innovation, with many looking forward and trying to understand the music industry in the years to come.Many of this year’s most important developments need more time in order to meaningfully contribute to a better industry, but that means 2016 has been a foundational year.In review, some of the year’s most important trends that we’ll see more of in 2017 and the years to come.Virtual realityThe start of the year already had people buzzing about the possibilities of VR. People are particularly interested in what VR can do for live performances. We’ve seen VR platform TheWaveVR raise millions of dollars to help artists get on stage in a virtual reality environment. Boiler Room, which you may know from the filmed DJ sets with an audience behind the performers, is in the process of opening a VR venue in London. NextVR teamed up with Live Nation to record real-world concerts so fans can experience them in VR. And Universal and iHeartMedia launched a similar initiative for VR concerts.

While this trend is set to continue, things are not moving as fast as some anticipated. There’s a chicken and egg problem: the consumer hardware is expensive and if there’s not a lot of great content out there, then people will not buy the hardware… and if they won’t buy the hardware, why create content for it? VR set manufacturers have had to cut their sales projections in half in some cases. The challenge is bringing parties together early to find ways to develop the market. One of these ways is the Khronos VR Standards Initiative which includes the likes of Valve, ARM, Google, Intel, NVIDIA, Facebook-owned Oculus and others.Benji Rogers, who started Dot Blockchain Music, sees an opportunity in making the music business more transparent through VR, as VR will bring new file formats that could adopt new standards for metadata integration.BlockchainThere have been A LOT of discussions about how the music business can utilize blockchain this year, and there will be many more in the years to come. The idea is that by moving rights data onto a distributed ledger, in which all changes are recorded and amended, it will be a lot easier to figure out who to pay for what, and as a result payments will be more timely and less money will enter a black box.The problem with some of the discussions is that we’re talking about how it can be implemented industry-wide… Which means that blockchain can’t solve the music industry’s problems, before the industry figures out how to solve them themselves. It’s reminiscent of the (failed) Global Rights Database. Luckily, Berklee has managed to get a lot of people into the same room for the Open Music Initiative, which is still rapidly growing.It will also be interesting to see what happens at the grassroots level. We don’t need to develop industry-wide solutions, necessarily. Small experiments to make things more efficient, for now, are a great start. Meanwhile there are many interesting developments in this space, with people building decentralized content registries for the decentralized web, and the teams around superstar DJs launching blockchain experiments to see how they can make the tech work.Augmented and mixed realityWith all the things that have happened since, it’s easy to forget the Pokémon Go hype that was the topic of the first Projecting Trends piece. It allowed the team of Landmrk, an app where people can unlock songs in a similar way to catching Pokémon, to double down on their augmented reality tool for music. They did a spectacular project with the Latin American boyband CNCO, where fans had to collaborate in the real world to unlock virtual goods.Meanwhile, the web was buzzing about Mark Zuckerberg’s demo at Oculus Connect, which showed how Facebook imagines the physical and digital world can be layered together. Troy Carter, who managed Lady Gaga and now heads up Creator Services at Spotify, talked about how ‘mixed reality’ in which the virtual interacts with the physical, will transform our music experience.A trend heavily intertwined with VR and it shows the promise virtual reality has once taken back into the real world.Streaming services competing with labelsThe year has also been interesting for streaming exclusives. It’s a phenomenon that was boosted by Tidal’s content strategy and after Apple Music enabled Frank Ocean to go indie, the head of Universal Music Group, Lucian Grainge, banned streaming exclusive deals. It’s logical. After all: for a long time music streaming services marketed themselves as all the music you want, for a fixed fee per month. Getting additional subscriptions is not a viable long-term option for most consumers, and instead they could go back to piracy. After all, they feel that they’re already paying for it – even when they’re not.We also see streaming going mainstream, with the Wall Street Journal dubbing 2016’s summer “the summer streaming took over”. Certainly true for Warner, Sony, and UMG - all seeing light at the end of the tunnel and healthy growth.Spotify, in the meantime, has started funding music creation in multiple ways. A passionate plea from a former Apple Music employee argued that Apple’s streaming service works more closely with artists than their labels do. It will be interesting to see whether streaming services will go full Netflix and will truly start competing for talent with labels.New price points in streaming?It’s long been argued that the music streaming landscape needs more price points to cater to different types of consumers. And while we talk about $10 / month being the standard price point, research by MIDiA revealed this year that the average monthly spend of newly acquired Spotify subscribers in Q2 was $3.09. This is due to discounting and particularly Spotify’s $0.99 for 3 months promotional offer. It helped fuel growth and boosted Spotify’s free-to-premium conversion figures.

A major player in the streaming space, Pandora, launched a new service priced at $5 / month to cater to mid-tier consumers. Another example of a lower-priced service is MTV Trax, which charges about $1 / week in countries like Spain. And a service named POPPED is experimenting with a $5 / month subscription app in The Netherlands.Spotify’s heavy discounting shows that they have a need for a lower price point. Perhaps spinning off one of their features as a standalone product could be a realistic scenario. And while they may not be buying Soundcloud after all, expect further consolidation in streaming next year, and new price points.Bots and automationThe culminating outrage against ticket scalping bots that snag tickets before fans can, only to resell them at higher price points, finally led to governments banning the practice in the US, UK, and Italy. Then there’s the other bots…If you’re deep in tech, it seemed like everyone and their mother had a chatbot this year. Facebook launched their Messenger platform, and saw the likes of Hardwell, Laidback Luke, Christina Milian, and Robbie Williams all getting in on the action. In India, music streaming service Gaana created a bot that let people stream music from Gaana via the Messenger interface. Record Bird, a service that lets you stay up to date on releases, also launched a relatively popular music bot.In China, the messenger WeChat has already become an app platform, and now Facebook’s trying to turn Messenger into an app platform of their own. So when looking at chatbots, try to see them as apps. Some are gimmicky, while others are thoughtful and well-executed. It’s an important trend because now, finally, messaging apps will become platforms of their own and step out of the shadows of social networks.Projecting TrendsIf you have free time around the holidays to dig deeper, here are all the Projecting Trends pieces of this year, so far:

Our 'Projecting Trends' series is created by digital strategist Bas Grasmayer, who runs the MUSIC x TECH x FUTURE digital strategy agency and newsletter. Subscribe to our Synchtank Weekly to receive all of our blog posts via email, plus key industry news, and details of our podcast episodes and free webinars.