​Water & Music — The innovator's guide to the music business.
​Today's date is September 20, 2021.
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Hello Reader,

Hope you're having a good start to your week!

This is the first edition of Water & Music's new weekly digest for free subscribers called Extended Play, which focuses on contextualizing music-industry data. Because you're a paying member, you'll receive these digests every Monday evening (ET), along with our members-only Discord digests and editorial/database updates on Wednesdays and Fridays, respectively.

Each issue of Extended Play will put a different piece of music-industry data in context — drawing from official earnings releases, trade reports, third-party surveys and/or our own first-party research at Water & Music. Sometimes, I'll dive deeper into why a given piece of data is so significant against the backdrop of the industry's history; other times, I'll warn you not to take industry data at face value, and explain why a single number doesn't tell the whole story.

The overarching goal is to use data as a vehicle to keep you up to date not only with the what of music and tech, but also with the why, how and so what, with actionable insights no matter where you are in your career.

I hope you'll find these new insights helpful, and encourage you to forward these and future emails to anyone whom you think would enjoy what Water & Music has to offer.

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Extended Play: The total (un)addressable market for music livestreams

​Read this article for free on Water & Music's website.​

​Just over 18 months ago, the world’s biggest concert promoters, Live Nation and AEG, officially suspended their tours as the COVID-19 pandemics swept across the globe.

It’s hard to overstate how much hype music livestreaming got in the ensuing months, as artists and their teams turned to “virtual concerts” to connect with their global fan bases and (attempt to) make ends meet. In May 2020, we published a Virtual Music Events Directory highlighting dozens of different video and audio livestreaming platforms that were available at artists’ disposal; dozens more music livestreaming platforms have been launched ever since, many of which have raised venture-capital funding with the promise of continued growth over time.

But with live shows slowly returning, we’re seeing a fundamental contradiction play out: Even as livestreaming platforms continue to raise more funds and announce marquee celebrity partnerships, demand for music livestreams has gone down significantly from its peak last year.

This leads us to our core data point for this week:

Of course, one should always take any consumer survey results like these with a grain of salt, especially when it comes to predicting demand for new technologies. But still, after the no-holds-barred adoption of livestreaming last year, these numbers give the music industry a much-needed reality check about the viability of the format as a standalone business model for concerts.

This reality check is especially clear when you compare the data against previous MRC Data reports. MRC’s 2020 U.S. year-end report (published January 2021) had painted a vastly different, more upward-trending narrative about where virtual concerts were going. From March to November 2020, consumer engagement with virtual concerts hovered at 20% to 25% of the general U.S. population, while overall consumer interest in music livestreams stayed at a healthy 35% to 40% of the population, according to MRC survey data. Assuming their researchers kept their core methodology intact, it’s pretty staggering that both of these figures have now plummeted to just 5% of the population.

Music livestream viewership metrics on platforms like Twitch have also stagnated over time. According to research I did last year, average concurrent viewership for music streams on Twitch nearly quadrupled from February 2020 (6,365 concurrent viewers) to April 2020 (27,761 concurrent viewers) — prompting Twitch to rapidly expand its music team, build an entirely new Music page for its user interface and pursue native integrations with services like Amazon Music. But average viewership for the Music category on Twitch is still at around 29,000 concurrent viewers — only a 4% increase from 18 months ago, according to third-party analytics platform Twitchmetrics.

There are two possible reasons for demand stagnating in recent months. One is that music livestreams just haven’t really innovated as a format, let alone to the point where fans are continually willing to pay for them. There were a few case studies of ticketed music livestreams last year from major celebrities and brands — most notably Tomorrowland’s virtual Around the World festival (July 2020) and Dua Lipa’s Studio 2054 (November 2020) — but they were the exception rather than the rule when it came to quality and access to resources, and, at least to my knowledge, no other music livestream has matched Studio 2054’s commercial success ever since. And certain other “livestreaming” initiatives that garnered a lot of buzz, like Spotify Live, were just pre-recorded short films that happened to premiere at a certain time, offered little to no opportunity for interaction with the artist and generally failed to strike a note with a critical mass of fans.

Not to say that all music livestreams have been devoid of creativity. The “in-game concert” boom — which Travis Scott’s Fortnite show helped propel forward last spring — opened much of the industry’s eyes to the importance of investing in new, experimental channels for engaging with fans, including avatars, digital merch and communities on platforms like Discord. Developments in virtual-reality apps for concerts have been slow but promising, with brands like Glastonbury and even Facebook jumping on board.

Unfortunately, just because something is more immersive or creative doesn’t mean it’ll be commercially viable or draw more engagement from fans. Case in point: Fortnite’s recent event with Ariana Grande was, IMO, one of the most creative in-game music events staged so far, with tons of different interactive chapters that gave fans a new perspective on the artist’s back catalog. But the official playback video has garnered only around 5 million views on Ari’s homepage in the last six weeks. In contrast, Travis Scott’s official Fortnite show video now has over 170 million views.

Maybe fans are just more interested in seeing these artists perform in person, now that more of them are going on tour (and with somewhat more consistent policies for COVID test/vaccine mandates). In fact, according to MRC Data’s 2021 U.S. Music 360 report, 16% of respondents plan to attend an in-person live music event in the coming year — 11 more percentage points than those who plan to tune into a music livestream. This somewhat contradicts the hypothesis that the total addressable market for music livestreams is larger than that for in-person concerts simply because the former is more accessible.

Again, take these kinds of consumer survey results with a grain of salt. But the truth is that even a year-and-a-half in, music livestreams still have a lot to prove when it comes to genuinely novel fan experiences, let alone sustainable or high-growth business models. As far as online media consumption is concerned, competition is hotter than ever; according to MRC Data, one of respondents’ top reasons for not tuning into a livestream is that “I choose to spend my time with other forms of entertainment.”

The gap between VC funding and actual consumer demand for music livestreaming

What’s most concerning to me about these data points is the widening gap between consumer sentiment about virtual concerts and the amount of investor money being poured into music livestreaming platforms.

According to our music-tech investment database, at least a dozen different music/event livestreaming platforms have raised at least $1 billion in venture-capital funding so far in 2021; six of these funding rounds were announced in the last two months. Moment House, Flymachine, Dreamstage and Wave are included in this list, as well as hybrid event management platform Hopin.

Based on MRC Data’s survey results, you could make the argument that music livestreaming startups are fighting for their piece of an ever-shrinking pie. That said, you could also argue that the pie starts to look a little bigger if you treat music livestreams as just one part of a wider entertainment and fan-engagement ecosystem, spanning both online and offline channels.

In fact, I’m seeing some previously livestreaming-centric startups move towards hybrid models — pitching themselves as holistic service providers that can help artists, venues and event organizers assemble brick-and-mortar livestreaming infrastructure and develop a strategy for a multilayered online/offline concert economy. For instance, Mandolin, which raised a $12 million round in June 2021, has shifted its messaging over time from being solely focused on livestreaming to optimizing the in-person concert experience for fans with digital engagement tools, while helping organizers bridge the online-offline audience gap.

With the current hype around crypto, I can see a music livestreaming startup build a core niche in helping artists sell both physical and digital merch (read: NFTs) for their shows using blockchain-powered tools. In my opinion, with the slow but steady return of live music, not enough music livestreaming startups are taking this hybrid partnership approach.

The music livestreaming pie could also look bigger from the perspective of a startup’s exit strategy. There are a lot of major entertainment corporations and streaming platforms that will probably want to acquire music livestreaming startups in the next year — more for the sake of owning the infrastructure than for the inherent market opportunity per se.

Live Nation acquired Veeps earlier this year, and there’s no reason why we shouldn’t expect another livestreaming acquisition down the line, especially one that focuses on different geographies or fan behaviors. Spotify just launched a series of live audio shows around some of its official playlists (like Lorem) on its Clubhouse clone Greenroom; we should expect the Swedish company to expand more into video streams as well, by either building or buying the right tools. Gaming companies Riot Games and Roblox have both strengthened their immersive music offerings in the last year as well, and could use some help from music-specific livestreaming companies, especially in the event that they want to host more offline concerts or cater more to an artist's core fan base (case in point: Riot Games partnering with Wave).

In theory, livestreaming is an important part of the fabric of the live music sector, especially when it comes to expanding a concert’s global reach and diversifying revenue streams for artists, promoters and venue owners who may be struggling to make ends meet.

But pitching the future of music livestreaming based on the promise of growing demand will likely be a losing battle as the concert industry shifts back to in-person shows in real time — and we’re starting to see the data to prove it.

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More of our coverage on livestreaming:

• ​Beyond the band-aid: How to create the music livestreaming platform of the future, now​
• ​The “waterfall” strategy: A new way to monetize paid concert livestreams​
• ​What will happen to all these music livestreaming platforms?​
• ​The legal underbelly of livestreaming concerts​

Our latest articles and databases:

• ​The à-la-carte artist: How Drake uses variability to provide each fan with a unique experience​
• ​Music/crypto dashboard: Track music NFT sales, music DAOs and more (last updated on September 20, 2021)
• ​Music/audio tech investment dashboard: Track $4B in deals, exits and IPOs (last updated on September 17, 2021)

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