A Record-Setting Quarter for Streaming

Hey, happy Friday! It's Friday, right? These days are starting to blend...

It's been a busy week in hip-hop. We got a collab with Megan Thee Stallion and Beyonce Thee Rapper. There's a new Drake project. A new Doja Cat and Nicki Minaj collab. As a movie fan, I'm closely following the AMC-Universal showdown. And as someone who doesn't own Tesla but knows plenty of people who do, I can only imagine what y'all are thinking today.

Today's update covers Drake's strategy for 2020, a record-setting quarters for streaming, and Facebook's new paid livestreams.

Drake's Strategy with Dark Lane Demo Tapes

From @champagnepapi:

My brothers @oliverelkhatib @ovonoel put together alot of the songs people have been asking for (some leaks and some joints from SoundCloud and some new vibes) DARK LANE DEMO TAPES out everywhere at midnight…also my 6th STUDIO ALBUM DROPPING SUMMER 2020!!! Lucky number 6 😈 soon fwd

Drake's new "tape" is now available everywhere. The previously released songs include, "When to Say When," "Chicago Freestyle," "Toosie Slide," "War," "Demons," and "Pain 1993." Nearly half the project is previously released music.

It's easier than ever to repackage existing content and get rewarded for it. The 33-year-old rapper proved that last year with Cake Package and So Far Gone. Here's what I wrote in March when "Chicago Freestyle" and "When to Say When" first dropped:

The biggest hit from these two-packs will make the next album, which helps ensure commercial success. This most recent pack dropped exclusively on SoundCloud and YouTube which proves two things. 

First, Drake can generate buzz and build demand outside the other DSPs... 

Second, he builds more anticipation for the album. Remember, last year’s Care Package topped the Billboard charts, and those songs weren’t new songs!... When the next Drake album drops Spotify, Apple Music, Amazon Music, Tidal, and elsewhere, the song(s) selected from this two-pack will give it an additional boost. 

In 2018, his Scary Hours two-pack brought us “God’s Plan,” which made its way to Scorpion and is his first single to go Diamond. In 2019, his Best in the World Pack brought us “Money in the Grave,” which got heavy radio play and will surely make the next album. He understands how the game works.

Dark Lane Demo Tapes isn't an album, but the Billboard charts don't care. It will still top the charts, just like Drake wanted.

Last year, he hinted that his next album won't be another high-volume album like Scorpion. This mixtape and upcoming album should work out better for a few reasons. First, the projects will be treated separately and get more attention from fans. For instance, if the double-disc Scorpion was released as one mixtape and one album three months apart, Drake would have topped the Billboard charts twice, and likely sold more records.

Second, a lower volume studio album gives Drake a better shot at that "classic" certification. I've written in the past that he no longer cares about that. But in December's Rap Radar interview, he alluded to it a few times. He talked about how Scorpion could have had more critical acclaim if it was shorter. He acknowledged the tightness of Nothing Was The Same's 13 tracks but held back from committing to that again.

Regardless of how many songs make the final cut, Drake will break all sorts of charting and streaming records with two drops in the same calendar year. Unless Beyonce or Taylor Swift drop two albums in 2020, those records are his.

Record-setting quarters, but will it last?

Q1 was big for digital streaming and media apps. TikTok had the best quarter for any app ever with 315 million downloads and 2 billion overall. YouTube generated over $4 billion in ad revenue, up 33% from Q1'19. Spotify grew 31%, its fastest year-over-year growth with 130 million subscribers. Netflix gained a record-setting 15 million subscribers last quarter. Apple Music set an all-time revenue record and had double-digit growth.

No surprises here. The COVID-19 quarantine has boosted streaming and other socially-distant activities. But is this growth sustainable? Is it legitimate? And will these pandemic-driven consumers maintain active usage over time?

There are a few ways to look at this. The first is the most favorable perspective. This virus will accelerate several transitions that were largely underway. Those transitions include streaming video on demand (SVOD), remote work, digital distribution, and livestreaming. There's heightened interest now, but it's still too early to know what will sustain. For instance, music livestreams will likely look different next year than they do today.

The second perspective is more skeptical. We can also assume that these record-breaking quarters are more a reflection of our ephemeral response to the virus. On the supply side, many of these services have offered more free trials and looser restrictions. Some of these promotional offers won't exist when the virus passes. How will that impact growth and customer acquisition tactics? On the consumer side, folks were more willing to accept lucrative sign-up offers, especially at steep discounts. But what will those look like upon renewal? And will they be impacted when social distancing measures are relaxed?

Some services will fare better than others. TikTok will still be strong. Netflix will fare well too since it's ubiquitous with digital media. But digital music streaming providers should be cautious. They're the only options with "free" alternatives to consume the same content. And music streaming has still been down in the pandemic.

In Music Business Worldwide, Tim Ingham called the key difference in subscriber growth and revenue growth:

Spotify’s ARPU – the average revenue paid each month by its Premium subscribers around the world – fell by 7% at constant currency, year-on-year, to €4.42m in Q1 2020... 

Q1 2019, SPOT posted €1.385bn in Premium revenues – representing year-on-year growth of €348m. 

In Q1 2020, however, it posted €1.700bn in Premium revenues – up by the smaller amount of €315m.

Some of this is inevitable since Spotify has expanded in markets where $9.99 / month would never fly. CEO Daniel Ek's response to this has been pretty consistent. He believes we should be evaluating the company on subscriber growth:

“No, again, our primary strategy is growth,” said Ek. “As we said before, rather than maximizing revenue [we are focused on] this amazing opportunity of moving [people] from radio to on-demand audio; that’s the trend line that we’re trying to capture and that’s what you’re seeing us go after.”

I'm not against companies prioritizing lifetime value / customer acquisition costs over profits. I get it. But in Spotify's case, its Q1 success is significantly influenced by free trials, timely Q1 promotional offers, and COVID-19 friendly initiatives. The actual numbers might not be sustainable once the pandemic is over.

Post-pandemic retention will be interesting to track. We won't get that level of granularity from these companies. But there should be enough public data to make estimations for next quarter or next year.

Paid Livestreams on Facebook

In a company press release, Facebook announced some new features:

To support creators and small businesses, we plan to add the ability for Pages to charge for access to events with Live videos on Facebook – anything from online performances to classes to professional conferences...

To help you support some of your favorite creators, we’re expanding Stars to more Pages and more countries. Once you buy Stars you can send them to creators while they’re streaming, and they’ll earn 1 cent for every Star.

Instagram’s VP of Product Vishal Shah said “I appreciate the level of thought put into this thread. We are investing a lot into Instagram Live and have been thinking about many of the areas you’ve highlighted. Stay tuned for more details in the weeks to come!” and Head of Instagram Adam Mosseri said “We have some plans in the works to support creators and artists using Live. Stay tuned.”

How much did this thread influences the upcoming changes? I know that some of these plans were underway, but it's hard Instagram or Facebook to ignore the groundswell and attention that tweet received.

The ability for creators to charge is great. Facebook is still the largest social network, and these options will extend to Instagram too. But given the capacity restraints from the Verzuz battles, it is better served for the rising creators or those with smaller audiences. Anyone with the capacity to attract millions is better partnering with others and moving to a platform they have more flexibility in.

The elephant-in-the-room is how much Facebook will charge for its commission. Twitch's revenue split is 50/50, while YouTube's is 70/30 for membership pages. I expect Facebook will be somewhere in that range. Facebook could also charge less commission today to draw in creators, but raise commission over time.

Enjoy your weekend! Stay safe.