A Virtual Show for a Digital Crowd: Mapping Out the Challenges of the Post-COVID Music Industry
Originally published at https://soundcharts.com on May 27, 2020.
So, here we are. Let’s face it, 2020 will be a hard year for the music business. Tours have been cancelled, venues closed their doors, and releases got postponed as we all locked ourselves in our apartments trying to make sense of those new life- and work-flows.
The initial bewilderment has now subsided. As of May 2020, we have entered the crisis management mode. I’m not entirely sold on the idea of the pandemic becoming the point in time that will split our personal and professional lives into pre-COVID and post-COVID eras — society and economy will, eventually, go back to normal. Venues will open once again, and festivals will follow. But, at the same time, it’s clear that (1) it will take a while to go back to “business as usual” and (2) the socio-economic impact of the pandemic will be felt long after the quarantine is lifted.
The point is, there’s no need to get pessimistic — but the “let’s just wait it out and rebuild” approach is not going to cut it either. That might sound like a cliche, but every crisis is an opportunity, and for those companies that are going to make it to the other side, it’s time to face the challenges, figure out the answers, adapt, and push forward. But before we can do that, we have to understand where we stand today and identify the questions that 2020 will be all about.
The Day the Show Stood Still
When will the live shows make their comeback? If you follow the industry publications, you probably see a lot of conflicting news in your feed. On one hand, we see governments around the globe taking their first tentative shots at lifting the ban on cultural events. Admittedly, the newly reinstated events will have to follow strict social distancing guidelines, so there’s a question if they will be financially viable in the first place. However, as of May 14th, you can, technically, organize concerts in a few selected markets like Spain, China, and a few states in the US.
On the other side of the spectrum, South Korea re-instituted a ban on nightclubs as following a spike in COVID cases and music conferences planned for 2021 are getting cancelled, while healthcare experts predict that concerts and festivals won’t come back until autumn 2021. So, how can we make sense of all that? How do we plan ahead? Well, I think the answer is simple: there won’t be any physical live shows in 2020 — at least not really. Sure, there will be some socially distanced gigs here and there, and we might even see a few “normal” small-scale shows by Q4. However, the live industry won’t come anywhere near the scope of the pre-COVID market we’re all accustomed to. Here’s why.
Concerts take a lot of time and resources to put together. As a promoter, you invest today into a show that will happen three to nine months from now. That was always somewhat of a risk, but in 2020 it will be a risk that no promoter is willing to take. Just think of all the “ifs” the live industry is facing right now.
Let’s not even get into international touring — imagine you want to promote a show for a local artist, right there in your hometown. Let’s even assume that there’s an official date for when the venues will open their doors to the public. Here are some of the bets you’ll have to make:
First of all, venues might close again — we’ve already seen it happen in China and South Korea. In the case of a second wave COVID spike (even a potential one), mass gatherings will be the first to go. So, if you’re planning three months ahead, there’s really no guarantee that the venues won’t close again as long as coronavirus is lurking in the background.
Then, you need concert-goers to feel safe enough to actually go out to the show. According to the recent Reuters/Ipsos survey, less than 27% of customers would go to a movie, concert, or live theater performance if the venues were to reopen before the vaccine is developed. Not to mention decreasing purchasing power as the economies around the world spiral into recession.
If we add the touring aspect back in the mix, we need international travel and logistics back. We need hotels and equipment shipping. We need visas and stable plane ticket prices. And then we need money to pay for all of the above. I wish I had better news for all of the promoters and booking agents out there. But based on the information available, I think that the pandemic has to be pretty much over to jumpstart the physical live industry again. And when I say over, I don’t mean “flatten the curve” over — I mean “vaccine developed” over. And it kinda has to be over everywhere.
So, let’s assume that there will be no shows in 2020. What are the implications for the music industry as a whole? Well, for starters, the global live industry was worth about $27bn in 2018, compared to $19,1bn made in recording revenues over the same year. Imagine if all the platforms allowing artists to monetize their recording were to shut down for a year. No Spotify, no Apple Music, no Bandcamp, no YouTube, no record stores, no nothing. Well, from the purely monetary perspective, the live industry coming to a halt is about 1.5 times worse. And it doesn’t end there.
The Domino Effect
First of all, apart from that explicit monetary effect, there are more subtle implications to consider. The music business is a network, and a major hit on one of the sub-sectors will be felt all around the industry — though it might take months or even years before the ripples reach certain verticals.
Take a look at publishing, for instance. For now, royalty payouts are mostly intact — in fact, for most songwriters out there revenues are still on the rise. But we have to remember that most CMOs operate on a 6–18 month lag, which means that royalties songwriters and publishers get today were collected long before the pandemic. And if we look at how these cash flows are actually generated, it becomes apparent that the royalty payouts are bound to go down.
With all the public spaces closed, all the public performance royalties attached to them are practically nonexistent since February. Radio seems to be one the rise, at least radio consumption — but most brands have slashed their marketing budgets and ad revenues are in decline. So, the radio revenues, and, by extension, radio royalties are bound to go down as well.
At the end of the day, a big chunk of publishing comes down to licensing music to businesses, from live venues to radio stations and FMCG brands, and so the publishing revenues are a function of how all those companies are doing. And a lot of them are not doing all that well right now. Movie production companies just got all their projects frozen, SMEs are struggling to keep the lights on and big corporations are cutting down on expenses across the board.
So, public performance royalties and sync fees will go down. Only mechanicals will probably stay intact as they are primarily linked to streaming consumption. In a few months, we will see a massive decline in publishing cash flows — that is an undeniable fact, already accounted for in most internal market projections.
So, the live industry is in stasis, and publishing is about to crash. But at least the recording industry is good, right? Streaming consumption is stable, and people are still paying for their subscriptions. Indeed, on the demand side, the recording industry is fine — but what about the supply?
For starters, the ongoing pandemic put an enormous strain on the music production process. Most studios are closed, and the collaboration has gone digital. Then, promotion campaigns became much, much more challenging — especially for majors artists. Not all of the audiences are digital, and a lot of artists out there still rely on traditional communications, like radio, TV, and magazines to promote their records. A lot of major artists are holding on to their releases, while they figure out a way to properly record and promote a release in the midst of a pandemic.
Then, with live shows out of the question, releasing an album loses its purpose for a lot of artists out there. With no tour to “support the album” live-relient artists are postponing their releases, waiting for things to come back to normal — which might take a year or even longer.
Conversely, we have artists that were always betting on winning the digital music game. For some of the acts out there, independent hip-hop being the prime example, digital music accounted for up to 90% of the revenue even before the whole COVID thing. Well, for those digital-first acts, pandemic might actually become a good thing, at least from a monetary perspective.
The streaming market, though still saturated, is relatively less competitive right now, as a lot of big players are still holding to their releases — and so there’s more room for all the digital-first independent artists. Though I have a suspicion that it won’t last much longer: for the major acts, the problem is really all about managing internal workflows — and so they will solve it, soon.
If I were to summarize the impact of the pandemic on the music industry in a single sentence, I’d get something along these lines: Live revenues are pretty much gone for at least a year, publishing will start plummeting with a 6–12 months delay, recording is gonna be fine in comparison, at least as far as the money is concerned — though it is still a bit of a mixed bag. And for artists, well, it’s a function of all three.
Which brings me to where I’ve decided to write this article. The crisis is very real, and not just the live industry that is in danger — everyone is impacted, and everyone is impacted long-term. In the next year, the true winners will be the teams that will find a way to overcome the challenges of the post-COVID industry, rather than waiting it out.
On the Value of Music
Before we get into it, I’d like to make a quick sidenote on the value of music in the post-streaming era. That is, no doubt, a big and nuanced topic — and I don’t really see a point in getting into too much details right now. Still though, since that is one of the most heated discussion in the industry these days, I feel like you need to know where I stand. And if you’d like to go down the wormhole, I suggest you check our Insiders episode with Kieth of MIDiA Research — it’s a nice introduction to the topic, that outlines the problem better than I’d ever could.
In short, I think that the true value the music industry is working with is not music in a sense of audio recordings. I mean, sure, there are artists and even entire genres out there that excel at working the streaming platforms and selling offscreen audio content. But for most acts, the real value is not in the music per se — it’s all about the connection that those artists have with their audiences. And given the way the music economy has been set up, it’s the scarce “physical” live experiences that were the prime (and sometimes, the only) way to actually monetize that connection. Then, it turned out that if you take that last, high-margin step out of the equation, the entire structure kind of falls apart.
The good news is, those artist-fan relationships are still there. It’s not like the fans have disappeared — in fact, you could argue that in our current socially distanced reality people are more likely than ever to dig into the artists’ universes in an attempt to connect. The fans are still there. The question is how do we build a new value funnel.
I’m not a big believer in music as a charity — tip jars, non-profit relief funds, and all that. Even though the value is in your fans, you can’t extract it by simply asking for it. Instead, you have to give your fans the experience they deserve and are willing to pay for. The only question is how we can do it without the tour?
Live Streaming for the Rescue?
The first instinctive response of the industry to that void in a place where live shows used to be was to turn concerts digital. As Cherie Hu puts it over on her Patreon, in COVID-19’s wake, live streaming has become the new normal. And while that is true, as the last few months have clearly demonstrated, bringing that physical live show experience to the via digital mediums turned out to be extremely challenging, if not impossible.
Source: Google Trends
I mean, live-streamed concerts made sense, especially at the dusk of the pandemic. Digital concerts were new and exciting, they provided a window back into pre-COVID reality for all the people stuck in their homes. Those first live streams were organized to replace cancelled shows and founded on “better than nothing” kind of logic — and indeed, they were better than nothing.
But as time went on, it became clear that the live stream of a concert in itself simply can’t compete with native digital content that has been perfected by years and years of practice. To keep the audience’s attention, the live show has to be better than Netflix series, YouTube videos, TikTok feeds, Twitch streams, video games, and so forth. And when your live stream is basically a recording of a concert you can find on YouTube (minus the crowd), don’t blame consumers for choosing Tiger King over it.
That said, I don’t think that live streams are a dead end. The medium has it’s potential, and it can become a powerful tool in the right hands, but if, and only if, we are able to break away from the “live stream is a recreation of a physical show” mentality, which still seems to be the dominant approach across the industry.
In the end, the goal of a live stream is to create the live show experience, but that is not something you can achieve by recreating all the “signs” on the physical live show: the stage, the lighting, the artist’s performance, etc. A good digital show needs to capture the “character”, the spirit of a live show experience, and then turn it digital. But what does the “live show experience” really mean?
The Live Show Experience
So, why do people go out to live shows? The answer can differ a lot, depending on the type of show and the type of concert-goer. For some, the live show is about re-experiencing their favorite recordings in a new and meaningful way. For some, it is about losing yourself in a mosh pit or a four-hour-long dancing session. For some, it’s about the intimacy between the listener and the performer. For some, it’s a way to socialize with their friends over a beer.
Looking for a way to structuralize that experience and put it into common terms, I’ve turned to scientific papers. Admittedly, the music market is an extremely underdeveloped field as far as academic research goes, but there are some useful papers out there.
Today, I’d like to take a look at a single paper titled (brace yourselves) “Attribute satisfaction and experiential involvement in evaluations of live musical performance: Theory and managerial implications for services” by Angela Hausman. The paper aimed at building and testing a model that would link attributes of a show with the audience’s overall satisfaction — and arrived at two conclusions that I think can really help us make sense of that elusive “live show experience”. Without getting into too much detail, here’s the gist of it:
First, the study has found that all the physical attributes of a live show are mediated by Audience Interaction, or “communal enjoyment of and participation in the live show experience”. In other words, all the physical aspects of a performance, from the venue decor to the sound quality and the skills of the performer, only matter as long as they are a part of a shared experience. The show comes together when, and only when there’s an audience to enjoy it, an audience that feels united as a group of like-minded individuals, a group of fans that have gathered to share their appreciation for the artist.
Then, the study highlighted a second important component of the live experience — Experiential Involvement. As the author defines it, experiential involvement is a lot like a flow state, the feeling of “being so involved in a current activity that nothing else seems to matter” — except that experiential involvement is a passive condition. At a live show, the audience has no power over what happens on stage, yet the concert goer is often so consumed by the experience that everything else fades into the background.
I like to think of experiential involvement as a proxy for the “magic of a live show”. Surely, we’ve all experienced it — that feeling of being lost in the performance, completely focused on the moment at hand. There are only you, the people around you, and the show. That feeling is a second integral component of the live show experience.
If we try to apply that conceptual framework to the live-streamed shows it can help us highlight all the main challenges of the medium. Let’s start with experiential involvement. It is still vague how that state can be invoked, and I won’t get into it here — sometimes, music works in mysterious ways and we have to accept it. But it’s clear that an involved listener is extremely engaged by the live show, swept by the moment — and it’s much harder to achieve such engagement when the show is just a tab on the person’s browser, one click away from, well, the rest of their online life.
Going to a physical show is somewhat of a ritual. You have to get the ticket, arrive at a venue, get in, pass a security check, watch an opening act, etc. By making all those steps you commit yourself to the experience. You’ve arrived at a space that serves a single purpose — directing all of your attention to the moment of the performance. If you’re there, you’ve dedicated yourself to enjoy the show.
I believe that the very process of going to a concert makes you predisposed to experience that “magic of a live show”. Well, with live streams, all it takes is opening a link — and then, you are still submerged in your daily routine. There’s all the content in the world, just a click away.
You remain exposed to all the distractions of digital life, from Facebook notifications to the recommendation sidebar of the very YouTube page the live show is hosted on. Here’s another way to put it: do you think anyone has ever picked up a phone and said: “Sorry, I can’t talk right now, I’m at a (digital) concert”?
Then, there’s a second challenge of Audience Interaction. Surely, there’s a live chat that comes with every live stream, but let’s be honest, reading a username typing down lyrics of a song is hardly comparable to pushing through a crowd at the venue. While digital concerts can easily recreate the physical aspects of the show, their audience remains detached. Detached from the moment and the magic of the show, and detached from each other — which is the very core of what makes a live show feel like a live show.
So, How Do We Solve This?
Figuring out the formula for a perfect digital concert will surely take some time and testing. But I think that the key is the change in approach. At the end of the day, the audience is there not just to see the artists perform songs live — they are there to have the experience.
Arguably the greatest digital concert of the last months, Travis Scott’s Astronomical Tour didn’t actually involve any sort of a live performance. The songs were pre-recorded — as well as the rest of the show. Nothing was improvised, nothing was impulsive. The live show was hard-coded into the game, which technically makes it more of a multi-medium recording than a performance. However, Astronomical managed to capture the experience of a live show.
First, it has put the audience through the virtual gates and into the moment of the show and then allowed people’s digital avatars to share that experience. And by creating that shared, dedicated virtual space, Astronomical came closer to the live show experience than all the live-streamed concerts out there. For its audience, that virtual concert was a real event and a real experience — an experience that you couldn’t get at a physical concert.
And that is what’s great about the digital space. When crafting a live performance, the artist is restrained by physical reality. You need a stage light for people to see you, you need a sound system for people to hear you, you need a zone for people to stand, and so on. A lot of traditional physical attributes of the show — well, you just don’t need them if you’re building a digital-first experience.
Instead, you can focus on expanding the artist’s universe in ways that are new and exciting for your fans and crafting a performance that will engage the audience in a native, digital way. Want to put your audience in an abstract non-space that evolves as the show progresses? Sure! Want to do a show on the moon? Go ahead! There are no boundaries here, not really. And if you manage to capture the character of a live show, you can make it feel much closer to “the real thing”. A good digital concert has to forget about its physical past, but remember what the audience loved about it.
And then, of course, you have to figure out how to monetize it. There’s a great article by Mark Mulligan recently out on MIDiA dealing with that exact topic of monetization of virtual experiences, concepts of digital scarcity and so forth. I’d say it complements this article really well, aiming at the same challenges but with slightly different optics — so if you made it this far, it might be worth checking it out.
Of course, the virtual shows, XR experiences, in-game concerts — whatever you want to call it — are not a panacea. It will work for some of the artists. It won’t fit others. At the end of the day, it’s just one of the instruments in the post-COVID survival toolkit, alongside D2C sales, direct Patreon-esque monetization models, and so on. But I do believe that it will become the next frontier for digital live shows.
With the news of Sony Music building a team “dedicated to reimagining music through immersive media”, we are bound to see more major artists enter the space. That won’t solve the problem across the board, but it will help create a further proof of concept. Then, we’ll have to see if the medium will be able to outgrow Fortnite — or, rather, outgrow the dependency on Fortnite distributing the show among its multi-million audience.
But if it can, I bet we’ll see independent players getting in on it. It’s easy to imagine a virtual promoter building custom experiences for artists — after all, developing a vignette video game is hardly more expensive than putting together an international tour. And then, who knows, there might be a space for a platform — a sort of a bare-boned customizable virtual venue — that will provide the tech infrastructure and make virtual show production available even for DIY artists. There are still all the usual unanswered questions of the format’s long-term viability and monetization, of course — but from where I stand, the potential is obvious. And as for the tech infrustructure to support all that virtual world-building, I think I’ll just leave you with this demo for Unreal Engine 5, developped by no other than Epic Games, the company behind Fortnite.
There’s really no proper way to end this article. We are all still holding our breath, not knowing what to expect next. Hopefully, this article helped structure it all a bit. We’re in it for the long haul, and for all the music industry professionals out there: it’s time to count our losses, adapt, and get back into the business of bringing fans and music together.
