Last year, the music industry generated $15 billion in revenue, a remarkable turnaround bolstered mostly through innovations in how consumers listen to music. Subscription-based streaming music services from firms like Spotify and Apple Music are leading that charge.
But the music industry must also add new revenue streams from new formats to keep this momentum going. Two in particular showing great promise are mobile games and augmented/virtual reality.
Video games have long been big customers for the music industry, licensing music for both in-game sound as well as for cinematic TV ads. In the console space, these were typically big-ticket deals available only to the larger gaming studios. In certain cases, developers have paid million for royalty and advance fees for artists like Kanye West.
But mobile games rarely have the kind of blockbuster successes that justify such a price tag. Instead, the mobile gaming market is defined more by volume and variety. With roughly 19 million mobile game developers worldwide, there’s a need for a more accessible, democratic music licensing solution.
While gaming doesn’t generate the kind of licensing revenue for music that film, ads and TV do, the industry is growing at a remarkable pace. According to video game research firm NewZoo, mobile gaming alone pulled in $37 billion in revenue in 2015. That's a 21% increase from 2014.
That brings us to SongLily, a music-licensing platform designed for mobile and other games. SongLily provides a more accessible licensing opportunity to developers. Those using the service pay roughly $1,440 for tracks provided by major labels and others, good for a set number of usages (either 100,000 downloads, or per unique registered player for online games).
This opens up a new revenue stream for the artists and those holding their royalty rights. It’s a win-win for both developers and artists. And it’s just the latest sign of good things to come for digital royalty owners. Here’s why.
By providing a price tag affordable for developers, SongLily is tapping into a significant marketplace. Featured music can be an important component of a video game. Game developer Mark Ettle for instance told the Wall Street Journal that hit songs can keep gamers playing longer. So providing an affordable outlet allows music licensing in games to scale rather than be limited to only top-tier artists.
Yet the price is attractive to artists as well. The Wall Street Journal says that SongLily's flat rate pays more than 10 times the amount that the average musician receives from subscription companies like Spotify and Apple Music.
We anticipate increasing revenue streams from virtual reality and augmented reality (VR/AR) devices and programs in the near future. While a small market today, some predict that this technological shift will be the largest the industry has seen in a generation.
“I do think we are about to see the world’s largest deployment of a new format since [compact] discs, and there is no standard or format for this new technology,” Benji Rogers, the founder of PledgeMusic, told Performer.
That's a bold statement, but not unrealistic. According to the Digi-Capital, the augmented reality market is set to hit $90 billion by 2020. That’s in addition to the $30 billion projected in the virtual reality markets.
The music industry could wind up a big beneficiary of this industry's growth. Primary uses include music education — as musicians learn how to play instruments and songs through these devices.
In addition, augmented reality will include new generations of music videos. For example, A British studio called Universal Everything created an augmented reality app that allows fans of Radiohead to explore and alter digital worlds while listening to their music. And in the VR space, startups like TheWaveVR and others are emerging to redefine the way music is experience.
This shift offers real opportunities to investors in the music royalty space. Given that subscription services are expected to drive the bulk of revenue growth over the next five years, these new revenue streams provide greater upside.
Others are sure to follow, and we'll continue to look at other technologies and royalty streams in the months ahead. To learn more about why music royalties make a compelling alternative investment, be sure to visit RoyaltyExchange.com.