Life

Music Is On Fire With Record Sales Topping $7.7 Billion In 2016, Plus H&M Feels the Wrath of Retail

#Morning Brew
by Last Updated

Enjoy your March 31st hand-crafted Brew!

QUOTE OF THE DAY

“Unfortunately for us @NASA mission ops folks celebrating our successful EVA, @SpaceX is about to make us the second bill space headline.”—Flight controller Ben Honey, on NASA’s spacewalk being upstaged by SpaceX’s successful launch of a reusable rocket, the first flight of its kind. One small step for NASA, one giant leap for SpaceX.

Market Snapshot

  • Stocks closed higher yet again, fueled by the financial sector, alongside a stronger dollar and oil closing above $50 a barrel
  • Two Fed officials, Eric Rosengren of Boston and John Williams of San Francisco, spoke about the strength of the American economy and hinted at up to three more interest rate hikes this year

Music Is On Fire

…With record sales topping $7.7 billion in 2016, according to a music label trade group. While 11.4% higher than last year, sales still sit at about half of what the industry earned in 1999. So, why was last year the strongest in recent memory? Streaming. No surprises there. Striking, however, is that streaming now accounts for a majority of all revenue. More than downloads, and way more than physical CDs.

Wait…I Thought Artists Hated Streaming?

They did. And many still do. Artists have revolted against services like Spotify and Pandora in recent years, which has led to the creation of supposedly “artist friendly” services like Jay-Z’s Tidal. Even YouTube now offers a premium service for listening to music and watching movies. But, none of these are cheap. Both Apple Music and Tidal cost upwards of $120 per year.

So Where’s The Money Going?

Good question. And the answer wasn’t easy to find. The pie gets cut four ways: the label, the platform, the publisher, and the artist all get a piece…in roughly that order. The label will receive something in the vicinity of 60 percent, while artists will bring in mid-single to low double-digits.

Streaming services are fairly secretive about artist pay, which is fueling some of the anger. Last year, singer/songwriter Perrin Lamb published his full payout sheet from Spotify, which shows he received only $0.004891 per play. Even megastars like Taylor Swift, who got just under $500,000 from Spotify in 2014, say the pay is unfair. If the revenue is so high—Pandora raked in $1.39 billion last year—it’s a safe bet that record labels are making a pretty penny. Now, as more streaming services become available, artists and labels will have to choose how to distribute their tunes.

Ford Pings BlackBerry

…To help develop wireless technology for connected cars. Ford Motor Co. (+0.00%) has hired 400 BlackBerry engineers in Canada to keep up in the race to automation. As motor companies young and old scramble to rev up production of self-driving cars, IBM’s Watson has a leg up with its smart wingman: a patented technology to help humans regain control of automated cars in the event of an emergency.

Ford’s gameplan is to advance its ‘infotainment’ system, which is currently powered by BlackBerry’s QNX OS. That’s not all—the plans include developing in-vehicle modems and device-to-device communication for the first generation of automated cars. This comes after Ford received a $154 million present from PM Trudeau to keep jobs in Canada.

H&M Feels the Wrath of Retail

…But its competitors don’t. That’s right, clothing retailer H&M (-4.01%) reported a 3% drop in profit YoY, and sales growth isn’t where it should be, either. On top of that, the Swedish company’s largest competitor Zara, owned by Inditex (-0.41%), reported a 14% increase in profit in the same quarter—as well as record sales. Ouch.

Why the opposite fate? With brick and mortar stores closing left and right and Amazon’s rapid growth, it’s no secret that retailers are hurting. Even American retailers such as Gap and J.Crew have had numerous issues with declining sales and store closings. Zara seems to have successfully predicted these retail woes. Over the last year, Zara has channeled precious resources towards larger areas. Because H&M didn’t ease up, it now must deal with a falling share price and more store closings. May the odds be ever in your favor.

What else is happening…

Economic Calendar

Water Cooler

Rethinking Citizenship

Estonia––the small eastern European country that you might have trouble pointing out on a map––has a plan to combat nationalism sweeping countries in Europe and North America alike. Entrepreneurs can now apply for Estonian “e-citizenship” to establish a business in the European Union without a physical office.

  • Almost 1,000 British companies have already applied ahead of Brexit, but they are by no means the majority. The program’s statistics page says 1,086 Americans have applied as well.
  • Estonia is quickly becoming one of the most digitally advanced nations in Europe and the world, and e-citizenship is only going to accelerate the innovation. You go, Estonia.

The Breakroom

Interview Question of the Day

How do you cut a circular cake into eight equal pieces using three cuts? (Answer)

Book of the Day

Today’s book recommendation comes from Brew reader Christin Spencer at The University of Alabama in Tuscaloosa. She sent us a concept from Arianna Huffington’s “Thrive,” called ‘solvitur ambulando,’ a Latin concept that involves brisk walks to solve problems. “[Huffington] makes the case that well-being, wisdom and wonder are key points for achieving success,” says Christin.

Last Words

What do Hot Cheetos, Valium, pool sticks and a smoke machine have in common? They’ve all been left in Ubers. The ride-sharing company released it’s “lost and found index” yesterday, and some of the items are…unique…to say the least.

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