Welcome to Plugged In, a newsletter that will highlight the unfiltered thoughts of the CEOs, decision-makers and power players at the intersection of technology and music. I’m Micah Singleton, Billboard’s director of technology coverage. I lead Billboard’s reporting of the streaming music ecosystem and startups that bridge the gap between two of America’s most important exports.
This newsletter was created to offer insights into the minds of the music industry’s most creative thinkers, power brokers and key decision-makers, who rarely speak candidly about their competitors and how they believe we will interact with music in the future. In these newsletters, the leaders of labels, streaming services, publishers and startups will speak anonymously — and occasionally on the record — alongside key investors, lawyers and managers about the industry’s biggest talking points. Every week (barring some holidays) Plugged In will delve into a single topic that has captured the attention of the leaders who have the power to shape the future of music for both consumers and artists.
How important is an independent Spotify for the future of music? Will the music industry keep up with the pace of innovation in gaming? How will the metaverse change the music industry? Is blockchain meaningful for music, or just noise? These are just a few of the topics we’ll cover, some of which have been published already, and some you will read in the coming weeks.
Let’s dive in.
There were three major music industry revenue streams that took major leaps during the pandemic era: gaming, livestreaming and fitness. We covered the gaming industry — which dwarfs the film industry and U.S. professional sports leagues combined — and livestreaming business in our last issue of Plugged In, and today we’ll tackle the fitness market.
The fitness industry is in the midst of a sea change. The global virtual fitness market is expected to grow from $6 billion in revenue in 2019 to nearly $60 billion in 2027, while the U.S. fitness industry lost $20 billion in 2020 due to health club shutdowns during the pandemic. While health clubs are expected to rebound, a shift is underway, led by the rapid growth of Peloton, a company that has embraced music so much that after settling a $370 million lawsuit with the National Music Publishers’ Association (NMPA) last year it’s throwing festivals now. Even traditional tech companies like Apple are making fitness a priority and with Meta (formerly Facebook) acquiring Within — the company behind the popular VR fitness game Supernatural — fitness will have an opportunity to become a notable part of the metaverse.
There’s no doubt that fitness will be a revenue driver for the music industry over the next few years, but can it be as lucrative as the gaming industry? And which companies are doing the best job so far?
“I don’t see it on the same scale as gaming,” one CEO says. “It’s significant and can grow. What you don’t know is how it settles out with in-home fitness versus a public place. It’s here to stay at some level, it’s a significant income stream that started with some confusion, and now it’s very clear,” they said.
Many executives pointed toward the demographics around fitness as the reason it won’t be as big for the music industry as gaming.
“Gaming is so much more crucial to music than fitness will ever be,” one senior executive says. “Fitness doesn’t rank in the same place for gaming for one reason: gaming consumers are young and are influencers. Fitness users are older and don’t necessarily have that same value as the younger consumers do.”
“It’s smaller than gaming, but I think it is major,” another CEO says. “Licensing Peloton, licensing Apple Fitness was key. As Gen Xers get a bit older, there is a lucrative market there. It’s all part of this experiential curve that we’re seeing in music licensing now that could give us a solid piece of revenue going forward. We are just starting to scratch the surface with integrating fitness with the wider digital ecosystem.” In comparison to gaming, the CEO adds of the fitness market for music: “It’s not rock music but it’s country music.”
“Being able to get our licensing strategy right in the digital world is critical,” another senior executive says, referring to the deals struck with Peloton. Multiple executives praised Peloton’s growth and noted that it can be a music discovery tool for lean-back listeners. “Peloton is awesome, what they’ve done is fantastic,” another chief executive says. “The agreement [with the NMPA] is fantastic. It’s a place that people are actively experiencing music, but they’re not actively going there to listen to music. It’s not where people are looking to discover music, but it creates music discovery.”
Another CEO says that while Peloton is currently dominant, there is plenty of room for competitors to carve out space. “What they’re going to be challenged with is how do you make this recurring, how do you keep people attached?” the chief executive says. “There’s plenty of other companies that can easily ramp into this space if they wanted to.”