4 Predictions for 2023

2023 has arrived with continued uncertainty over what the next 12 months will bring for the global economy and the resolution of conflict in Europe. In the Music and Entertainment industry, the next 12 months appear to be full of challenges and opportunities and we share some predictions below.

1) Macro, Markets and Momentum

There is no bigger topic in 2023 than the emerging global recession. From consumers to CFOs, the impact of decreased spending and higher interest rates will affect every decision made. It’s worth remembering though that as in previous downturns, these are often catalyzing periods of innovation.?

Entertainment stocks lost billions in market value in 2022, with an average of 35% decline and in some cases more than 60%. These declines seem set to continue in the first half of 2023.

Buried within these headlines lies the age-old debate of content versus distribution, with the former a winner in 2022. In the music industry, this is most noticeable in Universal Music Group which ended 2022 with a market capitalization 3x greater than Spotify.

The tech sector was similarly hit by decreases in pandemic-era demand for many products and services, soaring inflation, interest rate hikes and fears of an imminent recession decreasing consumer and advertiser spending, the latter making up the core business of companies like Google, Meta and TikTok. Valuations for both public and private software-as-a-service companies also saw meteoric declines, falling by 75% over the course of 2022 and similar to entertainment stocks, these declines are expected to continue in 2023.

Navigating this turmoil, media and entertainment companies will make more data-driven investment decisions in 2023, clearly demonstrating the line between programming choices, customer acquisition and retention. Entertainment technology companies built around single features alone will fail to reach scale, but companies with technology capabilities focused on solving the real challenges for their customers and partners will continue to grow.

2) No Musical Revolutions

The post-pandemic recovery in live music drove year-on-year global music industry growth to 24% in 2022, with a return to a more normal growth rate of 8% expected in 2023. With a forecasted CAGR of 12% from 2021 to 2030, the industry is set to reach more than $150bn in revenue by 2030. Music has historically proven more recession-proof than other consumer expenses, with catalog ubiquity resulting in consumers needing only one subscription to access all the music they need and showing reluctance to cancel this.

The headline growth rate doesn’t explain the complexity and continued disruption of an industry in continued transition from more than a decade. We don’t expect any revolutions in 2023, but we expect further evolution of the major trends of the last 12 months: the continued dominance of catalog music consumption; the proliferation of musical content, with more than 100,000 songs a day uploaded to streaming services; artists innovating through new ways to connect and drive greater engagement with their fans; the continued rise of TikTok and its impact on artist discovery; and the increasing globalization of both the creation and consumption of music.

It’s never been easier to create music and find an audience, but it’s never been harder to economically sustain yourself as an artist unless you’re the 1% of elite global talent. Data is a force for democratization in this dynamic.

In periods of growth and disruption, there will be increased reliance on trusted data and analytics to provide the tools to navigate this change. Understanding trends, how to adjust strategies and measure the outcome of actions becomes more important than ever. In 2023, artists, managers, labels, publishers, acquirers of catalogs and more will all seek to capture the largest share of this continued growth.

3) Decreased Investment, Increased Transparency

“So if you’re a creator it used to be about what’s my box office and what are my TV ratings? Gone. Both gone,” said Bob Iger at the Code Conference in Los Angeles in September.

Entertainment companies’ investment in streaming content production grew at a CAGR of 79% from 2019 to 2021, reaching $24bn in 2022. With Wall Street no longer rewarding this investment and consumers pickier about the number of SVOD subscriptions in an uncertain economic climate, this is expected to decrease to a CAGR of 15% from 2022 to 2025. This new golden age of content however masks the pervasive and unavoidable issues of transparency.

Similarly, Issa Rae from the Into It podcast: “Now, I think data across the board is not yours. It’s hoarded. Do ratings matter or do they not? Do ratings matter right now? Can I get access to it? Am I writing to it? And there’s a lot of confusion about how well creators are doing across the board, so that’s why you get creators surprised that their shows got canceled or their shows are getting pulled off the air because they don’t have the information.”

2023 will see increased transparency in entertainment industry around audience and viewership, enabling better content valuation, more granular tuning of content specific to subscriber objectives and a more equitable data landscape for talent and content creators alike.

4) Cloud-based Workflows, DaaS and AI: By 2024, Cloud Data Warehouses (CDWs) will process 75% of workloads, increasing from 50% today and only 20% 5 years ago. The combination of CDWs, Data Exchanges and Data Clean Rooms with established technologies will further enable Data-as-a-Service (DaaS) offerings. Organizations will easily access high-quality data sources that have been organized and curated by experts, in turn reducing the need for companies to build their own expensive, proprietary data collection and storage systems, translating to real operational cost savings.

With complex problems to solve, real-time analytics will become increasingly embedded into DaaS offerings and the rise of unified metrics layers will accelerate this transition. CDWs will continue to feed BI tools, creating increased data democratization in forward-thinking organizations and machine learning stacks will accelerate advanced model training and model serving. Analytics will become embedded in data pipelines, making real-time analytics faster than ever.

No discussion of 2023 would be complete without referencing the biggest innovation story of 2022, ChatGPT. As the highest profile example of generative AI technologies deployed at massive scale, ChatGPT demonstrated the power of these disruptive technologies when combined with the highest quality training data.

The most forward-thinking organizations are already evaluating and investing in these new technologies and will see their businesses accelerate in 2023 as a result.

2023 looks set to offer another 12 months of challenge but is also a year filled with promise for those willing to engage in the disruption. At Luminate, we are singularly focused on solving our customer's most pressing problems using the power of our data.

With thanks to: (1) Screentime, Lucas Shaw, Bloomberg January 2023 (2) Music Business Worldwide, January 2023 (3) Goldman Sachs Music in the Air June 13 2022 (4) Authors Notes (5) VIP+ (6) Issa Rae is Not Not Moving Like a Hollywood Beyoncé, Vulture (7) Tomasz Tungaz, 9 Predictions for Data in 2023, October 2022