How Will Record Companies Focus On Superfans This Year?

Two major record companies went into 2024 stating in internal memos to their global staff that cultivating and monetising superfans would be a priority for them this year.

Both accept that, as TheMusic.com.au reported last year, it’s an untapped market potentially worth $4.2 billion USD ($6.4 billion AUD) to the music business.

Universal Music Group (UMG)’s Chairman & CEO Lucian Grainge will focus on giving his artists the power to “create experiential, commerce and content offerings for their fans”.

This superfan focus, he went on to explain, was the second part of the company’s strategy to earn more money for its artists in streaming. The first was the “artistic-centric royalties” scheme in partnership with Deezer, which included eradicating fraud fluff which lessened the money available for them.

“The next focus of our strategy will be to grow the pie for all artists by strengthening the artist-fan relationship through superfan experiences and products,” Grainge wrote.

UMG is “already in advanced discussions with [its] platform partners regarding this phase and will have more to announce in the coming months”.

Meanwhile, Warner Music Group’s CEO Robert Kyncl told his team they needed to “develop our direct artist-superfan products and experiences” as part of his plan to ‘increase the value of music”. He added: “Both artists and superfans want deeper relationships, and it’s an area that’s relatively untapped and under-monetised. We already have initiatives in flight against most of these areas and specific projects with momentum behind them.”

The first move by the companies is expected to be a dedicated app where superfans get music and merchandising first with premium exclusive deals weeks before casual buyers. UMG and Warner stars would make appearances in the app to encourage fans to buy their products.

Finance powerhouse Goldman Sachs suggested that as the trend of superfans paying double for their streaming service grows from 10 per cent to 70 per cent by 2030 – when the industry is predicted to be worth $150 billion – streaming services should introduce more tiers within the premium range.

“(This) would better align monetisation with the value created by an artist or a song for the platforms,” said the report. “The current streaming model does not distinguish between its users, charging each the same flat monthly fee, independent of the level of engagement with the platform and its artists.”

The Gaming Sector

Most likely, the music industry would continue to collaborate with the gaming industry, which was first to realise the commercial potential of superfan obsession.

The best example to date are K-pop superstars BLACKPINK, who last August released their single The Girls on their dedicated mobile gaming app, The Game. It was free, supported eight languages, and came with a video featuring their avatars going through their dance routines. The video only appeared on streaming platforms two days later.

The app puts the band in a metaverse-style world where fans act as their manager and run their schedule, play numerous mini-games with the avatars, buy outfits to dress them in, talk to other fans, and play games with them. it instantly ranked #1 on the App Store in 24 countries and had one million downloads on Google Play alone.

With these kind of figures, BLACKPINK ranked #1 in the Korean Business Research Institute’s latest brand reputation rankings for girl groups (released in January 2024) before NewJeans, IVE and TWICE.

It’s not known how much BLACKPINK earn from superfans alone, but they make about $9 million a year from merchandise, record sales, touring, and brand endorsements. Last year’s Get Born tour grossed a total of $265 million, and the band’s 2024 turnover is tipped to come in at $62 million.

Lisa, Jennie, Jisoo and Rosé each earn $15-20 million a year with modelling, acting and solo endorsements on top of their band duties. Last month they renewed their deals with the company that manufactured BLACKPINK, South Korea's YG Entertainment, which saw the company’s shares jump up by nearly a third.

The music industry could well learn from gaming. The latter industry is worth $257.1 billion, far ahead of filmed entertainment ($99.7 billion) and recorded music ($25.7 billion). Figures from research company MIDiA showed a strong affinity between music and video games. 90 per cent of the world’s 62 million music producers are gamers.

It reported, “When having to choose between spending $70 on one high-profile game, a few indie games, or spending in-game, 34 per cent of music producers chose in-game spending compared to 29 per cent for the gamer average.

“As MIDiA’s 2023-2030 global games industry forecast shows, this is the sector of the video game industry that is set to grow the most this decade. This is where the opportunity for the music industry lies.”

Music’s Value

The well-documented figure is that 15 per cent of American music consumers are superfans, who spend 80 per cent more on music than the other 85 per cent of consumers. 26 per cent shell out more on merchandise, and 76 per cent more on physical formats such as vinyl, CD and cassette.

How will major record companies build up from that 15 per cent figure? They could learn from superfan-friendly start-ups such as Planet and Levellr.

As Themusic.com.au has outlined, initiatives include giving superfans a say in an album’s track selection, title and cover art, using their content in music videos, and coordinating with other superfans to hold launch parties for records and videos.

Planet’s technology lets artists provide fans with a digital pass for their smartphone, which gives them notifications about new music, tours and content. In time they can sell tickets directly to fans. “The future belongs to artists in control of two-way fan experiences,” declared co-founder James Morrison.

How much does it cost to be a superfan? Drake is the most expensive, with a spending tag of $16,447.33 to be the ultimate devotee. This was far ahead of EDM’s biggest coster, Major Lazer, at $796.35.

K-pop superfans are thought to be the most rabid. When boyband cuties BTS played six shows in the UK, it was estimated that intense followers would not have thought twice about spending $5,136.67 to catch all shows. Average K-pop fans are 60 per cent more likely to wish artists provided more merch options so they can show support for them.

Having 178 million K-pop fans around the world has generated interest in all things Korean. The Ministry of Culture, Sports and Tourism reported that the country’s content exports – including K-pop, dramas, films, beauty products and the study of the Korean language worldwide – reached $12.4 billion in 2021. The Korean fan app Weverse app has 10.5 million monthly active users, and plans to build that up to 50 million.

Serious money is at stake here. Record companies would do well to make sure superfans are genuinely given exclusive privileges rather than approach it as a shameless squeeze for money.