Does Beatport know something the rest of the music business doesn’t? Look at some of the dance music platform’s recent numbers across paid downloads and streaming, and it feels that way.
While digital downloads have fallen to near all-time lows across the music business, with global revenue down 43.75% in the past five years, according to IFPI, for Beatport they’ve increased 35% in that same period. In 2022, the digital service claims to have sold 25,519,770 song downloads — making up nearly 12% of all tracks downloaded globally, based on Luminate data.
A key to Beatport’s growth is its focus specifically on DJs. By offering high-quality downloads for use in live sets, that functionality is still driving sales in a music market dominated by streaming. (The cost of a digital track at Beatport averages $1.29). Other platforms are, meanwhile, following broader industry trends and have started burying downloads; on the desktop version of iTunes, for example, options to purchase tracks notably appear halfway down the homepage.
Beatport is working in a smaller market than Spotify or Apple Music, of course, and most casual streamers won’t go on to become practicing DJs, but Beatport CEO Robb McDaniels expects that the fraction that do will contribute to Beatport’s continued growth. “Our hope is that 1% or 2% of Spotify’s paying subscribers decide that their music experience isn’t a lean back one — it’s an active and immersive one where they’ll spend their time listening to their music in the DJ booth or while they’re DJing at home,” he says. “As a result, you’ll see the shift from the really low payouts at Spotify and Apple to the much higher ones at Beatport, and the copyright holders are the ones who benefit.”
Over the past two years, meanwhile, streaming has grown by 60% at Beatport — a jump supported by the platform’s push to appeal to the next generation of DJs, who are expected to gravitate to streaming-based workflows due to their greater familiarity with streaming models versus download models, according to McDaniels. The company is driving this push with its browser-based DJ web application, Beatport DJ, which allows users to access and DJ from its library of music (which includes all major labels as well as leading and boutique dance imprints) without any additional hardware or software.
New Beatport data also paints the platform as a leader in pay-per-stream rates, with Beatport paying 50 to 60 times more per stream than other DSPs. At a time when subscription services including Apple Music and Amazon music have raised their monthly prices, and Spotify is expected to eventually do the same, Beatport’s royalty payouts are boosted by drastically higher subscription rates. While the service offers a baseline, standard $9.99 subscription offer, it also has tiers at $14.99 and $29.99 that allow for integrations with other platforms like Serato and Traktor, and being able to play songs while offline — important functions for DJs.
In 2022, Beatport paid an average of $0.10808333 per stream, while its service aimed at open-format DJs, Beatsource, averaged $ 0.17773333 per stream — more than 30 times the industry-wide blended average streaming rates across platforms in the United States was $.0053 per stream. After launching in mid-2019, Beatport’s music subscription products now make up 20% of its revenue.
Below, McDaniels details the mechanisms of Beatport’s growth, its capacity to pay streaming rates that far exceed the industry standard, and why the DJ booth is “the most valuable real estate in the music industry.”
Billboard: Are there any demographic shifts among Beatport’s active users that could have contributed to the increase in downloads?
Robb McDaniels: We’ve been trying to answer this for ourselves so we can figure out the right levers to pull and buttons to push as we try to spread the brand around the world. Right before the pandemic year, [active use] was heavily skewed towards the Western world [the top five countries for paid downloads at Beatport are the United States, United Kingdom, Germany, Australia and Canada] , but dance music and DJ culture is global; we have these communities all over the world.
We just weren’t doing an effective job of engaging with them or keeping them engaged, so we started making an effort to do that in ways that were inspired or triggered by the pandemic. We wanted to speak to everybody and let them know that we were still going to be supporting the community in any way that we could. We had to broaden our perspective, and I think by doing that, we activated customers that had visited Beatport and been customers in the early years, or the people who’d put away their controllers and had maybe given up on DJing. Obviously, being stuck at home, it was the perfect time for them to wipe off the dust and start DJing again.
Going into the pandemic, we thought that our business would decline, because all the clubs were shut down, but it actually increased because of customers like these who realized how important music and DJ culture was to their happiness.
The other thing we did was fortuitous: We dropped our download prices the month before the pandemic. This reduced the sticker shock of high download prices when people came to the store. All of these things led to an increase in accessibility for anybody who wants to try DJing.
Were there other reasons why Beatport wasn’t reaching some of the global DJ communities as effectively as possible?
Historically, there have been a number of mitigating factors for Beatport. First, we’re a small company. When I joined in 2017, [after Beatport downsized in 2016 following its parent company, SFX, filing Chapter 11 bankruptcy] there were about 40 people. We’re now a lot bigger; we’ve grown tremendously through acquisition and organic growth over the last few years, but the brand is still a lot bigger than the company itself. You’ve got folks all over the world that know about Beatport, but they’re typically buying in dollars or euros. We weren’t a big enough company to accept all currencies [all over the world], so we didn’t directly market in those areas. We also didn’t have the marketing budget to spend $20,000 a month on ads in India.
There are other issues with places like the emerging markets where the price that customers could support is just not something that fits our business model, but we’re beginning to address that. Now, as we look into these emerging markets, they’re really not emerging anymore; India’s massive, and the Middle East and Latin America have a lot of opportunities. We are now beginning to make the investments that are necessary to really serve and activate those markets, so I think we’ll see that benefit in the next few years.”
Beyond broadening Beatport’s reach and re-engaging with existing users, what else has driven Beatport’s paid downloads?
I think the goodwill that Beatport generated during the pandemic by putting on livestreams to raise money for various charitable organizations, along with the focus on communicating and connecting with people around the world, are the primary reasons downloads increased in the last couple of years. Other business decisions like reducing the price of downloads and improving system performance, infrastructure, uptime — all of the stuff that we’ve been investing in — has helped to buck the global trend in the download market.
Can you tell me more about why the livestreams were so impactful?
Just before the pandemic, we had signed a deal with Twitch to broadcast live DJ gigs at the big festivals on our Twitch channel. We did the first one at CRSSD Festival in San Diego with Carl Cox and Charlotte de Witte; I think that was the last festival before everything shut down. Our media group team then moved it online, and we started doing all of these massive 24-hour livestreams with DJs all around the world. The team went on to do a number of other [livestreams]. While livestreams have generally decreased in popularity, we acquired a lot of customers, as well as followers, that way. Our social media outlets just went through the roof.
[Our media team] continues to produce and create really engaging content that keeps this global community revolving around Beatport and interested in what we’re doing. I think that inevitably brings a lot of the customers in, and you don’t really see any other traditional music store doing that kind of thing for and with the community. In that way, Beatport is pretty unique compared to the Amazons and iTunes and Deezers of the world.
Turning to streaming, how is Beatport able to pay so much more per stream than other DSPs?
There are a few things. Number one is — and this is the most important thing — our customers are different. The regular music experience has been a passive one where you throw on your Spotify in the background for six hours a day and just forget about it. Our customers are DJs; it’s a much more active and immersive music experience. We believe the industry is now shifting to this more active and immersive music experience, because the music experience changes every generation. Inevitably, it happens: vinyl to tapes, tapes to CDs, CDs to streaming, streaming to…it’s going to be something, right? We’re already about 15 years into the streaming experience, so this is when the next music experience is typically taking hold.
We’re also charging more because our services integrate with DJ software and hardware, and we also have offline mode. There’s a premium paid for these integrations. So, our average monthly revenue from our customers is probably almost double what it is from the Spotifys of the world. These two contributing factors result in a much higher payout rate per stream to our rights holders.
What can sectors outside of dance learn from Beatport’s approach, and how can the larger industry profit from Beatport’s success?
I’ve been asking everybody to change their definition of “dance music” to any music that makes people dance, because that’s 75% of the music industry. If you can dance to the music, then you can DJ with it. This is why we launched Beatsource for the open-format DJ community. I haven’t been to a wedding where I haven’t heard the DJ play “Come On Eileen”; the wedding DJ is our customer just as much as David Guetta and Tiësto.
Overall, we think other genres and their artists can benefit tremendously from the exposure that these DJs get them. If you DJ at a club in Vegas and play a new song, half the audience is examining the song and adding it to their Spotify or Apple playlist. Your revenue is amplified just because that DJ played your song.
What should the industry at large take away from the DJ’s role and how it relates to exposure?
It’s really important to realize the value that these DJs play in the overall music ecosystem and not treat them the same as any other customer. These are the most important customers in the music industry, in my opinion, and the DJ booth is the most valuable real estate in the music industry. The DJ booth is for profits, amplification and promotion. We need to make sure that as an industry, we’re serving this constituency correctly and delivering the types of products they need.
[At Beatport,] we’re constantly working with labels and publishers to clear derivative works, remixes, stems. We try to point out how important it is to the health of the overall music industry, and that this benefits them in a myriad of ways beyond just the download fee or the stream fee. There are a lot of positive benefits.