Category Archives for "Commentary"

Will The New Cheap Tier From Pandora And Amazon Be Worth It?

pandor more skipsEver since music streaming began in earnest, there’s been a mantra inside the music industry that’s gone something like this – “Until the paid subscription rate gets to $5 per month, streaming is never going to scale.” That’s only partially been true, as subscriber numbers have grown steadily at the now standard $10 per month, but not to the level that the industry wanted or expected. The question is, will they truly take off even when they reach the $5 cheap tier?

It looks like we might know soon enough as Pandora is reportedly about to launch a brand new service at that magic price, with Amazon to follow shortly thereafter.

But is what you get for that $5 going to be worth it?

According to reports, Pandora’s $5 tier is just another version of its other tiers, but with the ability to skip more songs and store several hours of playlists. And Amazon’s $5 tier will only apply to owners of its Echo smart speaker. That sort of limits the reach of these $5 tiers a bit, don’t you think?

While all streaming services are feeling the pressure to reduce prices, they’re bound by their agreements with the major record labels, which doesn’t provide a lot of wiggle room for lower prices. In fact, it’s rumored that Apple wanted to set the price of its Apple Music to $8 at launch but that idea was quickly laid to rest by the major label’s powers-that-be.

Pandora and Amazon dipping their toes in the $5 water could be a gateway to a new round of streaming discounts though. Whenever Spotify runs a sale (like the recent $3 for three months student special) its paid subscriber numbers rise pretty quickly, although it’s yet to be seen what the churn rate for those new subscribers is. That’s not enough evidence for the labels however, who still cling to the $10 per month price point as the floor that will never go lower. [Read more on Forbes…]

August 26, 2016

Will Amazon Break The $5 Streaming Music Barrier?

Amazon EchoThere’s been speculation for some time that Amazon was going to launch it’s own streaming music service to rival that of Apple Music and Spotify. While such a service could be formidable indeed, another me-too platform might not shake up the streaming landscape much. That could change if Amazon is able to launch a lower-priced service, which could be a game changer based on price alone.

Reports are that the company is considering a streaming service priced at either $4 or $5 per month, but it would only be available on Amazon’s Echo player, and not on phones or other devices. The service would have features much like its competition in that it would be fully ad-free and on-demand. Reports are that the company would also launch a $10 per month full-line service as well that would be available on all devices.

While an Echo-only service seems like a serious limitation given that Amazon has only sold a few million units so far (predictions say that there will be 4 million in use by the end of the year), it’s the precedent of breaking the $5 per month barrier that’s more important than the service itself.

Many industry analysts have railed against the standard $10 per month price point, with the premise being that the price is too high for the industry to reach the tipping point it needs to fully replace physical product. It’s long been predicted that $5 per month was the point that would reach consumers who were reluctant to subscribe at a higher price and finally have them sign on.

The $5 price point has been resisted by the major labels as being too low, and they have fought with the streaming services to keep it at $10. While that might have been a wise decision when streaming was ramping up, in order to truly grow to the heights that most in the industry believe can happen, an adjustment downward is necessary to overcome current consumer objections based primarily on price. The adoption of the proposed $5 per month of the Echo-only service would make music execs more comfortable with the idea that a lower price means more customers, enough so to make up for any perceived money being left on the table. [Read more on Forbes]

Goodbye MP3, We Hardly Knew Ya

Goodbye MP3When it comes to technology, the music business has always been about convenience. It’s ultimately never about the sound or even a lower cost, it’s always comes down to what’s easiest to use. Still, it’s surprising to see the MP3 file format (or the “download” as many know it) accelerating so quickly towards the end of its useful service life.

From the beginning of the modern music business, consumers have quickly gravitated to the latest technology that made it easier for them get their music fix. Going way back to the 1880s, the business consisted of distributing sheet music that the family musician would use to play the latest songs in the living room. When the player piano was introduced, piano rolls became the must-have product.

The Victrola brought the 78 RPM shellac record in the early 1900s, which was soon replaced by the much more durable 33 1/3rd RPM vinyl record that could hold more than twice as much music. But vinyl records weren’t portable, so in the 1960s 8 track tapes became a big hit for taking your music with you in your car. Cassettes were more convenient however, since they were smaller and operated more like a record album, having two sides. They also provided the ability to fast forward and reverse to quickly find the song you wanted, features not available on the 8 track.

The CD was a revelation, not so much for the digital audio it provided, but for its random access ability that let the user easily select a track with no rewinding or forwarding. This is where the music industry got greedy and included a “technology charge” on every CD, jacking the price up far higher than need be, which eventually caused a consumer backlash after the newness of the format wore off.

That dovetailed into the rise of personal computers and the internet, and the ability to share music was high on the list things that the average computer user craved. In Germany, the Fraunhofer Institute developed the MP3 file format in 1993, but it wasn’t until 1997 when it finally took off thanks to the advent of the Winamp player and popularized by MP3.com website.

An MP3 file “let the air out of the tire” of a standard digital CD file, making it about 10 times smaller in size. As a result, music files could then be easily transferred over the low bandwidth online connections of the times (remember, we’re talking the old 32kbd modem days). Not only that, a user’s favorite songs could be ripped from a CD then freely shared with friends without having to pay those sky-high CD prices. Before you knew it, the revolution had arrived as piracy ran rampant, sales waned and record stores closed.

After several feeble attempts to open up an online music store by the major labels, Apple came to rescue with iTunes in 2003, the first large scale way to monetize digital music, a move that the majors rue till this day. [Read more on Forbes…]

A SoundCloud Demise Would Create A Void For Indie Artists

SoundCloudSoundCloud is seeking a buyer, and that could make it much more difficult for indie music artists across all genres to have their music heard. The streaming music service is reportedly seeking a sale in the $1 billion range in a deal that could alter that part of the music landscape for a long time.

According to Bloomberg, SoundCloud execs are currently mulling over a strategy that would result in the sale of the company. No potential buyer has been identified however, and one may not be on the horizon at the valuation the company appears to be asking. Either way, it’s beginning to look as if the streaming service’s days are numbered, at least in the form that we know it today.

SoundCloud has sometimes been compared to an audio version of YouTube in that it’s basically a free service for user generated content, most of which is posted by indie music artists. It’s been good for that niche in that it’s easier and cheaper to post a music file to SoundCloud than to host on the artist’s private website or social media network. That said, the company was never going to earn enough revenue just from usage fees by artists, and it’s really not much of a draw for music fans when compared to any of the sites like Apple Music or Spotify that feature commercial music from label-signed artists. It may have 175 million users a month, but most are not high-volume listeners like on the larger services.

But what really hurt SoundCloud’s prospects for turning a profit is the fact that it was forced to sign expensive licensing deals with the major networks in order to avoid pending copyright issues, and to clear the way for the service to offer a subscription tier in an effort to finally increase revenue. While that sounds good on paper, the biggest distinguishing feature of SoundCloud is its indie artists, and that hasn’t proved to be enough of a draw when its free, so it’s difficult to imagine how it could work for a monthly fee. [Read more on Forbes…]

Do You Really Need A Record Label?

Do you need a record label?Here’s a very interesting video from The Economist that looks at the new dynamics of the record business and whether an artist really needs a record label these days. It’s a veiled advert for Kobalt, but frankly, that company is way ahead of the game when it comes to not only collecting artist royalties, but reporting them as well.

I had a personal demonstration from founder Willard Ahdritz a few years ago and it was indeed impressive in that an artist could see in real time how much he was making. This, of course, beats having to wait until the end of the quarter or even the end of the year to see a statement to see how much you’ve earned.

As the video correctly points out, Kobalt is perfect for an established artist, but the company has yet to break a new artist, and this is where record labels traditionally excel. Major labels are also able to take a successful artist and boost her to superstar status because of the infrastructure they have in place, something that can’t be easily replicated.

So there is a place for the record label in today’s Music 4.0 world, but there’s also a place for a rights management firm like Kobalt. Check out the video as well as this interesting article to learn a lot more.

Where Music Artists Go Wrong On YouTube

YouTube where music artists go wrongYouTube is capable of making people stars, and while that happens to exceptional content creators, most of them are not music artists. One of the reasons that artists don’t fall into the YouTube star category is that their general mindset is still set in the past. Here are the 4 places were artists go wrong on YouTube, which leads to far less success on the platform than they’re capable of.

  • It’s not about the views. YouTube is actually not optimized for total views, contrary to popular belief. It’s all about watch time and channel subscriptions, according to industry analyst Mark Mulligan. Most artists get most concerned about views, which takes their focus away from what really counts.
  • Major YouTube stars constantly drip content. They’re constantly posting on a schedule that their subscribers know and trust. Music artists, on the other hand, post an average of 3 videos every 18 months. The big problem is that even if these videos rack up some big numbers, the advertising revenue is lower because there’s not much inventory on the channel so the income is far lower than possible.
  • Releases are too far apart. Most artists are still on an album cycle, where they work on an album for months or years and only release singles (and therefore videos) when that album is complete. The world that we live in today has moved way past that. In order to keep an audience, constant engagement is essential and that means the release of more content in a more timely fashion, just like the native YouTube stars.
  • The video doesn’t have to be slick. If there’s one thing that we know from watching YouTube stars with huge followings is that production quality isn’t anything to get hung up on. A quick backstage video on an iPhone or impromptu acoustic jam can be far more effective than that big expensive music video. Like anything else, it still has to be entertaining, but with a little thought, a cheap video can still be very effective.

Artists and bands have a love/hate relationship with YouTube but the fact of the matter is that it’s still one of the most effective ways of getting your music out to both fans and non-fans alike, and growing an audience. That said, the techniques that worked in the past are no longer valid. Luckily, there are some very good models to look at for guidance, but few of them are from the music business.

Deezer Launches In The U.S., But Does Anybody Care?

Deezer-logoAfter a year run up, the streaming service Deezer has finally launched in the United States. Spotify’s major competitor in Europe is now in the world’s largest market, but the question is, does it have enough to differentiate itself from the rest of the current streaming contenders in the space? The Paris-based service launched in 2007 and is already live in 180 countries and has 3 million paid subscribers.

Deezer is available on iOS, Android and Windows phone apps and features a catalog of 40 million songs and 40,000 podcasts, but most significant is that it won’t have a free, ad-supported tier. The service is instead opting for a free 30 day trial period with no ads and no usage limitations. That should make artists, their managers and their labels happy, but it may not be much of an incentive to get people to jump from an existing service of choice.

The platform allows users to create multiple playlists, import MP3s of songs they already own so all their music can be found in one place, and even listen while offline. A feature called Flow also provides song recommendations based upon the user’s listening experience and existing library, and something called Deezer Sessions features live music from festivals and other venues. There are also curated playlists and recommendations, and lyrics are available for the songs you listen to.

Deezer is rolling out its U.S. service without a top Stateside executive though, as former CEO Tyler Goldman is apparently no longer with the company, according to TechCrunch. You can hear Goldman discuss Deezer on my Inner Circle podcast from September 13, 2015.

The company postponed its IPO last year after receiving only lukewarm interest, but raised an additional round of funding worth $109 million this year that made the U.S. launch possible. Deezer has been active in the territory for a while though, as it had previously acquired Muve Music from AT&T as well as the podcast service Stitcher, and also partnered with Sonos last year to support its $19.95 per month high-resolution tier. [Read more on Forbes...]

Apple’s Publishing Royalty Proposal Is A Shot At Spotify

Apple's Music Publishing ProposalWho says Apple’s music executives aren’t smart? In what may end up being a brilliant strategic move, the company discretely made a proposal to the governing Copyright Royalty Board to increase the song publishing royalty rate to 9.1 cents per 100 interactive streams, a significant increase over what is currently paid, according to the NY Times.

On the surface, this is not only an greater payday for songwriters and music publishers, but also a vast simplification over the current complex royalty calculation. Streaming services now pay publishers from 10.5 to 12% of overall revenue, which is determined via a strikingly large number of factors that changes with the device used, the country the user resides in, if the service is bundled, and the type of subscription, to mention just a few. The music royalty collection company Audiam reports that the average publishing royalty is now around 5 cents per 100 plays, so Apple’s proposal of 9.1 cents represents a windfall for a part of the industry that has suffered during the run up of streaming popularity.

There’s also a psychological impact that goes along with that figure however. Currently, the mechanical royalty rate for every song on a CD or vinyl record, or a download, is also set at 9.1 cents. A streaming rate set similarly will not only bring it in line with those standards, but put the ease of calculation back in the hands of the songwriter and publisher, who must now depend upon the streaming company to calculate the monies owed.

The Back-Door Strategy
While simplicity may seem to be the overriding factor for the proposal, there’s something much more strategic behind Apple’s thinking. First of all, an increase in publishing royalty payments would severely stress stand-alone streaming companies who’s only product is music streaming like Deezer and Tidal, but most especially Spotify. That company still hasn’t turned the corner to profitability, and having to pay roughly 80% more in publishing royalties might keep it that way, which may put the company in a more serious bind with its already itchy investors.

Not only that, it would put a severe crimp on any interactive streaming service (as opposed to non-interactive like Pandora) that currently features a free ad-supported tier, since the royalty rate per 100 streams would be the same regardless of if the subscriber makes a monthly payment or not. Such an increase in expenditures might put an end to the free tier as we know it (which in the end, might not be such a great thing for the industry – a topic for another day). [Read more on Forbes…]

July 15, 2016

Maybe YouTube Isn’t Music’s Boogie Man After All

YouTube logoArtists, bands and record labels have issued an all-out assault on YouTube this year over a variety of issues that mostly stem from what they consider to be low royalty payouts. The problem is, while it’s likely that many of the presumptions leading to the attacks have a basis in reality, their conclusions may be premature.

In the music industry’s eyes, YouTube is a devil that it’s forced to deal with. The service is widely used to market it’s product while throwing off enough revenue that it can’t be easily dismissed, yet YouTube is in a position of strength where the labels can’t easily use their licensing leverage to get their way as they could with other streaming service negotiations in the past. What seems to be true is that content owners are receiving a lower royalty rate for every video view than ever before. In fact, industry analyst Mark Mulligan reports that the per view rate was actually cut in half from 2014 to 2015, and is now down to around $0.001. That said, YouTube continues to pay the industry more money than ever, with almost $2 billion in payments since 2014.

While that may be true, the fact of the matter is that YouTube isn’t nearly as powerful as it once was, and indications are that its popularity for music delivery is waning. According to a recent BuzzAngle report that looked at music consumption from the beginning of the year, for the first time streaming actually outpaced music video views, with the number of streams at 114 billion and video views at around 97 billion.

What’s more, according to the GlobalWebIndex study, young people between 16 to 24 (the traditional driver for video views) are more willing to pay for streaming than older adults, despite indications that only 1 in 10 digital consumers end up paying for streaming music overall. This figure for younger Americans could actually be higher though, since pre-teens and teens don’t usually have credit cards. Many ask their parents to pay for the subscription or are part of a parent’s family streaming plan, so the complete picture here is still a question mark. When you take that into consideration, there may be more young people in that subscriber category than you might think.

Google has certainly taken notice to these numbers and is attempting to increase it’s own music subscriptions by running a sale. First of all, a free 2 month trial period for Google Play is now available that includes its YouTube Red service as well, and Red alone is being offered for just $0.99 for the first three months through the YouTube app. A company running aggressive sales campaigns is reacting to the market, and Google sees the writing on the wall. YouTube is falling out of favor with the demographic that, at least up until now, consumes it the most. [Read more on Forbes…]

(Photo: Rego Korosi via Flickr)

The Album Is Dying, And Good Riddance

Album salesThe music business was once all about the single song, transitioned to the album, and looks to be transitioning back again, as album sales sink lower and lower. While the writing may be on the wall that the concept of an album may be as outmoded as a buggy whip, artists, bands and record labels continue to hang on to the idea rather than looking at the data before them. Like it or not, the album is clearly dying.

According to Billboard quoting the Nielsen Music mid-year report, album sales have fallen by 16.9% so far this year, but even more worrisome is the fact that albums by current artists aren’t catching on, falling by more than 20%. Digital album sales and CD sales continue to fall like a rock, with only vinyl sales increasing (although the growth has slowed to 11.4% with just 6.2 million sales – hardly enough to write home about in the grand scheme of things).

The fact of the matter is that in this Music 4.0 world we now live in, is there even a reason for an artist to automatically make an album without considering some other alternatives first?

Albums are expensive and time consuming to make and, for the most part, amount to a lot of wasted effort as consumers only listen to one or two songs (the singles) anyway even if they buy the album. Most people that get their music from a streaming service will end up cherry-picking the most visible songs (again, the singles), and will never experience the rest of the album cuts anyway. Even if they do, chances are they’ll only listen to each a few times at most, and in most cases, not at all. That’s a lot of wasted effort for so little in return.

The Album In The Age Of Digital
The album concept may actually have been over for a lot longer than it seems, since the sales numbers have been propped up artificially since the beginning of the digital age. Track equivalent-albums, where 10 downloads equal one album sale, never really represented a true album of 10 songs. Most of the time one or two songs that happen to be from the latest album release were downloaded over and over again, but to label bean counters, that somehow amounted to a purchase of a real album. Move ahead in time to the present and stream-equivalent albums (or SEA, where 1,500 streams equal one album sale) presents the same dilemma.

While this might have made a convenient apples sort-of to apples data point that made a balance sheet look good, the problem is that it doesn’t reflect the reality of 80 to 90% wasted resources, since most of the songs of an album are ignored both internally by the label’s marketing department, and by potential listeners. Still artists and labels insist on making a product that’s increasingly becoming irrelevant to current audiences. [Read more on Forbes…}