Category Archives for "Music Industry News"

February 22, 2017

You Won’t Believe What The Most Popular Music Platform Is

Most popular music platformStreaming gets all of our attention these days but there’s more to music distribution than that. Business Insider conducted a survey of adults in the United States and found some very interesting data about our very favorite music platform, Here’s what it found.

iTunes – 30%

Pandora – 23%

Spotify – 13%

Google Play – 12%

Amazon Prime Music – 9%

Apple Music – 7%

Other – 6%

Now don’t misunderstand these numbers. It doesn’t mean that people are buying songs from iTunes, just that they’re consuming what they’ve already purchased there.

There are some total surprises with these numbers though. First of all, Pandora rates almost twice as high as Spotify, and Google Play and Amazon Prime Music have similar usage numbers as Spotify. Apple Music still lags behind.

When we look at the year end streaming numbers from Nielsen and the IFPI it’s very easy to think that streaming is all everyone does these days, but as this study shows, there’s more to music consumption than that.

Some caveats with this data though. First, it’s from September of last year, and second, it takes into account all US adults. These numbers would be very skewed towards streaming if it looked at only Millennials and younger (those that listen to music much more than older adults). Still it’s important to keep in mind that as a popular music platform, iTunes isn’t dead yet.

Spotify May Now Be Looking For A Buyer

Spotify looking for a buyerIt looked like Spotify’s strategy was to go public this year, but recent announcements have pretty much put that aside. The IPO (Initial Public Offering) market has changed recently, and tech companies can no longer be assured of the big paydays of just a few years ago. As a result it looks like the company’s new plan is to look for a buyer instead.

Now to be sure, Spotify has over $3 billion in revenue, but it also has been losing money as well. It currently has a lot of investors that want to cash out, and if an IPO is risky, then those investors are going to push for another way to get their money, which is through an acquisition.

Industry consultant Mark Mulligan thinks that a buyer probably won’t be Western. All the deep pocket companies like Amazon, Apple and Google already have their own services. Facebook is a possibility, but still not a good fit. Mulligan thinks that the only reason why Apple might be interested is to use up some of its off-shore cash reserves before it gets repatriated by the Trump administration, but that’s still a long shot. European companies don’t seem to be interested either.

That leaves Eastern companies and there are a number of them that could be potential suitors. China’s Tencent is already the streaming leader in the Asian market and the company has the money and the will for an acquisition. It would give the company an entrance into the West and immediately make it the 800 pound gorilla of music streaming.

There are a number of other Chinese companies also on Spotify’s radar. Alibaba, Dalian Wanda, and Baidu all have pockets deep enough to pull off an acquisition. Mulligan also suggests that a couple of telecommunications giants could also be in the running with SoftBank and India’s Reliance Communications being the most likely, although 21st Century Fox and Liberty Global may also see some synergy with Spotify in the fold.

One way or the other, it looks like Spotify is going to be going through some changes soon. How will that change its service? Probably not much actually. Until the license agreements with the major labels are renegotiated so the company can offer lower prices, things should still remain the same for some time to come.

Spotify Could Be Hurting If It Doesn’t Go Public Soon

Spotify go publicIt was assumed that Spotify would final go public in 2017 not only because the timing was right in its growth,  but mostly because of pressure from investors to get their money back. Rumor has it that the company is considering delaying its IPO until 2018, and that could cause the company a world of financial hurt if MBW and Techcrunch has it right.

The company feels that the extra time would allow it look better financially on paper than it does now. Plus, since it’s still negotiating license renewals from the major labels, there’s a cost uncertainty that could potentially decrease its stock price.

That’s easier said than done, according to the article. Spotify raised around $1 billion last year from a number of investors, but the terms were harsh, especially if an IPO is delayed.

According to the sources, the company is paying a 5% interest rate on the investment, in addition to a 20% discount on shares should the company IPO. That’s all well and good, but the interest increases by 1% every six months that the company fails to go public. That’s not all; the discount on the IPO shares increase by 2.5% every extra six months after the first year.

What does this mean in real numbers? If Spotify delays its IPO until the beginning of 2018, it would cost the company another $115 million just in interest. Not only that, it will cost the company another $250 million in shares, or another 3% of the company as well.

Spotify is caught between a rock and hard place financially. If it goes public now, its share price will suffer because its balance sheet won’t look as good. If it delays the IPO until the balance sheet looks better, it will cost the company in terms of increased interest (which the IPO revenue will presumably cover) and losing additional equity in the company.

This is the stuff that financial engineers live for. The public just wants it cheaper. Artists, labels and publishers just want a bigger piece of the pie. The investors and insiders just want a big payday. In the end, who do you think wins?

February 6, 2017

How Big Is That Super Bowl Halftime Bounce?

Super Bowl Halftime subscriber bounceThe Super Bowl is one of the most viewed events in the world, and the coveted halftime performance is what many A list artists dream of. But does an artist get much of a visibility bounce as a result? When it comes to videos on YouTube, yes they do, although some get a bigger one than others.

According to YouTube and as seen on the chart on the right, every halftime artist of the past 4 years received a substantial bounce in YouTube channel subscribers in the 7 days after their performance, with the reunited Destiny’s Child getting by far the greatest at 427% in 2013.

And channel subscribers aren’t the only thing that sees an increase. Halftime performers also see a rise in video views, although that number isn’t quite as high as the one for channel subscribers.

Super Bowl Halftime Songs GrowthThere are other factors at work though. It’s thought that Coldplay got a big bump last year because it had a recently released album and the band was touring, so their pre-Super Bowl exposure was already high.

The real test is yesterday’s Lady Gaga performance though. Even though her recent album Joanne debuted at #1 on the Billboard charts, it hasn’t had nearly the success as Gaga’s previous releases. It looks like she’ll get a huge halftime bounce (she had more viewers than the game itself!) and she’s already announced a new tour. It’s hard to pass up than kind of visibility.

Where Your Concert Ticket Money Goes

concert ticketsThe concert ticket you buy today is more expensive than ever, but that doesn’t seem to hinder music lovers from shelling out their cash anyway. With a typical ticket going for well over $100 and VIP tickets going in the thousands, it begs the question – where does the money I just spent for my ticket go? The Guardian just ran a comprehensive article on the subject and the numbers might surprise you.

While many concertgoers assume that their $150 is going exclusively to the artist, that’s not the case at all. Here’s approximately how it breaks down:

Taxes – Right off the top, 5% is taken off the top in the US, but it can be as high as 35% in some European countries.

Licenses – PRO’s like ASCAP collect anywhere from 0.1 to 0.8%, but the PRS in the UK collects 3% of the gross.

Fixed costs – The costs of putting on a show at the venue and many and varied. These include the cost of the venue, stage hands, venue staff, electricians, scaffolding, barriers, catering, liability insurance, backstage furniture, forklifts, rigging, medical staff, among many other expenses. Some of these are included in the cost of the venue or paid by the promoter, but sometimes not. This can account for 25 to 40% of the gross.

The promoter – Of the 50% or so that’s left, the promoter can take anywhere from 5 to 15%. Of that, all costs for advertising and promotion are paid by the promoter. The promoter is also responsible for the artist’s guarantee. That means that regardless of how badly tickets sell, the artist will receive this minimum amount.

The artist gets the rest, which sounds like a lot, but there’s a lot of expenses there as well. The production (stage design), crew, sound, lights and transport (as many as 30 trucks on a huge tour, not to mention the busses for artists, musicians and crew) are the responsibility of the artist, although some of this could also come under the category of fixed costs as well. The production rehearsals before the tour (which may but up to 6 weeks with full production in a full-size venue) is also the responsibility of the artist. Then the artist has to pay management 15 to 20% of his take.

Top it all off, the daily expenses of being on the road are high. A superstar act may have an overhead of $750,000 per day on the road whether the artist plays a concert or not.

Still, there’s big money being made from touring, and almost from the beginning of modern music history, this is where the bulk of an artist’s income is made. Even a small portion of the ticket price comes out to a lot of money.

HMV To Close Over 100 Record Stores In Canada

HMV CanadaOn Friday HMV Canada was placed into receivership and outlined its intent to close its 102 record stores in that country. HMV stores in the UK are not affected. According to a report by the Financial Post, HMV owes its major suppliers, including music labels and movie studios, about $42.6 million as of Dec 31.

If ever there was an indication that streaming is taking over as the main music distribution method worldwide, this is it. Canada is the world’s seventh largest recorded music territory, and the sixth biggest for CD and vinyl sales, which generated more than a $100 million last year. The HMV store closings are sure to impact that number as Canadians will find fewer places to purchase physical product even if they want to.

HMV was actually purchased by restructuring experts Hilco in 2011, but that company hasn’t been able to turn it around in an industry where fewer consumers care about physical product anymore. As a result, the company has suffered losses of around $20 million every year since .

Once again we see how technology has changed the music industry. Most every time a new more convenient (that’s the key) format is introduced, the industry and music consumers adopt it. This goes back to the days of piano rolls, followed by shellac records, vinyl records, cassettes, the CD, MP3s and now streaming. Sound quality doesn’t matter, its convenience that the consumer cares about. It’s simply easier to have access to tens of millions of songs on your phone than it is to own music anymore. Plus the inconvenience of going to a store to buy it (although many record aficionados claim that’s one of the best parts) is not in sync with the way most goods are purchased or consumed these days.

It’s a shame to see these stores close, but it was only a matter of time. The public knows what it wants and when it comes to music, its not something that you buy in a brick and mortar store.

January 30, 2017

Most Billboard Album Charts To Now Include Streaming

Billboard 200After updating the Billboard 200 chart to reflect both streaming and track sales a few years ago, Billboard is now doing the same for most of it’s other genre-based album charts as well.  The following charts will now reflect the new measurement methodology starting this week:

Top Country Albums

Top R&B/Hip-Hop Albums, plus:
-R&B Albums
-Rap Albums

Top Rock Albums, plus:
-Alternative Albums
-Hard Rock Albums
-Americana/Folk Albums

Top Latin Albums, plus:
-Latin Pop Albums
-Regional Mexican Albums
-Tropical Albums
-Latin Rhythm Albums

Top Dance/Electronic Albums

Top Gospel Albums

Top Christian Albums, plus:
-Christian/Gospel Albums

Soundtracks

Top Catalog Albums

Holiday Albums

The charts are still primarily based on sales, but 10 digital track sales from an album will equate to one equivalent album sale (TEA), and 1,500 on-demand song streams from an album will be equivalent to one album sale (SEA). Sales and streaming data is compiled by Nielsen Music. Billboard will also continue to publish pure album sales charts for the above genres using Nielsen’s sales data exclusively.

By moving to a “consumption” methodology, Billboard is trying to make sure that the top-ranked titles each week on the above charts align with the top titles of those genres on the Billboard 200.

The on-demand subscription services that provide the data for the charts are Spotify, Apple Music, Tidal, Amazon Music, Soundcloud, Slacker, Napster, Google Play, Groove Music and Medianet.

This is actually a good thing in that all the “official” charts will be measured the same way with data from physical sales, digital sales, and stream consumption. That said, with sales of both physical and digital costing more than streams, you have to wonder whether they’re worth more and should be pro-rated as such. This is a step in the right direction though, at least until music sales become a much smaller part of the picture.
January 25, 2017

Jay-Z Gets Bailed Out As Sprint Invests In Tidal

Sprint logoRecently there’s been a lot of speculation on how long Tidal could financially hold on before it would have do something drastic. Today those fears are allayed with the news that telco Sprint has bought a 33% interest in the music streaming service for $200 million. Each of the company’s much celebrated two dozen artist-owners will remain as partners.

A big part of the deal is that Sprint reportedly contributed another $75 million just for future artist exclusives and marketing, which had been lacking in recent months.

Sprint is owned by the Japanese giant Softbank and has about 45 million paying customers, which will reportedly now get access to Tidal as part of their cell phone service agreement.

Tidal is reported to only have about 1 million paying customers, but it is available in 52 countries and has more than 42 million songs in its catalog, as well as 140,000 videos. It’s not known how many of those are on the premium high-definition tier, but it’s presumed to be only a small portion. The press release sent out about the investment states that there will be no change in service for Tidal’s current customers.

Tidal has had a relationship with Sprint that goes back a couple of years, and owner Jay-Z has been courting the company since then. That said, Tidal was burning through money while its paid subscribers weren’t rising at a fast enough rate to compensate. Something had to give, and after overtures to other large companies like Apple, the company pulled off the surprise Sprint deal.

This should at least buy the company some time, give it some money to market with, and gain a new customer base from Sprint customers. Tidal gives Sprint its entry into the music world, which it’s been looking for for some time. At the moment its a win/win scenario for both companies.

Jack White Starting His Own Vinyl Pressing Plant

Third Man Records pressing plantFrustrated with the long wait in to get records pressed, Jack White’s new Third Man Records pressing plant is scheduled to open in February in his native Detroit. The company has installed 8 new energy efficient presses capable of outputting up to 5,000 discs every 8 hours. The company also hopes to add 50 jobs to a city that desperately needs them.

Although the plant is primarily for the releases from Third Man artists, it will also be available for outside work. The company will continue to maintain its longstanding relationship with United Record Pressing in Nashville to handle any overflow.

White is proud of the fact that the plant made every effort to be environmentally sustainable, which includes a closed-loop, chilled-water system that maximizes water sustainability, state-of-the-art temperature control, and noise control of the loud machinery.

There are only 20 record pressing plants in the United States (including Third Man when it comes on line), and just about all plants are currently backlogged by an average of 4 months. Obviously this prevents getting a release quickly to market, which is why Third Man decided to make the rather sizable investment in its own plant.

The major labels actually make up a great deal of the vinyl orders these days, as many new releases also get a vinyl version as well. This makes it very hard to squeeze indie labels and artists into the cue, so at least for the moment, any new plant that comes online should have no trouble finding enough work to keep itself busy.

Artist Sponsorship Is Today’s Payola

Payola has always been part of the music business and many insiders feel that it’s the reason that some artists become stars, and some stars become superstars. Without money or favors changing hands between the record label and the radio station/streaming service, a song might never gain the visibility it needs to become a hit. While this was a dirty under-the-table business in the past, today it’s a lot cleaner and above board in that we call it “corporate sponsorship” instead of payola.

What is payola? When it first reared its head in the 1950s, a record label would drop a wad of cash on a DJ or program director in order to get its record played on the station. It was basically renting the air time, or sponsoring the song, but it was never identified as such (or probably even thought of in that way). Soon payola was made a crime, so the labels then turned to “independent promoters” who handled the same transactions with the stations so the labels could legally say they weren’t involved. In many cases, drugs, vacations, and luxury items like big screen TVs where substituted for cash, but it had the same effect – getting airplay for the song on the station.

Today that still might happen in radio, but much of the attention has now turned to playlists, where indie promotion men now do their thing trying to influence the influencers to include a song or album on their playlist. That said, a new form of legal payola now exists in corporate sponsorship, which is completely out in the open even though we might not recognize it as what it really is.

It’s much more difficult to get radio airplay these days since stations are now owned by large station groups, so brands, bands, artists and labels have turned to sponsorship to fill the gap. For instance, Pepsi launched “The Sound Drop”in a partnership with MTV, Shazam, and iHeartMedia to spotlight artists who are already on major labels and in rotation on iHeartRadio. Not to be left behind, Dr. Pepper’s “One of a Kind Sound” is a series of artist promo spots designed to look and sound like pre-release album teasers. And of course, a few years ago Warner Music famously partnered with iHeartRadio to actively promote its artists (there was even a big announcement). Radio stations and groups continue to offer festivals and that’s also become a huge business. In fact, there was over $1.5 billion in sponsorship money spent last year for live events.

Sound familiar?

The artists of past were very idealistic about anything related to sponsorship and stayed as far away from it as possible in an effort to keep their music as pure as possible. Today those ideals are pretty much dead, as sponsorship is the main focus of the artist, management, labels and brands. It’s a new world out there where we might call payola by a different name, but it’s still payola just the same. If you don’t have the money, you can’t play the game.

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