Category Archives for "Music Industry News"
We like to think that everything about music is built around the tastes of the people that are both creating and listening to it, but that outlook seems to be increasingly out of step with reality. Artificial intelligence is being used more and more for all sorts of things that control our lives, so why shouldn’t what we listen to not be one of them? In this video from the BBC series The Secret Science of Pop, you’ll see that there’s already an algorithm that’s predicting the next chart hit. The scary part is that no human actually listened to the songs involved. The world has certainly changed from the old days when a hit could be picked by a local DJ who played a song until the rest of the world caught on.
Music is a big part of the nightlife of any city, but venues everywhere have been seriously threatened by rising real estate costs, noise control laws, and city taxes. Luckily, many cities are finally waking up to the fact that a city without music is a far less attractive destination or place to live, and the effort is being make to save local music venues.
London has a master plan in place to save its existing music venues, and is even creating a new position of Night Czar. Even so, local tax increases still threaten to close down many pubs and music venues.
Philadelphia has introduced a new Music Industry Task Force to try to reestablish the city as the music center that it once was, and the Pittsburgh Downtown Partnership has created a new initiative to bring more music to the city as well. Denver has a particularly thriving music scene these days that’s often overlooked by everyone but touring musicians in the know.
Yet venues everywhere struggle against against gentrification, which not only raises real estate prices beyond what a venue can reasonably pay, to local condo owners complaining about the loud music and patrons as well.
Clubs have a definite lifespan, and one that makes it beyond 5 years might be considered living on borrowed time, but the challenges facing club owners today are greater than ever. Increased liability for drunken customers, DUI laws that limit consumable beverages putting an artificial limit on revenue, and a limited number of acts that can actually draw a crowd put extreme pressure on anyone running a club.
But clubs and small music venues are the farm team of the music business. It’s where young artists and bands develop their musical and performance chops, build their followings, and hone their shows. They’re vital to survival of the industry as a whole, so everyone should shed a tear for any venue that closes. That said, at least there’s a newfound awareness regarding the fragile nature of the music culture by many cities that just wasn’t there before, and that could only be a good thing.
It looks like Pandora isn’t the only streaming company having big financial problems. SoundCloud is reported to now be in a do or die situation where it must either raise some serious cash or sell for pennies on the dollar. The company has been trying to raise $100 million to keep the doors open for almost a year now with no success, and it hasn’t been able to find a buyer in that time either.
One of the reasons why a buyer hasn’t stepped up is that SoundCloud valued itself too highly, reportedly seeking $700 million, but now that number is said to have decreased significantly. The company has raised about $250 million so far (including $70 million from Twitter), so now any offer over that number will be considered, which just goes to show how dire the circumstances seem to be.
One of the big problems is that although SoundCloud reportedly has 175 million users, not many of them pay for the service. They’re mostly indie artists who use it has a repository for their music, and while that serves a major slice of the market, it’s not necessarily one that has been successfully monetized yet. Plus, that 175 million figure hasn’t been updated in 3 years, so it’s possible that its now even lower.
The company has tried to boost its revenue by launching two paid tiers, one $10 per month and the other more recently for $5, which hasn’t exactly set the world on fire. That’s because most music consumers go to the one of the larger services first before they consider SoundCloud, and just like any other streaming service, it’s very difficult to get someone to either buy an additional service or change from the current one that they’re using.
All this means that it’s entirely likely that the streaming landscape will face even bigger changes in the coming months. SoundCloud plays an important part in the indie music environment, but if you’re an artist, it might not be a bad idea to have a plan B ready.
If you’re a Pandora user, the service that you know and hopefully love may very well be different in the next month. That’s because an investor revolt looks to be forcing the company’s sale, according to an enlightening expose’ by Music Business Worldwide, and that could come within the next two weeks by the way things are shaping up within the company.
Apparently on last Friday March 3rd new directors were scheduled to be nominated, and founder and CEO Tim Westergren’s tenure as a director was coming to an end. Since it was most unlikely that he would be renominated due to investor unhappiness, he managed to postpone the meeting was two weeks in order to gain some breathing room, which doesn’t normally happen in a publicly traded company.
The thought is that that newly appointed directors would force a sale (most likely to suitor Sirius XM) and force Westergren out as CEO. By postponing the meeting, Westergren has a chance to sell the company in that time period and keep his job, or that’s what the speculation would leave you to believe.
Pandora’s share price has taken a beating, dropping 22% since it’s IPO. It dropped 6% just in the last week after the chairman of Sirius XM parent company Liberty Media made a statement about Pandora being overvalued thanks to its operating loss of $343 million last year.
The big investors in Pandora no longer see a way to make the big money they were betting on and just want to get at least some of their money back as soon as possible, so they’re forcing the issue. That’s why you’ll see a change coming to Pandora one way or another very soon. It probably won’t go away as a company, but you can bet that by the end of the year it will be a far different service than it is right now.
A big controversy has popped up over a tweet (see below) that outlines the language in the latest SXSW artist contracts which stipulates stipulates “SXSW will notify the appropriate immigration authorities” if an international artist tries to play either an official or unofficial show without the proper work visa. As a result, a number of international acts have cancelled their appearances at this year’s event.
With all the hysteria of the Trump administration travel ban into the US fresh on everyone’s mind, any kind of contract language that outlines immigration policies is bound to upset some people, but the fact of the matter is that this is nothing new in terms of SXSW or any other promoter. All promoters know that they must comply with Immigration and Custom Enforcement (ICE) authorities, or things could get pretty miserable for them in short order. There’s been contract language to that effect in virtually all promoter’s contracts for decades when dealing with acts outside of the US. The promoter does not in any way want to be even remotely libel.
The fact of the matter is that SXSW has plenty on its plate already and being an ICE enforcer isn’t one of them. It’s never been known to report an act for a visa violation, and though they frown on unofficial shows, the festival has its hands full jsut making sure that its own shows run as planned.
Tweets have a way of riling people up and that’s happened way before the current president began posting. Celebrities, musicians, sports figures and politicians have been doing this ever since the service began, and this tweet is more of the same – an over-reaction rather than a look at reality.
So to break it down – 1. If you’re from outside the US, save yourself any possibility of a hassle and just get the proper work visa before you come to SXSW, and 2. If you get in trouble with ICE, SXSW will probably not be the cause of it.
You can read more about the controversy here, as well as read the reply from SXSW managing director Roland Swenson here.
Most pundits in the recorded music business have been advocating for a low-priced streaming music tier for years, predicting that real growth in that end of the business won’t begin until the entry level price falls from $10 to around $5. While Amazon introduced its low-priced tier at the end of last year, you needed to own either an Echo or Dot to take advantage. Now SoundCloud has launched it’s new $4.99 tier to try to compete with some of the deeper pockets in the industry.
The service is called SoundCloud Go and it offers 120 million songs, no ads, and the ability to listen offline. The company’s original tier, SoundCloud Go Plus, is still $9.99 but offers 150 million songs in its catalog.
Considering that all other streaming services have far fewer songs available (Apple Music has 40 million and Spotify 30 million), that might seem like a strong selling point except for the fact that most of these songs are by unknown artists. Even with the other music services, most streaming is dominated by hitmakers, so high catalog numbers don’t really mean anything in the end.
What does count is registered users and paying subscribers though. SoundCloud says it has 175 million users, but won’t say how many of these actually currently pay for the service.
Many think that the company is in serious financial trouble and that SoundCloud Go is a last-ditch effort to increase its paid subscriber base. There have been numerous rumors over the last few years of a larger company buying the company but that has yet to happen, and the official company line today is that it’s not for sale.
SoundCloud definitely has a place in the music ecosystem as it’s the main repository of indie music, and is key to any indie artist music strategy. That doesn’t mean it can make money from that however, as has been the case so far.
There are some states in the US that know the value of entertainment and they’re willing to invest in it. The latest is Georgia, which is about to pass the Music Investment Act to make it more financially attractive for music artists to create in the state. Not only is this piece of legislation intended to lure musicians to Georgia to record and tour, but also keep its home-grown talent from fleeing to other parts of the country like Nashville and Los Angeles.
The bill will provide Georgia’s music industry with tax cuts and incentives similar to the ones the film industry receives, which have proved very successful in bringing major film projects to the area. The proposed incentives are estimated to bring $9 million in net revenue and help spur as much as $2.2 billion of economic activity in the state within five years.
The Georgia Music Investment Act (also known as House Bill 155) has three major components:
The truth of the matter is that sometimes these tax incentives work and sometimes they don’t. Usually when they don’t it’s because the state hasn’t done enough to let the industry know that they exist. It’s unlikely this will happen with Georgia though, as it’s done a great job with its film and television credits already. Atlanta currently has a burgeoning music scene that will only grow larger as a result.
Streaming 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.
It 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.
It 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?