Tag Archives for " streaming music "
Who 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…]
Bobby’s worked with a variety of great artists ranging from Michael Jackson to Carole King to world music superstar Johnny Clegg to the legendary Harry Belafonte. He’s also a composer with his own music library, and his credits include shows like Oprah Winfrey, The View, Survivor, and ABC’s 20/20 News, and commercials for Coca Cola, Ford Motor Co. and American Airlines. Along the way, Bobby’s also been nominated for a daytime Emmy award. We had a great chat that you’ll enjoy.
In the intro I’ll discuss Apple’s interesting proposal for a new streaming royalty rate for songwriters and publishers, and the new breed of big fast flash drives now available.
Artists, 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)
I’m very pleased to have engineer/gear manufacturer Steven Slate on Episode #117 of my Inner Circle Podcast.
Steven will discuss his journey from musician to engineer to manufacturing some of the coolest and most forward-thinking audio gear available today.
You’ll also hear all about what goes into to making a product like the Virtual Mic or the Raven control surface, as well as some very cool behind-the-scenes company history.
In the intro I’ll discuss how the balance of online music distribution is changing as there are now more streams than YouTube music views, and how the great little audio manufacturer Rane is being acquired by inMusic.
The 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…}
A report from the Wall Street Journal yesterday has Apple in talks to buy Jay-Z’s Tidal streaming service, and even though Tim Cook’s company has a truck load of cash on hand, this is one acquisition that seems to be a waste of money.
When Apple purchased Beats two years ago for around $3 billion, the company received not only infrastructure that was later used to launch Apple Music, but also executive talent in Jimmy Iovine and Ian Rogers (who has since departed), and branding recognition from Dr. Dre. The general consensus is that the company vastly overpaid for what it received, but at least you could look at the deal and see that it made some sense because a few pieces fit into the larger picture of what Apple was trying to do.
Not so with Tidal. It’s a company reportedly in executive disarray, so there’s no operational talent to acquire. Apple already has all the infrastructure it needs for streaming delivery, so there’s nothing to be gained there either. Tidal does have a high resolution CD quality audio tier, but Apple has been collecting hi-res masters for its Mastered For iTunes program for more than three years now, so it’s even ahead of Tidal in this area, so that’s not a fit either.
Maybe the one thing that might be interesting to Apple is that fact that Tidal has 4.2 million paid subscribers, many of them attracted to the service because of Jay-Z’s brand, and exclusives from Beyonce, Rhianna, Kenye West and Prince. Buy Tidal and you get the users, but who’s to say that those subscribers can easily be retained?
Granted, if the price was right (meaning very low – $100 million or less feels right), it may be a worthwhile gamble for Apple, if for no other reason in that it takes it off the market (although none of Apple’s deep pocket competitors seem to be interested). [Read more on Forbes…]
Now that Brexit has unleashed its shock and horror on the financial markets worldwide, other much smaller sectors are wondering how it will affect them as well, and the music business is no exception.
The traditional music business (meaning record labels) is run by a crafty street-wise bunch that know how to roll with the punches, and that’s why I think they’ll find a way to come of this with a net gain when all is said and done.
Most of the analysis of the situation that I’ve read so far centers on the fact that doing business in both the UK and Europe will be more expensive because of the escalated operating costs associated with keeping offices either in London or in Europe. Travel, labor, and finances will all take a hit as costs rise because of the increased paperwork involved.
It’s a fair premise that will likely play out that way, but remember that the industry has a talent for turning lemons into lemonade (although usually that doesn’t apply to the artists).
For example, back in the ‘60s, all record producers were just staff personnel of the record label, and paid as such. After Sir George Martin had huge success after huge success with The Beatles that netted EMI hundreds of millions of dollars in profit, he didn’t get as much as a Christmas bonus, let alone a raise, in appreciation for his efforts. As a result, Sir George bolted and became what amounted to the first independent record producer, demanding his own royalty on the records that he produced in the process. Of course, an exodus of successful record producers followed, and it looked like the major labels had a huge new cost on their hands.
The lemonade came when the labels hit on the idea of passing off this new cost to the artist, and the producer royalty has been the responsibility of the artists ever since. The record labels came out ahead because there were now fewer employees on the payroll, and this new very expensive cost wasn’t theirs to worry about.
Another example came in the late 80s when recording budgets where skyrocketing. At the time, the labels paid all the invoices resulting from the recording process no matter how large or small. This resulted in an accounting nightmare, with vendors constantly upset with slow payments, and everyone in the supply chain from the artist on down being constantly hassled about it. The budgets were higher than ever, resulting in more invoices than ever, requiring more accounting manpower than ever to keep up. [Read more on Forbes…]
Twitter has made an investment in SoundCloud for a reported $70 million and if you’ve been following the story between the companies, you have to ask yourself “Why now?”
About two years ago Twitter almost acquired SoundCloud before walking away at the last minute, and an acquisition certainly would have made a lot more sense at the time, even though it might not have changed the futures of either company.
Back then Twitter wanted to capitalize on its high profile music users like Taylor Swift, Justin Bieber and Katy Perry, who had massive followings on the service (and still do) but weren’t able to take advantage by directly serving up their music to them. SoundCloud was struggling with both monetization issues (which still exist) and licensing problems, and theoretically could have provided the infrastructure for Twitter to transition to at least a partial music service.
Many think that Twitter was better off for walking away from the deal and keeping the focus on its core business, which in theory worked fine except for the fact that the company’s user base has plateaued in the meantime even with a focused agenda not diluted with delivering music.
SoundCloud has actually come a long way in that it now has signed licenses with the three major record labels, and has since worked hard to roll out its $9.99 monthly subscription service called SoundCloud Go. Still, it’s a cash-starved company and needs another round of funding to stay alive, so having Twitter as an investor in this round is most welcome.
That said, the benefit for Twitter isn’t as apparent. It’s not getting any of the technical goodies that come with an acquisition, and it’s buying a piece of a company that essentially hasn’t grown in valuation since its last go around.
In fact, out of all the music streaming companies currently in the space, SoundCloud may be the most baffling. It’s long been a boon to artists, bands and songwriters as a tool for free music distribution, and at that it may very well be #1 in the space. That market isn’t large enough to add enough subscribers to make the platform go however, and may be tapped out already. Attracting regular music consumers to its paid Go service may be limited to electronic music fans, since the platform is a favorite of DJs, but that genre seems to have plateaued as well. [Read more on Forbes…]
Artists, labels and music services alike continue to lament the fact that not enough free streaming subscribers are converting to the paid tier, yet the possible incentive to get those free tier customers to upgrade is being ignored by the different players along the product pipeline. Superstar albums continue to be released without the industry taking advantage of the considerable leverage that they bring with fans, which amounts to a missed opportunity to improve the health of the music industry.
What would be the perfect reason to upgrade? How about the ability to access the latest album by Radiohead, Drake, Kanye, Beyonce, Adele, Taylor Swift, or other superstar artist?
By making that new hot album available only on the streaming service’s paid tier, there’s a reason for the consumer to buy in (as we’ve seen with the upsurge of subscribers caused by latest albums from Beyonce and Kanye on Tidal). Although it would be better if a major release was available on every streaming platform for anywhere from two to six weeks before it migrates to the free tier, even an exclusive on a single on-demand platform like Spotify would work, as long as it was only available on the paid tier. Paid-only services like Apple Music could provide the same incentive by not having the latest release available during its free trail period, for instance.
That way, the artist, label, songwriters and publishers all get paid at the highest rate (and their complaints about the low payouts from streaming would diminish as a result), more consumers are turned into paying monthly subscribers, and the industry grows at a much faster pace.
Of course many of the current megastar release strategies are strewn with apprehension that equates to inaction. We may be in the last throws of the physical music business, but that segment still maintains a high-ticket and high-margin. Everyone wants that last surge of profit and no one wants to leave money on the table. But Spotify, who reportedly refused to window the latest Radiohead album on its premium tier, may be just as much to blame as well. [Read more on Forbes…]
With the battle over streaming music leadership raging on between Spotify, Apple Music and YouTube, there’s one major company that’s been lying silently in the weeds waiting for the right time to pounce on an industry increasingly ripe for the picking. Don’t look now, but it may be Amazon that may soon be the one causing the disruption in the music business, and not the other popular contenders.
Amazon’s already a major, but low-profile, mover and shaker in the industry, with reportedly somewhere between 75 million and 90 million yearly subscribers (the company doesn’t release such information, so this is just informed speculation) to its Prime service, and although most of that centers around 2 day merchandise shipping and video delivery, the different types of offerings coming from the Prime Music portion of its service have been growing by the month.
This slow roll-out is happening at a controlled pace, but you get the feeling that the company is learning what works best with each move while not intentionally making a lot of waves as it positions itself to enter the online streaming market full-force.
One recent example of this is when Amazon Music was added to T-Mobile’s Music Freedom data-free music streaming program, which is the first instance of Prime Music being available to off-the-platform users. The move didn’t cause a lot of headlines, but gives the company some experience in rolling out a service beyond its own closed ecosystem.
Step By Step
What might be more an indicator of the ultimate bigger picture is the fact that Amazon recently made it’s Prime Video service available as a stand-alone product for $9 a month. Just adding the ability to purchase the service on a monthly basis is a break from the traditional yearly membership required in the past. Another foreshadowing of the future perhaps?
Then Amazon Launched what amounted to a YouTube Rival with its Amazon Video Direct (AVD), which although it launched with only publishing heavyweights and no record labels, provides an interesting outline of how it will pay content partners, as well as how it will take down videos if copyright infringement occurs. AVD gives partners the option to upload their content to Amazon Prime Video (available to tens of millions of premium tier subscribers), make it available as an add-on subscription through its Streaming Partners Program, offer it as a one-time rental or a one-time purchase, or make it available to all Amazon customers, which is ad-supported like YouTube.
According to Variety, the Prime Video option pays video owners a 15 cents per-hour royalty fee in the US and 6 cents per-hour in other territories, but that appears to cap at $75,000 per year. On top of that, Amazon will also pay partners a 50% royalty of the retail price from one-off purchases and rentals. As with YouTube, Amazon will pay the partner 55% from any ad revenue received. Amazon will also distribute $1 million a month to the makers of the 100 most popular programs viewed by Prime members each month. Regardless of the percentages, providing a roadmap for how content contributors get paid sure looks like Amazon is setting up for something bigger down the road. [Read more on Forbes…]