Get Ready to Rumble; FCC Launches Net Neutrality Rollback

Here’s how high tension is already running over the Federal Communications Commission’s proposal to undo it’s own net neutrality order: At Thursday’s open meeting where the commission voted 2-1 to proceed with the first phase of the rollback, with security on high alert over online threats aimed at commissioners, security personnel “manhandled” long-time Capitol Hill reporter John Donnelly and removed him from the building for approaching commissioner Michael O’Reilly in a hallway and attempting to ask him a question outside of an official press conference.

FCC Commissioner Mignon Clyburn

Tensions are only likely to get higher as the proposal moves forward. This week’s vote kicks off at least a three-month period of pubic comments, during which the commission can expect to be deluged with input, ranging from the substantive to he hysterical. Democrats on Capitol Hill, meanwhile, are vowing “all out war” to prevent any rollback. Read More »

Competing With Paid

The rise of subscription streaming services, in both the music and video industries, has given the lie to the old complaint that consumers won’t pay for content online. But to many in the music industry, to say nothing of streaming investors, too many of them still don’t.

Ad-supported free streaming services remain the bête noire of the record labels and music publishers. They rail against YouTube, even as they’re making deals with it, and have fought to restrict the copyright safe harbors that allow YouTube to profit from music posted without license by users. They’ve maintained pressure on Spotify to shift more of its free users to its paid subscription tier, a tune now echoed by potential investors as Spotify eyes an IPO or public listing of its shares, and have begun to restrict when new releases are made available on the service’s free tier. Read More »

The Net Neutrality Paradox

One of the more unfortunate wrinkles in the long debate leading up to the Federal Communications Commission’s 2015 Open Internet Order, better known as net neutrality, was its increasingly commercial focus. There were important civil liberties issues at stake, to say nothing of the interplay of engineering and regulation of critical infrastructure and the private ownership of public goods. But much of the public debate boiled down to an argument over streaming — Netflix streaming in particular.

That was due in no small part to the efforts of Netflix founder and CEO, Reed Hastings, who made himself and his company the poster-children of the net neutrality cause by loudly proclaiming Netflix’s oppression at the hands of ISPs looking to impose interconnection fees on the streaming service.

Although net neutrality proponents eagerly embraced Netflix’s cause and Hastings’ pubic advocacy they worked to color the issue as essentially a commercial dispute between different types of service providers, which, paradoxically, is actually an argument against what the FCC did. Disputes between buyers and sellers are not really the FCC’s bailiwick; that’s more a matter for the Federal Trade Commission and the antitrust division of the Justice Department. Read More »

The Great Re-bundling: The Wireless Future of Music and Video

Bundled media services are becoming table stakes in the wireless business. With plain old wireless service (POWS?) at or close to the saturation point in the U.S., wireless operators are increasingly fighting over slices of a fixed pie, and feel a growing need to differentiate from their competitors in pursuit of market share.

With the costly build-out of 5G networks looming, operators also need to increase ARPU by adding services.

Thus, it was no big surprise this week when Softbank-owned Sprint snapped up a 33 percent stake in Jay-Z’s Tidal music streaming service. Sprint already had a partnership with Tidal, but as MIDiA Research analyst Mark Mulligan noted in a blog post,  the bundling game has changed for wireless operators, and meaningful differentiation increasingly means having your own skin in it.

“The original thinking behind telco bundles was differentiation, but when every telco has got a music bundle there’s no differentiation anymore,” he wrote. “Additionally, if you are a top tier telco and you haven’t got Apple or Spotify, then partnering with one of the rest risks brand damage by appearing to be stuck with an also-ran. By making a high profile investment in Tidal, Sprint has thus transformed its forthcoming bundle from this scenario into something it can build real differentiation around.” Read More »

Apple Tip-Toes Into Original Video

The Wall Street Journal reported this week that Apple has begun talks with producers in Hollywood about buy rights to original TV series and movies. If true it would represent at least the third attempt by the iPhone maker to crack the TV code, so far without notable success, although its strategy this time appears to be different from its previous efforts.

I say “appears” because, according to the Journal, Apple itself  “is still working out details of its business strategy built around original content.”

The new shows, which could begin appearing by the end of this year, will reportedly be made available to subscribers of Apple Music, suggesting this isn’t an attempt (yet) to build a direct competitor to Netflix and Amazon Prime. The fact that Apple is targeting individual movies and TV series rather than networks suggests this is also not some sort of skinny bundle play to compete with Sling TV and the new Hulu service. Read More »

For Music Biz, First-Half Results Are A Glass Half Full

The Recording Industry Association of America this week reported that U.S. music sales through the first half of 2012 were up 8.1 percent over the first half of 2015, to $3.4 billion, the industry’s strongest rate of growth in more than a decade.

iphone-artist-spotifyThe surge was due almost entirely to a whopping 112 percent increase in revenue from paid streaming services such as Spotify, Apple Music, and Tidal which more than offset a 17 percent decline in digital downloads (including albums, single tracks, and kiosks), and a 16 percent decline in sales of physical formats (CDs and vinyl).

Revenue from free interactive streaming, such as Spotify’s ad-supported tier, YouTube and Vevo, grew 24 percent but remained a tiny slice (5.9 percent) of the overall revenue pie. Revenue from non-interactive streaming services, primarily Pandora, was up 4 percent.

“Streaming in all its forms accounted for almost half of all recorded music revenues in the first half of 2016,” RIAA CEO Carey Sherman wrote in a post on Medium. “This represents a remarkable transformation and reinvention by a business that was principally physical products just six years ago.” Read More »

The More Things They Change, The More Digital Platforms Become The Same

YouTube is working on a plan to be more like Facebook, Snapchat, and Twitter. According to a report by VentureBeat, the video platform has been developing a new feature internally called Backstage that will allow users to post photos, links, text posts and other non-video content alongside their videos. The new content will resemble a Facebook Timeline, presented as a feed scrolling in reverse-chronological order on the user’s channel home page, but also appearing in subscribers’ feeds and notifications.

Backstage, or whatever it ends up being called, is expected to be rolled out later this year on select YouTube accounts.

The move to make using YouTube more like using Facebook seems only fair at this point given that Facebook has lately become more like YouTube. The social network has, with considerable success, moved aggressively to turn itself into a major platform for hosting and sharing user-created videos — once the near exclusive facebook_videoterrain of YouTube.

Facebook has also lately taken steps to become more like Twitter, launching Facebook Live to rival Periscope, while Twitter has tried to become more like YouTube by making video a bigger part of its offering.

A similar convergence is underway in the music streaming area. Pandora is reportedly in the final stages of negotiations with the record companies to launch an on-demand tier to its service, which would make it more like Spotify and Apple Music. Spotify, meanwhile, is acting more YouTube and even Netflix, adding original video to its mix of content.

It’s getting to where you can’t tell the players apart without a scorecard.

More to the point, it’s getting harder for digital platforms and services to differentiate themselves from each other. Music streaming services, which already share substantially the same catalog of content and now increasingly share the same business model, are trying, through the increasing use of  individual artist exclusives. Others have sought to make human vs. machine curation a point of differentiation. Read More »

Return Of The Gatekeeper

Making content available on-demand was supposed to put the consumer in charge. Armed with “personalization” tools and backed by social media filtering the viewer/listener/reader would be king, usurping the power of traditional gatekeepers.

But a funny thing is happening on the way to the throne: consumers increasingly are inviting gatekeepers back into the realm, albeit not necessarily the same ones they had overthrown.

guard-buckhm-palace-shst_w_755Speaking at MIDEM this week, MIDiA analyst Mark Mulligan reported that “The percentage of people who make their own playlists on streaming has dropped by 10 percentage points in just one year,” said Mulligan. “The main playlists which people are using are the playlists which are being pushed to them,” by the streaming services, or in some cases by record labels.

Citing data provided by Spotify, Mulligan noted that in December 2014, Spotify’s Today’s Top Hits playlist had 2.3 million followers and generated 35.4 million streams per month. By April 2016 it had grown to 7.8 million followers and was generating more than 120 million streams a month. Read More »

The Accidental Blockchain Evangelist

PledgeMusic founder and CEO Benji Rogers did not set out to become the leader of a movement when he posted his now-famous essay last November describing how the blockchain — the technological underpinning of the cryptocurrency Bitcoin — could be used to untangle the notoriously Byzantine world of music licensing and payments. It was more a thought experiment than a business plan. But his ideas struck such a chord in the industry that Rogers has been thrust into the unwonted role of leading spokesman for the use of blockchain in the music business.

PledgeMusic CEO Benji Rogers

PledgeMusic CEO Benji Rogers

“I could never have imagined that the article I wrote would have the impact that it has,” Rogers would write a few months later in a follow up post. “In the short time since it came out, I have been overwhelmed by offers to speak publicly, offers of help and even offers to fund ‘what you are building.’ So I need to be clear here before we begin: this is not something that I am building.”

There are many in and around the music industry who would like to try, however.

By putting the blockchain at the center of his proposal Rogers helped spark growing interest in the industry in using the technology to bring transparency to the famously opaque world of music rights, where simply identifying who owns a musical work or recording, and who is entitled to be paid for which uses, can be near-impossible, keeping works out of the hands of would-be licensees. Blockchain was a major topic of discussion at this year’s SXSW conference, where it bore for full slate of panels. Read More »

How The CRB Has Done The Music Industry A Favor (Updated)

With the possible exception of Taylor Swift, Janet Yellen may now be the most powerful person in the music business. As chair of the Federal Reserve, Yellen controls the levers that control the rate of consumer inflation in the U.S., a number on which potentially millions of dollars in music royalty revenues will now turn in the wake of Wednesday’s ruling by the Copyright Royalty Board (CRB) setting the royalty rates that internet radio services like Pandora and iHeartMedia must pay to record labels and artists for the next five years.

Under the new rate card, internet radio services will pay 17 cents per 100 streams in 2016 ($0.0017 per stream), up nearly 20 percent from the 14 yellencents per 100 streams they pay today but well below the 25 cents per 100 that SoundExchange, which collects digital royalties for artists, had sought. After that, the rate will be indexed to the Consumer Price Index (CPI), the main gauge the government users to track inflation, for the next four years, which means the rate could go up or down with the price of bread.

It was an unexpected and deeply peculiar move that looked like nothing so much as an effort by the CRB, an arm of the Library of Congress, to get out of the rate-setting business, which itself would be mighty peculiar insofar as its role in setting royalty rates for webcasters is mandated by Congress and not really optional on CRB’s part. Read More »

Licensing Music Streaming’s All-Of-The-Above Business Model

There’s an old adage in business that there really are only three fundamental business models in the world: I pay, you pay, or somebody else pays. Music streaming services have been built on each of those.

Music has been bundled in with other services at no apparent additional cost (I pay); it has been offered as a subscription service (you pay); and it gangnam1has been made available for free, supported by advertising (somebody else pays). Increasingly, however, streaming services are looking to multiple business models in search of still-elusive profits.

The latest case in point: Pandora. Originally an ad-supported internet radio service, it spent $450 million last month to acquire music concert ticketing and promotion service Ticketfly. This month it dropped another $75 million to buy parts of paid-streaming service Rdio at the latter’s liquidation yard sale. Read More »

Red Zone: Why Apple Music Should Fear YouTube Red

The most notable feature of YouTube Red is what’s missing. There is no more Music Key, the long-awaited YouTube subscription music service that has been in beta for much of the past year but never gained much traction. Nor will there be any more dedicated subscription channels, where users could get ad-free access to a single creator’s channel.

Instead, for 10 bucks a month, you’ll get ad-free access to virtually everything on the YouTube platform, including YouTube Gaming and Apple_Music_iPhoneYouTube Kids. There’s also a YouTube Music app for those who simply want to use the service for listening to music.

YouTube Red subscribers will also automatically be subscribed to Google Play Music, Google’s subscription streaming and cloud storage service that up to now had cost $10 a month on a standalone basis.

In effect, Google is now making all of its music and video content services available on both a free, ad-supported basis, and an ad-free subscription basis. (Those who are complaining that YouTube is being mean by hiding the videos of creators who have not yet signed up for the subscription program are missing the point. The point is to have two identical services with two distinct monetization strategies, and letting the consumer decide which to use.) Read More »

Competing With Free

The RIAA reported had some good news and some not-so-good news this week about the state of the music business. The good news is that while sales of CDs and permanent downloads continue to fall, revenue from paid-streaming subscriptions through the first half of 2015 was up a solid 25 percent from the first half of 2014, to $478 million. The not-so-good news is that the number of Americans actually paying for music subscriptions is growing much slower, up a sluggish 2.5 percent, or 200,000 subscribers, to 8.1 million.

Optimists noted that the first-half data did not include Apple Music, which launched June 30th, and that second-half numbers should be show faster growth. The New York Post reported this week, citing “music industry sources” that 15 million people had signed up for Apple’s paid-streaming service during the three-month free trial RIAA_paying_subscribersperiod, which ends Sept. 20th, and that roughly half those folks — 7.5 million — had not (yet) turned off the automatic payment feature the will soon turn them into paying subscribers. It wasn’t clear from the report, however, how many of those 7.5 million are in the U.S.

The optimists also note that while the number of paying subscribers was relatively flat, average revenue per subscriber was up 21.6 percent, to $118, perhaps reflecting a shift by consumers to more expensive services like Jay-Z’s Tidal.

Yet while growth in the paid-subscriber base flags, free, ad-supported streaming services like Pandora and Sirius XM continue to be hugely popular. Pandora claims to have 80 million active monthly listeners, only a tiny fraction of which pay for its ad-free tier. Due to licensing issues, Pandora is only available in the U.S., Australia and New Zealand, so the bulk of those 80 million users must be in the U.S. Read More »

Turning Talking Heads

With apologies to LBJ, but when you’ve lost David Byrne, you’re losing the argument over whom to blame for music artists’ meager share of the streaming pot.

Two years ago, the former Talking Heads front man came out as the scourge of Spotify, casting the streaming service in an op-ed that ran in the Guardian, as a sort of malevolent force that was destroying all that was good and holy about the music business:

There are a number of ways to stream music online: Pandora is like a radio station that plays stuff you like but doesn’t take requests; YouTube plays talking_heads_album individual songs that folks and corporations have uploaded and Spotify is a music library that plays whatever you want (if they have it), whenever you want it. Some of these services only work when you’re online, but some, like Spotify, allow you to download your playlist songs and carry them around. For many music listeners, the choice is obvious – why would you ever buy a CD or pay for a download when you can stream your favourite albums and artists either for free, or for a nominal monthly charge?…

The amounts these services pay per stream is miniscule – their idea being that if enough people use the service those tiny grains of sand will pile up. Domination and ubiquity are therefore to be encouraged. We should readjust our values because in the web-based world we are told that monopoly is good for us….In future, if artists have to rely almost exclusively on the income from these services, they’ll be out of work within a year.

Other artists, like Dave Lowry of Cracker, joined the sad chorus. But in an op-ed published in the New York Times on Sunday, Byrne struck a very different tone regarding streaming, even managing a (somewhat begrudging) compliment for Spotify for trying to illuminate the industry’s opaque payment system: Read More »