Music For The Masses

Music streaming has brought a lot of personalization to the experience of listening to music. Faced with the challenge of differentiating their service from competitors featuring substantially the same catalog of music, at a de facto standard price point, streaming services have focused on developing ever-more precise tools for personalizing the listening experience in the hope of keeping users engaged. So, Spotify has its playlists, Apple has its curators, Pandora has its music DNA project.

His_Master's_VoiceMusic rights owners too, in their approach to the streaming business, have also encouraged personalization. Burned badly by free music “sharing” sites, the record labels have been more than happy to reinforce the streaming services’ efforts to turn listening into a personal — and solitary — experience, such as by curating their own Spotify and Apple playlists.

Digital technology itself has also contributed to the bias toward personalization. Use of streaming services is heavily weighted toward mobile devices, particularly phones, which by design are personal, and in general highly personalized devices. Digital distribution also generates the sort of highly granular usage data on which personalization tools rely.

All that personalization has come at a price, however. With everyone cocooned inside their own playlists and cut off from the outside world by earbuds, the communal experience of listening to recorded music with friends or family has become a rarity. Read More »

Music In the Antitrust Crosshairs

File this one under “be careful what you wish for.” Two years ago, a group of major music publishers, along with ASCAP and BMI, which collect performance royalties on behalf of songwriters and publishers, asked the Department of Justice to consider changing how it enforces the antitrust consent decrees that have governed the two leading PROs, to allow publishers to withdraw digital rights to their repertoire from the PRO blanket licenses.

DOJ took it under advisement and this week gave its answer, according to a report by Billboard, and it was not at all what the publishers were hoping for.

elizabeth_warrenUnder the decrees, ASCAP and BMI are not allowed to pick and choose which songs in their catalogs to license. They must either grant a blanket license to the entire catalog or not at all. Thus, if a song is in their catalog for one use it’s in it for all uses.

The publishers raised the issue because they were unhappy with the royalty rate that internet radio services (cough — Pandora — cough) were paying under the compulsory performance license available to broadcasters, including internet broadcasters. Those rates are set by the rate courts that oversee the consent decrees and get collected by ASCAP and BMI. Having failed to persuade the courts to raise them, the publishers wanted to be able to withdraw digital rights to their songs in the PROs’ catalogs and negotiate directly with internet broadcasters.

This week, according to the Billboard report, DOJ said no. Read More »

Bridging The Streaming Music ‘Value Gap’

The global music business offered up two cheers this week for the first signs of life in the recorded music business in nearly a decade. According to International Federation of the Phonographic Industry’s (IFPI) latest global sales report, total recorded music revenue grew 3.2 percent in 2015, to $15.0 billion, the biggest jump since 1998 and the only growth since 2012, when sales ticked up 0.3 percent.

The overall growth IFPI_YouTubecomparisoncame entirely from digital sources, particularly streaming revenue, which jumped 45 percent over 2014, to $2.9 billion, or 19 percent of total revenues. Physical sales continued their decade-long slide, falling another 4.5 percent, buoyed somewhat by the continued renaissance of vinyl.

The strong streaming numbers were not evenly distributed, however. Subscription streaming revenue accounted for $2 billion of the $2.9 billion total, as the total number of paying subscribers reached 68 million, while industry revenue from ad-supported streaming amounted to a mere $634 million, despite more than 900 million listeners worldwide.

The report referred to the mismatch between consumption and revenue to artists and labels as a “market-distorting value gap,” that must be closed, echoing comments last month by RIAA CEO Cary Sherman. 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 »

Rethinking Music: What The Industry Could Learn From Netflix

It seems fair to say that no one in the music business right now is happy with how it’s being run. As streaming, including both paid and ad-supported, has replaced CD sales as the industry’s main economic engine, the record companies have seen gross revenue decline sharply, artists and songwriters have seen their royalty income diminished, and the companies doing the streaming are losing so much money they’re losing the ability to raise more of it.

In an interesting thought experiment at the Future of Music Policy Summit in Washington this week, musician and CEO of touring van rental service Bandago Sharky Laguana, considered how one component of the industry’s current business model — how subscription revenue Music_Festivalfrom paid streaming services is ultimately allocated to individual artists — might be made more fair, if not necessarily more lucrative.

In very broad strokes, of the $10 a month most subscription services charge consumers, the streaming service keeps $3 (30 percent) and $7 (70 percent) is paid out in royalties (theoretically to artists and songwriters but in practical terms to labels and publishers who are supposed to then distribute them). The portion of that $7 accruing to any one label is calculated based on how many times songs recorded by any of the artists under contract to the label are streamed by subscribers, typically resulting in a per-stream value of a fraction of a penny. Read More »

Music Streaming And The Two Drink Minimum

Ask the owner of any bar that hosts occasional live music how they make money and they’ll tell you it ain’t from the music. The music is there to draw a crowd to sell more liquor to, which is where the profits are. The cover charge helps defray the cost of the band so it doesn’t all come out of the liquor receipts. These days, the music streaming business is starting to look a lot like those gin joints.

While Spotify, Pandora and Apple are drawing pretty good crowds, none of them are making money from the music. And they’re starting to live_music_signcast about for other ways to make money. Pandora recently plunked down $450 million to buy live-event ticketing service Ticketfly, presumably hoping for some synergy between those who listen to music on Pandora and those who buy tickets to live shows and concerts. Spotify is trying to leverage its music audience to build a business around non-music content, such as online video.

Apple insists it can eventually make money from music streaming, but with Apple it’s always at least as much about finding new users for its devices, where it makes nearly all of its profits, than about any particular service.

All have invested heavily in data and analytics, initially for internal use but almost certainly with an eye toward turning their data into a product in its own right. Read More »

Apple Makes Music Fans An Offer They Might Refuse

As expected, Apple’s new music strategy is to try to be all things musical to all people. Or almost all people.

The newly christened Apple Music, unveiled Monday at the World Wide Developers Conference, includes a $10 a month streaming service that offers on-demand access to Apple’s 30 million song library, along with cloud storage and playback of your own music collection and the option to let Apple’s experts curate personalized playlists for you. It also includes a free, ad-supported internet radio service featuring featuring celebrity DJs and what Apple is billing as the world’s first 24-hour global radio station, Beats One. It also includes a reboot of Ping, Apple’s failed social media platform, now called Music Connect and featuring artist pages.

Apple_Music_iPhoneYou can also, of course, continue to purchase downloadable tracks and albums from the iTunes Music Store.

About the only thing Apple Music does not have is the sort of free, ad-supported on-demand tier that has helped make Spotify the world’s largest on-demand streaming service.

The lack of a free on-demand tier is partly Apple’s preference: It didn’t spend $3 billion to acquire Beats’ subscription-only music service last year to get into the free streaming business. But no free tier was also part of Apple’s pitch to the record labels, publishers and artists, all of whom have been agitating to get more people paying for music online, notwithstanding consumers’ demonstrably limited appetite thus far for paid streaming: Give us what we need to crush our rivals, Apple suggested, and we’ll do for paid streaming what they couldn’t. Read More »

Apple Covers Its Musical Bases

There are two ways you could look at Apple’s emerging music strategy. It’s either extremely ambitious, or Apple isn’t sure what to do in music so it’s trying everything.

The two need not be mutually exclusive. In fact, no one in the streaming music business seems terribly confident about their own business model right now, even as new players continue to pile into the market.

Apple is widely expected to announce a subscription music streaming service next week at its World Wide Developers Conference, offering unlimited, on-demand iTunes_adaccess to music from the major and leading independent record labels for $10 month. That will pit it Apple directly against Spotify, currently the leading subscription streaming service, with 15 million paying users and about 45 million users of its ad-supported free tier.

Unlike Spotify, Apple’s on-demand service will not include a free tier. But Apple isn’t writing off free music altogether. Far from it. According to the Wall Street Journal, is preparing to relaunch its existing free, ad-supported web radio service, iTunes Radio, adding programmed channels, some of which apparently will be hosted by celebrity DJs such as the rapper Drake, Pharrell Williams and Beats co-founder Dr. Dre, who is now working for Apple. Apple also recently hired away a group of producers and DJs from BBC Radio 1 to help with the programming. Read More »

Music Streaming’s Hidden Fees

Apart from precise dollar figures, there’s little in Sony Music’s original licensing contract with Spotify, uncovered by The Verge, that would surprise anyone familiar with how the major media companies do business with service providers (the full contract, which ran from 2011 to 2013, is here). Most of the money due to the label is payable upfront, in the form of a recoupable advances ($42.5 million over the three year term of the deal in this case), it includes a per-play minimum fee irrespective of Spotify’s own income, and it contains most-favored-nation (MFN) language assuring Sony that none of its competitors gets a better deal — all standard stuff.

Nonetheless, the contract provides a pretty good roadmap to where the money from streaming actually goes (hint: it’s not to artists).

spotify_1200x630_bThe advances payable by Spotify to Sony under the contract were recoupable (using a complex formula based on a fixed percentage of Spotify’s gross revenue, Sony artists’ aggreate share of total streams during the payment period and the minimum per-stream royalty) but non-refundable. If the actual payments due to Sony, as calculated under the formula, were less than the advance Sony kept 100 percent of the advance anyway. Read More »

Streaming music ‘war’ looming between Jay Z’s Tidal and Apple

Music-industry sources say Apple is interfering with Jay Z’s music-streaming service Tidal in an attempt to crush it ahead of the relaunch of Apple’s Beats Music, set for June.

Last week it emerged that Tidal, following its March 30 launch, has fallen out of the iPhone top 700 apps. But positioning in the app charts is driven by downloads, and according to our source, Apple “deliberately took a long time to approve Tidal iOS app updates. Tidal had a new app on Android on April 15, but still hasn’t received approval for Apple’s iOS app store.”

via Streaming music ‘war’ looming between Jay Z’s Tidal and Apple | Page Six.

From Apple Pay to Apple TV, Leveraging a Lack of Knowledge

We are not in the business of collecting your data,” Apple senior VP Eddie Cue declared in announcing the Apple Pay mobile payment system. “When you go to a physical location and use Apple Pay, Apple doesn’t know what you bought, where you bought it, or how much you paid for it.”

apple_pay_ogThe line was clearly meant as a swipe at Google and other competitors in the mobile payments space, who do collect purchase data and use it in ways that can implicate users’ privacy. But Apple’s studied indifference to the details of purchase transactions is also central to Apple strategy in launching Apple Pay. Read More »