We Were Right, CMA and Billboard Were Wrong On Streaming Cannibalization.


It’s illogical Captain. Why would people buy what they already get for free?   

It’s just math folks.  Nothing personal.  We were right. You were wrong. Even UMG which once broadly supported free ad supported streaming has concluded it doesn’t work.  The top two executives who led their digital initiatives resigned this week.

It’s over.  Let’s move forward.



Wait, you STILL want to argue with us? Dudes. This is getting to be like the “Cheney was behind Sept 11th Attacks,” “the moon landing was faked” or “Obama has a fake birth certificate” arguments.  You are starting to sound like the flat earth  society. 

It defies logic.  In what universe did you think that offering folks access to songs for free (albeit ad supported) wasn’t gonna cut  into sales and revenue?  Basic behavioral economics dudes.

There is an honest argument about streaming out there.   The argument is that streaming revenues (in certain cases)  will more than make up for the lost sales. And I’ll give you that.  With “windowing” and “transactional streaming” I bet there is  emerging evidence that this sort of streaming has been good  for movies and television.   But the honest argument IS NOT “Streaming” increases sales as Billboard and the  Country Music Association research department recently argued.   That’s some flat-earth superstition.  Have some self respect y’all.

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Liar Liar Streams On Fire #5: Pandora is Wildly Profitable, Can Afford to Pay Artists

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“The sleep of reason produces monsters”-Goya

By the end of 2015 Pandora Executives  and Investors will have sucked nearly 1/2 a billion dollars in “stock compensation” out of the company.  Yet Pandora complains very publicly to the US Congress about being unable to cover royalties to performers and Songwriters. Hence the massive lobbying effort in Washington DC and endless lawsuits against performers and songwriters.  Pandora is currently pleading for lower royalties before the Copyright Royalty Board in Washington DC.

Sen Ron Wyden the hand puppet of webcasters and broadcasters (and our vote for Manchurian Candidate) even repeated this crap when he announced the Pandora/broadcaster backed Internet Radio Fairness Act.

“Senator Wyden is introducing the Internet Radio Fairness Act (S.3609) to remove the regulatory shackles preventing Internet radio from being commercially viable” (italics added for emphasis).

But this is not true.  The interactive radio monopoly Pandora is not profitable simply because it doesn’t know how to live within it’s means.  It’s just math folks.  Look at the numbers.

If Pandora would eliminate the outrageous sums it is paying to executives in “stock compensation”  it would actually be profitable.

As The Specialist at Seeking Alpha notes Pandora’s own 2015 guidance demonstrates that it would have a $70-80 million dollar profit in 2015 without the $122 million in executive “stock compensation.”





Tom Silverman Reduces His Music Revenue Forecast 94% From $100 Billion to $5.5 Billion

Tom Silverman is a genius. Or Billboard is run by total idiots.

Maybe both. One does not preclude the other.

A billboard Guest Post By Tommy Silverman from Jan 2013

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2 years later this article in Billboard.  Here Billboard reports with (almost) a straight face that Silverman is now predicting a much more pessimistic 5.5 billion dollar business by 2019.  While the journalist does address the earlier $100 billion prediction you got to wonder why Billboard would devote this sort of fawning coverage to a guy that was off by 94.5 billion dollars! The only explanation is  Tommy Silverman is truly a genius.

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Liar Liar Streams On Fire #4: Percentage of College Students Buying Zero Music Rises Dramatically

We’ve got data.  Lots of data.  We have two different consumption surveys of college students and one of the broader population.  We’ve also got the details of 2014 digital revenues from a moderately sized independent catalogue.

While everyone else wildly speculates we’re gonna show you our data.  All this week.

Is our data definitive? No, but it’s also not pie in the sky projections involving “connected” refrigerators from the VPs of digital “strategy.”   This is what is really happening out there in the real world.

And why did we trust these “digital” record label  executives anyway? Aren’t these the guys with the HUGE salaries and tiny revenue streams?   Let’s see how that worked out this last week.

Drake:  >500,000 in sales = >$4.5 million to rights holders

Drake 27 million streams on Spotify =  $135,000

“Yeah but steams will continue week after week it’s incremental income”

Really?  Let’s do the math on that and check. It’s just math. What are you so afraid of?
So let’s suppose that  Drake sold ZERO albums after this week. In order for streaming income to catch up to sales this would require Drake to get 27 million streams for the next 34 weeks.   But that is only if Drake doesn’t sell anymore albums.  Taylor Swift has sold nearly 8 million albums.  The first week she sold 1.3 million albums.  Drake is gonna sell A LOT  more albums.  Let’s be completely pessimistic and assume he only sells an additional 500,000 this year. This would require Drake to be the TOP streamed artist on Spotify for 68 weeks.  Or 1 year and 3 months.   Unlikely.

“But wait there will be residual streams over the next few years, decades even”

Yes and there will be residual sales over the next few years and decades.  At current rates streaming revenue will never catch up…

But I digress.  Let’s look at todays little nugget of real data:

The percentage of college students in our survey that DO NOT buy digital music has risen from 26.5%  in 2014 to 36.7% in 2015.  This corresponds to reports of drops in sales of digital music elsewhere.  Is this the result of the widespread adoption of streaming?  We don’t know for sure…but 200 years of economics suggest that consumers don’t buy things they already get for free.  It strains credulity to insist that streaming does not cannibalize sales.  For this would require  these 18-24 year olds to suddenly behave differently than all other consumers we have ever known.

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Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.


We ran this back in October. It’s totally relevant again. You want solutions? We got them.

Originally posted on The Trichordist:

It’s not that streaming can’t work. It can. It’s that Spotify is a bad business model that has unsustainable economics and exploits artists because it is a wall street financial instrument and not a music company.

We’ve previously published a couple posts on streaming music where we explore how access models and windowing are working for the film industry and could serve as a guide to the record business. We’ve also shown how transactional music purchases have made legal music consumption the best value in the history of recorded music.

The key to building streaming business models that make sense and are sustainable is to increase the subscription fees, utilize well thought-out windowing models and experiment with new pricing tiers for access based services.

Historically the music business has employed the use of special markets such record clubs  (remember 11 CD’s for one penny). It’s not that record clubs…

View original 710 more words

On The Other Hand #2: Spotify at Least Negotiates, Pandora Refuses to Pay, Sues Songwriters and asks for Government Handouts

Spotify isn’t necessarily the enemy of performers and songwriters.  No I don’t like the rates I am paid (as either performer or songwriter).  My main beef with Spotify (and the deals labels cut) is that I wish I didn’t have to have all my catalog on  the service.   I’d simply like to be able to opt-out.  And if I control enough of my rights I can.  Spotify is a legally licensed service that negotiated deals with large blocks of rights holders.  It may have been bad business for performers and songwriters but it was just that: A business. A legally operating business.

However I’m not sure you can same thing about Pandora.   Pandora has conducted a scorched earth campaign against artists and songwriters.  Refused to pay on pre 1972  recordings despite recent court rulings.  Sued BMI and ASCAP for lower rates. In the ASCAP case there were tens of millions of dollars spent in legal fees to save a few million dollars a year? Pandora spent millions lobbying congress to pass a FEDERAL law that would have mandated artists take up to a 60% pay cut.  Who does that?  What kind of business goes to the US Congress to force it’s suppliers to take less? Also in what appears to be some sort of bizarre publicity stunt,they claimed to have bought a radio station in South Dakota (it’s still not clear they have all the assets that would allow them to really claim this).   The idea here may have been that they would pay  lower royalties as a terrestrial and web broadcaster? Each of these “events” was loudly proclaimed as “good news” for Pandora and it’s stock price in the financial press.    Why?   I don’t really know but maybe it has something to do with this:

By the end of 2015 executives and investors will have sucked nearly 1/2 billion dollars in “stock compensation”  out of the company. A company that has yet to make a dime in profit. 

Pandora does not seem like an actual “business” to me.  You readers are smart enough to draw your own conclusions.

While I’m not a huge fan of Spotify they have negotiated and despite the hardball stance on free tier of streaming have generally played by the rules.  Yes there may be a sort of Cold War between artists and Spotify, but there are rules.

So lets run with that analogy.   If Spotify is like the old Soviet Union what do we make of the DeadEnders over at Pandora?  Pandora has just about destroyed the music licensing system through their scorched earth policies.  The Copyright Office came as close as they could to pointing the finger at Pandora in their recommendations for music licensing reform. One could argue that  the last three years of Pandora rate court shenanigans is the very reason that the Copyright Office decided to study the music licensing process in the first place!

So if Pandora doesn’t care if they destroy the federal licensing process on which they and every  TV, radio station, restaurant and venue in the country depends what are they?   They are not a business.

In our analogy Pandora is more like ISIS?




Liar Liar Streams on Fire #3: Spotify Is Paying LESS per Stream as it Scales

We’ve got data.  Lots of data.  We have two different consumption surveys of college students and one of the broader population.  We’ve also got the details of 2014 digital revenues from a moderately sized independent catalogue.

While everyone else wildly speculates we’re gonna show you our data.  All this week.

This is not pie in the sky projections involving “connected refrigerators” from the VPs of digital “strategy” at your record label or distributor.   This is what is really happening.  And can we really trust these digital executives anyway?  They have been proven objectively and demonstrably wrong.  We suspect they are now  just making shit up to try to cover their asses,  (or looking for jobs at the streaming services.)

See: Who will be the first executive to lose their job over the streaming fiasco?

But I digress, here’s todays installment:

The Cynical Musician has demonstrated a flat rate streaming model of the music business essentially creates a cap on the size of the recorded music business.   The corollary to this is that as streaming services “scale” the rates will go down per spin. Our data shows that this is indeed the case.  Streaming rates per spin are falling.  This is contrary to what pro-streaming music business executives and the digital services have claimed.  Details here.


Liar Liar Streams on Fire #2: Ad Supported Spotify pays .0009 in US per Spin.

We’ve got data.  Lots of data.  We have two different consumption surveys of college students and one of the broader population.  We’ve also got the details of 2014 digital revenues from a moderately sized independent catalogue.

We’re gonna show you our data all this week.

This is not pie in the sky projections from the VPs of “digital” at your record label or distributor.   This is what is really happening.  You know you can’t trust these digital executives, right? They are objectively and demonstrably wrong.  We suspect they are now  just making shit up to try to cover their asses (or looking for jobs at the streaming services.)  Who will be the first executive to lose their job over the streaming fiasco?

Here’s todays installment:

According to our detailed examination of a moderately sized labels digital revenue, it appears that free Spotify pays less than a tenth of a penny per stream.  $0.000966 to be exact.  This is all revenue to rights holders!  The paid service pays 7.5 times as much (But as we detailed yesterday a survey of college students shows revenue from paid subscriptions appears to be falling).

See our detailed post about this from November. 





Why Did Rob Wells UMG Chief Digital Exec Resign?

We saw the surprise announcement that Rob Wells chief of digital has stepped down from UMG.

We have no idea why he would have resigned. It seems to be a great mystery.
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Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?


Let The Heads Roll…More Genius From The Record Industry Braintrust or Mark Mulligan Gets a Calculator…


Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

The Fix Is In: Did @Billboard Change the Way Charts Calculated to Help Streaming Services Avoid Artist Boycotts?

December of last year Billboard changed the way it calculates it’s album charts.   The publication once hailed as “The Bible of the Music Business” last year announced that it would count 1500 streams as the equivalent of an album sale.  While I welcome the addition of a streaming component to the charts,  I believe that Billboard may be overweighting free streams in order to help streaming services keep artists on the free tiers of streaming services.  Let me explain.

The 1500 streams were supposedly based on the approximate rate that streaming services pay per spin. At $0.005 a spin to rights holders the $7.50 generated by 1500 spins is close to the $7.00- 9.00 rights holders net on an iTunes album sale. Ed Christman detailed and previewed these changes last fall in Billboard before they were formally implemented. This was clearly part of the logic of the change.

But since that time we have discovered that Spotify free tier does not pay anything close to that.   Our examination of the revenue generated by a moderately sized indie catalogue shows that in the US Spotify free tier generates $0.0009 per spin.   So 1500 plays on the Spotify free service really only generates $1.35.  YouTube generates a similarly low amount per 1500 spins.  By our calculation YouTube pays $0.00175 to all rights holders per spin (including video!).  That’s $2.63 for 1500 spins.   So on Spotify free platform the revenue equivalent of an album sale would require more like 8000 streams and on YouTube more like 4300 streams.

Objectively we can conclude that in terms of revenue both YouTube streams and Spotify free plays are vastly overweighted compared to sales.



Now let’s put this in context.  What happened at the end of October/ beginning of November?  Taylor Swift released an album that she tried to place only on the paid or premium tiers of the streaming services.  Or in other words she tried to withhold her full album from the free tier of the  streaming services.  Both YouTube and Spotify refused to do this.  As a result Swift’s new album did not appear on these two streaming services at all. Largely unreported was the fact that Swift wasn’t making an anti-streaming statement, indeed she left key parts of her catalogue on the premium Rdio service.

Wait! This isn’t the way the mainstream press and Billboard first reported it?  That’s right. Ever wonder why? In the case of the mainstream press they may have innocently missed this subtlety.  But Billboard?  The Bible of the Music Business? You got to wonder.

This wouldn’t be the first time that Billboard has seemingly engaged in very Hearst like reportage to prop up a streaming service in trouble.   When we broke the story that Pandora founder Tim Westergren had repeatedly contributed funds to a congressman that tried to have Washington DC’s gay marriages voided,  Billboard quickly stepped in with this piece by Andrew Flanagan to defend Westergren.  Flanagan seemed to find some sort of “balance” in Westergren’s donations that canceled out those donations to a gay baiting congressman.  Interesting. An unusual  argument for a NYC based, sometimes NPR reporter to make. I wonder if he’s ever tried this argument out on his gay neighbors?

But I digress.  The point is this: Treating Billboard as an unbiased observer in the music industry battle over streaming is becoming a sketchy proposition. It has clearly become a partisan player in the battle over streaming.    And you have to wonder if the curiously timed changes to the Billboard charts are not part of this battle.  Because now if an artist wishes to “chart” they will have to think twice about removing their songs from YouTube or Spotify.

How convenient for the streaming services!


New Math $.00666 : Billboard’s New “Consumption” Chart, Free Streams and the End Of Meaningful Metrics?