Has music missed its ‘Netflix moment’? | Music Business Worldwide

Subscription streaming movie service Netflix announced earlier this week that it has reached 62m users around the world – almost exactly the same number as Spotify.

Big difference is, four times as many of Netflix’s customers pay a subscription each month: 60m of them, or 97% of its total consumer base.

READ THE FULL STORY AT MUSIC BUSINESS WORLDWIDE:
http://www.musicbusinessworldwide.com/has-music-missed-its-netflix-moment/

 


 

Why Spotify is not Netflix (But Maybe It Should Be)

 

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

 

BUT SPOTIFY IS PAYING 70% OF GROSS TO ARTISTS, ISN’T THAT FAIR? NO, AND HERE’S WHY…

Spotify is the Problem, Not Labels. (Well, Mostly…)

There is a narrative that keeps getting repeated by Spotify apologists and propagandists. It goes something like this, “The problem is not that Spotify pays too little to artists it’s that record labels are not paying the artists their fair share of royalties from Spotify.” Ha! When the gross payable is half a cent or less we think this has a lot more to do with Spotify than labels.

But this idea that labels are the problem pretty much means that Spotify ignores or otherwise feels that any artist not signed to a major label is unimportant in this conversation and that’s too bad.

We don’t know how many artists and small DIY indie labels aggregate to Spotify via Tunecore and CDBaby for example but we suspect it’s literally THOUSANDS of artists that are not signed to major labels (or ANY label). These are artists who are collecting either 100% of their Spotify royalties directly (Tunecore) or collecting those royalties after a 9% dist fee (CDBaby).

When Spotify shifts the blame for low royalties they are ignoring and invalidating all of the artists not signed to major labels, or any label. There are no industry middlemen taking Zoe Keating’s royalties from Spotify. The per stream rate is just incredibly, horribly bad. 

There are high profile artists such as Zoe Keating and others who echo the sentiments of artists across all strata’s of the business. The economics of Spotify are just unsustainable from the top down at present rates.

Everyone knows that record labels advance massive amounts of money to develop the careers of those artists signed. These advances are recouped from monies earned in royalties. One can argue about the recoupment mechanics but it doesn’t change the fact that with so little money being generated by Spotify the problem is much greater then the labels.

It’s also interesting that in all the talk of democratization and empowering musicians how little of it appears to be actually happening.

99.9% of Tunecore Artists Make Less Than Minimum Wage…

If the Internet is working for Musicians, Why aren’t more Musicians Working Professionally?

We’ve detailed numerous times how at the top end of the food chain, the Spotify math just doesn’t work and would require more subscribers paying $9.99 a month then any other mature premium subscriber business has achieved to date.

Here’s some context for the chart above. Netflix only has 36m subscribers in the US, no free tier, and massive limitations on available titles of both catalog and new releases. Sirius XM, 26.3m in the US as a non-interactive curated service installed in homes, cars and accessible online. Premium Cable has 56m subscribers in the US paying much more than $10 a month and also with many limitations. Spotify… 3m paid subscribers in the US after four years. Tell us again about this strategy of “waiting for scale.” Three Million Paid… Three…

* 3m Spotify Subs Screen Shot
* 26.3m Sirius XM Subs Screen Shot
* 36m Netflix Subs Screen Shot
* 56m Premium Cable Subs Screen Shot
* $7b Music Business Screen Shot

And, just so everyone is clear, we’re not giving the labels a free pass either. But Spotify’s divisive punt to blame the labels for their own bad business model isn’t fair. We’ve reported on the 18% equity stake the labels took as part of their licensing agreements. That’s an 18% equity stake that we’re pretty sure the artists won’t participate in at the time of an IPO or sale (should there be one).

The larger issue in this conversation however is that if Spotify and on demand streaming services can not generate the same or more revenue then transactional sales, then the model is a net negative for artists.  This has nothing to do with labels and everything to do with a flawed business model. Removing the free Ad-Supported tier after a limited time is probably the first, best and most obvious immediate solution but not the only one that should be addressed.

Spotify can not hide behind their bad math by shifting blame to labels when so many artists are getting their royalties from Spotify directly without labels.

 


 

Spotify Must “Adapt Or Die” : Pricing For Sustainability

 

Five Important Questions For Spotify from Artists and Managers

 

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

 

Spotify Desperately Doubles Down on Dumb Bad Math… Free Doesn’t Pay, It’s Just Math.

Bring out your shills… It’s no surprise that Spotify has once again enlisted it’s shills and PR machinery to defend it’s exploitation of artists, bad business model, and horrible royalties. The latest offensive comes as the major labels have announced that the unlimited free tier is not working for them (go figure, free doesn’t pay?).

Last year we wondered out loud, Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization? In February of this year we found out when Rob Wells exited his post at UMG. Around the same time public comments were made by Lucian Grainge for the need to get more paid subscription revenue. He also noted that the free tiers are not creating the type of performance required for a sustainable ecosystem of recorded music sales. Sony music chief Doug Morris has also come to the party stating, “In general, free is death.

Generally speaking we’re not often fans of major labels (remember they have 18% equity in Spotify) but we’re glad they’ve gotten out the calculators. Right now, the three major labels are currently reviewing their licenses with Spotify which are up for renewal this year. This is the time for the major labels to renegotiate those licenses to be more fair for artists.

We’ve detailed the math here, Music Streaming Math Can It All Add Up? In that post we look at the numbers based only upon paying subscribers. The bottom line is that even at the current rate of $9.99 (per month, per subscriber) it’s going to take a lot more paying subscribers to even get close to the type of revenue earned from transactional sales. Free, ad supported revenue, not even close.

Here’s a couple more things to keep in mind that we’ve detailed:

* Spotify Per Stream Rates Drop as Service Adds More Users…

– and –

* USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue

But perhaps the worst part of Spotify was outlined by Sharky Laguna’s editorial, “The Real Reason Why The Spotify Model Is Broken.” The well written piece details how the artist you play, may not be the artist who get’s paid due to the fixed revenue pool and market share distribution of revenues.

Now keep in mind we’re not anti-streaming. We completely believe that streaming is the future of music distribution and delivery. None of our arguments here are anti-streaming or anti-technology.

Our arguments are anti-exploitation and anti-bad business models. Technology and economics are different issues. We detailed our thoughts for moving forward with potential solutions in our post Streaming Is The Future, Spotify Is Not, Let’s Talk Solutions. We look at five practices that can make streaming music economics viable for all stakeholders and generate the revenue required for a sustainable ecosystem.

When a Spotify rep says, “We think the model works” keep this in mind as we review the Spotify Time Machine…

* 2010 A Brief History Of Spotify, “How Much Do Artists Make?” @SXSW #SXSW

Back in 2010 during Daniel Ek’s Keynote Speech an audience member who identified themselves as an independent musician asked how much activity it would take on Spotify to earn just one US Dollar. The 27 year old wunderkind and CEO of the company was stumped for an answer… Five years later we have a pretty good idea why.

– and –

* 2012 A Brief History Of Spotify, “It Increases Itunes Sales”… @SXSW #SXSW

Ek strenuously denied that his streaming service cannibalises sales of music through services such as Apple’s iTunes.

“There’s not a shred of data to suggest that. In fact, all the information available points to streaming services helping to drive sales,” he said.

Of course, that was until this past year when Itunes sales are reported to have declined by 13-14% and that is pretty much directly attributed to the cannibalization done by Spotify. Hello…

It is said that one of the definitions of insanity is to keep doing the same thing while expecting different results. Our suggestion to the those in positions of power is simply this, if  you want something different, you have to be willing to do something different.

Sure, Spotify was a grand experiment but after half a decade we now have the data to know if that experiment is working out (or not). In the end, it’s just math and free doesn’t pay…

 


 

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

 

Spotify Per Stream Rates Drop as Service Adds More Users…

 

USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue

Dead Kennedys’ East Bay Ray: The ‘Free Internet’ Will Not Set You Free | NY Observer

These Internet theorists also invariably fail to distinguish between the profound moral difference between sharing something with a friend and distributing, without permission, other people’s files for profit. It’s a crucial distinction.

One of the reasons that this distinction is not brought up is because the Internet corporations don’t want you to see much discussion about the enormous riches being made on the Internet from both the consensual and nonconsensual selling of your information to advertisers, as if it didn’t matter. The advertising system has money and money is power. Ask yourself: Are you gaining real power over your destiny from the Internet, or just stuff?


If Streaming is the “Solution” to Piracy, What Happens When Piracy is Streaming? Rot Oh… #sxsw

A big talking point of streaming, particularly of the Spotify variety has been that streaming is a solution to piracy, and that “access over ownership” models are the future.

Well… ok… but that assumes that piracy (of the corporately sanctioned, ad funded variety) remains a download business, while consumers migrate to the easier more accessible (free tiered, ad funded) music streaming models.

We’re told that the ad-supported free tier is the only way to attract consumers from piracy to legality. To be clear we’re not opposed to free trial periods. Free trials of 30 days, maybe even 60 days should give the consumer the ability to fully experience the value a streaming service offers. We just don’t see how the economics of ad-supported free streaming can create a sustainable revenue model for musicians and songwriters.

But here’s the bigger question. What happens when the pirates migrate to streaming over storing? Now we’re back to square one. A decade ago iTunes and later Amazon provided an legal solution to piracy that was superior in every way except one, price.

Why would anyone think that streaming would combat piracy any better than transactional downloads? Well, for the same reason piracy is, was and remains the primary source of music consumption, price. So the conversation and controversy over streaming is not one about the method of distribution, or technology. The conversation is the same as it has been for a over a decade, price.

Essentially Spotify appears to be designed to model ad-funded piracy whereby the company who can capture the largest market share would have ability to legally devalue music by delivering it to consumers for free. This math just doesn’t work. We can’t even see where the math on paid subscriptions will ever get to scale or revenue at a price point of $9.99 a month per subscriber.

So the inevitable question becomes if streaming is the solution to piracy, what happens when piracy is streaming? There are already multiple applications that are available or in development that reportedly enable users to stream music directly from BitTorrent as opposed to the need to download files to a local hard drive.

So explain to us again exactly how streaming is a solution to essentially the same service? Oh, they both need to compete on the same price point, which is free. Well, guess what, ad-supported free distribution of music is not sustainable.

YouTube is the largest free ad-supported free streaming distribution platform and it can not create the type of revenue required for the sustainability of the recorded music business. If we believe what they say, YouTube isn’t even a profitable business for Google!

So here’s the bottom line. Spotify, YouTube, Pandora and other ad-supported free streaming services are a side show to take the conversation away from the core problem, piracy. Internet piracy is big business and these side shows distract the conversation away from the fundamental truth of our economic reality… Free doesn’t pay. It’s just common sense and it’s just math…

 

Spotify Doesn’t Kill Music Sales like Smoking Doesn’t Cause Cancer…

 

BUT SPOTIFY IS PAYING 70% OF GROSS TO ARTISTS, ISN’T THAT FAIR? NO, AND HERE’S WHY…

 

Apple Announces Itunes One Dollar Albums and Ten Cent Song Downloads | Sillycon Daily News

 

 

 

 

 

 

 

 

Nashville’s Musical Middle Class Collapses | Tennessean

This says it all…

Since 2000, the number of full-time songwriters in Nashville has fallen by 80 percent, according to the Nashville Songwriters Association International. Album sales plummeted below 4 million in weekly sales in August, which marked a new low point since the industry began tracking data in 1991. Streaming services are increasing in popularity but have been unable to end the spiral.

READ THE FULL STORY AT THE TENNESSEAN:
http://www.tennessean.com/story/entertainment/music/2015/01/04/nashville-musical-middle-class-collapses-new-dylans/21236245/

Grooveshark “Offline by Christmas”… | Digital Music News

Infringement should not be a business model.

On September 29th, the United States District Court in Manhattan found Grooveshark guilty of massive copyright infringement, and specifically named CEO Sam Tarantino and CTO Josh Greenberg as bad actors. Now, the curtains are starting to drop: just days after that decision was rendered, federal judge Thomas Griesa issued another decision that removed all doubt that the plaintiffs — a total of 9 recording labels — had triumphed in the case.

READ THE FULL POST AT DIGITAL MUSIC NEWS:
http://www.digitalmusicnews.com/permalink/2014/11/21/grooveshark-offline-christmas

How to Fix Music Streaming in One Word, “Windows”… two more “Pay Gates”…

We’ve written about this before in two posts, Why Spotify is not Netflix (But Maybe It Should Be) and Streaming Is the Future, Spotify Is Not. Let’s talk Solutions. In Both posts we talk at length about how the problem is not technology or streaming itself, but rather the very restricted business models and poor economics that currently exist. No amount of selective double speak from Daniel Ek will change the bad math that Spotify can not scale at current rates.

Jason Aldean now joins Taylor Swift in removing his music from Spotify which leads us to wonder how many more artists with the ability to do so will remove their new releases and/or catalogs as well. This may also be a good time to revisit those two previous posts mentioned above.

So here is the question, is the record business really utilizing the new digital platforms correctly to address the current market place? Perhaps by looking at the options available to consumers from movie streaming, rental and download businesses we can find more robust and flexible opportunities for artists.

At the very least windowing releases allows artists, their managers and even labels the ability to manage and maximize current revenue streams more effectively. Windowing opens up strategic decisions about tier based pricing relative to the value proposition for both the artist and the consumer. Windowing may not fix all of the problems artists are facing in music streaming but it will be a great first step towards recognizing that the artists should have some direct participation in deciding how their work is consumed.

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.

Pay Gates may be another solution (which is essentially a window). For example, Spotify premium paid subscribers could access the new Taylor Swift record, but not those using the free version of the service. This also allows artists to determine which songs can be accessed for free for greater promotional value, and which songs are intended to maximize revenue.

Why does Spotify unilaterally get to dictate to artists, managers and labels how to best maximize their relationships and revenues with their own fans?

As Spotify is a destination platform, and not a discovery platform we could see where the current hit singles are only available to paid subscribers while select album tracks could be accessible for free. The tracks on the free tier are monetized only by advertising revenue which pays very little, but there may be a promotional benefit to build awareness on lesser know songs.

Even the old school record business had tier based pricing. There were front-line, mid-line and budget pricing tiers. Front-line titles were often deeply discounted for premium in-store positioning. Mid-line titles were discounted as an incentive to stimulate more sales from recent catalog titles. Budget titles were mostly oldies and very deep back catalog. Primitive as they were, these were windows.

Yes, we know the choir of “or else they’ll steal it” from piracy apologists will claim that anything less the complete devaluation of music as fodder for advertising revenue is pointless. We’ll take our chances with Jason Aldean, Taylor Swift, Adele, Coldplay, Beyonce’, The Black Keys, Thom Yorke and the growing number of artists that are either removing their catalogs from Spotify, or windowing them.

Bring on the windows and pay gates! Let’s see some “innovation” and “disruption” that actually works for artists and not just the new boss. The outcry (from Spotify) of artists removing their songs also proves another very important point – all music is not equal. If some weekend hobbyist does not put their music on Spotify or pulls it off Spotify it doesn’t make headlines. Taylor Swift, Adele, Beyonce, The Black Keys, Thom Yorke, etc – all make headlines because people  actually do VALUE professional music. Professional music, has a professional price.

If Spotify is such a good business for artists, why not let each artist decide if Spotify works for them? Why does Spotify publicly shame artists to convince them how good they are? The lady doth protests too much, wethinks…

It’s funny how long it’s taken the record industry to realize that if you keep allowing something to be given away for free there is no incentive to pay. Who knew?

calculator

 

 

 

 

 

 

 

 

RELATED:

Why Spotify is not Netflix (But Maybe It Should Be)

 

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

 

Spotify’s Daniel Ek is Really Bad At Simple Math, “Artists Will Make a Decent Living Off Streaming In Just a Few Years”

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

Happy Halloween and welcome to the scary stupid post of the day…

We’ve been saying this for a long time, music streaming math just doesn’t add up. Would someone please buy some calculators for the record industry braintrust that keeps making these stupid deals? Seriously, it’s just math and it’s not that hard… even Mark Mulligan is getting it… no kidding…

$2.3 Billion In Net Loss To Artists and Labels Per Year

The report extrapolates that YouTube Music Key will generate $400 million in revenues in its first year. But over the long run it will also be responsible for more than $2.6 billion in lost subscription revenue yearly. That’s a negative net impact of $2.3 billion in lost music revenue every year, according to the study.

Ok, that’s YouTube. Let’s revisit how the Spotify math works…

If you own a calculator, let’s just do the math one more time, real slow and simple like…

1) Spotify and former uTorrent CEO Daniel Ek says Spotify only needs 40m paid subscribers for streaming to be sustainable for artists. But that math just doesn’t work.

2) $10 per month subscription = $120 per year per subscriber

3) $120 per year, per subscriber paying out 70% of gross to rights holders equals $84 per subscriber, per year.

4) $84 per subscriber, per year x’s 40 million subscribers equals $3.4b per year in top line gross revenue to ALL rights holders. That’s $3.4b for labels, artists, publishers and songwriters combined.

5) $3.4b per year is HALF of the current revenue of $7b per year where the domestic business has been flat lined.

6) Assuming you could DOUBLE the subscription base to 80m PAID in the USA within two years by dropping the price in HALF to $5 per subscriber per month you still only gross (wait for it…) $3.4b a year in revenue.

We know this is shocking to the math impaired, but doubling scale (imagined as it is) while cutting the subscription fees in half, actually nets you the same amount of money. Shocking the things one can learn with a calculator or a spreadsheet.

Maybe we’re all screwed, but we will not go quietly and we’re gonna call it how we see it on the race to the bottom. We will document the stupidity undoing the business. Maybe it’s time for Lucian Grange to get out that axe again and let people know what time it is? #stopthemadness

READ THE FULL POST AT HYPEBOT:
http://www.hypebot.com/hypebot/2014/10/youtube-music-service-could-cost-artists-labels-23-billion-in-lost-income.html

RELATED:

Music Streaming Math, Can It All Add Up?

Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?

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

When Iggy Pop can’t live off his art, what chance do the rest have? | The Globe and Mail

But a new reality has tripped him up and it’s the same one shafting artists all across the world: Namely, that everyone wants to listen, and no one wants to pay. This week, Iggy gave a lecture for the British Broadcasting Corp. called Free Music in a Capitalist Society. Artists have always been ripped off by corporations, he said; now the public is in on the free ride, too: “The cat is out of the bag and the new electronic devices, which estrange people from their morals, also make it easier to steal music than to pay for it.”

To keep skinny body and maverick soul together, Iggy’s become a DJ, a car-insurance pitchman and a fashion model. If he had to live off royalties, he said, he’d have to “tend bars between sets.” As I listened to his enthusiastic stoner Midwestern drawl, I thought: If Iggy Pop can’t make it, what message does that send to all the baby Iggys out there? In a society where worth is judged by price, for better or worse, what are you saying to someone when you won’t pay for the thing he’s crafted?

READ THE FULL STORY AT:
http://www.theglobeandmail.com/globe-debate/when-iggy-pop-cant-live-off-his-art-what-chance-do-the-rest-have/article21154663/