Spotify

Spotify: The global music copyright business grew by $1.5bn in 2016 

In the calendar year of 2016, the latest year we can capture across all income sources, the global value of music copyright in worldwide revenue terms was nearly $26bn – representing growth of $1.5bn (+6.1%) on 2015. That’s a much bigger figure than IFPI’s value of recorded-music-only in the same year, at $16bn.

The $1.5bn annual growth is exciting when you consider that, in the prior year, the total annual global copyright revenue figure grew by a significantly smaller amount – $941m.

Source: How the global music copyright business grew by $1.5bn in 2016 (and why that’s amazing news today)

Competing With Paid

This blog post originally appeared on Concurrent Media.

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.

Pandora, the largest free streaming platform after YouTube, felt compelled to roll out a new subscription tier as it tries to woo investors and potential suitors.

To hear many in the music business tell it, the industry would be better off if free streaming went away altogether.

The video streaming business, however, has lately been moving in the opposite direction, at least on certain fronts. While over-the-top subscription streaming services continue to proliferate, streaming platforms continue to invest in free, ad-supported content.

Ad-supported streaming service Tubi TV this week announced a new, $20 million funding round led by Jump Capital, bringing its total funding since in launched in 2014 to $34 million. While Tubi is targeting the same cord-cutting consumers being catered to by the likes of Hulu, Netflix, CBS All Access and HBO Now, founder and CEO Farhad Massoudi thinks there’s a limit to the amount of paid content consumers will support.

“I think the market is delusional if they think consumers are willing to pay and subscribe to all these apps,” Massoudi told the Wall Street Journal. “In the next year or so these apps are going to disappear, or they’ll see there’s no clear path to significant scale.”

Tubi counts Lionsgate, MGM, Paramount and Starz among its 200 content providers, according to the Journal, and boasts a library of 50,000 movie and TV titles — an indication that TV rights owners are still open to distributing content via free platforms.

Little, if any of the content on Tubi TV is in its first release window, of course, and in many cases has been thoroughly monetized already. So the circumstances are not entirely comparable to the music business. But free, ad-supported video streaming is nonetheless attracting a growing amount of direct and indirect investment in new production.

Facebook, which has made ad-supported video streaming central to its growth strategy, is preparing to debut a slate of original series in June, ranging from mobile-friendly 5-10 minute fare up to more traditional, 30-minute episodes suitable for watching on TV.

Word of Facebook’s plans comes as YouTube is developing its own slate of 40 new original series intended primarily for its free, ad-supported platform. In a recent interview with Adweek, YouTube chief business officer Robert Kyncl made clear the primary role that ad-supported content plays in YouTube’s evolving long-form video strategy:

For many years, [marketers] have been asking me, “When you are going to do big original shows?” Of course, in their minds they mean free [programming] with ads. As you know, two years ago, we started a team to focus on originals, and we created YouTube Red with no ads. At the beginning of last year, we started to think about the fact that advertising is our core business. And big brands and big agencies are our biggest partners. This is something they have been asking for for a very long time, and we should deliver on that…

Secondly, when I started to look at the statistics, they showed a share shift from advertising-supported shows to ad-free shows, which started to increase. I just think that’s a trend that’s not favorable to our biggest partners. We are the biggest video platform in the world. We should play a role in changing that.

Even traditional media companies are eyeing investment in original, ad-supported streaming content, as the list of TV networks and studios lining up to create TV-like content for Snapchat attests.

The reasons for the differences in attitudes toward free, ad-supported channels are both historical and structural. Historically, the music industry’s primary ad-supported business — terrestrial broadcasting — was conducted under compulsory license by broadcasters. Rights owners earned only royalties based on use, under a formula set by the government, or, in the case of sound recording owners, nothing at all.

In contrast, advertising was for many decades the exclusive means of monetization for TV content and the industry’s corporate structure was built around that paradigm. Critically, TV rights owners controlled and conducted the majority of the advertising sales, claiming 100 percent of the revenue it generated.

In the streaming era, music rights owners have been able to tie their earnings more directly to the total advertising revenue pie, but they still don’t control ad loads or prices, and their slice of the pie is still calculated in part by the government. Video rights owners, in contrast, have been able to carry over their direct control of ad sales into the streaming era.

So, could the music business ever accommodate itself to ad-supported business models as the video industry has done? Not without major copyright and structural reforms. But the video industry’s experience suggests that paid and free channels are not inherently incompatible.

Too Many Music Blockchains? Don’t Tell OMI

When news broke last month that the ASCAP is partnering with France’s SACEM and the U.K.’s PRS For Music to develop a prototype metadata-matching system utilizing blockchain, many blockchain proponents celebrated the move as validation of their claims for the technology’s future role in the music business. But the announcement also raised the troubling possibility that blockchain-based approaches to solving the industry’s notorious data problems are already fragmenting into distinct and discrete implementations of the technology, which could end up simply recreating the current fractured data landscape on distributed ledgers.

In undertaking their own effort, with no clear indication of how widely any resulting database would be shared with other industry stakeholders, ASCAP, SACEM, and PRS, will be working outside two other major multi-stakeholder blockchain-related data initiatives, to say nothing of the growing number of smaller efforts being bootstrapped by entrepreneurs.

The Open Music Initiative, spearheaded by the Berklee College of Music’s Institute for Creative Entrepreneurship, is seeking to promulgate a series of API specs that will enable interoperability among disparate music datasets. Although OMI does not intend to create its own database of music rights information, on a blockchain or anywhere else, it does anticipate that some of the solutions utilizing its APIs will be blockchain-based. It’s members include a long list of industry stakeholders, including SACEM, but not ASCAP or PRS.

The dotBlockchain Music project, spearheaded by PledgeMusic co-founder Benji Rogers, has partnered with Canadian performing rights organization SOCAN, CD Baby, FUGA, and SongTrust, all of whom apart from FUGA are also participants in OMI, as it attempts to develop a new, blockchain-based music rights ecosystem starting with a metadata standard it calls Minimum Viable Data.

Numerous entrepreneurial efforts to develop a blockchain-based music data and royalty payment system have also sprung up, from Mycelia to Tao Network to token.FM, all based on bespoke implementations of blockchain technology. In perhaps the most unexpected move to date, last week Spotify announced the acquisition of Mediachain, the VC-funded startup that was developing a universal media metadata system utilizing blockchain. While Spotify’s intentions are not entirely clear — Mediachain’s technology will remain open-source but its principals will join Spotify — the deal indicates that interest in blockchain is coming from the demand side of the music rights ledger as well as the supply side.

Despite all that activity, however, OMI co-founder Panos Panay says he’s not worried about the potential for conflicts or fragmentation.

“I think [the ASCAP/SACEM, PRS project] is a good thing,” Panay told Rightstech.com. “I don’t view these things as competitive at all. Innovation is a relay race, and sometimes you have to take the baton from others.”

Panay is also heartened by Spotify’s acquisition of Mediachain, both of which are members of OMI.

“There really hasn’t been a ton of forums to enable this sort of rubbing of elbows between startups and bigger companies,” Panay said. “Part of our objective [with OMI] is to bring these companies together. We’re actively encouraging these sorts of connections.”

In Panay’s view, all the activity can only help attract more investment into the rights-tech space, leading to more innovation.

“This is not an industry that has attracted a lot of interest from VCs, or seen a lot of successful exits,” he said. “The complexity of music rights, historically, has thwarted investment. So I think the more deals there are, the more activity you see around the efforts to solve that complexity, the more investment you can attract .”

He also thinks it’s far too early to be worrying about blockchain fragmentation.

“We’re just at the beginning of this,” he said. “I think [blockchain] technology is about where the commercial internet was in 1989, when it was just getting started, or maybe the very early 90s. The applications and implications of blockchain are huge, but you want to make sure people don’t get too far ahead of themselves.”

To that end, OMI is not likely to mandate the use of blockchain in its first API spec, which it plans to release at the end of the month or in early June, although “we will encourage it,” Panay said. “This technology is still in its very early days.”

 

Spotify Seeks to Fine-Tune Music Rights as It Gears Up for IPO 

As Spotify AB gears up for a potential initial public offering next year, the music-streaming service is missing one key component in its pitch to investors: rights to play the music in years to come, according to people familiar with the matter.

Spotify is now operating on short-term extensions of its old contracts with all three major record companies, having been on a month-to-month basis with at least one of the labels for nearly a year. It is negotiating new deals that would make its finances more attractive to investors.

Source: Spotify Seeks to Fine-Tune Music Rights as It Gears Up for IPO – WSJ

Kobalt rethinks the ‘greatest hits’ album with dynamic David Gray ‘Best Of’ 

David Emery, VP Global Marketing Strategy, Kobalt Label Services, told MBW that the format would give Kobalt and Gray the opportunity to keep the artist’s 850,000-plus monthly listeners on Spotify engaged.

“We didn’t just want to make a static playlist – Kobalt has the technology to create something special that changes and adapts with David Gray as an artist,” he said. “We have noticed that the tracks that are most popular for [David Gray] change over time on Spotify, and a lot of that is driven by playlists.

Source: Kobalt rethinks the ‘greatest hits’ album with dynamic David Gray ‘Best Of’ – Music Business Worldwide

Tech Giants Boast an Edge in Music Streaming 

Because streaming music advances their other ambitions, Apple Music, Amazon, Alphabet’s Google and YouTube units, don’t need their services to be hugely profitable, though none of them are selling subscriptions at prices that suggest a willingness to lose money. That gives the tech companies a major advantage over smaller companies like Pandora Media Inc., Spotify AB and French counterpart Deezer, whose main businesses are music streaming.

“I think that any company that has some other motive [for offering streaming] is going to win,” said Paul Young, a music-business professor at the USC Thornton School of Music. That is at least partly because the music-only companies are burdened by heavy costs. The paid services typically spend 70% of their revenue on licensing music and much of the rest on acquiring customers.

Source: Tech Giants Boast an Edge in Music Streaming – WSJ

What does Spotify’s decision to share user data mean? 

A recent Spotify ad campaign plays on how well the digital music-streaming company knows its users’ tastes. The ads, found plastering New York City subways, showcase Tweets where listeners extoll how a Spotify playlist knows them well – “like former-lover-who-lived-through-a-near-death experience-with-me well.”

But Spotify will no longer just use this intimate knowledge of a user’s musical palate to generate personalized playlists. It’s now using that information as a powerful leveraging tool for advertiser dollars: Spotify announced this week that it is opening up user data collected from its 70 million free subscribers for programmatic, automated advertising.

Source: What does Spotify’s decision to share user data mean? – CSMonitor.com

Apple Proposes Simplified Statutory Licensing Scheme to D.C.

Apple has submitted a preliminary proposal to the U.S. Copyright Royalty Board to simplify the way music-streaming companies pay songwriters and publishers — in a way that could make it more expensive for rivals like Spotify and YouTube to keep offering free streaming.

Right now, streaming companies pay songwriters and publishers between 10.5 percent and 12 percent of their overall revenue, according to a complicated formula. (Labels and other owners of recording copyrights negotiate their own terms.) The money is divided into public performance and mechanical royalties, then paid to collecting societies and publishers.

Source: Apple Proposes Simplified Statutory Licensing Scheme to D.C. | Billboard

Spotify IPO Watch: Brexit’s Bubble Bursting Bang 

Hanging over a Spotify IPO is the $1 billion in convertible debt that the company recently borrowed from Goldman Sachs, Dragoneer Investment Group, and Texas Pacific Group (TPG is also a Pandora lender, coincidentally–if you believe in coincidences).  Let’s assume that loan is in dollars.

If you take into account the loan’s 5% interest rate and the value of the warrant coverage in the deal, Spotify is essentially paying credit card interest on $1 billion (that 5% rate escalates 1% every six months until it reaches 10%, or Spotify registers an IPO).

Source: Spotify IPO Watch: Brexit’s Bubble Bursting Bang – Artist Rights Watch

How Spotify Will Battle Taylor Swift 

When the pop superstar decided to pull her entire catalog from Spotify in 2014, citing issues with how the company compensates artists, it looked like a massive blow for the world’s largest paid music streaming service.

More than a year later, Swift’s music is still nowhere to be seen on Spotify. But the streaming service experienced its biggest growth year ever in 2015, adding 29 million active users. There’s no specific star or revolutionary business plan behind this success: In large part, its growth is thanks to the Echo Nest, a music data start-up that Spotify acquired just months before Swift’s exodus. Echo Nest alums have conceived and shepherded virtually every major product update Spotify has rolled out over the last year, from Discover Weekly to its Running mixes. These features, centered on personalization, are part of Spotify’s big bet that crafting killer, user-friendly playlists will keep its followers loyal.

Source: How Spotify Will Battle Taylor Swift — The Ringer

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