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Posts Tagged ‘Apple Music’

The Ethical Pool Future: Will Fans Cut the Cord to Big Streaming Services if Artists Leave?

November 30, 2018 Comments off

Everybody knows that the boat is leaking
Everybody knows that the captain lied…

From Everybody Knows by Leonard Cohen

I wrote up my take on “user-centric royalties” a few weeks ago in a post titled “Arithmetic on The Internet: The Ethical Pool Solution to Streaming Royalty Allocation.”  The post has been widely read in the artist community and stimulated conversation about the current model of royalty allocation by streaming services that artists like Sharky Laguana have led the debate on.  I argue that the current model results in the hyper-efficient market share distribution of streaming revenues that effectively bypass the independent artists who fans listen to on the subscription streaming services.

Hyper-efficient marketshare distributions can have unintended pernicious effects due to the impact on the per-stream rate.  If you have a big market share, you don’t care much about per-stream rates because you get minimum guarantees and probably non-recoupable “technology fees” that help protect your downside and defray your accounting costs.  (Particularly important to independent labels whose streaming accounting costs may exceed streaming revenue.)  If you are an independent or “niche” artist, the per-stream rate is everything because you won’t be getting advances or technology payments.

Crucially, that hyper-efficient distribution almost guarantees to a mathematical certainty that per-stream rates will decline over time if service revenue fails to increase at a rate that exceeds the increase in the total number of streamed recordings.  The Trichordist has documented that the per-stream rate has declined by 16% over the 2014-16 period–which happened at the same time as we are told that streaming accounts for over 50% of industry-wide recorded music revenues.  If streaming revenue declines on a per-stream basis while expanding to a larger share of over-all recorded music revenues, the negative effects on the per-stream rate will almost inevitably hurt independent artists, as well as genres like instrumental jazz and classical.

As we found in a recent reader poll, many fans–even many MTP readers–are unaware that an overwhelming share of their streaming service subscription revenue is paid for music they didn’t listen to (and performed by artists they don’t care for in some cases).  Assuming that MTP readers may be more aware of these inequities than the average fan, many if not most consumers may be in the dark about where their money actually goes, which may have an effect their buying decisions and a ripple effect through the market.

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There’s little doubt that the status quo is unsustainable even though the transition from high to low-or-no margin goods may be irreversible.  Recently, Canadian artist and producer Danny Michel wrote a must-read op-ed for the current edition of the Vancouver Weekly that highlights the motivation behind the Ethical Pool.  Titled “The Expiration Date on Music”, Danny describes his own experience, which of course is echoed by a chorus of independent artists and songwriters around the world:

I’ve been a full-time musician for 25 years. It’s been nothing but hard work, but I love hard work. My songs bought my home, my studio, paid the bills and more. Through it all, the conversations backstage with other musicians have always been about music, family, guitars, friends, art, etc… But in 2018 that conversation changed. Everywhere I go musicians are quietly talking about one thing: how to survive. And I’ve never worried about it myself UNTIL 2018. What I can tell you is my album sales have held steady for the last decade until dropping by 95% this year due to music streaming services.

And therein lies the rub:  You cannot trade a high margin sale at a wholesale price of $5-$10 for a replacement with a wholesale price of a fraction of a fraction of a penny without an unrealistic corresponding exponential boost in activity.

The math is stacked.

Based on the Trichordist’s Streaming Price Bible, it takes roughly 1,600 streams on Spotify, 950 streams on Apple Music, or over 10,000 on YouTube to replace one physical or digital album that sells at a venue or retailer with $7 of net revenue to the artist.  (This revenue variation across services is one reason the TEA math doesn’t really work.)   Venue sales are incremental revenue–you’re already spending to market the show.  Due to streaming, venue sales have all but evaporated in the last few years at an increasing rate as Danny Michel observes.

The fan at the show is in direct contact with the artist in real time when the fan comes to a show the artist is already promoting.   If the fan leaves the show empty handed, it will probably be difficult to get that fan to remember to stream the new artist when they launch their service player.

Getting fans to stream the record usually requires additional effort if not expense–a key reason why it’s important at the show to get that fan’s email at least or some other way to get in touch with them outside of the music service.  As one astute independent label put it, “if the devil made me choose between selling 25 CDs at a show or getting 25 fans to sign up to an artist’s email list, I’d have to think about it for 5 minutes.”  The email signups are a hope for future revenue to make up a shortfall that will likely never be made up on streaming.

Absent getting that fan’s email, independent artists are largely at the mercy of playlist gatekeepers to the point that many are asking if they really want to continue to participate in the major streaming services.  As long as those services have little interest in allowing subscription rates to increase or pay royalties at a level that allow independent or niche genre artists and songwriters to sustain themselves, there’s less and less reason to participate.  And hyper-efficient market share distributions are already causing some artists to like cutting the cord with big services–the only question is how to get their core fans to follow them.

 

So Much for Conversion: Apple Set to Pass Spotify in Subscribers

February 4, 2018 Comments off

Remember this one?

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Spotify was saving us all from piracy by giving the music for free in its ad supported tier. And if you had any doubts about that, just ask any Spotify employee, particularly circa 2011 or so.  They’d tell you in no uncertain terms that not only did you just not get it, you were failing on a cosmological level not to understand that that person you saw in the distance walking on water was not Jesus.  It was you know who.

Some of us believe that most people have an ambivalent relationship with advertising.  Some tolerate it, and of course you do hear people saying in their best automoton impression how advertising is “useful” which if it’s said just right can send a chill up the spine at the sheer Stepfordness of it all.  Many people, however, loathe advertising, which is why you constantly hear “leave it there” or “don’t move” from some on-air folk before a commercial break.  Some of those advertising loathers are themselves artists, which is why they have restrictions in their contracts about how their music can be used in advertising.

All of which went out the window with Spotify, because Spotify was going to save us all from piracy.  (We’ll leave out the Daniel Ek/U-torrent part today.)

And when Apple launched Apple Music as a subscription only service, Spotify had a meltdown–staring with Daniel Ek himself who Tweeted “Oh ok” which I guess he thought was something of a put down.

But–what about the conversion bit?  Apple is into conversion, too, but a different kind.  As of January 2018, the Apple installed base was over 1.3 billion.  Set aside what’s probably relatively minor overlap (mulitple phones on same billing account), one way or another that’s an existing customer base of over 1 billion people that already have iTunes installed, already have a billing relationship with Apple and are already predisposed to buy an Apple Music subscription.  What you might call economy of scale.

Spotify on the other hand wants you to believe that they can some how take people who have many, many commercial alternatives to theft–all of which they’ve ignored–and get them to use an advertising supported model.  A larger potential market, but people who don’t know you, don’t pay money for music online (yes, I know there’s an argument that they buy other things, which I don’t buy), and for many of them, people who don’t like us much.  Dedicated followers of Lessig in many cases.

So it should be no surprise that Anne Steele in the Wall Street Journal is reporting that if you include users who have subscribed to free or discounted subscriptions, Apple is actually ahead of Spotify in the US:

Apple Music has already passed Spotify. Including people who are still in free or deeply discounted trial periods leading up to paid subscription, Apple Music has a slight edge on Spotify in the U.S., according to one of the people familiar with the figures.

Apple Music has three to four times the number of such trial users as Spotify, according to this person, in part because it doesn’t offer a free tier. Also, all Apple Music subscribers are entered automatically into a free initial three-month period. Excluding those trial users, Spotify is ahead, but by a small amount—and that gap is closing.

And that’s kind of the point–Apple already has the billing relationship with their users so any resources they spend to convert users to subscribers is money well spent with a much higher likelihood of return.

But Anne Steele is one of the only journalists I’ve ever read who even mentions the possiblity that Spotify’s subscriber numbers are…let’s say exaggerated.   As she notes:

One question lingering in the industry is what metrics Spotify will have to disclose once it becomes a publicly traded company. The service has periodically released global subscriber totals and just last month touted a new high of 70 million.

Pop quiz–and be honest now–how many times have you thought that Spotify has 70 million paying subscribers?  Meaning users who are not on their 14th 90 day free trial?  If you look carefully you will see that Spotify itself doesn’t ever say 70 million paid subscribers.  The hoorah Spotify boosters in the press add “paid”.  But when the cold hand of the Sarbanes-Oxley truth in public company reporting law comes into Spotify’s post-IPO life like it does Apple’s, that 70 million number may get clarified–a lot.  And my bet is it will move downward or that there will start to be a greater distinction drawn by Spotify between subscribers and paying subscribers.

And that restatement of subcribers is not the kind of conversion that Spotify wants.

 

How Accurate are Music Subscription Service Subscriber Numbers? — Music Tech Solutions

March 4, 2017 Comments off

All of you who subscribe to the New York Timesfly Quantasuse any of a number of mobile carriers or who are in the 6th month of your third Spotify 90 day free trial may be interested in this post.

According to Billboard in a story titled “Spotify Officially Hits 50 Million Paid Subscribers“, the “official” announcement came from a tweet:

I found this intriguing–how did we go from “Spotify Officially Hits 50 Million Paid Subscribers” in the headline to a tweet that doesn’t really say the same thing?

via How Accurate are Music Subscription Service Subscriber Numbers? — Music Tech Solutions

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