Music Business

Spotify is Not Going to Save Music

May 30, 2016

Get over it, streaming is not the savior…yet

 This may be hard for some of you to read. I’m sorry.

Spotify continues to tip their hand at their true intentions, and it is as I — and some others — have long suspected, not to save music. Hell, it may not even be involved with music at some point.

Maybe at some point Spotify was in the business of saving the music business.

But know this, that is no longer the mission.

Here’s today’s headline:

TechCrunch Mar. 20th 2016: “Spotify raises $1 billion in debt with devilish terms to fight Apple Music”

Spotify isn’t raising a billion dollars in MORE debt to fight a competitor (a weak one, at that). The company has never turned a profit (neither has any on-demand streamer), and as many of us in the industry know, the streaming model is an ironic one that results in wider losses as revenue increases.

So what are they trying to accomplish?

We know an impending IPO is rumored, and really that’s what all these tech companies want, money. Lots of it. The investors need an “exit.” We need more billion dollar unicorn darlings!!! However, IPOs are extremely tough as of late, and the music sector is particular hard.

Witness, Pandora. A stock that has fallen from $21.98 a share to just $9.50 a share in 5 months.

                                               I’m no economist, but that doesn’t seem good.

Maybe they are bolstering their war chest to acquire Pandora (just changed CEOs to Tim Westergren this week), or maybe SoundCloud (which was taken to task for their premium subscription announcement).

Pandora is a different category of streamer (non-interactive — more akin to radio) and SoundCloud’s tech is laughable compared to Spotify; add to that, both companies are kind of a mess right now. So, while possible, neither seem likely.

Which leaves us with… the pivot to video. Video! It’s all the rage. And why not? After all, video is where the ad dollars and eyeballs are.

Online video now accounts for 50 percent of all mobile traffic and up to 69 percent of traffic on certain networks. (Bytemobile Mobile Analytics Report)

And let’s not forget, Spotify is an app, and a mobile first company.

92 percent of mobile video viewers share videos with others. (Invodo)

I also trust the judgement of Peter Kafka — one of the smartest people reporting on tech and music — when it comes to these things (especially when we agree).

He thinks it’s about video too, and makes the excellent argument for why on re/code.

So, it’s video.

The change actually happened a year ago, on May 20, 2015. Spotify finally transitioned away from being “just” a music streamer at a splashy keynote type of event. It started with the launch of features for runners, utilizing a tempo algorithm and your playlist, plus custom DJ tracks. Hmm. Additionally, Spotify would now be serving you audio content (podcasts, radio snippets). Ok, podcasts and rebroadcasts of public radio. Got ya.

Oh, one more thing…

“…new types of content, including non-music content to deepen our users’ engagement with Spotify.” — Daniel Ek

Spotify would now be carrying video (mostly shorts) from over 40 different partners, such as Tuner, Viacom, BBC, Conde Nast, and more!

Does that sound like the world’s leader in music to you?

Is that benefitting music rights holders (other than the labels who have partial platform ownership)?

Spotify would have you believe the change is going to make people listen to more music by offering them other things to watch and listen to…other than the music. Huh?

I can’t blame them, really I cannot. Video is valuable. People care about (and share) video. Video can carry multiple ad units: before, within, around, and after. Audio can’t really compete with that kind of format. So, the game is video. The game has been video for a while. Hello! Remember YouTube? How about Facebook’s obsession as of late with auto-play in-feed native video, video calling, and the latest push of live video. The list goes on, Instagram, and of course, Snapchat, and so on.

Video is the thing.

And here’s the thing about that. Why would Spotify even mess with music if video works? More presciently, why would the investors or soon-to-be shareholders allow them to piss their money away on a hook of audio track playback, when video has very little of the licensing complications that music does, little to no lawsuits, far less artists bitching publicly, there’s no issue with exclusive windowing, AND it can be monetized a bazillion ways?

I’m betting they probably won’t. People who loan money or invest, usually get itchy when it comes to getting it back

                               Exclusive from inside the shareholders meeting

We have to start talking about this streaming war madness honestly. I fear that the narrative around music streaming (interactive, on-demand specifically) is purposefully misleading in its attempt to tout minor successes as global wins, and prop up IPOs and quarterly earnings.

As of today, I think streaming is a failure.

You read that correctly, a failure. It may be growing, it might eventually take hold, but a “trend does not a result make.”

I’m not writing here to convince you of that, necessarily. But, I do want you pump the brakes, at least consider that it is not as big of a success as what you are being sold. I want you to consider the possibility that we are being taken for a ride by people and institutions who have much to gain by you abandoning digital downloads and physical music purchases. I want you to entertain the idea that when platforms have to pay labels upfront and give up some ownership, it is in those labels’ best interest to have chaos, and multiple companies vying for success, resulting in no clear winner.

Most people I talk to about this subject — even music industry people — honestly and truly think that MOST people use Spotify (because they do so). They honestly feel that tons of people are using Tidal or Apple Music, maybe Deezer or one of the other marginal ones, and will jump onboard with the new SoundCloud Go at $12.99. ←Highlarious!

These people treat you like a fool if you wouldn’t want to pay a small fee for so much convenient music.

One thing everyones knows, unequivocally, for sure, without a doubt, is NOBODY BUYS MUSIC ANYMORE.

                                                               I wouldn’t buy music from that guy either.

You‘ve read that Spotify is saving the music industry by reducing piracy.

You’ve been told that music “streaming has already won” by Lefsetz.

You see that streaming has overtaken downloads (in terms of revenue), and

Download the full R.IA.A. report here

Look at the breathless proclamations of big numbers to bolster the case –

Apple Music Now Has Over 11 Million Subscribers

And then this…

Tidal says they have 3 million paid subscribers.

What about Deezer? Sure, they’re “cracking the U.S. streaming market” as we speak.

Well, this all just sounds great. We’re saved. Whew! That was a close one. I mean, NO ONE IS BUYING MUSIC ANYMORE because they all love streaming so much!

But… hold on a tick. All of that cheerleading doesn’t really jibe with the data I’m looking at. What gives? Is this the best marketing ploy of all time to just say, “Streaming is the future and everyone agrees,” and hope that everyone just parrots it?

Fuck that. Let’s unpack these numbers a little and clear the air.

While digital download sales are declining slightly, I will let you punch me in the mouth if you can find another industry where $2.32 BILLION in revenue is dismissed as (NO ONE IS BUYING).

 

Don’t worry, I’m not going to bore you with another “The Resurgence of Vinyl” story here (12 million units in 2015). But, even CDs (those shiny plastic things) are not “dead.”

How many of those arcane, old-school discs would you guess were sold in 2015 in this ‘NO ONE BUYS MUSIC ANYMORE’ society?

10 million? 20 million? 50 million? Surely not 100 million? “Are there even that many people with a CD player?”

How about 126 million. Ding! Correct. Now, of course that is a far cry from where they used to be, and the numbers are undeniably trending downward. But that is not NOTHING! It’s far from nothing. But that’s not what you’ve heard, right?

So, people are buying music, to the tune of billions of dollars.

What about those Spotify subscription numbers?

This July will mark 5 years since Spotify’s U.S. launch. They have grown from roughly 1.5 million paying subscribers to 30 million. That sounds real impressive, until you dig a little deeper and realize that only about 20–25% (6m or so) of those paid subscribers are in the U.S. Does it surprise you that perhaps only 6 million people pay for Spotify in a country of 250 million adults, almost all of which are target customers? I bet that LA, SF, and NYC make up most of that number, and the other 2 million are spread amongst the Top 20 cities. Now it starts to look a bit paltry.

What about Apple Music’s 11 million paid subs, that should be impressive?

Really? Apple sells 50-75 million iPhones every quarter with Apple Music onthem.

Did you know that there over 1 billion active Apple devices in use and 782 million iCloud users?

So, you’re telling me that out of, for the sake of argument – 700 million users, with active credit cards for a subscriptions, who are tech-savvy, traditionally more economically well-off, and tastemakers who love all forms of media (especially music), that only a pittance of 11 million are paying for basically all the music in the world in their pocket. Only 11 million? Again, keep in mind, mostly only 20–25% of those are in the U.S., now it’s only 2–3 million!

That’s a failure. It just is. It’s not a revolution. It’s perhaps a slow magic show, that has convinced some to pay. But, certainly we can agree that not all, not most, not half, not a quarter, not even a piddly 1/5th of America is paying for streaming (altogether).

Don’t you dare tell me it’s because people don’t know about streaming either. Not now, not after 6 years of Spotify, countless stories on YouTube’s Content ID, a splashy Apple Music rollout, oh and the press from your favorite artist and songwriter talking about it.

They know about streaming, they just aren’t buying it.

And that’s the point.

Let’s put it another way:

210 million adults in the U.S. have chosen NOT to pay $10/mo for streaming all of the world’s music from anywhere, at anytime, unlimited.

690 million iPhone users have chosen NOT to pay $10/mo for streaming all of the world’s music from the world’s best phone, backed up to the cloud, with exclusive content from their favorite artists.

More people purchased Adele’s 25 (7.5 million) and Taylor Swift’s 1989 (2 million) albums than pay for a subscription to Spotify, Apple Music, Tidal, and Deezer combined, in the United States.

Look, as I’ve said, streaming may be the future, but it is a long, long, long ways off.

Should we promote downloads still? I don’t know, but let’s not dismiss them as if they’re not happening at all (34% of all total revenue)

Should we promote CD sales? I don’t know, but don’t discount 127 million of anything that people buy (widgets or albums).

I think streaming should be part of the mix certainly. I love being able to listen to obscure songs that I may not own. I love the convenience of having my music collection be mobile. I love playlists. I look at it as a premium cloud locker for my music.

But then again, I am odd. I don’t buy music as a commodity that should be priced accordingly based on market forces; I buy it to support the artists, the songwriters, the publishers, mixers, producers, engineers, and so on. I buy it because it needs to be bought to be able to finance making more.

Perhaps your precious sharing economy should stay out of my art.

I guess the overarching point here is:

But, you can buy it…

iTunes: https://itunes.apple.com/us/album/dont-believe-the-hype/id1072568871?i=1072568874

Amazon: https://www.amazon.com/gp/product/B002PMAAY2/182-5822684-8877360?ie=UTF8&*Version*=1&*entries*=0