Streaming service Aspiro (WiMP) is to be acquired by Scandinavian news publisher Schibsted, reports paidContent . The price tag is said to be around $50 million, and the purpose of the acquisition is, writes paidContent to “compete with Spotify on the global stage”.

Schibsted, a newspaper giant, publishes the largest newspapers in Scandinavia and Norway and owns several other media companies.

This insightful article over at the The Music Industry Blog couldn’t have had a more opportune timing. The author notes:

“Innovate, innovate, innovate! Newspapers and record labels are both at a crucial juncture: physical format revenues will continue to pay the bills for the coming years but paradoxically they must pursue radical format and product innovation strategies that will actually hasten the demise of those same physical revenues. If they don’t, record labels and newspapers will find themselves with the lose-lose scenario of depleted physical revenues and pitiful digital income.”

Indeed. So this move by Schibsted makes perfect sense. The one concern would be whether such a large organisation can manage to pour enough product development love into the service in order to make it a real alternative in the competitive landscape of streaming services. When the novelty of streaming services wears off, and a baseline of identical catalogues and pricing is established, such intangibles as user experience, “look and feel” and brand might very well be what tips the scale in favour of one or the other.

Business Week: ”Spotify Doesn’t Sound So Great to Artists”

Business Week notes that some artists such as Coldplay, Adele and Tom Waits, are opting out of making their latest releases available on the streaming services. The reason given is the very one I explored here, that revenue from streaming services cannibalise on potential profit from downloads.

“Like all of Coldplay’s other titles, the new album will be on [Spotify] eventually”, Coldplay manager Dave Holmes tells Business Week. From this statement, Business Week draws the same conclusion as I did on these pages, namely that Coldplay and their management attempts to play the same game as the movie industry, releasing to theatres first (iTunes) and then to DVD (streaming services). Sort of.

 “It certainly hurts Spotify’s perceived value if the consumer frequently searches for songs that aren’t there, even if that represents a small fraction of titles”, Needham analyst Laura Martin tells Business Week.

On the other hand Justin Bieber manager Scooter Braun seems to believe that this is a temporary strategy:

 “There were a bunch of artists who wouldn’t sell music on iTunes when that first started, and now it’s standard. The same thing will happen with Spotify.”, Braun tells Newsweek.

So, which is it? A strategy that will become industry standard, or a temporary burst of techno-fear?

What do you think? Let us know in the comments.

A more grown up DIY movement on the rise?

In the wake of major label turmoil the middle ground of Indie-land is being populated by a growing crowd of music professionals. The many possibilities of the Internet is no doubt a driving force behind this trend, and the DIY spirit of  2012 certainly has a more professional feel to it than earlier incarnations of the same sentiment. This interesting piece in American Songwriter is an inspiring read on the subject.

Angry Music! Photo by: Arti Sandhu

Stream Wars have flared up again and the world of digital music is in turmoil. The recent round of streaming-bashing originated in a study by NPD group and NARM. Words were harsh “Spotify is detrimental to music purchasing”, the study says. In the words of the researchers, the new digital music climate makes it easier for consumers to avoid taking “high value action”. In words used by normal people, “high value action” means “buying”. Only last week, Coldplay chose not to have their latest release available on streaming services as they understand that they simply make more money selling downloads.

One player who found this out the hard way is the distributor STHoldings, who announced yesterday that they have decided to remove their 238 labels strong catalogue from the streaming services.

The numbers that STHoldings published showed  that for the first time ever, digital revenue for the distributor is down. Results from the third quarter 2011 reveals that all-in-all, digital revenue has dropped 14 percent, iTunes revenue has dropped 24 percent, and streaming services accounted for 82 percent of the music consumed, but only 2,6 percent of the revenue. In the press release from STHoldings, you can find this juicy quote:

“Add to that, the feeling that their music loses its specialness by its exploitation as a low value/free commodity. Quoting one of our labels “Let’s keep the music special, fuck Spotify”

Some aggrieved artist (not necessarily associated with STHoldings) even went ahead and created this angry page.

It eludes me how anyone can be surprised that subscription services eats away at revenue from downloads. If I stream, I don’t buy. The question has rather been one of “can revenue from streaming services make up for the revenue lost from downloads”. And right now, it seems that the answer is no.

One of the problems is of course that the streaming services are reluctant refusing to share their payment rates with the world. Paidcontent calls out for “Transparency On Music Streaming Rates” and concludes:

“…what do the industry’s power brokers have to hide? If the rates really are fair and have merit, it would serve everyone better to get them out in the open now”.

Indeed. And the recent deal negotiated between Spotify and Swedish performance right association Stim is secret even to the Stim-members. It seems a lot of people sign a lot of NDA’s.

A side note: Anyone who understands how a standard record contract is designed quickly realises that when money is portioned out between several middle men in the music industry value chain, and the record labels owns parts of this value chain, the artist is in a sense being screwed more than usually. You have to pay the retailer (or subscription service), you have to pay the distributor, you have to pay the tech-aggregator in the middle, and so on. But what if the label partly owns the retailer, owns the distributor, who in turns owns the tech-aggregator? Suffice it to say, share holders are probably doing OK.

All the fuzz about the takedowns really boil down to this: can I as an artist / label make more money of my music if I take it off the streaming services? Many have determined that the answer to that question is yes. And so they opt out. There’s really nothing controversial about this. One could claim that labels and artists should take a moral interest in the future of their industry and support new tech initiatives. But the life cycle of an artist (or even a label) is simply not long enough for them to afford taking a beating for the good cause.

But in the end, it leads directly to the recurring streaming services argument that it’s either dimes from us or nothing from piracy. But the artist and labels cannot possibly know what a takedown would mean in terms of increased piracy, now that customers are accustomed to renting their music, rather than buying it.

This is the rationale for the artist:

At point A there was downloading – I made 100 bucks.
At point B there was streaming – I made only 10 bucks.

Conclusion: I will revert to point A and hope that I will make 100 bucks again.

The predominant word here being “hope”. But with current data at hand, the hope seems worth exploring.

Show me the money! - Photo by: Dave Barger

Far too long since last update. Here’s a quick one just to get back in the game.

Since last I wrote, Coldplay have stirred up some emotions as they refused to license their latest release Mylo Xyloto to streaming music services such as Spotify and rdio. The reason, of course, is the fear that licensing to these services would cannibalise on a la carte downloads, which are substantially more economically viable.

When the results started pouring in a week later, Coldplay had broken the previous digital album sales record. Of the over 200 000 units sold in the UK alone. Over 80 000 of these (or 40%) were digital downloads.

What to make of this? Well, it wouldn’t surprise me if Mylo Xyloto pops up in the streaming services catalogues soon, and if it does, this would make the Coldplay-strategy very similar to how the movie business operates, with releases to the theatres first. In time the movie becomes available on DVD (or Netflix) as the novelty wears off.

This makes perfect sense for any act that has reached such a vast popularity as Coldplay. The value (in dollars and cents) of “reaching out with the music to consumers” via the streaming services’ excellent music discovery and sharing features, is arguably very low for a band with an already established following. Coldplay have put in their time, done their “reaching out” and now they find themselves in a position where they want to reap the benefits of their labours.

It’s a simple case of conflicting goals. Both Coldplay and the streaming services want to maximise output. It is commonly understood that the revenue coming in from the streaming services to individual acts is minuscule, even if the payouts to the industry as a whole is rather impressive. But until such time that the goals of the big acts and the streaming services converge, I expect we will see more of this.

If this becomes a common strategy, the value of the streaming services will be diminished. The streaming services will be your local video rental shop on the corner, and iTunes will continue to reign supreme as the “movie theatre” where you’ll always find the good stuff first (and on illegal services of course). I think we can expect hard negotiations from the streaming services to prevent such a development.

Speaking of piracy, Mylo Xyloto is currently number five on TPB’s top downloads list. Would the album have been at the top, had Coldplay licensed the album to streaming services? And what difference would that have made for Coldplay’s bottom line?

Photo by: Tom Magliery

Major Label Licensing Will Kill Your Startup

The free spoken Michael Robertson did not mince his words when he appeared at the SF MusicTech Summit this week. Robertson, who founded MP3tunes, made his feelings about music startups and the major labels clear. He basically told the assembled crowd to avoid major label licensing or die a painful death.
 ”The odds of making money with a major record label are pretty close to zero,” Robertson said.

More over at digital music news here.

Music Fans Still Prefer Ownership, study says

A study recently published by eMusic show that a whopping 92 percent of music fans prefer owning their music. In context, this bears significance to the ongoing battle between a la carte downloads and streaming. The reasons cited by the interviewees for preferring ownership were among others “unlimited playback” and “security of collections”.

Read more about the study here.

What an Artist Really Gets Paid

Ever wondered what the financial break down looks like across services? Uniform Motion revealed their stats on their blog, a move that caught the attention of the digital music press. Read the band’s own post here
and checkout what digital music news made of the numbers here

The numbers are unsurprising, but it certainly provides a great overview and Uniform Motion does a great service to other bands by publishing not only the revenue they can expect from various services, platforms and distribution channels, they are also good enough to disclose the total costs involved, which allows for a rather straight forward profit calculation.

Photo by: Sam Howzit

Google Magnifier to boost music discovery

This week Google not only acquired Motorola Mobility, they also launched a new music blog service named “Magnifier”. The service, which is described as “Google Music’s cousin”, makes music recommendations to users and offers daily free downloads. The downloads will be made available in the users cloud library . and that part of the experience is said to be seamless. There is also a dash of editorial content available, as the Google Music team selects one up and coming artist per week to shine a spotlight on. Even though the idea of “staff picks” is not very web 2.0 it’s a nice flirt with the “curation” trend.

Trouble is that other blogs and websites out there do this better, and the logic of hype tells me that Google will have a hard time selling this to the music savvy hipsterati out there. To be honest, Magnifier feels as much as a music discovery experience as walking into a gas station and see a CD of “Best of the 80’s” at the counter, compared to shared playlists and crowd sourced solutions. So, why does Google bother, well perhaps techcrunch nailed it in their header “Google Launches A Music Blog To Remind People That Google Music Beta Still Exists”

Here’s a second opinion from TheNextWeb

YouTube upgrades Music Page

YouTube, who reign supreme as the top music service on the Internet (without even being a music service per se, mind you) recently added a few features to make the music experience on YouTube even better. You’ll now find recommended videos and artists based on your viewing history, local concert listings and publications such as Spin and Vice will offer playlists and recommends music in a very trendy effort to “curate”. Read more over at Mashable here

The times they are a changing

This wonderful animated gif have been floating around the digital music web lately. It does a fine job of reminding us that things change, wether we like it or not. The status quo is not carved in stone. Change is possible.

Week 32. Photo by: Scott Beale

The world of digtal music is not exactly moving at break neck speed right now. Thank god then for Spotify – a company that always manages to stir up feelings and get into all sorts of amusing trouble.

First of all, the good news: True to their style, Spotify executed a flawless marketing campaign and quickly reached 1.4 million US users - 175,000 of which are paying subscribers.  This means a conversion rate of 12.5% for the first four weeks, which is impressive.

Strategically, Spotify chose to play the invitations game. Needless to say, this strategy is usually deployed in order to create buzz and exclusivity – making the scarcity of the invites and the access to the service build up expectations. As such, the intent of the strategy is not to attract massive amounts of users, but massive amounts of interest. Apparently, the strategy delivered both this time, leaving their competitors Rdio, MOG and Rhapsody with reason to worry. And they have been in the states for years (sort of).

Still, Spotify did set up a very ambitions goal of reaching 50 million users within its first year in the states, at least according to marketing material leaked to AllThingsD in July. This may or may not have something to do with the investment round preceding the US launch, the result of which is that the current Spotify valuation now reaches $1.1 Billion, according to  PaidContent.

Spotify also went and got slapped with their first law suit for patent infringement – which is nothing but silly of course. They also received some bad press for using a malicious cookie.

But then label group Century Media announced in a statement that they are pulling all content from Spotify. The reason: to “protect the interests of its artists”.  The general objection is that the money coming in from Spotify is so minute for the individual artist that the service is effectively killing the industry, not helping it.

In the words of Century Media:

“Physical sales are dropping drastically in all countries where Spotify is active. Artists are depending on their income from selling music and it is our job to support them to do so. Since the artists need to sell their music to continue their creativity, Spotify is a problem for them. This is about survival, nothing less, and it is time that fans and consumers realize that for artists it is essential to sell music to keep their heads above water. […]

“Obviously, it is ultimately up to the music fan and consumer how they access their music, whether it is buying, streaming or stealing. There needs to be awareness, though, that how you will consume your music has direct consequences for the artists, who we are all trying to support.”

And then Spotify responded as they usually do: it’s either dimes from Spotify or nothing at all from piracy:

“We are sorry that Century Media have opted not to offer its music to their fans through Spotify. Spotify has one of the biggest music libraries in the world – of over 15 million tracks – and is committed to offering our users the widest possible selection of music across artists and genres from around the world.

Spotify was launched out of a desire to develop a better, more convenient and legal alternative to music piracy.  Spotify now monetizes an audience the large majority of whom were downloading illegally (and therefore not making any money for the industry) before Spotify was available.

“Spotify is now generating serious revenues for rights holders; since our launch just three years ago, we have paid over $100 million to labels and publishers, who, in turn, pass this on to the artists, composers and authors they represent. Indeed, a top Swedish music executive was recently quoted as saying that Spotify is currently the biggest single revenue source for the music industry in Scandinavia. 

“Spotify is now also the second single largest source of digital music revenue for labels in Europe (IFPI, April 2011). Billboard reported in April that Spotify territories saw an average digital growth rate of 43% last year. By contrast, neighbouring countries (without Spotify) saw only 9.3% digital growth.

”We are very proud of the positive contribution that Spotify makes towards growth in the music industry.”

The streaming vs. downloads wars are likely to continue. Right now, all stats point towards that the two solutions can co-exist. Both solutions are on the rise, and together they seem to be stealing market shares from physical sales and not each other.

The road ahead - me hiking in Iceland.

After some well deserved R&R – this blog is back. While I was struggling to enjoy some time off – Spotify finally managed to go live in the US, execute a successful marketing campaign (as usual) and then they went and got slapped with their first law suit for patent infringement. The law suit is ridiculous of course, but welcome to America.

Also in the news, Chinese search giant Baidu (dominating 75 per cent of the Chinese Search market) signed some papers with major music labels. The idea is that searches for song titles on Baidu will lead to legal alternatives instead of the many, many, many illegal copies out there. Apparently Baidu will pay the record companies per listen (if streaming) or per download. It seems there are still quite a few illegal versions popping up in the SERP though. But it’s an interesting development none the less.

One of the best parts about coming back to work is planning the road ahead.

Here’s what’s on for me so far:

August 19-28 – Various stuff – Malmö
September 7-9 - PopKomm - Berlin
Sept 22-24 – EuroIAVII – Prague
October 10-12 - You are in control - Reykjavik
October 13-16 - Iceland Airwaves - Reykjavik (Get a Spotify playlist here)

I hope to add more travels and events soon – and I hope to see you out there.

This is an interesting release in all its weirdness. If you are wondering what the title “Medulla Oblongata” means, more info can be found here.

Photo by: Ben Dodson

Spotify closing in on the US

It seems that a Spotify US release is imminent. For real this time. Multiple sources report that Spotify has signed a deal with Universal. Sony Music and EMI are both already onboard, and so only Warner remain and they too are rumoured to be close. Worth keeping in mind though, is that it was but a year ago that Warner Music Group CEO Edgar Bronfman Jr expressed harsh scepticism towards streaming music solutions. But things change, as they always do.

So with this new development, a Spotify release could happen sometime this summer. In between the several year old Spotify ambition to launch in the US,  and now, some interesting things has happened in the shape of Google Music, Amazon Cloud Player and Apple iCloud. There is also the competition from Mog and  Rdio to take in to consideration. With all this competition in place – how will Spotify fare? How will they position themselves? How will they compete? It will all be very interesting to watch.

SoundCloud marches on

This week SoundCloud announced that they have reached a milestone of five million registered users. The current growth rate is said to be 20,000 users per day. SoundCloud also announced that they have pocketed investments from the investment firm A-grade, run by Gary Oseary and Ashton Kutcher.  Alexander Ljung, founder and CEO of SoundCloud had this to say:

“It’s totally awesome to welcome Guy and Ashton into the SoundCloud family, especially this week as we celebrate such a significant user milestone. A-Grade are joining our mission to get everyone creating and sharing sound in their everyday lives, and with their knowledge and passion for new technologies and using social media to reach and influence people all over the world, their support will be invaluable.”

Meet Kiwi, yet another Swedish streaming service

New streaming service Kiwi (currently in beta) is joining the ranks of Spotify and WiMP to provide millions of tracks to subscribing customers. Behind the service is digital music provider Plusfoursix who recently acquired competitor Global Media Bank. So, it makes sense; Plusfoursix already had the music and the licensing in place – so “all” they had to do was build the service.

Plusfoursix founder Fredrik Nyström tells Swedish Television that Kiwi will target other markets than the Swedish, make bundling deals with telecom companies and they will have curated content in the shape of playlists put together by an editorial staff (sort of like WiMP). Furthermore, Kiwi will offer videos as well. Apparently, there are 10 000 of them in stock so far. As you probably know, the worlds largest music service by far is YouTube. So perhaps this makes sense.

The service is 11 million tracks strong and will work on your pc/mac desktop, as well as on your android smartphone. No iphone yet, as Apple is taking its time to approve the app.

The service will be free from advertising and will not feature free listening. You will, however, get a free month to try the service out. Apparently, founder Fredrik Nyström believes that free services will disappear in the future.

As I got my hands on a beta test account and started playing around with the service I noticed that it is built upon the Adobe Air platform, and I’m sad to say I didn’t manage to listen to any music. But Beta is Beta, so that’s just fine.

It is interesting to watch new streaming services pop-up. If you follow it closely, you can get a free lesson in market positioning, differentiation and brand building.

iCloud in Europe – don’t hold your breath

DigitalMusicNews points out an aspect of the Apple iCloud that completely slipped my mind in the midst of all the buzz: the rollout of iCloud in Europe will of course be subject to (presumably) lengthy negotiations before the service can be made available to us Europeans. DigitalMusicNews reminds us of the historic fact that “Apple endured a multi-year nightmare to license the iTunes (Music) Store across Europe. Now, it looks like that that process is starting all over again with the iCloud.”

One has to wonder (again) who really benefits from this very complicated system of licensing? For someone not initiated it seems that the whole thing should be very simple: theres music, there’s a global audience, let’s do business already. But alas, such is not the way of the global music industry.

As someone clever once said: Change happens when the cost of the status quo exceeds the risks of change. If we are to believe this (and I am tempted to do so) one has to wonder: didn’t we move beyond that point several years ago?

Hello iCloud

The big thing this week was of course the Apple WWDC and the official unveiling of the iCloud. Examined from a macro perspective it seems clear that Apple tries hard to stay true to the user centric approach that have made Apple what it is today. “It just works”, said Jobs repeatedly during the presentation – and it seems like Apple are whipping the competition with the rather obvious trick of hiding unnecessary complexity all across the line. With every aspect of the Apple iCloud, from the GUI to the communication to the very way users are expected to think about whats going on – the mantra is “it just works”.

Apple of course understand that regular users don’t give a hoot about the cloud, but might be keen to enjoy the benefits of cloud based computing – what ever those benefits may be expressed in “perceived value”. There’s a world of difference. Why this is so hard for other players to grasp is beyond me. The old “sell benefits – not features” rule of marketing and copywriting simply cannot be news to Google and Amazon. But still – Apple just seem to do it better.

From our digital music perspective, the biggest story here is iTunes Match. Basically, iTunes will scan your hard drive for the music you have stored there, and then make that music available to you across iOS devices. Should there be music on your drive that doesn’t already exist on the Apple servers (currently 18 million songs), that music can be uploaded. This means that if you have gone and downloaded music illegally, you can still enjoy the access. The music is not streamed per se, as in “Spotify Stream”, but rather downloaded to your device. The consumer price for this magic is $24.99 per year – and Apple had to pay the labels a hefty advance to make it happen (some say $150 million) – and on top of this labels get 58% of the $24.99 annual fee, and publishers get 12%.

Amazon and Google are now more or less forced to get those licensing deals in place in order to offer a similar “match” service.

Marketing Gaga

Billboard did the math on how much the Amazon Lady Gaga campaign cost. As you know, Amazon offered the new Lady Gaga album “Born this way” for a mere $0.99 during a two day campaign to raise awareness and business to their Cloud Player service. If Amazon pays Universal the standard price (which sources say is the case), the cost for Amazon would be about $7 per unit sold. As Amazon managed to sell 430 000 units during these two days, the total cost of the campaign is calculated by billboard to be about $3.2 million.

Value for marketing money? Well, the Amazon service did go down during the campaign, causing people to swear to never shop at Amazon again. And then Apple went ahead and launched iCloud and people quickly forgot about the hollow Amazon victory of being first in the music cloud game.