Apple Beats/iPhone Bundle Tries To Counter Music Key

The Financial Times is reporting that Apple plans to bundle its newly acquired Beats Music service into an upcoming version of iOS, making it instantly available to hundreds of millions of users. This news should come as no great surprise, since the company originally bought Beats with the intention of doing exactly that. What is interesting is the timing of the leak, however.

As I wrote in my last post, a beta version of YouTube’s new Music Key service has just been introduced, and that provides a far greater threat to Apple’s position in the music business than other services like Spotify and Pandora ever will. Considering that YouTube is the number one online source of music consumption, and that Music Key provides audio and video (with no adverts either) as well as the full Google Play library, Apple’s iTunes service faces a clear and present danger of being majorly usurped as far as market share goes.

For Apple, the real threat is that Music Key will hit the market in full stride before it can roll out the next Beats-baked iOS. Guess what? If too many people get a taste of Google’s offering, they’re not coming back to iTunes any time soon.

Apple suddenly finds itself in a dilly of a pickle in that even though it has those reported 800 million credit cards on file and a built in audience in iPhone and iPad users, the music side of the iTunes is shedding sales faster than even CDs. Read more on Forbes.

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The Pandora Effect On Music Sales

A study by Pandora earlier this year has found that the more a song is streamed on the service, the more actual sales it will generate. If that's the case, it turns out that Pandora is a radio-like service in more ways than one, as radio plays have always lead to sales as well.

The study, which was outlined in a Billboard article, found that the average positive effect resulted in a 2.31% increase in music sales for new music, and 2.66% for catalog in something they called "track equivalent albums," which is a metric that counts 10 tracks as an album.

This ratio really changed between music released by major and indie labels. New music from the major labels played on Pandora resulted in a 2.82% positive effect, but only 0.62% for indies, who fared much better on catalog at 3.85% compared to the major's 2.36%.

The study also looked at how the number of streams affected sales as well. It found that if the streams were at least 25 times the sales, the positive effect was around 5%. When the streams to sales ratio was 150, the positive effect grew to 15% (I'd like to see the methodology for this, as the results seem dubious).

As a result of all this info, the researchers could put a value on each Pandora stream that was higher than the actual royalty paid. For instance, new music was valued at 0.265 cents while the actual royalty paid was 0.13%. Catalog music didn't fare nearly as well though, being valued at only 0.135 cents for only a 4 percent increase.

While the numbers look impressive, it's important to remember that the study was sponsored by Pandora in the first place, and these numbers will be used in the various upcoming lawsuits and hearings that the service is involved in. That said, there have been previous independent studies in the past that have found similar results, like this one from the NYPD Group.

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Facebook's Post Reach Falls Like A Rock

Facebook is the largest social network by far with over 1.3 billion users, but its effectiveness as a promotional tool is dropping almost to the point where it's not worth even using despite those large user numbers. A new study by Forrester Research called Social Strategies That Work shows that a post may only reach as few as 2% of followers, making many artists look at the entire process and say,"Why bother?"

Up until about 3 years ago (before Facebook went public), if you had 100 fans or followers, a post would reach all of them. This dropped to about 15 (or 15%) when Facebook began monetizing its platform by requiring you to promote the post in order to reach all your followers. In other words, a post would only reach about 15 of your 100 followers unless you paid to promote it, in which case all 100 would see it.

This declined even further last year to around 6%, and now Forrester says it's down to 2%, which means that only 2 of your 100 followers will see your post unless you pay to promote it.

Yes, it's possible that these figures can go higher on an occasional post, depending upon a number of conditions set forth by Facebook's EdgeRank algorithm, which measures how relevant a post is and who sees it, but don't count on it.

Forrester suggests that advertisers move to smaller social networks with less competition and better platform terms, but that won't necessarily work if not enough of your followers are there. And by the way, the study also puts Twitter in the same category as Facebook in requiring payment to access all of your followers.

Advertising on Facebook can actually be highly effective, but it also comes with some quirks (like text in graphics can take up no more than 20% of the graphic's area) that make it challenging. That said, if you continue to use Facebook for promotion, you'll have to be prepared to spend some money to do so.

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Artists Get Record Payout From Soundexchange

If ever there was evidence that streaming is becoming the new music consumption paradigm, this is it. SoundExchange, the not-for-profit performing rights organization that collects non-interactive distribution royalties for copyright holders, distributed a record $267 million in the third quarter. This is up 74% over the prior year period, and almost 40% more than the previous quarter.

The good news is that at the current rate, SoundExchange distributions could reach about $800 million this year, which is what the value of digital downloads for the year is predicted to be as well. In other words, there's as nycg money being collected from just this portion of the streaming business than from all digital downloads.

SoundExchange collects for both artists and record labels (whomever owns the copyright) from non-interactive radio-like services like Pandora and iHeartRadio, satellite radio and cable music channels. Interactive streaming services like Spotify and Rdio pay the royalties directly to the copyright holder or an aggregator like CD Baby or Tunecore.

It's interesting that download sales are falling a lot more rapidly than physical product sales at this time, but the good news is that decrease is being more than offset by streaming royalties. Considering that there's only about 28 million full-price subscribers world-wide at the moment, there's plenty of room for growth, which is great news for artists and songwriters.

If you're not yet signed up with SoundExchange, you're most likely leaving money on the table if your songs are getting played on non-interactive services, so register now!

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How Long Do We Listen To A Song?

We now live in a world where it's really easy to skip a song that we're listening to if we're not satisfied. This is a revelation of sorts because it wasn't always that way on a personal level in the days of vinyl and even CDs, and of course it's still like that when it comes to radio. But in today's streaming world a new choice is only a click away to switch to something that's more to our liking.

MusicMachinery.com had a recent piece called "The Skip" that looked in depth at the current listening habits of Spotify users. Why Spotify? It has some of the best user data available, making it easy to extract some conclusions from billions of music plays. Here's what the post found:

• We're almost as likely to skip to another song as we are to listen to it. 

24.14% skip within the first 5 seconds
28.97% skip within the first 10 seconds
35.05% skip within the first 30 seconds
48.6% skip before the song finishes!

• The average listener skipped 14.65 times per hour.

• Mobile users skip more - 51.1% versus 40.1% for desktop users.

• People skip more in the morning before they start work. The less they concentrate on the music, the less they skip.

• The skipping rate is higher on the weekends, when people have more spare time.

The takeaway is that a true listen to your music may be very elusive. What may be counted as a stream may only be someone passing through until they find something that they really like!

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