Spotify Still Gaining Steam

It's easy to look at the upcoming streaming music launches from Apple and Google and think that they'll automatically take the lions share of that end of the business, but that underestimates just how important Spotify is the current music industry.

Spotify is now responsible for 10% of the industry's total revenue as of the first quarter of 2015, if you can believe their Director of Economics Will Page. That's a number that few thought would ever be reached, at least from Spotify.

Considering that according to the IFPI, all streaming services combined equaled about 10.2% last year, that means that the company is a juggernaut in the space. Of course, it also means that the 10.2% mark has grown considerably in just 3 months.

Last year subscription music brought in about $1.5 billion, and Spotify accounted for about half that. According to Page, it also accounted for more than 90% of subscription music growth last year.

Granted, these numbers are coming from Spotify, so they're most likely biased, but it does show that the service has a real hold on the market that might be tougher to dislodge than any of the potential upstarts realize, regardless of how deep their pockets might be.

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The Music Subscription Music Service You Don't Know About

Subscription music services have been getting more and more press as the music business and their customers gradually adopt the concept, but we normally only hear about the higher profile services like Spotify and Pandora. It's true that they have the most subscribers at the moment, but did you know there's one service that's quietly crossed the million mark that very few have heard about?

Muve Music, which is a service of wireless carrier Cricket Wireless, has quietly surpassed 1.1 million subscribes less than 2 years after it was launched. It's basically an unlimited music service that's tied to a pay-as-you-go mobile phone service. It offers no apps for personal computers or tablets, and is only offered on Android phones.

What's particularly interesting is the demographic that Muve Music caters to. Most of its users don't own a computer or have a credit card. That means they'd never be a user of one of the other services anyway.

It just goes to show that there's always a sub-market to be served, even though it may not get much attention. That's pretty much the way music works these days. Even superstar artists have their own niche that they cater to, and any artist can have a career within a narrow category.

That's the key to being an artist in Music 3.0. Find your niche and play to it. It doesn't matter if you play something esoteric like Swahili polka or Manchurian jazz, there's a market out there for what you do. The trick is to find it. Luckily that's easer than ever thanks to social media. Stay tuned for more on how it's done.

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Spotify's First Year

Spotify certainly still is the music subscription service that still gets the most press, so let's look at its first year in the United States. There are some numbers that the company should celebrate, and others that should shake it to its core.

• First all, in the last year Spotify garnered more than 3 million US users, with about 20% of them being converted to paying customers. That's good.

• Not everyone is in love with the service, since a lot of those paying subscribes are not re-subscribing, and not many of the others are willing to upgrade their service to paying. That's bad.

• American users streamed 13 billion songs last year and shared almost 28 million. That's good.

• 55% of those came through Facebook, 41% came from Spotify itself, 2.7% came through Twitter and the rest came from other sources. Spotify has a tight integration with Facebook, which isn't looking all that strong these days of post IPO madness. That's potentially bad.

• Facebook users used the Spotify client almost 24 million hours last year. With 950 million users and over 500 million of those daily at about 45 minutes per, that's not all that much. Not so good.

• For artists, Spotify pays $.0051 per free stream, .0078 per unlimited stream, and .0153 per premium stream. It takes 47 plays to equal a single $.99 sale from iTunes, according to Ditto Music. Not so good if you're a musician, although it's better to get paid something rather than nothing.

What we have to remember is that these are still the early days of subscription streaming music. Things are still shaking out, and will probably change significantly when some major players enter the market (hint: iTunes). Let's check back next year and see how much progress has been made, not only by Spotify, but the streaming service market in general.

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

The Music Industry's Biggest Blunts

Paul Resnikoff's Digital Music News had a great story the other day entitled "The Music Industry's Biggest Blunts 2000-2010" where he used the analogy of some of the industry's highconcepts to passing around a joint. It's a fun read, very poignant, and in some cases, hits really close to home.
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Why do we play this game?  It seems that in times of digital disruption, the music industry has had this strange tendency to cling to potential saviors, almost all of which disappoint.  The major labels are masters at this, though this goes far beyond the Big Four.  And, it makes you wonder whether the same blue-sky, save-the-industry mentalities are currently driving areas like cloud-based models, DIY distribution, and  'middle-class artist' concepts.     

But what are the biggest blunts this industry has smoked so far?  

(1) The a-la-carte download. Remember when Steve Jobs was praised for 'saving the music industry' by simplifying music purchasing?  These days, he's mostly praised for making billions for Apple and tripling Wall Street investments, not for enriching musicians or labels.  And the a-la-carte, variably-priced download is hitting its plateau.

(2) The ringtone. In hindsight, this was a billion-dollar hulu hoop, but labels, mobile startups, rappers, and everyone in-between were pegging serious fortunes on the ringer.  These days, there's still some scratch, but mobile entertainment is a totally different - and tough-to-monetize - space.  

(3) Mobile Music. That is, controlled, walled-garden environments that would force fans to pay.  That is, before the phone became smart, and totally connected to the PC.  

(4) Subscription services. There was a time when services like Napster and Rhapsody were viewed not only as saviors, but potential multipliers of broader industry revenue.  These days, both are currently swimming in niche waters, and publications like Digital Music News have been accused of smoking another spliff called Spotify. 

(5) 360-degree deals. Not sure if this is as much a blunt, or merely some diversified resin to keep the party going. 

(6) Branding and sync licensing. Everyone wants a branding deal, and music supervisors are chasing every last sync possibility.  But it seems that this area is best viewed as a revenue enhancement, not a revenue replacement, and a rush of creative supply is only driving down potential payouts.

(7) MySpace Music. Sort of a mandatory parking spot for bands, but the monetization part never quite ramped.  

(8) Ad-supported music services. One word: Spiralfrog.

(9) Publishing. Once upon a time, publishing was viewed as a rock in the storm.  The only problem was, this rock wasn't that big compared to recordings - nor was its fate truly independent.  Instead, publishing is getting dragged by mechanicals, sinking syncs, and broader economic malaise.  And these days, most publishers are thrilled with flat financials.

(10) Touring. This is where the real money was!  Except, bands taking this advice often found themselves struggling to fill clubs, earn gas money, and create meaningful revenues.  Not only that, everyone was getting the same memo.  Meanwhile, for big fish like Live Nation, sagging attendance is currently creating serious revenue problems.  

(11) Licensed P2P. If only the industry had licensed Napster!  But modern-day attempts like Mashboxx, Peer Impact, Choruss, and whatever Virgin Media was trying may have been too little, too late.

(12) DIY Distribution. The hangover is just starting on this one, but the dogma surrounding direct-to-fan distribution remains deafening at times.  Meanwhile, DIY bands are struggling against some serious challenges, including a huge glut of competing content, distracted music fans, and tough monetization models.  This is a blunt in progress...

(13) DRM. Thankfully, this stopped getting passed around a few years ago!  (thanks Larry Miller for adding this one...) 

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The Music Industry of the Future

We live in a time when the music industry is in a state of flux. It's trying to adapt to the new while holding on to the past - some months more in the present, and other months still steeped in the old. One thing we know for sure is that it's changing quickly. Music 3.0 is here to stay and music 2.5 isn't coming back.

So what will the music industry of the future look like? There are 5 areas where it will change, as I see it.

1) Subscription Music - Industry pundits have been predicting for ages that digital music distribution will ultimately change from paid downloads to subscription, and they'll finally be right. The upcoming US introduction of the Spotify service will push the ball up the hill. The iTunes subscription service (which I predict will debut in 2011) will seal the deal.

2) Hybrid Record Labels - Even today most record labels are more concerned with selling music products than anything else. In the music industry of the future, the new hybrid labels will be more concerned with rights management than actual sales. Since it's so easy for an artist to produce and even market his own product (the traditional duties of a record label), they'll no longer need those functions. But they will need an entity that's expert in overseeing their digital rights in the variety of distribution streams that will exist, from streaming to download to subscription to licensing (supplanting the traditional publisher) to even physical product like CDs (while they're still around) and boxed sets.

3) A New Gig Model - A band dies if it doesn't gig. That's always been the way an artist made the majority of its income. It's pretty impossible to gig outside of an act's home area unless they have an agent, and the agent had a good relationship with promoters and venues. The new model would make it easier to connect an artist directly with venues, either eliminating the agent or as an adjunct to an agent. On the concert side of the music business, the agent is the middle man, much the same as a record label. Agents will have to change the same way that labels have.

4) The New 5th Beatle - Producer George Martin was always the uncredited "5th Beatle," since his input was such a huge part of their success. In the future, that person will not be a musician, but a web presence expert. It'll be a kid that's spent all of his time on every social network, learning all the ins and outs. The guy who just graduated from college who learned everything about web design and programming that he could just because he thought it was so cool. The kid who loves music, loves the band, can't play a lick, but can handle every aspect of their social media presence better than anyone in the organization. He's the guy that allows them to utilize Music 3.0 (the interaction with their audience) to it's fullest.

5) A New Media Package Replaces The Album - The album as a package was great for it's time, but that time is not now. At some point in the future a new multi-media package will combine audio, video, photos, text and interactivity into a new product that's fit for the time we live in. There are already a number of experiments that we'll soon see come to life (MXP4 is one technology; the major label backed CMX is another). Regardless of whether these catch on or not, it's inevitable that some combination package will.

In some ways, the future is almost here. We're starting to see the social media 5th Beatle pop up. Subscription music has been around for a while and growing, but still not at critical mass. Record labels are getting hipper to the needs of Music 3.0, a new gig model is brewing, and the rich media album is about to be born. The question is not longer if, it's when will the future get here?