Is the Future of Streaming Music Services Turning Bleak?

I don’t think so. I love my Rdio and Spotify and Aha. However, I’m on the consumer side of things. The Kernel takes a look from another angle.

A little over a year ago, I declared streaming music the next major music industry ice age. In the past year, the major players have jockeyed for paid subscribers, hushed artists advocating for their demise, and straddled two very different worlds: Silicon Valley’s startup go-round and and the ever backward-looking recording industry.

A lot has happened since then. Apple made a very flashy, rather out of character bid for Beats—both Beats Electronics, the headphones brand, and Beats Music, a brilliantly remixed version of well-loved streaming service MOG that Dr. Dre and co. picked up in 2012 for $14 million before flipping it, making it look young, and serving it up to Apple, image and all, for a cool $3 billion.

One other huge thing happened. In November 2014, Billboard’s music charts, unchanged since 1991 in spite of massive tectonic shifts in the industry, decided to take streaming music seriously, incorporating streams into its huge tallies of album sales. Billboard charts now aggregate streaming data from Spotify, Beats Music, Rdio, Rhapsody, and Google Play Music. Under Billboard’s rather arbitrary new rules, 1,500 streams of one song add up to a single album purchase. If that isn’t a metaphor for the plight of the streaming and record industry alike, I don’t know what is.

Billboard’s symbolic shift and Apple’s belated entrance are two tensions that are poised to sculpt the future of an music business model that’s hung around for over a decade (the advent of on-demand streaming is slightly younger) sheerly because a handful of hubristic tech companies remain convinced they can make it work.

So far, no one really has.

Read more here.  Meanwhile, AdWeek has this look at how streaming is making artists unhappy.

Pharrell’s “Happy” was the song of 2014, topping the charts in the U.S. and two dozen other countries, selling 6.45 million copies and winning a slew of accolades, including a Grammy Award and the inaugural Grand Clio Music Award.

It was also in heavy rotation on the digital radio platform Pandora, streaming 43 million times in the first quarter alone. Despite all that, Sony/ATV Music Publishing says it received just $2,700 from Pandora for plays of the tune during that period, which it split with writer Pharrell Williams.

“Streaming services are going to be the major method in the way music is accessed. I don’t think enough money trickles down to the songwriters,” says Sony/ATV CEO Marty Bandier.

Pandora argues that its model is justified. “We want to be an indispensable partner to music makers, and that involves paying a tremendous amount in royalties,” explains CEO Brian McAndrews. (Last week, The New York Post reported that Spotify—the second largest streaming site after Pandora, with 60 million users—projects that it will pay top record label Universal Music Group $1 billion in royalties over the next two years.)

Streaming music was supposed to be the savior of the record business, putting the brakes on piracy while mining new ground for revenue. Meanwhile, brand marketers have viewed it as a means of connecting with the younger consumers they crave. As Nathaniel Perez, global head of social for digital agency SapientNitro, which has used Pandora’s geotargeted data for its clients, points out, “Uber doesn’t have the same opportunity. Sessions are short and usually about functionality. Music is interesting. It provides this opportunity for advertising to be a second screen.”

But streaming sites lately are facing a battle at every turn, with artists, labels, publishers and industry groups speaking out against the unfairness of their payment models.

Read on.  Finally, why don’t the major labels just gang up and buy YouTube already?

Streaming music, up 54.4% YOY in the US in 2014, is finally putting some cash into the pockets of record labels (and growing pressure to improve freemium conversion rates may boost income from it further), but next to the continued plummeting of physical sales and digital downloads it doesn’t seem like much to get overly excited about. The fact is that record labels need substantive new revenue streams, and more M&A within the label landscape (or music industry in general) is of incremental value: buying other sinking (or at least unstable) ships isn’t a solution.

The three majors — Universal Music Group (UMG), Warner Music Group (WMG), and Sony Music Entertainment (Sony) — require ambitious repositioning of their role within the modern media (not just music) landscape. They need to apply their skill in identifying, promoting, and monetizing creative talent toward a more diversified scope of operations. The most logical jump for their expansion is to acquire or incubate their own Multi-Channel Networks (MCNs), which represent online video stars from YouTube, Vine, Snapchat, and elsewhere.

While the labels would be entering a new market, it wouldn’t actually be that radical of a move. Here’s why:

Continue reading.