spotify

RAJAR MIDAS – Winter 2016

It has been a while since I’ve properly looked at RAJAR’s MIDAS survey, and it really does bear some close attention because it gives the most accurate picture of audio consumption in the UK right now.

As a reminder, MIDAS is a separate survey to the main RAJAR measurement, in which over 2,000 respondents are asked in detail about their audio listening habits by platforms, location, device and who they’re with.

It’s there to provide additional listening information and generally add ‘colour’ to the main RAJAR survey. Over time it allows some tracking in behavioural changes.

The full dataset is only made available to RAJAR subscribers, but RAJAR publishes a very good summary, and this provides plenty to get stuck into.

The key measure is Audio Share – the percentage of time spent listening to various types of audio. This is also known as “Share of Ear”, although I believe this is trademarked by Edison Research who carry out similar research in this area in the US.

Of course, simply saying “audio” is too simplistic because, for example, watching YouTube music videos is undoubtably a competitor to traditional audio sources for some audiences. So MIDAS does measure video as well as audio, although in most of the charts below, visual media has been excluded.

Share of Audio % (excluding visual)

The topline results show that live radio accounts for 76% of all audio consumption. The next closest category is digital music (downloads) at 9%. To put this in context, here is how radio’s share has performed over the most recent MIDAS surveys:

Careful examination of this data would seem to suggest a few things:

  • Radio remains vastly important in the audio world. While the last couple of MIDAS releases showed it declining a touch, it seems to have bounced back this time around. I’d be surprised if it didn’t fall some more over time since there are such strong radio competitors. But there’s still only one gorilla in this room.
  • Online Music Streaming (OMS in the above chart – e.g. Spotify, Apple Music) is growing. They seem to be growing as digital music tracks and CD listening is declining. Do you pay 99p at iTunes for a track or £9.99 a month for as much as you like? Consumers are shifting towards the latter.
  • Listen again is growing a bit, while podcasts remain static. The latter in particular definitely suggests something different in the UK, from say, the US.
  • Vinyl and cassette is basically static (although the graph doesn’t really show that it was at less than 1% at the start of the period displayed). You can safely treat all those news stories about vinyl’s resurgence as the hyperbole they truly are. Yes, a few albums are being sold as nice to have items, but in the scheme of things, they don’t amount to much in behavioural changes.

Now this chart doesn’t show the whole story. As I say, only RAJAR subscribers get the full dataset of MIDAS, but RAJAR publishes different aspects of the data in each release. And this time around they’ve published the demographic breakdown of listening. Indeed I think some of this has been presented at the Salon de la Radio in Paris over the last couple of days.

This shows some really clear differences by age group.

  • 15-24s spend 51% of their time listening to the radio (the green bar above) compared with 88% of 55+’s time. Radio is still the clear leader, but in time spent listening there is a competitor on the block.
  • Online Music Streaming is vastly more popular amongst 15-24s than other demographic groups. 15-24s spend 21% of their audio time on these services. This drops to just 9% for 25-34s and right down to 1% for 55+. This is as clear a behavioural change by age as you’re likely to see.
  • If you’d asked me to predict which age group spends the biggest proportion of their time listening to CDs, I have definitely said it was an older group. But in fact, the actual biggest group is 15-24s! Are they borrowing others music, or perhaps they can’t yet afford a Spotify subscription?
  • Podcasts are most popular amongst 24-34s, spending significantly more time than other age groups.

One thing to be careful of is that these are percentages within each age group. It’s important to note that overall volume of time spent listening will be different by different groups. So amongst CD listening, 5% off 55+ listening might be significantly more hours than 6% of 15-24s (the data doesn’t let us see).

What will be interesting to see is future growth of streaming. While there are free/bundeled streaming options – notably Spotify, or Amazon’s free offering for Prime members – there is surely a top limit to those prepared to pay £9.99 a month for music? There are ways to reduce the cost including family plans and logins shared with others; and some will happily bounce around different services taking advantage of free three month trials, creating new disposable email accounts as necessary. But continued growth within the UK market still isn’t clear.

Hours isn’t the whole story of course, and it’s worth looking at reach too. That shows that usage is much closer for most of the platforms. So while 90% of 55+ listen to the radio accounting for 88% of their listening, 82% of 15-24s listen to the radio but it accounts for just 51% of their listening.

Audio Reach % By Age Group

A couple of other charts. Ever wonder what people are doing when they listen to the radio?

Live Radio by Activity

Most radio presenters will recall being told to broadcast as though they were speaking to a single listener. There’s a good reason for that. A slight majority of radio listening is done alone, although this changes for younger listeners who listen more socially.

Live Radio by Who Listened With

Other things of note:

  • While most services are split evenly by sex, podcasts are notable for being significantly more male than female – 61% v 39%.
  • While laptops and tablets are used a lot for live radio, on smartphones the majority of use is for digital tracks and on demand audio.

There’s more in the original presentation which you can download on the RAJAR website.

Source RAJAR/IpsosMori. Sample 2,191. Conducted November 2016.

The End of Digital Downloads?

That’ll teach me for writing this too quickly. I based this on a Digital Music News report which was published Wednesday evening UK time. A few hours later, and ReCode was reporting that Apple is planning no such thing. Of course plans change all the time, and record labels can get angry. So who knows what the truth of it was. But I think the piece stands either way.

On Sunday, after a week or so teasing the internet by turning their website to pure white and closing various accounts, Radiohead released their new album, A Moon Shaped Pool. I was able to head off to their website and buy a download instantly.

I’d given Radiohead some money – cutting out middlemen retailers as it happens – and they’d given me some files that, as long as I’m careful, will be playable for years to come.

This is essentially the same kind of transaction I’ve been conducting when I buy music, since I was a child.

But we are in the early 21st century, and it’s all about streaming. So if I hadn’t chosen to spend £9, how else could I have listened? Well, there’s Apple Music or Tidal. The new album is available to stream on both platforms.

Notably though, it’s not on Spotify.

No skin off my nose, as I don’t pay for a premium Spotify subscription, and only every rarely listen to the free service.

But if I was a different – probably younger – listener, I might be a bit miffed. Because if I have a Spotify subscription, I’m unlikely to have either an Apple Music or Tidal subscription as well. Why would you pay twice for access to the same music?

And therein lies my problem with streaming services – they don’t always deliver. Indeed, Radiohead has reportedly been removing some of their other music from Spotify as rights return from their old label to the band itself.

So in that context it was interesting to read a report that suggests that Apple will phase out digital download sales from iTunes within the next two years. The US and UK are likely to be first!

[Update: Apple has quickly denied that it is planning to stop selling downloads according to ReCode.]

The thinking is this:

  • Download sales peaked a couple of years ago and are now falling.
  • In their place is rapdily growing subscription revenue, so why maintain a dual economy?

The article also mentions some Apple specific issues around matching music incorrectly, and “orphan tracks.” Those are a bit of a red herring though since they’re software issues that Apple could quite easily solve if it really wanted to.

iTunes Song Downloads

If download sales are in decline, then why should Apple bother continuing to support them?

But look at this larger picture chart of music industry revenues:

Infographic: Rise of Digital Music Stops the Industry's Decline | Statista

While digital overtakes physical, it doesn’t show a healthy overall picture, and that’s because streaming revenues don’t make up for losses from physical and downloads. Growth is actually coming from other revenue areas.

Special offers aside, the cost to a consumer of a streaming subscription is $120/£120 pa. Yet the average amount spent by British consumers on music currently is less than £40 a year.

By removing the option to buy, Apple is banking on a good number of current downloaders stepping up to become subscribers, yet for the “average” person, that involves a 200% increase in their music spending!

Well, good luck with that.

But my main issue is the one that I started with. Music rental removes my control over my music.

  • If EMI goes out of business tomorrow, my EMI CDs are still safe.
  • If Radiohead decides it doesn’t want to be on Spotify, my Radiohead CDs and downloads remain available to me.
  • If Spotify goes bust, I still have access to my music library.
  • If Apple Music puts its subscription rates up tomorrow, and I can’t afford the new price, I can still listen to all the music I own today.

It’ll be interesting to see how the music industry reacts to this story.

YouTube v Radio

Since Phil Riley, Chairman of Orion Media, suggested it, I thought I’d have a look at what’s happening here.

YouTube has just published a strong blogpost penned by Christophe Muller, Head of YouTube International Music Partnerships, essentially defending their payment structure to musicians, saying that they do compensate rights holders fairly, and that perhaps radio should take a closer look at itself.

I think it’s a slightly scatter-gun argument, so it’s perhaps worth examining the various elements of what Muller is talking about.

But first a bit of background. What you need to know is that Universal, Sony and Warners, three of the major record labels, all have upcoming renegotiations of their agreements with YouTube.

YouTube is also phenomenally successful. It offers a simple, free, proposition for consumers to listen to music. Some reports suggest that more music is listened to on YouTube than Spotify and Apple Music combined. Users can build playlists, and plenty use the video streaming site as a de facto audio streaming site, not actually watching the videos all the time.

According to the FT:

Last October, Jimmy Iovine, the head of Apple Music — and the former chief executive of Interscope Records — told the Vanity Fair New Establishment conference that YouTube was responsible for 40 per cent of all music consumption but generated only 4 per cent of the industry’s revenues.

Set against YouTube are the paid-for streaming services like Spotify and Apple Music. These pay more to the labels, but there’s a limit on who’s willing to pay for such services.

Spotify recently said it had 30m paid for users, while Apple Music has reached 13m. But those numbers are drops in the ocean compared to the wider music-consuming marketplace. Those are global numbers, yet more people listen to music radio in the UK in a given week than those two combined.

Of course, there are many more paid-for services, but it puts these numbers into perspective.

And with YouTube having over a billion users, it’s estimated that as much as 35% of its traffic is music.

With physical sales and downloads declining in revenue, the only real growth for pre-recorded music (I’m excluding “live”) is coming from those subscription services. So the labels are obviously looking at YouTube and thinking that it’s not paying its way.

That explains why YouTube is coming out on the defensive. But what about the radio charges?

Like radio, YouTube generates the vast majority of our revenue from advertising. Unlike radio, however, we pay the majority of the ad revenue that music earns to the industry. Radio, which accounts for 25 percent of all music consumption in the US alone and generates $35 billion of ad revenue a year, pays nothing to labels and artists in countries like the U.S. In countries like the UK and France where radio does pay royalties, we pay a rate at least twice as high.

I’m not going to defend the US rights situation. I do think it’s iniquitous. But it’s worth noting that US broadcast radio does pay the songwriters. It’s the performers who don’t get paid. And it’s also worth noting that performers are compensated on satellite radio and on streaming services such as Pandora.

Beyond that, it’s worth noting that the share of revenues that artists, songwriters and labels get, is something else entirely. When you hear about an artist receiving a cheque for a relative pittance from Spotify plays, it’s worth examining what Spotify actually paid out, and how much – or little – of that found its way to the artist.

But with radio, the truth is that it does provide valuable promotion. Simply put, if radio was just leeching off the music industry, then why would labels work hard to employ pluggers, send their biggest stars to do interviews and to a greater than ever extent, agree to often appear at stations’ events – e.g. Radio 1’s Big Weekend or Capital’s Summertime Ball.

As for the charge that YouTube pays music rights at a higher rate than radio? Guilty as charged. But there is a mighty difference between radio and YouTube. Radio selects what it plays, and listeners get little choice in the matter – tuning in to hear the tracks in the order the station has determined.

Radio certainly is a promotional vehicle in that you don’t get precisely what you want when you want it. On the other hand, you’re introduced to music and discover music as a result of radio.

If I want to hear some Bruce Springsteen right now, I could turn on Radio 2 or Absolute Radio, and perhaps, after several hours of listening, it’s just possible that I’ll hear a single track.

YouTube on the other hand is an on-demand service. It’s like Spotify in that regard. You choose what you want to listen to. If I want to hear Bruce Springsteen, I can cue up most of his biggest hits before you’ve finished reading the end of this sentence.

YouTube, as with Spotify, is used as a direct replacement for buying music. Radio exists alongside as it has always done. There are more stations available, but actually less time being spent per person listening to the radio. Radio shouldn’t be considered the “villain” of this piece from the music industry’s perspective.

Let’s get back to that YouTube piece:

Instead of talking about a “value gap,” we should be focusing on a “value shift;” if the ad revenue currently spent on radio instead flowed to online platforms, it would double the current size of the music business.

Well good luck with that. A couple of days ago, the Advertising Association in the UK announced the value of advertising in the UK. Advertising in the UK has now reached £20bn of which £8.6bn is spent on the internet (43%). Compare this with £592m or 3% of advertising spend on radio.

I’m not sure quite how much money YouTube would to see further “shift” from radio to the internet.

Yes, I realise that they were thinking of the US market where radio gets closer to 10% of the ad spend, while TV is still bigger than digital (at least, it was predicted to be at the start of 2015). But there as everywhere else, digital will take a larger bite of the advertising pie, at the expense of “traditional” media including radio.

I think Muller is driving at the idea that £1 spent on radio advertising delivers less to music rights holders, than £1 spent on YouTube. Except that advertising goes from medium to medium. That shift is already happening – internet spend has gone from 0% to 40% in less than 20 years. There should be plenty of money floating around already!

The lines are blurred now; where once there was paid-for music you owned, and free music you listened to on the radio, there are now paid-for and free music streaming services. Consumers stopped buying CDs or mp3s and started paying for subscription services or using ad-funded free services. These services launched “radio” stations that might allow the skipping of songs you don’t like. It’s all very different.

Yet radio is the key discovery mechanism for music, and provides validation. Most people do not want to spend hours trawling through new music blogs looking for something new. Radio still does that job.

Incidentally, Radio 4 has just broadcast an interesting two-part series The Business of Music. The two episodes have been edited together to make a single episode in Radio 4’s Seriously podcast, and it’s well worth having a listen.

Amazon Prime Music – Filling A Hole

AmazonPrime

Back over the summer, Amazon launched its Prime Music offering in the UK. Anybody who pays Amazon £79 a year, for it’s free next day delivery service, and video streaming service, now also has access to more than a million tracks and hundreds of playlists to stream via the web, Fire TV or a mobile app. I’ve been using it on and off since it launched and thought it was worth writing about.

“A million songs you say? That’s a bit rubbish compared to the 30 million that others like Spotify and Apple Music offer?”

Well it is, and it isn’t.

But I don’t think this is really competing with those services. If you are subscribing to one of them you’re paying three times what the UK average consumer is used to paying for music on that subscription alone.

When it launched, it was noticeable that music from Universal was notably missing. But Amazon has subsequently done the deal and added some of their catalogue to its Prime Music offering.

In any case, this isn’t a full service as Spotify and Apple would offer. It’s an “enough” service. You’re already paying for it if you have Amazon Prime, so it’s just a free bolt on to you as a user.

If you need some more convincing, look back at my piece explaining how the average UK consumer spends less than £40 a year on music. Spotify Premium or Apple Music are not mass market offerings. Those companies might like them to be, but in fact they mostly appeal to a subset of the universe of people who listen to music.

I’ve been intrigued to see how Amazon’s offering is developing. Two weeks ago, the new Adele album, 25, was released to fanfair of publicity and primetime TV exposure. Notably, the album is not available to stream on either Apple or Spotify’s streaming subscription services. On the other hand, another album that will likely be a big seller ahead of Christmas is Enya’s new album, Dark Sky Island. That album is available to stream on Spotify, but perhaps more interestingly, Amazon.

For the most part, Amazon’s one million tracks are slightly older fare – albums mostly having been out a year before they reach Prime streaming. There are a few other newer albums on the service too like new ones from “Jeff Lynne’s ELO” and, er, One Direction.

And then there’s this week’s big new release, A Headful of Dreams by Coldplay. That too can be streamed on Amazon. It’s also seemingly on Apple Music, but is not available to stream on Spotify (possibly because Spotify won’t offer different catalogues to premium and free users). [Update: Seemingly, Coldplay’s new album will be available on Spotify from this Friday, 11th December]

Amazon is making quite a big deal about all four, so I imagine that there’s some kind of marketing quid pro quo going on.

[A little side note here on Adele.

Some have suggested that Adele is just being greedy not making her album available on Spotify et al. She has in past spoken pretty naively about the amount of tax she pays, which doesn’t come across well when you’re a multi-millionaire. But I think she’s entirely within her rights to get people to buy her album for a tenner rather than stream it for tuppence. She is the minority of artists who have the clout to demand this, alongside the likes of Taylor Swift. Kudos to her if she can get her own way.

The other slightly daft comment I’ve heard is that this somehow forces people into “ye olde” ways of buying a CD and ripping it.

Er. No.

Yes, the CD is getting distributed in hundreds of stores, including places like Tesco Express where you wouldn’t ordinarily expect to see music, but it’ll also sell a bucket-load on Amazon, iTunes and Google Play, all of whom will let you instantly download or stream the album without you ever having to go near a shiny disc.

In any case, there are still an awful lot of people who listen to music, but don’t subscribe to a streaming music service, or even use a free one. And they buy Adele albums as her gargantuan sales show.]

Back to Amazon Music.

30 million tracks is a ridiculously large number. So is one million. That’s still a lot of music. In fact it’s a scary amount of music. That means that it’s interesting to see how much curation is coming into play with all the music services these days. Because unless you are a real “muso,” there’s nothing scarier than that empty flashing box at the top of the screen asking you what you’d like to listen to.

Most of us have no idea what to type, apart from a handful of very obvious artists.

So like Apple, Amazon has pre-populated dozens of playlists for you start with.

And when you consider that some popular radio stations play as few as 400 unique tracks across a month, you’ll understand that a million tracks is actually quite a lot of choice even when you dive down into your preferred genres of music.

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My main criticism of the service so far is accessing the music. It is true that there are perfectly functional apps for iOS and Android, with the latter not requiring you to download it from Amazon’s own store rather than Google Play as the do with the Amazon Video app. They’re functional rather than wonderful, but you get offline downloads and it merges purchased tracks with Prime Music that you “add” to your library.

But curiously, if you use a Fire TV, you’re mostly limited to playlists. I’ve yet to discover a good way to navigate around their offering, looking for individual albums within the Fire TV interface. If it’s there, it’s not intuitive.

The one thing I can’t try is listening via the Amazon Echo. Having recently had a chance to play with one a little, I’d actually love to buy one of these devices. But Amazon has yet to deign to release them outside of the US for reasons that aren’t really clear, since just about all the rest of the hardware, even their ill-fated phone, made it to the UK.

For me, the most useful aspect of Prime Music remains the automatic digital copies Amazon has of at least some of the CDs I’ve bought from it over the years. It’s not complete – indeed today, there are still plenty of new CDs that don’t come with Amazon’s AutoRip. But it at least gives me an immediate subset of my audio catalogue which can be supplemented with the Prime offering.

In the end, is this as good as the other streaming services? No, of course not. It was never designed to be. But if your household is already paying for Amazon Prime, then I can imagine a lot of people very happy to dip into Prime Music now and again.

A Curious Case of Google Play Music

Screenshot 2015-09-06 at 11.51.39

Note: See multiple updates on this story at the end.

I use Google Play Music as my primary music service. That is, Google Play Music hosts my audio files allowing me to play them back via my phone, the Chrome browser or a Chromecast. I’ve never felt the need to subscribe to a music service because I own an awful lot of music – around 20,000 tracks you may recall. If I subscribed, I’d end up playing a lot of that music anyway. And in any case, I like to know with certainty that the music I want to listen is available to me and hasn’t been removed at the whim of an artist or because a record label’s agreement had lapsed with my service provider.

(For what it’s worth, I keep a local duplicate library in iTunes.)

A little while ago when Google launched its subscription service – charging the same £9.99 a month that Spotify and everyone else does – I got a free trial of their full service. I used it a little to experiment with – going beyond my own library and being able to play anything I wanted. In general I wasn’t that bothered with it. However the most interesting part was their integration of Songza into the app.

If you’re a full subscriber, you’ll get suggested playlists dependent of the time of day, day of week and so on. So first thing in the morning it might be upbeat music, music to exercise with or to commute to. Then during the work day it may offer you tracks to get you through that, or do to chores to. By the end of the night it could be offering songs to go to sleep to, or music to play at your house party. You get the picture.

It’s pretty intuitive, and there are usually two or three sub-menus to get to some music that suits you. It was kind of fun, but not enough on its own to make me want to pay a subscription.

Then last weekend my Google Play Music account changed. I logged in and up popped those options for radio stations. It seemed as though I was able to access the service that launched in June in the US. This is a free version of the service that offers limited skips and supposedly serves visual ads. You can’t see upcoming tracks, but it was clear that the service was making good use of my own healthy library (like Spotify, Google doesn’t have to pay rights if I already own the track).

The same service was replicated on my mobile phone. I was quite excited about it, and spent a couple of mornings listening to the service. It seemed pretty decent.

And then it was gone.

My phone was displaying a repeated “Connection error,” despite the fact that there was no loss of data connectivity.

Loading the service into my browser displayed my old familiar service. What had happened?

Searching Twitter only resulted in finding a couple of other people who’d noticed the service.

Is Google trialling the service in the UK? Is it because I initially got Google Play Music through a loophole when it was US only? Was it because I occasionally use a US VPN?

Who knows. But I wouldn’t mind getting the service back. I was quite enjoying “Ambient Scandinavian Stargazing.” (See screenshot above from a tab I left open)

[Update 7 September: And radio seems to be back again!]

Screenshot 2015-09-07 at 22.45.40

[Update 10 September: And it’s gone again. This is getting ridiculous.]

[Update 11 September: And it’s back again. I’ve literally no idea whether I should or shouldn’t have access to this service and whether Google has genuinely launched it in the UK or not.]

[Final update: It went again pretty quickly, and it’s not been back. So new proper UK launch of the service yet.]

How Should Spotify Pay For Its Music?

Ooh Chris Martin on your Radio

Yesterday I got into a bit of a discussion with James Cridland on Facebook about the rights and wrongs of how services like Spotify distribute their revenues. And I thought it was worth sharing and expanding on some of my thoughts on the matter.

This comes off the back of a Medium piece from Sharky Laguana.

But I’ll preface things by reiterating that I don’t think the flat subscription model works at all well for the music industry. Go back and read this piece to understand why I say that.

Sharky explains how Spotify uses what he calls the Big Pool method of distributing royalties. He believes that the Subscriber Share method would be fairer.

Big Pool

The Big Pool method takes all the revenues that Spotify earn and attributes to rights holders – about 70% of the money subscribers give them – and then it divides that pot of cash by the total number of streams delivered. In his example, which uses December 2014 data, that means $0.007 per stream. Spotify then pays out that money accordingly, based on the number of streams each song has had.

I’ll leave you to read why he thinks this method is bad. But in essence it means that a large proportion of the money you personally give to Spotify each month goes to artists and rights holders that you don’t yourself listen to.

Subscriber Share

The Subscriber Share model works in a different way. It looks at each user’s listening habits and apportions the relevant money that subscriber pays (~70% of your monthly fee) to those artists/rights holders. Ed Sheeran might be one of the most popular artists on Spotify, but because I don’t listen to him, none of my subscription goes to him – it just goes to artists that I listen to.

So which of these methods is fairer?

I would actually argue that they’re both legitimate ways of dividing the spoils. The difference between them depends on how you look at an offering like Spotify.


  • Do you consider your usage in isolation: you have £9.99 to spend on music each month, how do you spread that out? Which artists do you apportion that money?
  • Or are you paying £9.99 for a service. Your cash pays for access to 30m+ tracks which you can listen to as much or as little as you like?

Spotify as a Service

Spotify treats the money in the latter manner. And this is not an uncommon way of doing things.

Think of your pay monthly phone tariff. For a flat fee the operator gives you unlimited calls and unlimited texts. I might be a relatively light user of the service, only speaking for a couple of hours a month or sending a handful of texts. You might live your life on the phone and send hundreds a texts a day (OK – I know all the kids are on WhatsApp or whatever, but you get the point). The operator prices its products on the overall usage. It has inter-network fees it has to pay, and it needs to make sure that the overall spread of usage is balanced out by the subscription fees it collects.

Or think of a gym membership. You and I both pay £50 a month. We can go as often as we like. But I’m lazy and I only go once a month. I should really cancel my membership. Each visit is costing me £50 a time! You go daily, and you get great value from your membership – use of all those facilities and only £1.50 a time! The gym needs to ensure that it collects enough subscription revenues to pay for itself and not be full the entire time.

At its very simplest, this is how our taxes work too. I don’t have children, but some of tax money is spent on schools. You might have a serious medical issue, and the NHS may offer treatment vastly in excess of the income tax or National Insurance you pay.

In terms of Spotify, some people get amazing value from the service – they listen morning to night and stream thousands of tracks. But most subscribers stream far fewer. There’s nothing to stop them streaming more, just as there’s nothing to stop you going back for seconds at an all-you-can-eat buffet. But some people are full after one trip, while others are students who want to get full value!

In terms of how artists and rights holders get paid, should this depend on how much I personally use the service? Or should it depend on the overall usage by all the service’s subscribers? After all, even without considering rights payments, someone who streams Spotify 10 hours a day is costing more in bandwidth than someone who streams for 10 minutes a day.

Think of it in “Entertainment Hours.”

Ed listens for 10 hours a day or 300 hours a month, while Taylor listens for just 30 hours a month.

Should each Entertainment Hour delivered to Ed be worth less than each Entertainment Hour delivered to Taylor simply because Ed uses the service more?

Indeed the Big Pool share is pretty consistent with how music is paid for in general. In UK radio for example, stations have to return a list of all the tracks they play, and royalties are calculated by simply dividing the stations’ royalties fees accordingly.

If I want to start an online streaming radio service, I will quickly discover that royalties are charged on a per-song/per-stream basis. In other words if there are 10 people listening to my service when a particular song is played, then it costs me 10x that per-song/per-stream price.

We Don’t Have The Data… But Denmark Does

None of what I’ve argued here should discount the Subscriber Share model as being a legitimate alternative method to paying out royalties, although I think you’d have to consider what Spotify is as a very different beast.

But to truly calculate the impact of one method of payment to another we need data. It requires a big bulk of real usage data sampled properly from the full Spotify subscriber base. Because it’s simply not possible to calculate which artists do better out of which system without access to that data.

In Sparky’s example, he points out that Alt-J might earn $1.75 from a single subscriber under the Subscriber Share method assuming that user plays them 25% of the time. Based on the same average usage, the band only receives $0.35 based on the Big Pool method.

But what that ignores is the overall playing of Alt-J across all users. If the Ed Sheeran/Taylor Swift playing mainstream, who account for the bulk of subscribers, also stream just a single Alt-J track, does that add up to more money? Under the Subscriber Share model, the amount might be incidental. But added up across many more listeners, could the Big Pool revenues actually add up to a similar amount? Without the data we simply don’t know.

Via a comment to Sharky’s Medium piece, I was directed to this fascinating Danish report based on a month’s worth of Danish streams via WiMP (available in Denmark, Germany, Norway, Poland and Sweden).

The report looked at the top 5,000 artists played across that month. Unsurprisingly the top 1% of artists accounted for 28.2% of streams, with the top 20% of artists accounting for 80.1% of streams. The tail gets long very quickly.

What the report also clearly showed is that people who listen to less popular artists also listen to more artists. And that doesn’t help the economics for those smaller artists.

“Because the most popular artists have the least intensive listeners, per user distribution [Subscriber Share] would generally move money from the tail towards the head.

“Among the top 5,000 artists, per user distribution would primarily benefit the most popular artists at the expense of the less popular. The top 1% among the top 5,000 artists would go from 28.2% of payout with the current model [Big Pool] to 31.0% of payout with the per user model [Subscriber Share]. Artists between 1,000 and 5,000 would go from 18.1% of payout with the current model, to 15.9% of payout with the per user model – a relative decrease of 12.1%.” [My emphasis]

This also goes back to my contention that the music industry loses out massively from its biggest fans by letting them have everything for a flat rate when they were previously spending much more.

Other Considerations

What happens to your subscription money if you don’t listen in a given month? Under the Big Pool method, it makes no difference. Your 70% rights share gets thrown into the pot. But under the Subscriber Share where does it go? Does Spotify just bank it? This isn’t quite as niche a case as you might think. Globally some mobile phone operators include Spotify Premium subscriptions in their packages, and not all of those subscribers will take them up on those deals, but revenues are probably collected. I know that I used to have a Deezer subscription via Orange that I essentially never used.

The major labels may also have determined minimum pricing per stream. Under the Subscriber Share model, it’s possible that the price paid per stream would drop, and that may cause issues.

And it’s worth noting that while I’ve no doubt that the Big Pool method works satisfactorily for the major record labels (they wouldn’t have signed up otherwise), it must surely do OK for the independent labels represented by groups like Merlin. Spotify et al need indie labels for their services. As well as some major superstars like Adele appearing on Indie lables, the services simply wouldn’t have the requisite breadth without them.

Summary

As I said right at the start, I wouldn’t argue that the Subscriber Share method isn’t a valid one, but it’s not as black and white an issue as might be painted. Spotify is a service, and like every service you use it to a greater or lesser extent. But it does at least treat artist equally, and each play is valued the same. So in that sense it’s equitable.

And the Danish report suggests that it’s actually a better deal financially for smaller artists. In fact it’s the biggest artists who should be complaining.

Apple, Spotify and a Binary Way of Selling Music

Microphone in Studio 2

Apple Music is now up and running. If you have an iPhone, you’ll be pestered to update your device, and a new Music app will appear that on first open is desperate to give you a 90 day free trial of Apple’s Spotify-like experience.

So I dusted off an iPod Touch (mainly bought to use Lightroom Mobile when there was no sign of an Android version), and updated last night to see what the fuss was about. But I didn’t bother with the free subscription because I’m old. I already own lots of music – far more than I actually listen to. So I don’t feel the need to invest in a paid subscription music service.

Beats 1 seemed to work fine when I tuned in. But I tuned out again pretty quickly because, well, it’s not really up my street musically. Their exclusive upcoming Eminem interview is not really something I’m likely to tune in for.

But the station worked, which was more than could be said for all the other “stations” I was presented with. Perhaps they didn’t work because I’m not a subscriber? Or perhaps because it was day one, and there are some bugs to fix?

The BBC World Service – seemingly the only non-Apple station on the service at launch – did work though. So in practice I was presented with a choice of either Beats 1 or the World Service. I confidently predict a surge in World Service streamed listening! (Disclaimer: I’m working alongside the team that did this deal. Radio folk – I bet you’re jealous that your stations aren’t there!)

The question then is, what impact will Apple have on other people’s music usage? Will they tempt new users or bring Spotify users across? How invested are they in their playlists? Or do you want to hear an exclusive new Pharrell song? (So good you can only get it there, or just a particular live version?)

No sooner had Apple announced it’s Music proposition a few weeks ago, than Spotify responded with new record figures.

In a blog post, it reported that it now has 20 million paying subscribers globally up from 10 million a year ago. And it also now has 75 million active users – defined as those who’ve used the service in the past 30 days.

Those would seem to be some very solid growth figures. But although all 20 million are paying customers, it’s not clear that they’re all paying £9.99/$9.99, and whether they’re doing so directly out of choice. It’s quite a big step to hand over £120/$120 a year for music, even if it’s in small “insignificant” monthly payments.

It’s notable, for example, that various mobile carriers around the world are bundling Spotify into their offerings.

In the UK Vodafone offers Spotify on some of its packages, in the Phillipines Globe Telecom offers it with some tariffs, while in Hungary Maygar Telecom offers it. Of course Spotify isn’t alone in doing these kinds of deals. I first used Deezer via an Orange tie-up for example.

The problem is that these are not necessarily permanent offers. Telecoms operators provide them for a while as marketing initiatives, but can quite as easily switch to something else. Orange became EE, and I no longer have Deezer. That has the potential for seeing premium subscriptions fall in the future if operators choose different marketing initiatives to attract and retain customers. Alternatively, telecoms groups will be able to drive down prices because the streaming companies need them to keep paying customer numbers up, more than vice versa. I suspect that some of the most important jobs in streaming companies like Spotify are handling relationships with mobile operators.

Spotify has also published a slightly defensive video explaining why it has a freemium model. It says that 80% of its premium customers began on its free plans, and it likens its model to music being available free on the radio, leading to music sales in record shops.

Undoubtedly the revenues that Spotify is earning are growing, and therefore so are the amounts that are being paid out to artists. (Cumulative payments to artists, incidentally, are meaningless, and we should stop looking at them. Annual revenues are the real benchmark.)

But it’s not at all clear to me that the subscription model provides a net gain for the music industry over Digital To Own (DTO – or downloads, to you and me).

While streaming revenue is growing, album and single sales are declining in value (regardless of whether in physical or digital format), and overall in 2014 there was a decline in value of the UK recorded music industry of 1.6%. And globally, industry revenues fell 0.4%.

I’ve argued before that this must largely be down to the inequal way people used to buy music, and the binary way we are being pushed into paying for it today.

Put another way, the BPI says that the average UK spend on music in the UK in 2014 was £39.52.

While averages can be dangerous, remember that this incorporates both those who spend nothing at all, and those who buy many albums a week. In essence then, a lot of people are buying perhaps the equivalent of 2-3 albums a year, and a significant minority of music fans, spend an awful lot more than that.

Or at least they used to. Here’s a thought experiment:

Think of a light music purchaser and a very heavy one.

The light music buyer used to buy perhaps the equivalent of a couple of albums a year. Maybe a few big tracks and one of the big albums in the run-up to Christmas. Maybe they spent £25 in total (£39.52 was the average remember, lots of people are spending less than this).

Today, in a convenient streaming world, they instead get Spotify Free, and put up with the limitations it offers and the adverts. This actually gives them access to much more music than they had previously when they were hearing the same few tracks or albums over and over.

But does the value of the advertising revenue Spotify hands on to labels make up for their share of what was previously £25? No, they don’t have all the convenience of mobile apps and offline listening, but these people really aren’t interested in music that much. There are a lot of them, and a shift to Spotify is a net loss.

The heavy music buyer used to spend perhaps £30 a month on music. Once upon a time they’d have been trawling the shelves on a Monday in a record shop looking at the new releases. They shifted online, but they were buying a lot. Perhaps they were driven by the music press or blogs. Those who bought physical formats had collections that spanned walls or even rooms. They were spending £360 a year!

Today, in a convenient streaming world, they instead pay £10 a month for Spotify Premium (or Apple Music) – or £120 a year. Sure they buy a handful of other albums to own, perhaps those of favourite artists. Let’s be generous and say £100 worth. But that’s still a massive shortfall: £220 instead of £360.

Indeed it’s reported that the top 10% of digital music buyers accounted for 55% of digital music spend in 2014 (Enders).

These people who are the bread and butter of the music industry – those who bought the magazines, and spent hours drifting through record shops – are now much less valuable if they shift to Spotify Premium or similar.

So even though consumption of music is probably higher than ever, with just about all recorded music at their finger-tips, the net revenues from them are less.

This is probably a bit of a simplistic model, but it explains why even though Spotify is showing solid growth, and ever increased revenues paid out to rights holders, that’s not really the whole story. (Inicentally, if anyone has access to the more detailed BPI numbers as published in their Music Matters yearbook, I’d love to see them. But not enough to pay £85!)

I’m left asking the question as to why the music industry thinks that this is a good model? Or if it is, why are the prices set at the levels that they are? And the binary “free” or “pay £10/$10” doesn’t seem to allow for any nuance. Tidal might have tried quality for £20/$20 but that seems unlikely to work.

The only way the sums can stack up for the music industry is if Apple or Spotify can persuade many more people to spend significantly more money on music than they’ve ever done before. They have to convert a £40 a year spender into a £120 a year spender. That’s a massive challenge in economic terms.

It’s not at all clear to me that the one-size-fits-all model works.

If it did, we’d see a lot more all-you-can-eat buffets instead of restaurants with set menus.

Apple Music

So now we finally know the details of Apple Music.

I won’t go through all the details because every site on the planet has already done so, breathlessly live-blogging the full announcement. So go elsewhere for those.

To be honest, as The Verge reports there are probably some sighs of relief around the rest of the streaming music world, because Apple hasn’t actually announced a service that’s leaps and bounds ahead of the rest of the pack.

They’ve got a streaming service, a radio service, and some kind of social media bolt on (nobody mention Ping, OK!).

And what they do have is scale. They’re launching in 100 countries all at once. I imagine, because they have gargantuan teams of lawyers who have been working those deals. Other services like Spotify have had to launch market by market. Even Netflix is still going country by country.

The price point for Apple Music in the US is the same as for all the competitive products – $9.99. I can’t find details of a UK price, but I imagine we can see a magic exchange rate in action and as for Spotify, expect to pay £9.99. There’s also a family plan which is innovative, although I suspect many families currently just share the same streaming subscription. And Apple is actually deigning to make an Android app, although not until the autumn.

The big play Apple has is that it will send an upgrade to all iOS devices with a no-doubt unremovable icon (or set of icons) promoting the service. Spotify et al need you to download and install their app. Apple does that bit for you.

[An aside: isn’t this sort of thing what the EU accused Microsoft of doing when it was rolling out Internet Explorer with Windows updates in an attempt to kill Netscape? They got very angry about that. I know the EU has been looking at suggestions that Apple wanted labels to limit Spotify’s free plan, but that’s somewhat different.]

To be honest, the most interesting part of the whole announcement seems to be Beats 1 which sounds very much like a regular radio station. Zane Lowe is the key person behind this and he will be broadcasting daily from LA with other shows coming from New York and London, live around the world (We’ll get Zane Lowe for drivetime). From what I can tell this will be an advertising-free experience.

In some respects then, another free online radio station. There are many of those already; licenced or not. But I wouldn’t underestimate the power of this station. Apple can throw more money at this project than any radio broadcaster in the world.

And it’ll be free to listen to. You won’t need to be paying for Apple Music to hear it. With big music acts doing exclusive things on the station, I imagine that this will be the free-entry point into the service. Something to persuade you to subscribe.

Of course it probably won’t be directly competing with your station because I suspect that the music mix will be quite eclectic. But it’ll have massive credibility. And I expect that the station will allow its presenters to have their own voices. Stations that do this seem to do well (cf. Radio 2 and 6 Music).

But then it sounds very much like Beats 1 is just the first of a set of Apple branded radio stations. They certainly use the plural in their promotional material.

Here’s an interesting thing though. A big part of Apple Music is curated listening. So rather than simply rely on algorithms, an actual programmer will build playlists (Spotify and others do this too of course). Apple is spreading their net far and wide to create those playlists.

I note from Apple’s website that various music magazines and sites are building playlists. These include Q and Mojo – owned by Bauer Media. That would seem to mean that Bauer on Apple will be competing with Bauer’s own radio services for listening! I suspect that Bauer thinks being inside rather than outside is the better bet.

Earlier I wondered on Twitter whether radio stations that in the past had been massive Apple fans, had been talking about Beats 1? 6 Music did, but I’m not certain about others.

Let’s face it, stations have previously been in a rush to align themselves with Apple and announce the cool new iPhones or iPads that they’ve launched. There’s been basically little need for Apple to run radio advertising (has Apple run any radio advertising in the UK?), because stations plug the products for them free of charge. Indeed ask any promotions team and they’ll tell you that Apple products are what prize winners want to win in competitions.

So will stations be quite as keen to hand over free publicity to a device that now has a button – front and centre – that will compete with your brand? Apple is now a well-funded competitor.

[Update: I thought this piece from The Guardian was well worth linking to, with some really interesting numbers. In particular the fact that the average consumer is not going to be spending £120 a year on music when they currently pay just £40. Sure, some people will. But most people just aren’t into music to that extent.]

Thoughts on Tidal and Streaming Music Services

CD

I’m still not really clear about Tidal – the music streaming service. There was some kind of hideous press conference with lots of very successful – i.e. rich – artists talking banalities earlier this week in New York.

But at this stage, a streaming music service really needs to have a point of difference compared with rivals in the marketplace including Spotify, whatever-Apple/Beats-comes-up-with, and Google Play Music.

The first issue is price. There really isn’t a great deal of competition here. Paid for, or premium prices are pretty consistent across the board. So Tidal has a £10/$10 a month fee for Premium and a £20/$20 a month fee for HiFi. This is one of their two key points of difference from what I can tell. There’s no free tier, and they’re streaming using a lossless Flac format. That makes it the same quality as a CD, although it’s not the same as an album master. The format they’re using is still 16 bit and 44.1 khz sampling, whereas most studios record in higher defintions than that.

That all said, I’m not convinced that many beyond those with “golden ears” and seriously high-end audio kit are likely to notice the difference listening to most overly-compressed popular music.

So technologically they’ve got an interesting proposition, although you’re probably going to have to dial that back on a mobile device unless you’re using WiFi. But what else do they have?

Well they want their artists to give them exclusives.

Whether that’s achievable or not is another matter, and probably down to what contracts artists have with their labels. Is it in a label’s best interest to give one platform priority over another? Platforms do get exclusives of course. Spotify might get an album a week ahead of everyone else, or a “special edition” CD may only be available from a particular retailer. But that’s normally because the platform or retailer is promising something in return – maybe they’re heavily marketing the artist, or adding some kind of other added value.

Finally there’s the claim that Tidal will make more money for artists, and that’s the bit I really struggle with.

There are regularly cases of artists saying how relatively little Spotify has paid them for millions of plays of tracks. On the other hand, Spotify pays around 80% of all the money it earns in royalty fees and isn’t yet profitable globally.

If we assume that Spotify keeping 20% of its revenues is a fair amount, but that artists are not being fairly rewarded, then it also suggests that the current numbers just don’t really add up.

Spotify, of course, has an advertising platform, and that drags down the overall revenues it makes, since the advertising supported service returns less per track in revenue. But in terms of comparing paying subscribers, I can’t see how Tribal and Spotify can pay much differently on a per track streamed basis.

If I subscribe to each service and listen to the same amount of music on each, then rights holders are going to get paid the same share of my £10/$10 a month since Spotify and Tribal cost basically the same amount of money to me as a consumer.

And let’s not forget that those revenues are split between artist, songwriter and copyright holder – with the label often being the latter. If you “just” performed the song, then a decent chunk of revenues that Spotify or Tribal are passing on, are not making their way to you. That’s frequently the case with big hit records, and it’s worth taking into account when a performer is bemoaning what they’re getting. Did they write the song? On their own? And who owns the publishing rights of the song?

But if there was no free version of Spotify, I can’t see how Tribal would pay more out that Spotify, short of eating into that remaining 20% of revenues which have to cover overheads, technology, staffing and so on. And again, I’ll point out that Spotify is not yet profitable – the business model isn’t yet proven.

Ownership does pollute some of this. It’s thought that a number of artists were given shares in Tidal in order to help promote it. All the more reason for them to back this service. On the other hand, a number of big record labels have shares in Spotify, and hence they’re perhaps more likely to favour that service.

It seems to me that Tidal is unlikely to attract those who’ve been happy with the free version of Spotify, although it might tempt current premium Spotify users across.

The only real way it’s going to make more money is by getting people to pay more – and the £20/$20 price point is just that. But I’d be amazed if more than a fraction of subscribers go for the high-end option.

To me, it’s a question of acknowledging that perhaps $10 a month is too low if you want to get paid more. Although the rumours are that Apple would like its service to cost $8 a month – a battle that labels are currently fighting.

The real difficulty is that before we had these streaming services, there was a real range of different types of music consumption.

A large part of the population certainly didn’t spend as much as £120/$120 a year on music. The average person only bought about two albums a year. These are the people that make up the masses of Spotify’s free subscribers. If they only spent £20 a year on music before, they’re not suddenly going to spend 6 times that now. Worse, the record industry is probably only making pennies on the pound of that £20 they used to earn.

On the other hand, there are those who probably bought an album a week or more – your £50 man (remember them?). Now they’re only paying £10 a month for Spotify Premium. There weren’t nearly as many of these, but they sure did spend a lot on music. And the industry is losing out on revenue from those people. (That’s not to say that this was guaranteed of course. There are lots of demands for the leisure pound.)

However, now we’ve baselined everything. Everyone pays either nothing or £10/$10 regardless of how “into” music they really are. I just don’t think the “Netflix model” really works for the industry.

The question then is this. If Spotify Free was pulled tomorrow, what would those users do? Let’s assume nobody else had a free service they could shift to. (As an aside, I note that the EU is looking carefully at Apple’s agreements with record labels to prevent them forcing Spotify to do this very thing.)

A few would upgrade to Premium. But I think a lot of people would say, “Well it was nice while it lasted, but I’ll go back to the radio, YouTube or just buying a few songs ever now and again from iTunes.”

In the meantime, I’ll continue to buy physical CDs from bands I really like and want to support.

The other day on my commute to work, I noticed the woman next to me fumbling in her bag and pulling out a CD Walkman!

“How quaint,” I thought as she plugged it in. But of course, she was listening to her music “losslessly,” and whoever she was listening to had been fairly compensated. Maybe she isn’t behind the curve but ahead of it?

Update: Here’s a link to Paul Flower’s piece as mentioned in the comments.

Spotify and Meghan Trainor

A week or so ago I popped in for a couple of sessions of an interesting music tech conference held in the BBC Radio Theatre called On the Beat.

One of the sessions included a presentation by the always interesting Will Page, Director of Economics at Spotify. He was examining the interaction of Spotify, Shazam, radio and sales in the case of the big international hit All About That Base by Meghan Trainor. And Spotify has just published the details from Page’s presentation. It’s well worth a read.

This was a track that was massive in the US before reaching the UK. What was particularly unusual was the delay in it being released to buy in the UK. Spotify made great play of that in the UK, having the track for a month and a half before consumers could buy it.

The key UK chart is probably this one:

UK performance

The theory goes something like this. When people first hear a song they don’t know, they Shazam it, quite probably from some kind of broadcast media. Then they might either listen to it via Spotify or buy it somewhere like iTunes. But of course, if you can’t buy it, but can rent it on Spotify, then that’s what you do.

And the key thing with this track was that it was the first song to make the UK charts via streams alone. The chart rules changed this year, and 100 streams = 1 sale under the new rules.

Spotify’s case study very properly suggests that withholding the song from retail may have well damaged sales, and that the music industry should be borderless, not holding back tracks artificially on a territory by territory basis.

But I do have a little bit of an issue with the charts. You see, for market sensitivity reasons, you’ll notice that there are no numbers on the y axis. The numbers have all been normalised. The peak number of Shazams is not equal to the peak number of streams which is not equal to the peak sales. And most relevantly, nor is the amount of airplay listens coming from radio.

Because if you look at the chart above, it looks like radio came to the game very late with this release. Aside from a small number of Spotify listens very early on (before the track was on Spotify?), it’s Shazam that seems to lead the way. But what are people Shazam-ing?

They could be hearing it in clubs. That was the suggestion given in the room when someone raised a similar point. Other data shown at the conference by Shazam show very clearly that club tracks get heavily Shazam-ed at weekends. But put in context of a massive hit record like this, I’m unconvinced it’s purely clubs.

But I wonder if the detail isn’t in the normalisation? Radio gets thoroughly flattened by the process. But a handful of plays on some key shows when the chart is “normalised” might appear hidden. Because without the artificial flattening, I’m certain that radio would have the biggest peak, followed by streaming/Spotify, then sales and then Shazam. And those might be quite substantial differences in scale (See my piece on possible artist earnings from radio to get an idea of that scale).

So a few key plays on Radio 1 or Kiss early on, may have led to a lot of Shazam-ing among music influencers, which certainly then meant a lot of Spotify listening (since that was one of the few places you could hear the track), before sales only came in pretty late in the day once the label had released.

Because if people are Shazam-ing your song, they’re hearing it somewhere without the ability to find out the track’s name (i.e. probably not online). And clubs aside, that usually means radio.

I wouldn’t deny that radio, like the label, was late to the party with this track. However radio always stays with a song longer than sales do (“I’ve already bought the track, but that doesn’t mean I don’t like to hear it”). But I wonder if it wasn’t early as well?