Some key take-aways from Midem, from a mobile perspective
Although mobile was not a headline topic last week at Midem, the music industry’s big meet-up held every year in Cannes, it permeates a lot of the things that were the focus of discussion at the show.
Under an unusually cold, grey and wet sky, there was much agonizing about whether music-streaming services are good or bad for the music industry, especially artists. There was also plenty of discussion about whether self-publishing is a better route for artists than labels, as labels’ A&R budgets dwindle and more and more digital tools come on stream to help would-be stars carve out their own careers.
Mobile is the value-add that attracts the highest premium in streaming services such as Spotify and Rdio. I spoke to Scott Bagby, Rdio’s vice president of strategic and international partnerships, who said that the majority of Rdio’s subscribers are on its top-premium mobile-access tariff. (Bagby would not go into details about how many people are subscribed to Rdio – which is now deployed in seven countries – nor on the amount of revenue the service has made so far.)
Rdio’s pricing model – US$4.99 a month for ad-free streaming on PCs only or US$9.99 a month with mobile access added in – essentially copies that of Spotify, which launched in the US last July with the same prices. In its home territory, Europe, Spotify charges €4.99/€9.99 a month (£4.99/£9.99 in the UK). The difference with Rdio is that Spotify also offers a free ad-funded entry-level service – which proved a major bone of contention with the labels when trying to extend the service’s licensing agreements to North America.
Others in this new breed of music-streaming services, such as Deezer and Mog, offer exactly the same pricing and pretty much the same service. It is a remarkably uniform offering for such a nascent sector with an as yet unproven business model – unproven both for the providers of the services and the labels and artists from whom the music is licensed.
Why such uniformity?
Some in the industry blame the labels for this uniformity, claiming that they are forcing the same pricing and service models on all new entrants wanting to license the labels’ catalogs. I spoke to one source that was in negotiations with the major labels to set up a streaming service, only to be frustrated by their inflexibility.
Not only do the labels expect the same pricing in all territories, regardless of whether it is Scandinavia, southern Europe or the developing world, but they also demand that new services stick to the same kind of offering as existing ones, said the source. This imposed uniformity not only makes it virtually impossible for new entrants to differentiate from existing services, but it also undermines the viability of streaming services in lower-per-capita-income countries, he added.
Label representatives wouldn’t comment on these allegations. But with the labels only just beginning to become comfortable with the Spotify business model, it wouldn’t be that surprising if they were cautious about embarking on further experimentation just for the sake of tweaking the model for new players. Licensing music they have done to the likes of Spotify has taken the labels a giant leap of faith – for which they are getting continued flak from artists, who complain of seeing little return from the number of “plays” they get on streaming services.
The maths of streaming services
I heard at the show that it takes around 700 plays on a music-streaming service for an artist to earn the same amount of money he or she would earn from just one download on an a-la-carte service (based on a reported conversation between an industry insider I spoke to and a label). That sounds like a rotten deal – until you compare it with radio and YouTube, each of which requires infinitely more plays to earn the same money.
Would the artists who have pulled out or threatened to pull out of streaming services also pull out of radio and YouTube? It’s certainly unlikely in the case of radio, which artists have been using for decades for exposure. The argument for streaming services is that not only do they provide artists with a legal, and monetizable, alternative to the popular file sharing sites from which they get no money at all, but also with a richer channel for their music to be discovered and build a fan base around it. But this argument is unlikely to persuade the many artists who suspect that streaming is cannibalizing download revenues.
On the pricing front, whilst it is true that the 4.99/9.99 pricing model is applied uniformally across the Euro zone, UK and US, because of exchange rate differences, the cost does varies somewhat from currency to currency (for example, £9.99 is US$15.88). Yet, if you look at Rdio, which launched in Brazil in November in partnership with carrier Oi, there seems to be little or no compromise for the big drop in per-capita-income between the US and Brazil. The Oi Rdio service costs R$8.99 (US$5.20) a month for the Web-only version, which actually exceeds what it costs in the US, and R$14.90 (US$8.63) for the mobile-access version, which is not that much cheaper than in the US.
Emerging services in emerging markets
One service that does seem to have broken the pricing mould is Zvooq.ru, focused on Russia and the CIS. It charges the equivalent of US$5 a month for unlimited streaming to a PC or phone. The former Soviet Union has proven virtually impregnable for the Western labels, because of rife piracy and the logistical complexities of doing business there. iTunes has no presence there yet, for example. So that might explain why Zvooq might have been able to license tracks at a more competitive rate than other streaming services.
Midem saw the launch of a music-downloads service in another emerging market, Africa. With Africa having the world’s lowest PC-penetration rates, Spinlet is using mobile as the main mode of access to the 200,000 tracks in its catalog. It is targeting smartphone users on the Android, BlackBerry and Symbian platforms and has deals in Nigeria, South Africa, Kenya, Ghana, Angola, the Democratic Republic of the Congo and other countries in the region. As well as striking deals with labels, Spinlet is also inviting artists to hook up directly with it. Artists can sign up for free to the service and make use of features such as an in-app artist-to-fan-base chat service.
A new source of revenue
Also at the show was LyricFind, a company that is touting a new revenue stream for the music industry in the form of royalties from song lyrics accessed digitally. The company has spent more than seven years striking licensing deals with publishers – around 2,700 so far – building a catalog of more than 2 million lyrics. At the show it announced that it’s also secured global rights for lyrics from all four major publishers – added to similar deals with several of the big independent labels.
With these global rights, LyricFind is now targeting global brands, such as handset and tablet makers, who might want to license lyrics for music services bundled with their devices. The company’s main business is to help websites legitimize their lyrics offerings (song lyrics are one of the most-searched-for content on the Internet), but it is also collaborating with mobile services such as music-recognition app Shazam. And it is using mobile as a direct-to-consumer channel, via its Lyrics Lite and Lyrics Pro apps, available on iPhone, iPad, Android devices and Blackberry Playbook.
Leading up to the show, Shazam announced the launch of LyricPlay, which streams lyrics (licensed from LyricFind) in synch with songs as they are being played. The service comes with its own media player, Shazam Player – a bold departure for a company that has been entirely focused on music recognition until now – so that users can use LyricPlay with their own music collections. LyricFind is also building its own lyric synchronization software which will work in a similar fashion.
Shazam is expanding into the TV ads business too, using the same audio-recognition technology that has brought it so much success in the music-discovery field to add a touch of augmented reality to commercial breaks on living-room screens. Viewers hold up their phone whilst the TV ad is being broadcast and can connect via the Shazam app to a landing page providing further information on the product or service being advertised, including special offers such as coupons.
Will Mills, Shazam’s director of music and content told me that the application is attracting around 4.5 million new users per week and clocking up around 5 million “tags” (i.e. recognized songs) a day, leading to 500,000 song purchases a day – from which Shazam makes around US$100 million a year.
With the number of artists who are bypassing labels and going down the self-publishing route growing every year, Midem also serves as a showcase for developers and companies that offer artists tools to help them get discovered and leverage the support of their fan bases.
Participating in a “hottest start-ups” competition at the show, French company GeniusMonk pitched its crowd-sourcing application, Oocto – currently only available online, but looking to extend to mobile too. The app helps artists raise funds and recruit skills and help from fans. For example, artist Julia Cinna asked her 2,000-strong fan base on Facebook to help her raise €5,000 for a recording and got more than €6,000. To those donating €20 she promised to send them her new recording two weeks before its official launch date; to those donating €100 she invited them to attend her recording sessions; and to those donating €500 she offered to go and play privately at their homes.
Another crowd-sourcing service in the competition was Rockstar Motel, which is also looking to go mobile. It is a US-based social-networking site that taps into the enthusiasm of fans to get them to promote their favourite artists. Fans earn points for “signing up” artists and inviting friends to share those artists with them. The points not only earn them recognition from artists, but also rewards. The service is geared at providing free marketing to indie and unsigned musicians.
Competing too was UK start-up Bandapp, which aims to be the MySpace of the mobile applications age. It provides artists with the tools to build media-rich apps for free which link to the Bandapp downloads store, where artists place their tracks for sale. Revenue is also generated through in-app advertising and sponsorships. Rather than place the apps in app stores, Bandapp arranges for messages to be sent to fans with links from which they can download the apps.
As well as a huge threat, digital is of vital importance to the music industry to counteract plummeting CD sales – and mobile, primarily in the form of smartphones and tablets, is playing a leading part. Although mobile full-track revenues are often obfuscated in the official music industry stats, mobile was a big factor in the sharp rise in digital music revenues last year, which rose by 8% to pass for the first time the US$5 billion mark in trade value (i.e. the portion of sales revenue kept by labels, publishers and artists).