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Music Business - What's Up?
What's up with the new music industry
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Why the music industry should be very worried that Spotify has only 5 million subscribers, worldwide.

Today, in an event in New York, Spotify announced its most recent stats. The high notes in these statistics were the claims of 5 million paying subscribers, 1 million of which are in the US.

 

I believe it is time for the music industry to look at these numbers and feel very real concern, rather than moderate celebration.

 

Let’s focus just on the 1 million music service subscriber number for the US of A. And add to this number approximately 2.5 million subscribers across Rhapsody (1 million), MUVE (700,000), Rdio(?), Slacker (500,000), and MOG(?). That’s a total of approximately 3.5 million subscribers to subscription music services in the United States.

 

First, the US has had subscription music services since as early as 2002. And a grand total of 3.5 million subscribers in 2012 suggests that, quite frankly, the market for these services in the US is growing at a miniscule rate — which is why most modern services try to license and launch in as many countries as possible.

 

Second, 3.5 million account amounts to 1.1% of the total number of US mobile phone subscriber accounts.

 

So after a decade of music services being offered to customers with mobile devices here in the US, we have found service characteristics and a price point that appeals to 1.1% of the market.

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Japanese consumers turning away from mobile music formats in ever greater numbers

Japanese consumers turning away from mobile music formats in ever greater numbers | Music Business - What's Up? | Scoop.it

Music buyers in Japan are continuing to confound the rest of world, with digital sales falling and physical-format sales rising. Recent figurespublished by Japanese music trade association the RIAJ show that the once loved mobile music formats are continuing to suffer big drops in sales. Internet sales are growing but nowhere near fast enough to stem Japan’s digital-music collapse.

 

For most developed countries around the world, it would be safe to assume that the sales trend in the recorded-music industry is one of falling physical-format sales and rising revenues from a growing number of digital-music formats and delivery means. No country has avoided an overall contraction from the physical-to-digital transition, but some have managed to turn things around faster than others. One or two have already seen digital sales overtake physical and have returned to the days of rising annual sales with good prospects for a healthy future. Others remain stubbornly unmoved and continue to record annual sales contractions. And then there is Japan, where physical sales are going up and digital sales are falling.

 

According to the RIAJ, total unit sales and the value of digital-music trade revenues fell sharply between January and September this year compared with the same nine months of last year. Digital-music unit sales dropped 27%, from 284.7 million to 209.1 million, while the trade value slumped 26%, from ¥55.5 billion to ¥41.2 billion.

 

Mobile-music sales fell a staggering 36% in unit terms, to 152.9 million, and 39% in value, to ¥27.9 billion. For the same nine-month period in 2011, mobile music sales were down 20% year-on-year in both unit terms and value, meaning unit sales and the trade value of mobile music sales in Japan have more than halved in just two years.

 

 

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Spotify to introduce new music discovery system – Rumour - StrategyEye Digital Media

Spotify to introduce new music discovery system – Rumour - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Spotify is reportedly taking steps to improve discovery on its music streaming service, launching an overhauled user follow system that will allow listeners to find and track influential musicians and tastemakers. According to a report in TechCrunch, the new feature will roll out in early December, with Spotify showing follow suggestions to both new and existing users in an attempt to make it easier for them to find music. New third-party app partners will also reportedly offer complementary features to boost the social and discovery elements of the service.

 

Spotify is often criticised for the relative lack of discovery features, with the service relying on third-party apps such as Rolling Stone or NME to guide users to new music. Though users can connect with friends via Facebook's Open Graph, it remains relatively difficult to track down whether their favourite artists or DJs might be using the service to create playlists.

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$2.5 Billion: The Big Number that “Big Radio” could owe each year if it paid music royalties at Pandora’s rates

$2.5 Billion: The Big Number that “Big Radio” could owe each year if it paid music royalties at Pandora’s rates | Music Business - What's Up? | Scoop.it

While the controversy over the rates paid by both streaming services and webcasters continues to bubble, one simple question lurked in my mind:

 

If it paid for music at the rates paid by Webcasters like Pandora, how much might Big Radio owe in royalties to record labels and performing/features artists?

 

And so, in the post that follows I describe the conclusion and the method for estimating this potential pool of royalty dollars.

 

The Short Story:

 

Were so-called “Big Radio,” otherwise known as Terrestrial Radio, to pay for their performance of sound recordings at rates similar to that paid by Pandora for the performance online of the same recordings, I estimate that the royalty pool would be pretty big: approximately $2.5 billion.

 

Were Big Radio to pay for the performance of sound recordings at the statutory webcasting rates established by the US Copyright Royalty Board (aka, the CRB Default Rates), I estimate the royalty pool would expand considerably in size: approximately $4.7 billion.

 

I will leave it up to the reader to determine whether the NAB’s proposed payment of $100 million for sound recording performance royalties would constitute a discount from the payments estimated above. I will also leave it up to the reader to decide whether webcasters like Pandora should be paying more or less for music than they now pay. However, I felt a little Oranges to Oranges sort of comparison might be worthwhile in the Fairness debate.

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Mobile commerce market to be worth USD1 trillion in 2017 - StrategyEye Digital Media

Mobile commerce market to be worth USD1 trillion in 2017 - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Revenues from consumers making purchases via a mobile device will increase to more than USD1 trillion globally in 2017, as people increasingly use their smartphones and tablets to browse the web and buy goods and services, according to figures from IDC. The report suggests that mobile commerce, where users buy products via a mobile web browser, will continue to make up the bulk of these revenues, accounting for 66%, or USD660bn, of the total. And while the NFC payments market is still small, IDC is forecasting “rapid growth” driven by the increasing penetration of smartphones and merchants upgrading their point-of-sale terminals. By 2017, it is expected to account for 25%, or USD250bn, of revenues, although IDC does not break out how much a rise this is.

 

“The growing prevalence of smartphones is enabling a variety of mobile payment methods, which combined are becoming a significant share of global commerce,” says IDC’s worldwide payment strategies practice director, Aaron McPherson. “We expect growth rates to continue to accelerate as consumers and retailers become more comfortable with the technology.”

 

The figures, particularly on the market for mobile commerce, serve to highlight how important it is for retailers to ensure they have a presence on smartphones and tablets. Recent numbers from Google suggest that just a quarter of businesses currently have websites optimised for mobile devices, with the rest risking missing out on the rising numbers of consumers browsing via mobile devices.

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Musician Neil Young launches challenge to MP3s

Musician Neil Young launches challenge to MP3s | Music Business - What's Up? | Scoop.it

Neil Young, the rock singer who said he was prepared to brave "treacherous" venture capital markets to popularize his high-fidelity format for downloading music, raised $500,000 from an investment group last month.

 

Ivanhoe Inc., a Santa Monica, Calif.-based company that lists Young as chief executive officer, got the money from 12 investors, according to an Oct. 29 regulatory filing.

 

The musician, a two-time inductee to the Rock and Roll Hall of Fame who co-founded the band Buffalo Springfield and played in Crosby, Stills, Nash & Young before going solo, plans to roll out an audio system called Pono as a higher-quality alternative to digital formats such as MP3. Young, writing in a new memoir that he has "big ideas and very little money to show for them," said he would finance Pono by turning to investment firms that typically back technology startups.

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Pandora founder rejects criticism of Internet royalty bill - The Hill's Hillicon Valley

Pandora founder Tim Westergren on Tuesday pushed back against claims that an Internet royalty bill pending in Congress would take money away from musicians and recording artists.

 

Westergren is a vocal proponent of the Internet Radio Fairness Act, which proposes to put Internet radio services on the same royalty-setting standard as satellite and cable radio stations. The Pandora founder has argued that Internet radio stations unfairly pay higher royalty fees than other digital radio services because they're placed under a different standard.

 

Critics of the bill, such as musicFIRST, have said that Pandora is more interested in its bottom line than fairly compensating artists. Speaking at the Future of Music Summit on Tuesday, Westergren said those charges are false and emphasized that the bill does not set royalty rates for Internet radio services.

 

"That's a huge misnomer. It's really important for artists to try to parse the rhetoric around this. That is not true," Westergren said.

 

"What this legislation proposes to do is to provide us with the same rate-setting standards so when the Copyright Royalty Board considers our situation, they get to consider that evidence under the same sort of rubric," he said. "It doesn't set a rate. It's been unpredictable in the past. It wouldn't even bet on what the outcome would be. It allows us to operate on a level playing field."

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IFPI: Labels Still Invest Big Bucks In New Music

IFPI: Labels Still Invest Big Bucks In New Music | Music Business - What's Up? | Scoop.it

A new report from the IFPI (International Federation of the Phonographic Industry) finds that record labels spend $4.5 billion annually on A&R and marketing, continuing to invest in new music and new artists, despite the economic downturn. According to the IFPI, record labels spent $2.7 billion in 2011 on A&R, only marginally down on 2008 ($2.8 billion), despite an overall decline of 16 percent in the trade value of the industry globally over the same period. Revenues invested in A&R increased from 15 to 16 percent of industry turnover between 2008 and 2011.

 

The report found that music companies invest a greater proportion of their global revenues in A&R than most other sectors do in research and development. Comparisons show music industry investment exceeding that of industries including software and computing (9.6 percent) and the pharmaceutical and biotech sector (15.3 percent). The comparisons are based on the European Commission's 2011 EU Industrial R&D Investment Scoreboard.

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Anti-scale in music licensing: The Spotify example | david touve

More often than not, startups are in pursuit of venture dynamics that exhibit benevolent economies of scale: cost per unit, or per user fall as the number of users increases.

 

When licensing key inputs, rational startups pursue ceilings and not floors: license terms that place limits on the obligations rather than really high minimums for the obligation.

 

Music service startups face their own very special sort of “anti-scale.” Really high minimum obligations alongside ceilings that scale 1:1 with user growth or music use.

 

Eric Eldon of Techcrunch claims to have otherwise “secret” information on the license terms accepted by Spotify:

 

"Its deal structure with the labels requires either a $200 million annual payment, like what it had to do last year, or around 75% of total revenue (whichever is higher)"

 

That “whichever is higher” aspect of the licensing context says it all: Anti-scale.

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The Downfall Of Pandora, Consumer Choice And Emerging Music - hypebot

The Downfall Of Pandora, Consumer Choice And Emerging Music - hypebot | Music Business - What's Up? | Scoop.it

If you listen to Pandora, you may have started hearing commercials asking you to support the Internet Radio Fairness Act. It’s legislation proposed to reduce Internet radio royalties to the level of other digital formats, like satellite radio. Over the coming months you’ll hear others “advocating for artists” by keeping the rates high. As a strong advocate for artists, let me tell you why maintaining the current rates is the worst thing that could happen to artists, consumers, and the future of music.

 

The beauty of Internet radio over broadcast is its personalized nature. With each user having an individual stream, Pandora can play totally obscure music for one person while playing Top 40 for someone else. With broadcast radio, audience sizes are static and large. This creates airtime scarcity and opens up programming to the influence of money. That’s why commercial radio has long been dictated by the major labels and their massive budgets. With unlimited stations and single-person audience sizes, Internet broadcasters are empowered and driven to play what each user wants. If they don't, users will find someone who will, and finally they can.

 

Simply put, the Internet is democratizing music, and this is a good for artists.

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INTERVIEW: Rara's director on growing music streaming competition - StrategyEye Digital Media

INTERVIEW: Rara's director on growing music streaming competition - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Rara's entry into the music-streaming space was unconventional - spun out of business-to-business music provider Omnifone in a market that is seeing as much consolidation as growth. In spite of the expansion of bigger rivals like Spotify, Rdio and Deezer, Rara's director Tim Hadley is convinced that there is still room for new players.

 

¤ Music streaming is a crowded market. What can you offer consumers that is different?


"We looked at the current crop of music services and found that the vast majority are focused on the 20% of consumers that are currently paying for music who tend to be in the early-adopter space. When you look at it, that's only a small proportion of the market. We wanted to go after consumers who aren't necessarily early adopters. We're after the more mainstream consumer who loves music, but they don't live and breathe it to the extent they always know exactly what they want to listen to."

 

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Business Matters: Young Consumers Legally Purchase More Digital Music Than Anyone, Study Shows | Billboard.biz

Business Matters: Young Consumers Legally Purchase More Digital Music Than Anyone, Study Shows | Billboard.biz | Music Business - What's Up? | Scoop.it

The 30-to-49-year-old age group has an average of 683 purchased files. The 50-to-64-year-old age group has an average of 408 purchased files. The 65-and-over age group has an average of 348 purchased files.

 

This should sound a bit familiar. The Nielsen Music 360 reportreleased in August said 36% of teens have bought a CD in the last year and 51% of teens have purchased a music download in the last year. Kids are still buying music, even though people seemed to have written them off to piracy years ago.

 

Read more at http://www.billboard.biz/bbbiz/industry/digital-and-mobile/business-matters-young-consumers-legally-1007981632.story#D8S51zBoX1R8Tqqg.99

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File sharers buy 30% more music than non sharers - StrategyEye Digital Media

File sharers buy 30% more music than non sharers - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

The biggest most active consumers of peer-to-peer (P2P) shared music content are also the biggest spenders on music, according to new research from Columbia University. The report claims that US consumers who share files with their peers are spending 30% more on legal song downloads than those that do not. In Germany, this margin is even wider, with file sharers spending three times as much on digital music.

 

The study, which looks at consumers in the US and Germany, claims that offline “copying” from friends and family is more prevalent than downloading music for free, or pirating material. Although the threat of music piracy seems to have shrunk from its peak a decade ago, the report suggests that consumers are still finding ways to avoid paying for music, highlighting the ongoing difficulties facing the industry as it attempts to boost digital revenue growth.

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Alex Day, YouTube phenomenon, on building fans and making money

Alex Day, YouTube phenomenon, on building fans and making money | Music Business - What's Up? | Scoop.it

Last Christmas Alex Day became the first unsigned artist ever to reach number four in the Official Charts – a Guinness Book of Records entry, he says proudly. He sold 100,000 downloads in one week, and it was largely due to the fan base he had built through his YouTube channel. But it wasn't just a promotional channel – at the time, he was also making half of his monthly income from YouTube's ad partnership scheme.

 

This Christmas he's aiming to get to the top of the charts, breaking his own record.

 

Day started making YouTube videos six years ago, at the age of 17, before the partnership programme existed. At the time the most prolific YouTube stars would get about 10,000 views per video, he says, and most of them would make no more than four to six videos a year, as there was no reason to make more.

 

In 2007 the company contacted him inviting him to be one of the 10-20 first partners in the UK. "It was seamless," he explains. "Ads just started appearing on my videos. I could choose what type of ads – I could, for example, say no to ads relating to religion or gambling. Now you can also choose pre-roll ads." (Day only allows pop-up ads, as he finds pre-rolls much too intrusive.)

 

His deal with YouTube prevents him from saying how much he gets per ad. Though it would be impossible to even give a set rate, as it depends on what's being advertised, he estimates that he receives an average of $1 per CPM (1,000 views). YouTube's share of advertising revenue in the partnership programme is 30%.

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INTERVIEW: 7digital CEO on profitability and new funding in digital music - StrategyEye Digital Media

INTERVIEW: 7digital CEO on profitability and new funding in digital music - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

As the losses and expenses sustained by the likes of Pandora and Spotify dominate headlines on digital music, UK player 7digital has quietly achieved profitability by focusing on building partnerships for its platform. It has also just raised USD10m in funding and, here, its CEO Ben Drury explains why the cash injection reflects some well-deserved faith in his business.

 

¤ You’re profitable in a tough market. How?


The only people making money in the digital space are people like Apple, who are really using music as a customer acquisition tool. The large number of billing relationships they have are being created through their music service, and it’s arguably break-even for them.

 

We’re in the same camp, we license our platform, we license our technology, we've built an incredible amount of IP on our platform. That technology we've created has significant value and we're licensing it to companies like Samsung. If we were just purely in the music retail business, we wouldn't be profitable and we wouldn't be here.

 

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Myspace seeks USD50m to reposition as music streaming service – Rumour - StrategyEye Digital Media

Myspace seeks USD50m to reposition as music streaming service – Rumour - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Myspace is reportedly seeking USD50m in funding as it attempts to reposition itself as a music streaming service. A Business Insider report, citing leaked documents from Myspace parent company, Interactive Media Holdings (IMH), formerly Specific Media, claims that the once-dominant social network is set to launch a streaming service next year, with a mobile-based service launching in Q2, positioning it as a direct competitor to Spotify and Pandora. IMH believes that Myspace has an advantage over the pair in the US, as half of the music played on Myspace is by unsigned artists. The total of unsigned artists significantly lowers the royalty fees it will need to shell out to content creators, with IMH claiming that the cost of paying royalties is “one of the biggest challenges facing online streaming services”.

 

IMH claims that USD10m of the potential funding will be spent on marketing, while USD15m to USD25m will be allocated to licensing deals with labels. The remainder will be kept as “working capital”. Myspace already has existing licensing deals in place with all four major record labels, as well as 20,000 independent labels, and a move into streaming could pay off if executed successfully.

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Europe’s music services in harmony - FT.com

Europe’s music services in harmony - FT.com | Music Business - What's Up? | Scoop.it

Efforts by European authorities to encourage pan-European Union music distribution and licensing are bearing fruit with the launch on Monday of a system that brings together a quarter of the bloc’s music repertories.

 

The so-called hub system, backed by a group of mostly European music licensing societies known as Armonia, provides a one-stop shop for digital music services such as Pandora or Spotify.

 

The group, which represents songwriters and singers, now encompasses 5.5m music works in 35 countries, including parts of South America. Google last week launched in Europe its online Play Music store – aimed at rivalling Apple’s iTunes – after signing the first deal with Armonia.

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Spotify just one of many business models, say digital music players - StrategyEye Digital Media

Spotify just one of many business models, say digital music players - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Streaming services such as Spotify are just one of a "broad gamut" of possibilities when it comes to tackling piracy and encouraging users to pay for digital music, according to the CEO of pay-per-play service Psonar, Martin Rigby. Speaking at the Enterprising Music event in London, Rigby's comments were echoed by the CEO of metadata firm Decibel, Gregory Kris, who claimed that there is a misperception that the Swedish service leaves no room for competition.

 

"There's going to be a place in the market for downloads as well as streaming. In [Psonar's] case we see many consumers want to move from streaming pay-per-play to downloading to own, because you can do things with a download that you can't do with a streamed music service. There is a broad gamut of possibilities," says Rigby. "As an industry, we can't, say, bash Google's search results over piracy if we're not offering a reasonable range of services that are reasonably affordable and convenient which match with the way people want to enjoy music."

 

The growth in music streaming revenues will outpace downloads this year, up 40% year on year to USD1.1bn, according to the latest research from Strategy Analytics. This still means downloads account for the lion's share of digital revenues, coining USD3.9bn, but that figure is up just 4% year on year by comparison. Although Spotify is leading the streaming service pack in terms of mindshare, it is still a loss-making business four years after launch, suggesting there is still room to crack the model.

 

"New models of consumption will be very important going forward," says Kris. "I had a meeting with an investment company, and they asked why people are looking for new models in music, when Spotify has it all sewn up. I find that abhorrent."

 

 

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Fred Wilson Wary on Music Investments; Questions Spotify's Valuation, Apple's Music Leadership | Billboard.biz

Fred Wilson Wary on Music Investments; Questions Spotify's Valuation, Apple's Music Leadership | Billboard.biz | Music Business - What's Up? | Scoop.it

Investor Fred Wilson ( @fredwilson) loves music but he's still "relatively cautious" about investing in it, he said during his keynote Q&A at Billboard's FutureSound Conference in San Francisco today, citing some of the difficulties with his most high-profile music start-up, Turntable.fm.

 

Wilson, who through his firm Union Square Ventures has backed some of the fastest growing start-ups of last decade (including Twitter, FourSquare and Tumblr), said of looking at music investments in general, "I've felt that the desire of both sides of the issue -- on the tech side and music -- to work in partnership wasn't there." He said that more recent negotiations with music companies have been improving.

 

During the keynote, which was moderated by Billboard editorial director Bill Werde ( @bwerde), Wilson said the upfront costs for a start-up in the music business are "extremely high relative to almost any other sector I can think of. It takes $5 million to $10 million before you know what you've got."

 

Read more at http://www.billboard.biz/bbbiz/industry/digital-and-mobile/fred-wilson-wary-on-music-investments-questions-1008016742.story?utm_source=twitterfeed&utm_medium=twitter#ZIoKeI76PV7mgARh.99

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Spotify raising USD100m to pursue rivals to Latin America - Rumour - StrategyEye Digital Media

Spotify raising USD100m to pursue rivals to Latin America - Rumour - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Spotify is reportedly in the midst of raising a USD100m funding round at a valuation of USD3bn from Goldman Sachs and other investors, to finance its expansion to Latin America and further into Europe. According to a report in the Wall Street Journal and confirmed by a number of other outlets, the firm is close to wrapping up funding. Spotify is currently refusing to comment on the rumours. If true, the new round would see Spotify raising considerably less than initially thought, with reports earlier this year that Spotify was seeking a USD4bn valuation on a larger funding round.

 

Although earlier reports suggested that Spotify sought new financing in order to ease its negotiations with rights holders, it now appears that the firm is after new funding in order to chase new markets and keep ahead of the competition. The company is facing pressure from multiple rivals, with French service Deezer making a particular push into Latin markets. The firm recently announced deals with local mobile operators Millicom and StarMedia, and claims to be live in 35 Latin American countries. Smaller rival Rara is also headed to Brazil. Meanwhile, Spotify has yet to enter Latin America, but is reportedly planning launches in India and Canada at the same time.

 

Spotify and its direct competitors are also facing competition on a bigger scale from Microsoft, Apple and Samsung, all of which are showing interest in evolving their own digital music offerings to bear more resemblance to on-demand services. Microsoft has scrapped its subscription Zune Pass service in favour of the multi-platform Xbox Music, which will offer streaming, radio and downloads from one place. Apple is reportedly looking into an online radio service, while Samsung's Music Hub also offers cloud storage, scan-and-match, and streaming.

 

Separate reports also claim that Spotify made USD200m in revenues for the first six months of 2012, with an annual run rate that could bring that figure to USD500m by January 2013. The firm is still thought to be reporting losses, according to a report in TechCrunch, but, if true, the financials are a marked improvement on 2011's performance. Spotify is thought to have reported full-year revenues of USD244m, with a net loss of USD59m. TechCrunch claims that the firm will trim its loss to around USD40m this year, as the firm continues to win new subscribers and advertisers.

 

Further speculation in the report that Spotify will have to fork out 75% of its revenues, or USD200m, to rights holders this year are not correct, according to a source speaking to StrategyEye.

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Online music services boom as traditional listening drops - StrategyEye Digital Media

Online music services boom as traditional listening drops - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

The range of legal online music services now available means US consumers are abandoning traditional listening methods, according to new research from NPD. New figures show a huge surge in the use of internet radio and on-demand streaming over the last three months, while CD and analogue radio listening fell. Some 50% of US internet users, or 96m people, listened to an internet radio or music streaming service, while CD and traditional radio listening fell.

 

Offline radio still remains the most popular method for users to listen to music, reaching 75% of the US internet population, down just 4% year on year. CD listening has, however, dropped more significantly, down 9% year on year to 46%. Though this puts them above services such as Pandora and Spotify, NPD's figures show, at the very least, that users are looking to increasingly diverse methods for music discovery.

 

In a sign of radio's continued popularity in the US, the likes of Pandora are seeing faster growth than streaming services. In terms of market share, the two are currently neck and neck, with online radio's reach at 37% of the US internet population, and streaming at 36%. But radio is growing faster, up 27% year on year, compared to the 18% increase in streaming.

 

"Although AM/FM radio remains America's favourite music-listening choice, the basket of internet radio and streaming services that are available today have, on the whole, replaced CDs for second place," says NPD analyst Ross Crupnick.

 

NPD also examined the general listening habits of those that use online music services and found, for the most part, that they were listening less to offline radio, CDs and MP3s. For example, users who listen to music via Vevo or YouTube became less likely to listen to offline radio or MP3s. A similar picture applied to Pandora listeners, suggesting that online services are cannibalising traditional music listening methods.

 

 

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Spotify Is Having A Good 2012: Revenues Could Reach $500M As It Expands The Digital Music Market | TechCrunch

Spotify Is Having A Good 2012: Revenues Could Reach $500M As It Expands The Digital Music Market  | TechCrunch | Music Business - What's Up? | Scoop.it

Spotify, the streaming music startup, was having serious trouble paying its bills, if you believed reports from earlier this year. Its 2011 financials showed a loss of nearly $60 million on revenues of $244 million. But this information is out of date, because the company has had a relatively strong 2012.

 

It made $200 million in total revenue over the first six months of 2012, and is on an annual run-rate that could put it around $500 million by January, according to confidential financial information leaked to me by industry sources. Despite another net loss this year, Spotify’s business model — free streaming music with ads, $5 for web access with no ads, and $10 a month for ad-free plus mobile access — is going in the right direction.

 

Its deal structure with the labels requires either a $200 million annual payment, like what it had to do last year, or around 75% of total revenue (whichever is higher). 2012 will be the first year that revenue is high enough for the percentage structure to kick in. The company is projecting profit after cost-of-sales to be around $60 million. It still has another $100 million in engineering, marketing, sales and other operating costs, on top of the licensing burden, so it’ll likely post an annual loss of roughly $40 million.

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Too big to succeed: Is the music streaming market doomed to failure? | ITProPortal.com

Too big to succeed: Is the music streaming market doomed to failure? | ITProPortal.com | Music Business - What's Up? | Scoop.it

The music industry’s refusal, or inability, to embrace the Internet and digital technology is what led it to spiral into the mire that it’s still trying to claw its way out of. But, today, record labels, publishers, and distributors are clinging to those two things in the hope of reversing the almost-fatal missteps of the past two decades.

 

As the public buys fewer and fewer records and digital sales struggle to adequately make up for the ebbing of that revenue, the music industry, media companies, and technology ventures are increasingly putting their eggs in the music streaming basket.

 

New streaming services are popping up every day. Among the latest services to grab headlines is Deezer, a French startup that recently courted a $130 million (£81 million) investment from Warner Music owner Len Blavatnik and is expected net a more global user base than current darling Spotify. On the strength of partnerships with Facebook and mobile operators such as Orange and Deutsche Telekom, the service has amassed more than 20 million registered users and two million paid subscribers.

 

But it seeks to growin what is an already crowded playing field, with a glut of streaming services using a handful of different models all vying to capture the estimated 100 million person-strong market.


Read more: http://www.itproportal.com/2012/11/08/too-big-to-succeed-is-the-music-streaming-market-doomed-for-failure/#ixzz2BgjlJLl9

 

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Mobile to boost digital music revenues, says Warner Music owner - StrategyEye Digital Media

Mobile to boost digital music revenues, says Warner Music owner - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

Mobile devices will prove key to monetising digital music over the next few years, according to a director at Warner Music’s owner, Access Industries, as consumers increasingly rely on smartphones and tablets to listen to music.

 

Speaking at the NOAH 2012 conference in London Access partner, Jorg Mohaupt, who also serves on Warner’s board, says he believes the smartphone in particular will be crucial in driving digital music sales in the future, especially in emerging markets such as South America where digital music sales are starting to take off.

 

His comments are underpinned by recent research from Forrester, forecasting that mobile devices will boost music revenues by 75% over the next five years to hit USD3.4bn in 2017.

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EXPERT COMMENT: Digital media legal expert on content licensing and collecting societies - StrategyEye Digital Media

EXPERT COMMENT: Digital media legal expert on content licensing and collecting societies - StrategyEye Digital Media | Music Business - What's Up? | Scoop.it

In a rare display of synchronicity, the UK government and the European Commission have proposed new laws concerning how collecting societies should be governed. The UK proposals go no further than legislation to allow the introduction, through regulations, of a backstop power to apply a code of conduct setting out certain minimum standards that a collecting society must meet. In contrast, the Commission has gone much further, setting out minimum standards and an array of requirements in relation to multi-territorial licensing by collecting societies of rights in musical works for online use.

 

There is a growing school of thought that, in the digital age, collecting societies will have a critical role in enabling the development of new services. For example, the Hargreaves report and the subsequent feasibility study into the Digital Copyright Exchange both point to a streamlined approach to copyright licensing facilitated by collective licensing bodies. There is work afoot in the music publishing industry to create a global repertoire database which can identify and track millions of musical works across the world, and in the commercial archive sector, business is booming for services such as iStockPhoto, which act as democratised digital repositories and licensing hubs for copyright works.

 

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