The Shazam Effect

November 20, 2014

Record companies are tracking download and search data to predict which new songs will be hits. This has been good for business—but is it bad for music?
Derek Thompson TheAtlantic.com 11/17/14

In 2000, a Stanford Ph.D. named Avery Wang co-founded, with a couple of business-school graduates, a tech start-up called Shazam. Their idea was to develop a service that could identify any song within a few seconds, using only a cellphone, even in a crowded bar or coffee shop.
At first, Wang, who had studied audio analysis and was responsible for building the software, feared it might be an impossible task. No technology existed that could distinguish music from background noise, and cataloging songs note for note would require authorization from the labels. But then he made a breakthrough: rather than trying to capture whole songs, he built an algorithm that would create a unique acoustic fingerprint for each track. The trick, he discovered, was to turn a song into a piece of data.

Shazam became available in 2002. (In the days before smartphones, users would dial a number, play the song through their phones, and then wait for Shazam to send a text with the title and artist.) Since then, it has been downloaded more than 500 million times and used to identify some 30 million songs, making it one of the most popular apps in the world. It has also helped set off a revolution in the recording industry. While most users think of Shazam as a handy tool for identifying unfamiliar songs, it offers music executives something far more valuable: an early-detection system for hits.

By studying 20 million searches every day, Shazam can identify which songs are catching on, and where, before just about anybody else. “Sometimes we can see when a song is going to break out months before most people have even heard of it,” Jason Titus, Shazam’s former chief technologist, told me. (Titus is now a senior director at Google.) Last year, Shazam released an interactive map overlaid with its search data, allowing users to zoom in on cities around the world and look up the most Shazam’d songs in São Paulo, Mumbai, or New York. The map amounts to a real-time seismograph of the world’s most popular new music, helping scouts discover unsigned artists just as they’re starting to set off tremors. (The company has a team of people who update its vast music library with the newest recorded music—including self-produced songs—from all over the world, and artists can submit their work to Shazam.)

“We know where a song’s popularity starts, and we can watch it spread,” Titus told me. Take, for example, Lorde, the out-of-nowhere sensation of 2013. Shazam’s engineers can rewind time to trace the international contagion of her first single, “Royals,” watching the pings of Shazam searches spread from New Zealand, her home country, to Nashville (a major music hub, even for noncountry songs), to the American coasts, pinpointing the exact day it peaked in each of nearly 3,000 U.S. cities.

Shazam has become a favorite app of music agents around the country, and in February, the company announced that it would get into the music-making business itself, launching a new imprint under Warner Music Group for artists discovered through the app.

Shazam searches are just one of several new types of data guiding the pop-music business. Concert promoters study Spotify listens to route tours through towns with the most fans, and some artists look for patterns in Pandora streaming to figure out which songs to play at each stop on a tour. In fact, all of our searching, streaming, downloading, and sharing is being used to answer the question the music industry has been asking for a century: What do people want to hear next?

It’s a question that label executives once answered largely by trusting their gut. But data about our preferences have shifted the balance of power, replacing experts’ instincts with the wisdom of the crowd. As a result, labels have gotten much better at understanding what we want to listen to. This is the one silver lining the music industry has found in the digital revolution, which has steadily cut into profits. So it’s clearly good for business—but whether it’s good for music is a lot less certain.

Earlier this year, Patch Culbertson, a scout for Republic Records, sat in his New York office and opened the Shazam map on his iPhone. Republic Records is the most data-driven major label in the music business (even an executive at a rival label described Republic as the gold standard for using analytics in scouting and marketing), and Culbertson in particular has proved to be a star at the company

Culbertson wanted to check up on SoMo, an R&B singer from Denison, Texas, whom Culbertson had helped sign last year. Culbertson zoomed in on Victoria, Texas, a small city between Corpus Christi and Houston, where one of the radio stations had started playing a SoMo single called “Ride.” Although a town of just 63,000 won’t launch a national hit by itself, Culbertson was using Victoria as a sort of testing ground to determine whether the song would resonate with listeners. “ ‘Ride,’ ” he told me, “is the No. 1 tagged song in Victoria.”

Pop music is a sentimental business, and predicting the next big thing has often meant being inside that crowded bar, watching a young band connect with the besotted, swaying throng. But now that new artists are more likely to make a name for themselves on Twitter than in a Nashville club, Culbertson is finding that the chair in front of his computer might be the best seat in the house.

New tools may soon further diminish the importance of actually hearing artists perform. Next Big Sound, a five-year-old music-analytics company based in New York, scours the Web for Spotify listens, Instagram mentions, and other traces of digital fandom to forecast breakouts. It funnels half a million new acts through an algorithm to create a list of 100 stars likely to break out within the next year. “If you signed our top 100 artists, 20 of them would make the Billboard 200,” Victor Hu, a data scientist with Next Big Sound, told me. A 20 percent success rate might sound low, until you gaze out at the vast universe of new music and try to pick the next Beyoncé.

Last year, the company unveiled a customizable search tool called Find, which, for a six-figure annual subscription, helps scouts mine social media to spot artists who show signs of nascent stardom. If, for example, you wanted to search for obscure bands with the fastest-growing followings on Twitter, Find could produce a list within seconds.

The top 1 percent of bands and solo artists now earn 77 percent of all revenue from recorded music.

The company has discovered that some metrics, such as Facebook likes, are unreliable indicators of a band’s trajectory, while others have uncanny forecasting power. “Radio exposure, unsurprisingly, is the most important thing,” Hu says. It remains the best way to introduce listeners to a new song; once they’ve heard it a few times on the radio, they tend to like it more. “But we discovered that hits to a band’s Wikipedia page are the second-best predictor.” Wikipedia searches are revealing for the same reason Shazam searches are. While getting a song on the radio ensures that people have heard it, Culbertson says, “Shazam tells you that people wanted to know more.”

To get a song on the radio in the first place, music labels confront a paradox: How do you prove that it will be a hit before anyone has heard it? DJs consider unfamiliar songs “tune-outs,” because audiences tend to spurn new music. In the past, labels sometimes pressured or outright bribed stations to promote their music. Songs became hits because executives decided they should be hits.

But radio, too, has come to rely more on data, and now when label executives pitch a station, they’re likely to come armed with spreadsheets. The search for evidence of a song’s potential has become exhaustive: you can’t just track radio data, or sales, or YouTube hits, or Facebook interactions, or even proprietary surveys and focus groups. To persuade a major radio station to play a new song, labels have to connect all these dots.

“The idea that DJs are just picking songs because they like them is so antiquated,” says Radha Subramanyam, the executive vice president of insights, research, and analytics at iHeartMedia (formerly Clear Channel), the nation’s largest owner of FM stations. iHeartMedia consults companies like Shazam to figure out which songs are going viral. Nielsen Audio, another data firm that has partnered with the company, offers thousands of listeners cash or gift cards to wear devices called Portable People Meters that track which radio stations people are tuning in to. To know when listeners are growing tired of a song, iHeartMedia conducts weekly surveys using a database of 1.5 million people.

Perhaps iHeartMedia’s most interesting partner in the search for pop music’s next big thing is a 12-year-old subsidiary called HitPredictor, which, true to its name, predicted 48 of the top 50 radio hits last year. Before a song debuts on a major chart—Top 40, urban, country, or alternative—HitPredictor plays key sections for its online database of listeners and rates their responses. Any song that scores above a 65 is considered a possible breakout, though above that threshold, the highest-scoring songs don’t always do best. (Meghan Trainor’s debut single, “All About That Bass,” scraped by with a 68.97 rating but went on to become the top song in the country this fall.)

All of this number crunching is aimed at keeping listeners’ fingers off the dial. “It’s not about eliminating the human element from radio, but rather presenting the most human element—the reaction of audiences—more clearly than ever,” Jay Frank, the owner and CEO of DigSin, a digital record label (it sells music strictly through downloads—no CDs), told me. “This might be the most populist moment in radio history.”

A similar revolution has occurred in the music charts. Take the Billboard Hot 100, which has counted down the top songs in America since 1958. For decades, Billboard had to rely on record-store owners and radio stations to report the most-bought and most-played songs. Both parties lied, often because labels nudged or bribed them to plug certain records, or because store owners didn’t want to promote albums they no longer had in stock. The entire industry was biased toward churn: labels and stores wanted songs to enter and exit the charts quickly so they could keep selling new hits.

The Hot 100 matters because it doesn’t just reflect listener preferences, it also shapes them. In a groundbreaking 2006 study on the influence of song rankings, three researchers at Columbia University showed that popularity can be a self-fulfilling prophecy. The researchers sent participants to different music Web sites where they could listen to dozens of tracks and download their favorites. Some sites displayed a ranking of the most-downloaded songs; others did not. Participants who saw rankings were more likely to listen to the most-popular tracks.

The researchers then wondered what would happen if they manipulated the rankings. In a follow-up experiment, some sites displayed the true download counts and others showed inverted rankings, where the least-popular song was listed in the No. 1 spot. The inverted rankings changed everything: previously ignored songs soared in popularity, and previously popular songs were ignored. Simply believing, even wrongly, that a song was popular made participants more likely to download it.

Billboard replaced its honor system with hard numbers in 1991, basing its charts on point-of-sale data from cash registers. “This was revolutionary,” says Silvio Pietroluongo, Billboard’s current director of charts. “We were finally able to see which records were actually selling.” Around the same time, Billboard switched to monitoring radio airplay through Nielsen.

When that happened, hip-hop and country surged in the rankings and old-fashioned rock slowly began to fade—suggesting that perhaps an industry dominated by white guys on the coasts hadn’t paid enough attention to the music interests of urban minorities and southern whites.

Another sea change came in the mid-2000s, when Billboard started tracking music streaming and downloads. Songs that weren’t label-picked singles, like the Black Eyed Peas’ “My Humps” in 2005, began outperforming the tracks that executives expected to do well. “Deep cuts”—songs that labels didn’t hype but that fans nonetheless loved—used to fly under the radar. (There is no evidence that Led Zeppelin’s “Stairway to Heaven,” one of the most famous rock songs of all time, was ever played on the radio in the years immediately after its release, and it never cracked the Hot 100.) But because the industry can now track what people are listening to, any song that catches on can become a hit.

Everyone I spoke with about the Hot 100—label and radio executives, industry analysts, and other journalists—agreed with Jay Frank’s assessment that consumers have more say than they did decades ago, when their tastes were shaped by the hit makers at labels. But here’s the catch: if you give people too much say, they will ask for the same familiar sounds on an endless loop, entrenching music that is repetitive, derivative, and relentlessly played out.

Now that the Billboard rankings are a more accurate reflection of what people buy and play, songs stay on the charts much longer. The 10 songs that have spent the most time on the Hot 100 were all released after 1991, when Billboard started using point-of-sale data—and seven were released after the Hot 100 began including digital sales, in 2005. “It turns out that we just want to listen to the same songs over and over again,” Pietroluongo told me.

Because the most-popular songs now stay on the charts for months, the relative value of a hit has exploded. The top 1 percent of bands and solo artists now earn 77 percent of all revenue from recorded music, media researchers report. And even though the amount of digital music sold has surged, the 10 best-selling tracks command 82 percent more of the market than they did a decade ago. The advent of do-it-yourself artists in the digital age may have grown music’s long tail, but its fat head keeps getting fatter.

Radio stations, meanwhile, are pushing the boundaries of repetitiveness to new levels. According to a subsidiary of iHeartMedia, Top 40 stations last year played the 10 biggest songs almost twice as much as they did a decade ago. Robin Thicke’s “Blurred Lines,” the most played song of 2013, aired 70 percent more than the most played song from 2003, “When I’m Gone,” by 3 Doors Down. Even the fifth-most-played song of 2013, “Ho Hey,” by the Lumineers, was on the radio 30 percent more than any song from 10 years prior.

The reliance on data may be leading to a “clustering” of styles and a dispiriting sameness in pop music.

And not only are we hearing the same hits with greater frequency, but the hits themselves sound increasingly alike. As labels have gotten more adept at recognizing what’s selling, they’ve been quicker than ever to invest in copycats. People I spoke with in the music industry told me they worried that the reliance on data was leading to a “clustering” of styles and genres, promoting a dispiriting sameness in pop music.

In 2012, the Spanish National Research Council released a report that delighted music cranks around the world. Pop, it seemed, was growing increasingly bland, loud, and predictable, recycling the same few chord progressions over and over. The study, which looked at 464,411 popular recordings around the world between 1955 and 2010, found that the most-played music of the new millennium demonstrates “less variety in pitch transitions” than that of any preceding decade. The researchers concluded that old songs could be made to sound “novel and fashionable” just by freshening up the instrumentation and increasing “the average loudness.”

The problem is not our pop stars. Our brains are wired to prefer melodies we already know. (David Huron, a musicologist at Ohio State University, estimates that at least 90 percent of the time we spend listening to music, we seek out songs we’ve heard before.) That’s because familiar songs are easier to process, and the less effort needed to think through something—whether a song, a painting, or an idea—the more we tend to like it. In psychology, this idea is known as fluency: when a piece of information is consumed fluently, it neatly slides into our patterns of expectation, filling us with satisfaction and confidence.

“Things that are familiar are comforting, particularly when you are feeling anxious,” Norbert Schwarz, a psychology professor at the University of Southern California, who studies fluency, told me. “When you’re in a bad mood, you want to see your old friends. You want to eat comfort food. I think this maps onto a lot of media consumption. When you’re stressed out, you don’t want to put on a new movie or a challenging piece of music. You want the old and familiar.”

It would be too simplistic to say that music is racing in a single direction—toward dumber, louder, and more-repetitive pop. Now that labels recognize how popular hip-hop and country really are, they have created innovative new sounds by blending those genres with traditional pop. One of the popular songs of this past summer, “Problem,” combined a dizzy sax hook, ’90s-pop vocals, a whispered chorus, and a female rap verse. It was utterly strange and, for a while, ubiquitous. Greta Hsu, an associate professor at the University of California at Davis, who has done research on genre-blending in Hollywood, told me that although mixing categories is risky, hybrids can become standout successes, because they appeal to multiple audiences as being somehow both fresh and familiar.

Music fans can also find comfort in the fact that data have not taken over the songwriting process. Producers and artists pay close attention to trends, but they’re not swimming in spreadsheets quite like the suits at the labels are. Perhaps one reason machines haven’t yet invaded the recording room is that listeners prefer rhythms that are subtly flawed. A 2011 Harvard study found that music performed by robotic drummers and other machines often strikes our ears as being too precise. “There is something perfectly imperfect about how humans play rhythms,” says Holger Hennig, the Harvard physics researcher who led the study. Hennig discovered that when experienced musicians play together, they not only make mistakes, they also build off these small variations to keep a live song from sounding pat.

The Internet can connect us to an astonishing amount of music—some of it derivative, but much of it wildly experimental, even brilliant. Streaming services like Spotify and Pandora let us sample from music libraries that, decades ago, wouldn’t have fit inside the largest record store in the world. These services aren’t just vast; they’re also searchable and exquisitely personal. “One thing about Pandora that isn’t obvious to people who use our service is that it isn’t just one algorithm,” Eric Bieschke, the company’s chief scientist, told me. “We have dozens and dozens of algorithms that connect people to music in different ways, like genre, and popularity, and repetitiveness. Then we have a meta-algorithm that directs all of the algorithms, like a conductor standing in front of a symphony that’s only playing for one person.”

But while fans can burrow deep into rabbit holes of esoterica, “Today’s Top Hits” is still the No. 1 playlist on Spotify, and Pandora’s most popular station is “Today’s Hits.” Even when offered a universe of music, most of us prefer to listen to what we think everyone else is hearing.

Billboard, Changing the Charts, Will Count Streaming Services

November 20, 2014

BEN SISARIO NYTimes.com 11/19/14

Streaming music services like Spotify have brought big changes to the music industry. But one important part of the business has not kept up: Billboard’s album chart.

Now Billboard and Nielsen SoundScan, the agency that supplies its data, will start adding streams and downloads of tracks to the formula behind the Billboard 200, which, since 1956 has functioned as the music world’s weekly scorecard. It is the biggest change since 1991, when the magazine began using hard sales data from SoundScan, a revolutionary change in a music industry that had long based its charts on highly fudgeable surveys of record stores.

The new chart, covering sales and listening from Monday to Nov. 30, will be revealed on Billboard’s website on Dec. 4 and published in print in its Dec. 13 issue. Silvio Pietroluongo, Billboard’s director of charts, said that by looking at streams as well as sales, the new chart will more accurately reflect how people listen to music these days.

“We were always limited to the initial impulse, when somebody purchased an album,” Mr. Pietroluongo said in an interview. “Now we have the ability to look at that engagement and gauge the popularity of an album over time.”

One expected result is that albums by big pop stars — which tend to open high on the chart and then plunge after just a few weeks — should linger longer in the upper rungs. Ariana Grande’s “My Everything,” for example, which opened at No. 1 in September, was No. 36 on last week’s chart, with 10,000 sales. Under the new formula, it would have been No. 9.

SoundScan and Billboard will count 1,500 song streams from services like Spotify, Beats Music, Rdio, Rhapsody and Google Play as equivalent to an album sale. For the first time, they will also count “track equivalent albums” — a common industry yardstick of 10 downloads of individual tracks — as part of the formula for album rankings on the Billboard 200.

The change is to some degree a sign of a broad reconsideration of media measurement in the digital age, as television studios, magazine publishers and others push companies like Nielsen to account for the changes in how people consume media.

It is also being welcomed by record companies that have been frustrated with the old chart’s blind spots. Daniel Glass, the founder of Glassnote Records, an independent label whose acts include Mumford & Sons and Chvrches, said that Billboard’s charts play a vital role in the industry by demonstrating the success of a new act. These days the fans of those acts may stream more albums than they buy.

“It’s been very difficult over the last two or three years to communicate the charts to radio stations,” Mr. Glass said. “I’ve been Scotch taping and Band-Aiding Shazam and Spotify, bringing in all this data for them. Now with this all-in-one streaming chart, it’s a much truer reflection of how much is being consumed.”

Album sales in the first half of the year declined 15 percent from the same period in 2013, according to SoundScan, as downloads have now joined CDs as a declining sales format. Yet streaming from so-called on-demand services like Spotify — which let people pick exactly what songs to listen to, unlike radio services — was up 42 percent in the same period.

Continue reading the main story Continue reading the main story

Continue reading the main story

“Album sales have become a smaller and smaller part of the industry,” said David Bakula, a senior analyst at Nielsen. “To just look at album sales and say this is how we measure success is really leaving out that half of the business that is coming from streams and song sales.”

With each tweak Billboard makes to its charts, there is often a corresponding uproar. Last year, Billboard began counting YouTube views for the Hot 100, its pop singles chart. Critics worried at the time that the practice would reward novelty viral videos, and indeed the first beneficiary of the change was Baauer’s “Harlem Shake,” a song with modest sales but huge exposure through dance-along videos online.

For the most part, the Hot 100 has remained the dominion of the same pop hits that rule radio and download sales, although there have been exceptions. Last year, for example, a popular parody video on YouTube helped Miley Cyrus’s “Wrecking Ball” return to No. 1 after a nine-week absence.

The change may hurt artists whose albums are not on streaming services, or are mostly consumed through sales. Barbra Streisand’s “Partners,” for example, opened at No. 1 in September, and on last week’s chart it was still at No. 7, with 28,000 sales. But under Billboard’s new chart rules, it would have fallen to No. 13.

Taylor Swift’s “1989,” the biggest hit album of the year, was withheld from Spotify and other streaming outlets, and two weeks ago, it still opened at No. 1 with nearly 1.3 million sales, the biggest weekly total for any album in 12 years. On the latest chart, released by Billboard on Wednesday, “1989” holds at No. 1 for a third week, with 312,000.

“No amount of streaming in the world,” Mr. Bakula said, “could keep Taylor from No. 1.”

YouTube’s Refusal to Remove 20,000 Songs Leads to New Irving Azoff Warning

November 19, 2014

Eriq Gardner HollywoodReporter.com 11/18/14

YouTube has apparently made the decision not to immediately remove songs composed by popular musicians including The Eagles, Pharrell Williams and John Lennon, and as a result, the popular video website is being warned of the risks of “defiance.”

Last week, just as YouTube announced the launch of a subscription service called Music Key, music industry heavyweight Irving Azoff was sounding the alarm [2] that YouTube hadn’t completed all of the licensing necessary. YouTube may have made deals with record labels, but to publicly perform songs, the company also has to take care of songwriters, which Azoff says are “massively underpaid” when it comes to digital services. Many songwriters are handled by publishers working through performance rights organizations like ASCAP and BMI, but Azoff is spearheading a new venture, Global Music Rights (GMR), which has managed to sign up about 42 songwriters, including Smokey Robinson and Chris Cornell, who collectively have published about 20,000 songs.

According to a letter sent by GMR’s outside lawyer Howard King to YouTube general counsel Kent Walker on Monday (see below), YouTube has failed to comply with demands to stop performing those 20,000 songs. Now the two sides begin a dance to the beat of copyright law.

The first question that arises from the escalating situation is whether YouTube has a right to perform these songs until proven otherwise. GMR thinks the burden of proving a valid license is on YouTube.

According to the Azoff camp, YouTube has come forward with word that it has a multiyear license for the public performance of works represented by GMR. The licensors aren’t identified, but it’s possible that YouTube thinks itself covered by prior deals made with ASCAP, BMI, SESAC or some foreign PRO. (YouTube hasn’t publicly commented about the situation, although it did give us a statement. It’s below.)

King writes: “Obviously, if YouTube contends that it has properly licensed any of the songs for public broadcast, a contention we believe to be untrue, demand is hereby made that we be furnished with documentation of such licenses.”

The next issue to be debated will be whose responsibility it is for alerting YouTube about infringing works on the network. Azoff tells The Hollywood Reporter that GMR has sent takedown notices, but from what we understand, these appear to fall under the category of a general notice of 20,000 unlicensed works. Azoff says that YouTube is making GMR track down each instance of an infringing work in the YouTube ecosystem. “They hide behind safe harbor,” he says. “But that doesn’t protect a knowing and willful infringer.”

Interestingly, the responsibilities of ISPs under the Digital Millennium Copyright Act began to be shaped by Viacom’s lawsuit against YouTube [3]. That litigation was settled [4] earlier this year, leaving it to other cases like the record companies’ dispute with Vimeo [5] to further inform the discussion about precisely what kind of knowledge and awareness is necessary before an ISP like YouTube is disqualified from having safe harbor from copyright liability. (The Vimeo case will be argued before the 2nd Circuit Court of Appeals very soon.)

Although Azoff says he’s not contemplating a lawsuit quite yet, the letter from King (a notable litigator) does raise the prospect of “willful copyright infringement.” Statutory damages for willful copyright infringement run up to $150,000 per work, meaning that if a lawsuit does come, it could theoretically be a $3 billion case. Statutory damages more typically run between $10,000 to $50,000 per work, though. That still amounts to a lawsuit potentially worth somewhere between $200 million and $1 billion.

Of course, it’s possible YouTube does have a prior license or can mitigate its liability another way. (For example, the company now uses content fingerprinting technology that could be a middle ground in the takedown process.) If not, this is Azoff’s way of ratcheting up the pressure and making his formal invitation to YouTube to get to the negotiating table right away.

A spokesperson from YouTube gave us this statement: “We’ve done deals with labels, publishers, collection societies and more to bring artists’ music into YouTube Music Key. To achieve our goal of enabling this service’s features on all the music on YouTube, we’ll keep working with both the music community and with the music fans invited to our beta phase.”

Revenue Streams: Is Spotify the music industry’s friend or its foe?

November 17, 2014

John Seabrook Newyorker.com 11/24/14

Daniel Ek says his company is “not in the music space—we’re in the moment space.” Daniel Ek says his company is “not in the music space—we’re in the moment space.”
Daniel Ek, the C.E.O. of Spotify, is a rock star of the tech world, but he is not long on charisma. At thirty-one, he is pale, boyish, cerebral, and calm. Jantelagen, the Scandinavian code of humility and restraint, is strong in him. He doesn’t greet you with a firm handshake from behind an imposing desk; he doesn’t have a desk. He sprawls on a couch with his laptop, like a teen-ager doing homework. Or he wanders the company’s offices, which form an oval around the open core of a big building on Birger Jarlsgatan, in central Stockholm. The design encourages “random encounters,” which Ek once read was Steve Jobs’s plan in laying out Pixar’s offices.

Ek’s phlegmatic manner makes his unshakable, almost spiritual belief in Spotify burn all the more brightly. His vision, that Spotify is a force for good in the world of music, is almost Swedenborgian: salvation in the form of a fully licensed streaming-music service where you can find every record ever made. Spotify doesn’t sell music; it sells access to it. Instead of buying songs and albums, you pay a monthly subscription fee ($9.99), or get served an ad every few songs if you’re on the free tier. You can listen to anything on the service—the Beatles (as with iTunes, the surviving members are not rushing in) and Taylor Swift (who left the service in a flurry of publicity in early November) notwithstanding—and there is an astonishing amount of music. When Spotify launched, in October, 2008, in Sweden and a handful of other European countries, Ek’s dream seemed like the longest of long shots. Now Spotify is the Netflix of music sites. Mark Zuckerberg, Facebook’s founder, says, “Daniel just saw the opportunities of streaming music before anyone else.”

Spotify appeared nine years after Napster, the pioneering file-sharing service, which unleashed piracy on the record business and began the cataclysm that caused worldwide revenues to decline from a peak of twenty-seven billion dollars, in 1999, to fifteen billion, in 2013. The iTunes store, the industry’s attempt, in partnership with Apple, to build a digital record shop, opened in 2003 to sell downloads, but that didn’t alter the downward trajectory; indeed, by unbundling tracks from the album, so that buyers could cherry-pick their favorite songs, Apple arguably hastened the decline. Legal actions against individuals—thousands of people in the U.S. were sued for downloading music illegally—only alienated potential customers. As bad as the bloodbath was in the U.S., the situation was even worse in Sweden. Pelle Lidell, an executive with Universal Music Publishing in Stockholm, told me that by 2008 “we were an inch away from being buried, and Spotify single-handedly turned that around.”

Ek was one of the pirate band. Before starting the company, he had briefly been the C.E.O. of uTorrent, which made money in part by monetizing pirated music and movies on BitTorrent, a major file-sharing protocol. Later, the Napster co-founder Sean Parker, for years Public Enemy No. 1 to record-company executives, joined forces with Ek. Who would have imagined, as one label head put it recently, that “your enemy could become your friend”?

Spotify is now in fifty-eight countries. (Canada, its latest market, got the service at the end of September.) It has raised more than half a billion dollars from investors, including Goldman Sachs, to fund its expansion, and there are rumors of an I.P.O. in its future, to raise more. Spotify’s user base exceeds fifty million globally, with twelve and a half million paying subscribers. At the current rate of growth, that number could reach forty million subscribers by the end of the decade. To date, it has paid out more than two billion dollars to the record labels, publishers, distributors, and artists who own the rights to the songs. “I’m very bullish on it,” Tom Corson, the president of RCA Records, said. “The all-you-can-eat access model is starting to make sense to people. And we expect that free is going to roll into subscription and that is going to be a really huge part of our business.”

The question of whether Spotify is good for artists is considerably more vexed. The service has been dogged by accusations that it doesn’t value musicians highly enough. In 2013, Radiohead’s Thom Yorke memorably called Spotify “the last desperate fart of a dying corpse,” a remark that “saddened” Ek. In July, Taylor Swift wrote in a Wall Street Journal editorial, “In my opinion, the value of an album is, and will continue to be, based on the amount of heart and soul an artist has bled into a body of work.” For Swift, streaming is not much different from piracy. “Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently,” she wrote.

In early November, when Swift’s new album, “1989,” was released, her label, Big Machine Records, not only declined to make the album available on Spotify but also removed her entire catalogue from the service. Is this a gesture of artistic solidarity, or, as one insider put it, “a stunt to wring the last drop of blood out of what is a dying model”—i.e., album sales? Swift’s impressive first-week sales of “1989,” which were just under 1.3 million albums, making her the year’s top seller, are still well short of the all-time first-week high, 2.4 million, set by ’N Sync, in 2000. And the sixty-nine-per-cent drop-off in “1989” ’s second-week sales suggests that Swift’s seventy-one million Facebook fans didn’t rush out and buy the album when they couldn’t get it on Spotify. They just streamed whatever was available on YouTube, which pays artists even less than Spotify does, or on other sites. Or they set sail for the Pirate Bay, where the album was also No. 1.

On Spotify, music consumption is “frictionless”—a favorite word of Ek’s. In tech terms, we’ve gone from a world of scarcity to one of abundance. Nothing is for sale, because everything is available. The kind of calculations you make on iTunes, such as “I like this song, but not enough to buy it,” don’t matter. It is a music nerd’s dream, which may be why the user population on Spotify tends to lie outside the mainstream. On Spotify, the Pixies’ top songs have about four times as many streams as Neil Diamond’s biggest hits.

The difference between Spotify and Internet radio services, like Pandora, is that Spotify is interactive. You can sample the complete catalogue of most artists’ recordings. (Spotify also has a non-interactive radio component.) Spotify now has some twenty million songs on the service, and twenty thousand new ones are added every day. If you are a “lean forward” listener—that is, the kind of motivated fan who takes the time to discover the music you want—Spotify is a celestial jukebox. But, for Spotify to continue its rapid growth, it must bring in the “lean backers” Pandora caters to. Spotify tries to do this with playlists. It has staff-curated playlists, and users can also make their own—there are more than a billion on the site. The playlist is the album of the streaming world. Spotify is working on getting its service into car stereos, and is negotiating agreements with automobile companies; one such agreement was announced this week. The power of playlists will only grow.

When Spotify launched in the U.S., in 2011, it relied on simple, usage-based algorithms to connect users and music, a process known as “collaborative filtering.” These algorithms were more often annoying than useful. You think because I listened to Neil Young that I want to listen to America? America ripped Neil Young off! But over time the algorithms have improved. Earlier this year, Spotify bought a Boston-based startup called the Echo Nest, which has developed a form of artificial music intelligence—a kind of A.I. hipster that finds cool music for you. The Echo Nest powers Spotify’s automated radio stations and is also behind an in-house programming tool called Truffle Pig, which can be told to sniff out music with combinations of more than fifty parameters, such as “speechiness” and “acoustic-ness.” Now that the Echo Nest is part of Spotify, its team has access to the enormous amount of data generated by Spotify users which show how they consume music. Spotify knows what time of day users listen to certain songs, and in many cases their location, so programmers can infer what they are probably doing—studying, exercising, driving to work. Brian Whitman, an Echo Nest co-founder, told me that programmers also hope to learn more about listeners by factoring in data such as “what the weather is like, what your relationship status is now on Facebook.” (In 2011, Facebook entered into a partnership with Spotify.) He added, “We’ve cracked the nut as far as knowing as much about the music as we possibly can automatically, and we see the next frontier as knowing as much as we possibly can about the listener.”

All this, Ek explained, will help Spotify to better program the “moments” of a user’s day. “We’re not in the music space—we’re in the moment space,” he told me. The idea is to use song analytics and user data to help both human and A.I. curators select the right songs for certain activities or moods, and build playlists for those moments. Playlists can be customized according to an individual user’s “taste profile.” You just broke up with your boyfriend, you’re in a bad mood, and Justin Timberlake’s “Cry Me a River,” from the “Better Off Without You” playlist, starts. Are you playing the music, or is the music playing you
You can design your own Spotify day. You wake to the “Early Morning Rise” playlist (Midnight Faces, Zella Day), and get ready with “Songs to Sing in the Shower” (“I’m hooked on a feeling/I’m high on believing”). Depending on how much work you have, there’s “Deep Focus,” “Brain Food,” or “Intense Studying.” By eleven-thirty, you’ve hit “Caffeine Rush,” and, after a sandwich at your desk (“Love That Lazy Lunch”), it’s time to “Re-Energize” (Skrillex, Deorro) for the afternoon. A late-in-the-day “Mood Booster” (Meghan Trainor) gets you pumped for your workout (there’s a “House Workout,” a “Hip Hop Workout,” and a “CrossFit Mix,” to name just a few). Then it’s “Happy to Be Home” (Feist, the Postal Service). After “Beer n’ Burgers” (rockabilly) or “Taco Tuesday” (Celia Cruz), you “Calm Down” (Wilco, the National) and then, depending on your love life, click on “Sexy Beats” or “Better Off Without You” (or maybe “Bedtime Stories,” for the kids), followed by “Sleep” (heavy on Brian Eno, king of the z’s).

My problem with playlists is not the Starbucksy rubrics, or the spying on my embarrassing Lana Del Rey obsession. My problem is that I end up skipping most of the songs anyway. I lean forward and check the next song when I’m supposed to lean back. The human or the A.I. who chose Pharrell’s “Happy” for the “Mood Booster” playlist isn’t getting the job done for me.

By the time he turned twenty-two, Daniel Ek had achieved his life’s ambition: he was rich. A gifted programmer, he had been making money by working on Internet-based tech products since he was fourteen. After selling an Internet advertising company called Advertigo, in 2006, he retired. He rented a big place in Stockholm. He bought a red Ferrari and drove it to night clubs, where he arranged for good tables for friends and attractive female companions, whom he plied with expensive champagne. He lived like this for a year or so, until one morning he awoke to a startling realization. “I was completely depressed,” he said.

“I realized the girls I was with weren’t very nice people,” Ek went on, “that they were just using me, and that my friends weren’t real friends. They were people who were there for the good times, but if it ever turned ugly they’d leave me in a heartbeat. I had always wanted to belong and I had been thinking that this was going to get solved when I had money, and instead I had no idea how I wanted to live my life. And no one teaches you what to do after you achieve financial independence. So I had to confront that.”

Ek describes himself as “missionary,” by which he means he likes to formulate five-year missions for himself. “That’s how I think about life,” he said. “Five years is long enough for me to achieve something meaningful but short enough so I can change my mind every few years. I’m on my second five-year commitment on Spotify. In two years, I will have to make my next one. I will need to ask myself if I still enjoy what I’m doing. I’m kind of unusual that way, but it gives me clarity and purpose.”

Ek sold the Ferrari, got rid of the apartment, and moved to a cabin near his parents’ place in Ragsved, a Stockholm suburb, where he meditated about what to do with his life. He had soul-searching conversations with Martin Lorentzon, the Swedish entrepreneur who had bought Ek’s advertising company, and was himself looking for a new project. “And we always came back to the music industry,” Ek said. Like many teen-agers around the turn of the millennium, Ek had become infatuated with Napster—in particular, with the idea of a site where all the world’s music was available for free. Radio offered free music, too, of course, but radio wasn’t interactive; you couldn’t pursue your own interests, the way you could on Napster. Ek said, “Before that, I was listening to Roxette,” a Swedish pop-rock band from the eighties. “I discovered Metallica and learned that they were inspired by Led Zeppelin, and King Crimson, and then I got into the Beatles. And from there I went to Bowie and the whole British scene from the Eurythmics to the Sex Pistols. Hearing the anger and frustration of the Sex Pistols or the Clash made you feel like you were in the seventies. You started to understand culture. It was pretty magical.

“It came back to me constantly that Napster was such an amazing consumer experience, and I wanted to see if it could be a viable business,” Ek went on. “We said, ‘The problem with the music industry is piracy. Great consumer product, not a great business model. But you can’t beat technology. Technology always wins. But what if you can make a better product than piracy?’ ” Ek continued, “Piracy was kind of hard. It took a few minutes to download a song, it was kind of cumbersome, you had to worry about viruses. It’s not like people want to be pirates. They just want a great experience. So we started sketching what that would look like.”

Their “product vision,” in tech parlance, was that the service had to give the impression that the music was already on your hard drive. “What would it feel like?” Ek asked. “That was the emotion we were trying to invoke.” The key was to build something that worked instantly. Streaming, whether audio or video, tends to have built-in delays while you wait for the file, which is stored on a server in the cloud. But if the music starts in two hundred milliseconds or less—about half the time it takes, on average, to blink—people don’t seem to perceive a delay. That became Ek’s design standard. He told his lead engineer, Ludvig Strigeus, a brilliant programmer he had worked with before, “I don’t accept anything that isn’t below two hundred milliseconds.”

Strigeus responded, “It can’t be done. The Internet isn’t built like that.”

“You have to figure it out,” Ek insisted.

The solution involved designing a streaming protocol that worked faster than the standard one, as well as building their own peer-to-peer network, a decentralized architecture in which all the computers on it can communicate with one another. In four months, they had a working prototype.

“And I knew when we had it that it was going to be very special,” Ek said.

Ek’s original idea was to launch Spotify in the U.S. at the same time that he launched the service in Europe. Ken Parks, Spotify’s chief content officer, said, “Daniel thought he could just go down to the corner store in Stockholm and pick up a global license.” He didn’t realize that he would have to negotiate directly with all the different copyright holders, a herculean task. Not surprisingly, the labels weren’t interested. Ek was an outsider—a techie, and a Swedish one at that. Parks, an attorney who’d worked at E.M.I., recalled, “We needed to overcome the music-is-free mentality that Spotify represented.” Of the labels’ attitude, he went on, “If you have something you’ve invested a ton of money in, and you’ve been selling it for a lot, and you feel raped by piracy—to say to that person, ‘The only way to beat this is to co-opt the people who are stealing from you,’ that was a challenge.” Ek said, “If anyone had told me going into this that it would be three years of crashing my head against the wall, I wouldn’t have done it.”

Eventually, Ek decided to start regionally and prove that his concept worked. “And I invested all of my personal money in it,” he told me, “saying, you know, here’s my balls on the table. For them, the risk of trying it was kind of zero.” Swedish labels, gutted by piracy, literally had nothing to lose.

Sean Parker lives in the Plaza Hotel, in a private residence in the northeast corner of the building, looking out at Fifth Avenue and Central Park South. The grand, high-ceilinged dining room has commanding views in both directions, and it was there that the thirty-four-year-old billionaire was sitting on a warm fall afternoon, dressed in jeans and rust-colored high-tops, drinking tea from a white china cup. It was a setting that would have impressed Edith Wharton, even if the owner’s attire might not have.

Parker was talking about Napster, which he and Shawn Fanning started back in 1999. “Napster had been this cultural revolution, much more than it was ever a legitimate company,” he said, stroking his neatly trimmed beard. Napster, which had sixty million registered users at its peak, taught the world how to get music from the Internet. Parker says he had always wanted to go legit, by making a deal with the record industry, but instead the labels put Napster to sleep. “There was this unique opportunity in history. We said, ‘If you shut down Napster, it’s going to splinter, and you’re going to have a Whac-A-Mole problem on your hands, where you’re fighting service after service and you’re never going to get all those users back in one place.’ And that’s what happened.” From the dragon’s teeth sprang Kazaa, Grokster, Morpheus, and Limewire. “It was one of those things where it can be totally clear to you and everyone in your generation and you can explain it in the clearest of terms, not as a threat or a negotiating tactic—just, ‘Look, you just have to see this.’ And they couldn’t see it.” Napster was the enemy, pure and simple, and it had to be killed. “This was the biggest existential threat to the music business and they wouldn’t listen.”

advertisement

Parker sipped his tea. “So I went off and did other things”—he became president of Facebook in 2004, and helped turn it into a company, which helped turn him into a billionaire—“but in the back of my mind I was thinking about the untimely fate that Napster had met. That aborted mission.” He had watched while other entrepreneurs tried to realize the dream that was Napster. “They’d try to negotiate with the record labels and they really didn’t speak the language and they’d end up adapting their product vision to the terms they were able to get,” he said. In 2009, a friend told him about a Swedish service called Spotify. Parker had never heard of it. He sent Daniel Ek an e-mail and they arranged to meet.
“Who put back an empty jar of formaldehyde?”Buy or license »
“The thing that made Spotify very different when I first met Daniel and Martin was that they had this incredible stubbornness,” Parker went on. “In a good way. They were willing to let the product vision lead the business deals.” He agreed to invest in the company and help Ek in his negotiations to enter the U.S. market. “Daniel said, ‘I think it’s going to take six weeks to get our licenses complete.’ It ended up taking two years.” Of the four global music companies at that time—E.M.I., Sony, Warner Music, and Universal—Ek had managed to get E.M.I. and Sony on board, but Universal and Warner were holdouts. The latter was led by Edgar Bronfman, Jr., who had spearheaded the move to close down Napster, back in 2001.

This time, Parker was more persuasive. “He did know a lot of people,” one top label executive said. “Daniel Ek didn’t. And he worked it non-stop.” The Swedish trial period was key. The record industry’s total revenues in Sweden grew by more than a third between 2008 and 2011. Piracy plummeted. As the label executive recalled, “It was like—O.K., proof of concept, we should be doing this if we can get the right license.”

Another factor in the labels’ thinking was Apple’s iTunes store, which had proved to be an unsatisfactory business partner. Music had been an important part of Apple’s business when Steve Jobs first negotiated the iTunes licenses, back in 2002—the music helped sell the iPod. But by 2011 music was more important to the Apple brand than to its business. Apple would not even let Android users, who today represent more than eighty per cent of the global mobile business, have iTunes on their phones, because it wanted to sell iPhones. Spotify offered a way out of a troubled marriage.

Thomas Hesse, who led the negotiations for Sony, told me, “The main reason it took so long for Daniel to get all the majors on board was that he had this free tier, where all the music was on demand. Was that going to cannibalize the download world?” In the end, the free tier was limited to personal computers, so users would have to pay for subscriptions in order to listen on their mobile devices, a major incentive to convert to the paid tier. Nevertheless, Hesse continued, there was “a lot of discussion about how much Spotify needed to pay for the free streaming and how many paying subscribers it could potentially guarantee.”

After Universal made a licensing agreement with Spotify, Warner was virtually compelled to join the other major labels in negotiating. At the time, the company was also looking for a buyer. Parker told me that he tendered an offer to buy Warner with Ron Burkle, the Los Angeles-based venture capitalist. When another buyer, the Russian oligarch Len Blavatnik, expressed interest, Parker said that he told him, “Look, if you make Spotify contingent on the deal, I will withdraw my offer and you’ll get the company.” In 2011, Blavatnik bought Warner, for $3.3 billion. Parker became a Spotify board member and helped broker its partnership with Facebook.

The exact terms of the licensing deals that Spotify made with the majors are not known; all parties signed nondisclosure agreements. In addition to sharing with other rights holders nearly seventy per cent of the money Spotify earns from subscriptions and ad sales—about the same revenue split that Apple provides on iTunes sales—the majors also got equity in Spotify, making them business partners; collectively, they own close to fifteen per cent of the company. Some analysts have questioned whether Spotify’s business model is sustainable. The company pays out so much of its revenues in fees that it barely makes a profit. It operated at a loss before 2013. (The company maintains that its focus has been on growth and expansion.) The contracts are renegotiated every two or three years, so the better Spotify does, the more, in theory, the labels could ask for. This makes Spotify unlike many Internet companies, in which the fixed costs of doing business become relatively smaller with scale. For Spotify, scale doesn’t diminish the licensing fees.

advertisement

When Spotify began in the U.S., labels demanded up-front payments as the price of getting in the game. These payments were not always passed along to the content creators, even though it is their work that makes the catalogues valuable in the first place. Month by month, Spotify pays the major labels lump sums for the entire market share of their catalogues. How the labels decide to parcel these payments out to their artists isn’t transparent, because, while Spotify gives detailed data to the labels, the labels ultimately decide how to share that information with their artists. The arrangement is similar on the publishing side. Artists and songwriters basically have to trust that labels and publishers will deal with them honestly, which history suggests is a sucker’s bet. As one music-industry leader put it, “It’s like you go to your bank, and the bank says, ‘Here’s your salary,’ and you say, ‘But what is my employer paying me? I work for them, not you!’ And the bank says, ‘We are not going to tell you, but this is what we think you should get paid.’ ”

Parker’s tea had grown cold, and he poured some hot water into it. The October light dimmed in the high Plaza windows. He pondered the progress of the tide of humanity flowing up and down Fifth Avenue. For him, Spotify was a do-over—a second chance to get Napster right. And that felt “very vindicating.”

The deals that Spotify made with the major labels launched on-demand streaming in earnest. But although the way the consumer gets access to music had changed, the way the creators of music are paid for their work had not. Somehow, the billions of micro-payments parcelled out in the form of streams have to be reconciled with a royalty-payments system that is rooted in a century-old sales model. No economic infrastructure exists for that apples-to-oranges transformation.

Spotify is only one of many streaming sites. There are competing services like Rhapsody (which recently bought a rebranded, fully licensed Napster), Rdio, and Google Play Music, but there are also thousands of other sites where songs are streamed. Labels, publishers, and performing-rights societies struggle with dozens of different technologies to monitor this welter of outlets. And with any given stream of a song there is a myriad of copyrights—performing and mechanical rights apply to both the recording and the composition—which makes sorting out who’s owed what no easy matter. Liz Penta, an artist manager in New York, told me that, in addition to larger payments, she regularly gets checks for one penny from the Harry Fox Agency, which administers mechanical royalties for Spotify, among other streaming services. YouTube, which is by far the largest streaming-music site in the world (it wasn’t designed that way—that’s just what it became), is notorious among rights holders in the music industry for its measly and erratic payouts. Spotify’s exponential growth rate suggests that the chaos in royalty collection is only just beginning.

Not surprisingly, companies that specialize in digital royalty collection constitute one of the hottest growth sectors in the music business. Among the leaders is Kobalt, founded, in 2001, by Willard Ahdritz. Part collection agency, part music publisher, and part tech platform, Kobalt has built a system of enormously complex Oracle databases that compute billions and billions of transactions and royalty lines from all over the world, and collects on behalf of some two thousand artists, including Paul McCartney, Maroon 5, and Skrillex, while the rest of the industry uses Excel spreadsheets to try to piece everything together. On YouTube, Kobalt’s proprietary song-detection technology, ProKlaim, detects unclaimed videos for its clients. Ahdritz says, “We create transparency, which drives liquidity, and the money is now flowing.”

Spotify’s payouts to indie labels and digital-music distributors such as Tunecore are considerably more transparent than its dealings with the major labels. Spotify sends out monthly statements showing the total streams per artist, broken down into individual songs. To come up with the royalty rate per stream, Spotify divides the monthly streams of a single artist’s work by the total number of streams on Spotify that month, and arrives at the artist’s share. It multiplies that number by the total monthly revenues, and keeps thirty per cent. Labels, publishers, and distributors then pay the artist according to their royalty deals.

advertisement

But exactly what is the royalty rate for a single stream? It depends on many factors. The more popular you are, the higher your metric. Some countries’ streams are worth more than others’. Free, ad-supported streams are worth less than subscriber streams, because the company makes less on ads than on subscriptions. (One of the reasons that Swift left Spotify was that her label wanted her music to be exclusive to the premium tier in the U.S.; it was willing to make her catalogue available for free in the rest of Spotify’s markets.) According to the company’s Web site, the average stream on Spotify is worth between six-tenths and eight-tenths of a cent. If you do the math, that means that around a hundred and fifty streams equal one ninety-nine-cent download. But that metric is hard for many musicians and record executives to accept. (I don’t stream my Lana favorites close to that many times.) On the other hand, seven-tenths of a cent is better than nothing.

Some artists are already making real money from Spotify. Swift’s music was earning about five hundred thousand dollars a month at the time she pulled it. E.D.M. artists like Avicii and David Guetta are seeing payouts in the millions. Avicii’s “Wake Me Up,” the most streamed song on Spotify, has more than three hundred million spins, which, using Spotify’s benchmark per-stream rate, would be worth about two million dollars to the rights holders. Daniel Glass, a music-industry veteran who is the founder of Glassnote Records, an indie label, told me that he is very happy with the royalties Spotify pays his artists, who include Mumford & Sons, Phoenix, Childish Gambino, and Chvrches. “We’re getting big beautiful checks from them!” he exclaimed.

At a recent series of educational meet-ups with the music industry in New York, Nashville, and L.A., Spotify representatives tried to reassure managers and artists, offering rosy-sounding future royalties, based on growth projections. A niche indie album, which now earns thirty-three hundred dollars a month, will receive seventeen thousand dollars in royalties a month when Spotify hits forty million paid subscribers. A breakthrough indie album, now earning seventy-six thousand dollars a month, will pull in three hundred and eighty thousand dollars. A global hit album, currently earning four hundred and twenty-five thousand dollars a month, will get $2.1 million. How likely are these projections to come true? When I asked Ek, he said, “Is there a definitive way of knowing? Of course not. But I’m not the only person who believes it. Pretty much everyone is in agreement that streaming will keep on growing over the next few years.”

AM/FM radio pays the writer of the song on a per-play basis, but gives the performer and the owner of the recording of the song—generally, the record label—nothing. On digital streaming services like Spotify, the situation is nearly reversed: the owners of the recording get most of the performance royalty money, while the songwriters get only a fraction of it. Songwriters, who can’t go out on the road, are particularly hard hit by the loss of publishing royalties. As one music publisher put it, “Basically, the major music corporations sold out their publishing companies in order to save their record labels. Universal Music Publishing took a terrible rate from streaming services like Spotify in order to help Universal Records. Which, in the end, means that the songwriter gets screwed.”

Ek’s answer to the question of whether or not Spotify is good for artists tends toward the tautological. If it’s good for listeners—and almost everyone who uses Spotify likes it—then it must be good for artists, because by encouraging more listening it will “increase the over-all pie.” Many music-business people think he’s right. Richard Jones, the Pixies’ manager, says, “Particularly for artists who are established with solid catalogues and are big live-touring acts, streaming services can be extremely beneficial. I’m a massive supporter.” He said of Swift’s decision to pull her music, “It’s purely P.R.-driven, which is fine. But let’s not pretend it’s artist-friendly. Because actually the most artist-friendly thing here is for everyone to make streaming into something that is widespread.”

Spotify does offer undiscovered musicians new opportunities to break through. Playlists tend to be much broader in scope than commercial-radio playlists. Lorde is often cited around Spotify as an artist who gained crucial early exposure after Sean Parker heard her song “Royals” when a friend played it for him. In April, 2013, before the song was a hit anywhere, Parker added it to his “Hipster International” Spotify playlist, which currently has seven hundred and ninety thousand followers. Parker’s followers added it to their playlists, as did their followers; users shared it with one another; and within weeks “Royals” was the second most popular song on Spotify. Spotify’s director of economics, Will Page, says, “Now, remember, there is no Old World business model here, no radio pluggers or traditional marketing—just a playlist. But it’s like becoming a broadcaster. And you could see the viral nature of growth that led to this artist becoming No. 1 in America before Christmas.” Still, the fact is that Lorde had a major label and its marketing budget behind her. Jason Flom signed Lorde to his Lava label months before Parker playlisted her. “ ‘Royals’ was not to be denied,” Flom told me. “Nothing could stop it.” Even so, he said, “Spotify—and especially Sean—was definitely helpful in establishing Lorde the way we wanted to establish her. It gave her a foundation with the cool kids.”

advertisement

Record companies are beginning to figure out how to employ Spotify’s potential to their advantage, sometimes by manipulating release dates. “Windowing” releases—start out on iTunes only, and add Spotify after two weeks of sales—is popular at some labels (and very unpopular at Spotify). In Taylor Swift’s case, Big Machine Records decided to keep her previous album, “Red,” off Spotify in the first weeks after its release in order to increase record sales. “Red” was later added to Spotify, before Swift removed the entire catalogue.

But there is another class of musicians whom Ek hasn’t helped so far. For them, Spotify has further eroded their CD and download sales, without coming close to making up the difference in streaming revenues. Ek acknowledges that the switch from a sales model to a streaming model could be bumpy for some artists. “In Sweden, there was one tough year and then the debate changed,” he said. “That will happen in the larger markets. The end goal is to increase the entire pool of music. Anything else is part of the transition.” He added, “This is the single biggest shift since the beginning of recorded music, so it’s not surprising that it takes time to educate artists about what this future means.”

Two artists who are part of that transition are Marc Ribot, an esteemed jazz guitarist, and Rosanne Cash, whose work has won a Grammy and received twelve nominations. Both are mid-level, mid-career musicians who are a vital part of the New York City music scene. Both have worked with major labels. (Ribot is currently releasing his music on indies.)

I met them in New York one October afternoon. Ribot and Cash brought along their Spotify numbers. In the past eighteen months, Ribot reported, his band made a hundred and eighty-seven dollars from sixty-eight thousand streams of his latest album, available on Spotify in Europe and the U.S. Cash had made a hundred and four dollars from six hundred thousand streams. The math doesn’t fit Spotify’s benchmarks, but that is how their labels and publishers did the accounting.

When I mentioned that both Ek and Parker seemed to be sincere in their desire to help artists, Ribot replied, “Well, our ‘friends’ in the online-distribution business have helped artists to go from a fourteen-billion-dollar domestic record business to a seven-billion-dollar one, and now Spotify wants to help us reduce it even further. With friends like that, give me the old Brill Building system.”

He went on, “Here’s the simple fact that no one wants to talk about. Spotify says it pays out seventy per cent of its revenues to rights holders. Well, that’s very nice, that’s lovely. But if I’m making a shoe, and it costs me a hundred dollars to make it, and the retailer is selling that shoe for ten dollars, then I don’t care if he gives me seventy per cent, I don’t care if he gives me one hundred per cent—I’m going out of business. Dead is dead.”

Cash said, “I don’t think any of us want to make the streaming services go away. We are not Luddites. We just want to be paid fairly.”

“And we’re not going to say a model is viable unless it’s viable for the creators,” Ribot added. “I know Daniel Ek is going to do just fine. I don’t know that about the people in my band.”

“And, if the artist can’t afford to work, the music is going to suffer,” Cash added, with feeling. “Spotify is not acting in its own self-interest by obliterating us.”

Or maybe Spotify itself will get obliterated. Apple, Amazon, and Google have recently begun to enter the on-demand streaming market. (YouTube débuts Music Key, an ad-free paid-subscription service, this week, which will include access to Google Music Play.) Spotify’s advantage, Ek maintains, is its data and its ability to analyze that information. “We’ve been doing this for years,” he said. “And what we’ve built is the largest set of data of the most engaged music customers. I think it would be really hard for anyone to come in and do what we do better. Maybe someone could lower the cost of a streaming service and make it hard for us to survive. But am I concerned that someone will build a better product? No, because they can’t.”

James McQuivey, an analyst with the Boston-based Forrester Research, is less optimistic about the company’s prospects. “Spotify has shown people value streaming,” he said, “and that means somewhere someone could use that value in a bigger chess game. Someone like an Apple or a Google is already realizing how valuable music is as a customer-engagement tool and will offer something quite similar to this, without making you pay for it, the way Amazon has included video in the Prime membership without expressly charging. And then suddenly you’ve disrupted Spotify.” He added, “If I have to say yes or no will Spotify be as big and strong as it is five years from now, the answer will be no.”

Earlier this year, Apple acquired Beats Electronics, an audio company, which had entered the streaming business via Beats Music. It’s not yet clear what Apple wants to do with Beats. It could try to sign up Spotify holdouts like the Beatles (Taylor Swift hasn’t pulled her back catalogue from Beats, which is subscriber-only) and promote its service as more comprehensive. On the other hand, Apple faces the classic innovator’s dilemma. An Apple on-demand streaming service would undermine its iTunes downloads business. But if streaming is the future of music—and even people who fear the prospect agree that it is—Apple will need to enter the market soon. iTunes’ music sales have dropped almost fourteen per cent since the start of the year.

Apple could pose a real threat to Spotify, by pre-installing a service—iStream, maybe—on the next generation of iPhones and including the price of a subscription in the plan. Siri could be your d.j. That would insure a paying user base in the hundreds of millions almost instantly, easily eclipsing Spotify’s. And, since Apple makes money primarily from its hardware, it could afford to undercut Spotify on the price of a subscription—a scheme it is currently promoting to the labels. Of course, that would require the support of the labels, and they are Spotify’s business partners in streaming. “You might want to take a discount in a business you have equity in,” one label head told me. “You might not want to take a discount in a business you don’t have equity in. Would we subsidize Apple with no real upside for us? We did that once before. It was called unbundling the album.” In any case, the downward pressure on price from increased competition seems likely to diminish the pot of money that the rights holders get to divide.

Even if Spotify does manage to survive Apple, it will take years to complete the paradigm shift to streaming. Meanwhile, album sales will continue to decline—even albums recorded by Taylor Swift. The labels, feeling the pinch in their bottom line, may try to squeeze more money out of Spotify, imperilling its future growth. They may even try to cash in their equity stakes. Proving that, while your enemies can indeed become your friends, the reverse can also be true. ♦

The Streaming Price Bible – Spotify, YouTube and What 1 Million Plays Means to You

November 16, 2014

theTrichordist.com 11/12/14

Several of our posts on streaming pay rates aggregated into one single source. Enjoy…

musicstreamingindex020114[EDITORS NOTE: All of the data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $5,210 / 1,000,000 = .00521 per stream). In cases where there are multiple tiers and pricing structures (like Spotify), these are all summed together and divided to create an averaged, single rate per play.]

If the services at the top of the list like Nokia, Google Play and Xbox Music can pay more per play, why can’t the services at the bottom of the list like Spotify and YouTube?

We’ll give you a hint, the less streams/plays there are the more each play pays. The more plays there are the less each stream/play pays. Tell us again about how these services will scale. Looking at this data it seems pretty clear that the larger the service get’s, the less artists are paid per stream.

So do you think streaming royalty rates are really going to increase as these services “scale”? No, we didn’t either.

StreamingPriceIndexwYOUTUBE

We’ve been waiting for someone to send us this kind of data. This info was provided anonymously by an indie label (we were provided screenshots but anonymized this info to a spreadsheet). Through the cooperative and collaborative efforts of artists such as Zoe Keatingand The Cynical Musician we hope to build more data sets for musicians to compare real world numbers.

In our on going quest for openness and transparency on what artists are actually getting paid we’d love to hear from our readers if their numbers and experience are consistent with these numbers below. At the very least, these numbers should be the starting point of larger conversations for artists to share their information with each other.

Remember, no music = no business.

whatyoutubereallypaysFor whatever reason there appear to be a lot of unmonetized views in the aggregate. So let’s just focus on the plays earning 100% of the revenue pool in the blue set. These are videos where the uploader retains 100% of the rights in the video including the music, the publishing and the video content itself.

Plays  Earnings  Per Play
2,023,295 $3,611.84 $0.00179
1,140,384 $2,155.69 $0.00189
415,341 $624.54 $0.00150
240,499 $371.47 $0.00154
221,078 $313.47 $0.00142
TOTALS TOTALS AVERAGE
4,040,597 $7,077.01 $0.00175

So it appears that YouTube is currently paying $1,750 per million plays gross.

We understand that people reading this may report other numbers, and that’s the point. There is no openness or transparency from either Spotify or YouTube on what type of revenue artists can expect to earn and under what specific conditions. So until these services provide openness and transparency to musicians and creators, “sharing” this type of data is going to be the best we’re going to be able to do as East Bay Ray comments in his interview with NPR.

As we’re now in a world where you need you need a million of anything to be meaningful here’s a benchmark of where YouTube ranks against Spotify.

Service  Plays  Per Play  Total  Notes 
Spotify To Performers/Master Rights 1,000,000 0.00521 $5,210.00 Gross Payable to Master Rights Holder Only
Spotify To Songwrtiers / Publishers This revenue is for the same 1m Plays Above 0.000521 $521.00 Gross Payable to Songwriter/s & Publisher/s (estimated)
YouTube Artist Channel 1,000,000 0.00175 $1,750.00 Gross Payable for All Rights Video, Master & Publishing
YouTube CMS (Adiam / AdRev) ** 1,000,000 0.00032 $321.00 Gross Payable to Master Rights Holder Only

The bottom line here is if we want to see what advertising supported free streaming looks like at scale it’s YouTube. And if these are the numbers artists can hope to earn with a baseline in the millions of plays it speaks volumes to the unsustainability of these models for individualcreators and musicians.

Meet the New Boss: YouTube’s Monopoly on Video | MTP

It’s also important to remember that the pie only grows with increased revenue which can only come from advertising revenue (free tier) and subscription fees (paid tier). But once the revenue pool has been set, monthly, than all of the streams are divided by that revenue pool for that month – so the more streams there are, the less each stream is worth.

All adrev, streaming and subscription services work on the same basic models as YouTube (adrev) and Spotify (adrev & subs). If these services are growing plays but not revenue, each play is worth less because the services are paying out a fixed percentage of revenue every month divided by the number of total plays. Adding more subscribers, also adds more plays which means that there is less paid per play as the service scales in size.

This is why building to scale, on the backs of musicians who support these services, is a stab in the back to those very same artists. The service retains it’s margin, while the artists margin is reduced.

[** these numbers from a data set of revenue collected on over 8 million streams via CMS for an artist/master rights holder]

Here’s what 1 million streams looks like from different revenue perspectives on the two largest and mainstream streaming services.

Service  Units Per Unit  Total  Notes 
Spotify 1,000,000 $0.00521 $5,210.00 Gross Payable to Master Rights Holder Only
Spotify same million units as above $0.00052 $521.00 Gross Payable to Songwriter/s & Publisher/s (est)
YouTube 1,000,000 $0.00175 $1,750.00 Gross Payable for All Rights Video, Master & Publishing
YouTube CMS Master Recording (Audiam / AdRev) 1,000,000 $0.00032 $321.00 Gross Payable to Master Rights Holder Only
STREAMING TOTALS  3,000,000 $7,802.00 TOTAL REVENUE EARNED FOR 3 MILLION PLAYS ON SPOTIFY AND YOUTUBE 
Itunes Album Downloads 1,125 $7.00000 $7,875.00 Gross payable including Publishing

Here are some compelling stats on the break down of what percentage of videos on YouTube actually achieve breaking the 1 million play threshold, only 0.33%

An artist needs to generate THREE MILLION PLAYS on the two largest and most popular streaming platforms to equal just 1,125 album downloads from Itunes. This is an important metric to put in context. In 2013 only 4.8% of new album releases sold 2,000 units or more. So if only 4.8% of artists can sell 2,000 units or more, how many artists can realistically generate over four million streams from the same album of material?

in 2013 there were 66,565 new releases, only 3,237 sold more than 2,000 units = 4.8% of new releases sold over 2,000 units

in 2013 there were 915,482 total releases in print, only 14,856 sold more than 2,000 units = 1.6% of ALL RELEASES in print sold more than 2,000 units.

This is even more important when you start to consider that many artists feel that growing a fan base of just 10,000 fans is enough to sustain a professional career. Note we said solo artists because these economics probably need to be multiplied by each band member added for the revenue distribution to remain sustainable. So a band of four people probably need a sales base of 40,000 fans to sustain a professional career for each member of the band.

Each 10,000 albums sold on iTunes (or 100,000 song downloads) generates $70,000 in revenue for the solo artist or band. To achieve the same revenue per 10,000 fans in streams, the band has to generate 30 million streaming plays (as detailed above) if they are distributing their music across the most common streaming services including Spotify and YouTube.

In 2013 the top 1% of new releases (which happen to be those 620 titles selling 20k units or more) totaled over 77% of the new release market share leaving the remaining 99% of new releases to divide up the remaining 23% of sales.

This appears to confirm our suspicion that the internet has not created a new middle class of empowered, independent and DIY artists but sadly has sentenced them to be hobbyists and non-professionals.

Meanwhile the major artists with substantial label backing dominate greater market share as they are the few who can sustain the attrition of a marketplace where illegally free and consequence free access to music remains the primary source of consumption.

What’s worse is that it is Silicon Valley corporate interests and Fortune 500 companies that are exploiting artists and musicians worse than labels ever did. New boss, worse than the old boss, indeed.

Brand new week, more frickin Taylor Swift

November 10, 2014

Chris Cooke. completemusicupdate.com 11/10/14

The boss of Taylor Swift label Big Machine, Scott Borchetta, confirmed on Friday that it was Spotify’s freemium level that caused the singer to pull her entire catalogue off the streaming platform last week. Allowing people to stream Swift’s music for free on-demand anytime anywhere, with the only inconvenience an ad here or there, was an insult to the fans who paid to buy the albums, whether on CD or download, he added.
After a few days of no comment from Swift and Borchetta after the biggest popstar of the moment pulled out of Spotify entirely early last week, both singer and label chief provided comment in separate interviews on Thursday and Friday.
Swift was less specific about the entire catalogue pull in her interview with Yahoo, speaking mostly about her hesitance in sharing new music on the streaming platforms, saying that she’d given it a go with single ‘Shake It Off’ and that it just didn’t feel right. Though she repeated concerns aired in an earlier Wall Street Journal op-ed about music being available on-demand for free, as well as delivering what might be called the killer blow in this debate.
She told Yahoo: “All I can say is that music is changing so quickly, and the landscape of the music industry itself is changing so quickly, that everything new, like Spotify, all feels to me a bit like a grand experiment. And I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music”.
Borchetta, meanwhile, in an interview on Nikki Sixx’s radio show, confirmed what had been assumed, that his and Swift’s concerns are about those streaming services that offer fully on-demand functionality for free. So platforms like Beats, with no free option, will still get Swift’s music, as will personalised radio services like Pandora where full albums are not available on-demand (though, in the US at least, Swift has no control over the latter, copyright law obliging artists and rights owners to licence via SoundExchange).
And this, of course, is all for the good of the fans. “We never wanted to embarrass a fan”, said Borchetta. “If this fan went and purchased the record, CD, iTunes, wherever, and then their friends go, ‘Why did you pay for it? It’s free on Spotify’, we’re being completely disrespectful to that superfan who wants to invest”.
He went on: “We determined that her fanbase is so in on her, let’s pull everything off of Spotify, and any other service that doesn’t offer a premium [only] service. Now if you are a premium subscriber to Beats or Rdio or any of the other services [which limit fully on-demand access to premium users only], then you will find her catalogue”.
So there you go. But one week on from the Swifty catalogue pull and Spotify’s since criticised response via a cheesy ‘Come Back, Taylor’ playlist, what is the impact on the streaming service? Well, if it’s only Swift’s catalogue that remains absent, once the chatter dies down the short term impact will likely be limited; after all, some big name heritage artists are already hold-outs in the streaming domain.
Few subscribers will jump based on the absence of one act, the equity-holding major record companies will remain loyal, and hopefully the all important stakeholder as the digital company marches towards its IPO – ie Wall Street – will remain convinced that Spotify is, in fact, the future of music. And therefore pay big when the company floats, ensuring a handsome pay-day for early investors and the majors.
Though what if other big name artists with the contractual power to veto where their music gets played follow Swift’s lead? Says Borchetta: “I’ve had calls from so many other managers and artists. There’s a big fist in the air about this. Spotify is a really good service, they just need to be a better partner and there is a lot of support for this”.
A wider exodus of big name artists from Spotify would cause problems. Of course, unlike with Swift, whose label is equally dubious about the Spotify business model, major label artists would come under pressure from their record companies not to pull. Because, while Spotify is indeed a “grand experiment”, by getting shares in the company the big labels have been assured that they will be rewarded if the experiment works. Artists, however, are not cut into these rewards, and that’s been an increasing bone of contention even pre the Swift Exit.
But even if Spotify’s major label allies do limit any big artist exodus – maybe with some secret deals to pay bonuses to the biggest acts when those shares are cashed in, or guarantees of marketing support from the streaming platform to ensure more plays and therefore more royalties – all of this does frame a debate that is sure to be unleashed post-Spotify IPO when the majors have less need to stay loyal.
Which is the problem of the streaming service’s loss-leading freemium level, a proven way to sign up premium users, but – some artists would argue – at too high a price. As previously noted, the compromise here is to pull the biggest artists out of the freemium level’s catalogue, making access to those acts’ music for premium users only, a move that would probably see the return of Swift’s tunes to Spotify.
Though the challenge is where you draw the line without making the freemium option utterly unattractive, especially as the streaming firms turn their attention to more mainstream consumers for whom Swift et al are important. What is more likely, then, is the Rdio approach of having only a personalised radio option for free users (but with a pretty comprehensive catalogue), with fully on-demand access kicking in once you pay.
It’s actually a sensible approach, but would require Spotify taking something quite considerable away from its existing freemium users. Particularly while top artist content is routinely available via user-upload platforms like YouTube and SoundCloud.
Quite how soon such compromises will have to be negotiated remains to be seen. But Spotify and its major label shareholders will be hoping serious debate can be postponed by at least a year or so, and that in the meantime the Swift Exit will remain confined to just Swift.

- See more at: http://www.completemusicupdate.com/article/brand-new-week-more-frickin-taylor-swift/#sthash.NWj2vcbh.dpuf

UNLOCKING YOUTUBE – HOW YOUTUBE WILL CHANGE MUSIC SUBSCRIPTIONS

November 10, 2014

Mark Mulligan midiaresearch.com 10/29/14

YouTube is the globe’s leading digital music service but for its size delivers comparatively little back to the music industry in direct revenue. Even the one billion dollars paid out in Content ID revenues only represents $0.14 for each of its one billion users per year, since the launch of Content ID in 2007. Now YouTube is poised to launch its long anticipated subscription service, Music Key. It should prove to be among the most compelling music product offerings in the marketplace, yet YouTube’s net impact on the subscriptions’ sector will still be net negative with its free tier sucking the oxygen from its premium competitors.

YouTube Is The Globe’s Most Pervasive Music Service But Most Of Its ‘Active’ Users Are Relatively Inactive

Scale is YouTube’s biggest ally but its active music audience is somewhat smaller than the headline reported billion monthly users. Of those that watch music videos, 53% only watch music videos a maximum of three times a month, while just 47% watch a few times a week or more. 15% are super engaged daily users who use YouTube as their primary music app, often the music app of choice.

This is the target market for MusicKey, which has the potential to transform the streaming market, but not for the right reasons:

Music Key could kill Vevo’s golden goose: If we translate this frequency data to Vevo’s reported 243 million unique global we see 37 million daily users. This 15% generates approximately 67% of Vevo’s total views, while 53% is responsible for generating just 8%. This matters because these super users are the target audience for Music Key, which includes removal of ads from music videos. A successful Music Key could leave a gaping hole in music ad revenue. For YouTube, which has a roster of successful non-music creators like PewDiePie and Smosh to fall back on, this would be an inconvenience. For Vevo it would be disastrous. So do not be surprised if Vevo finds a way to be part of Music Key.
YouTube will take more than Music Key gives: Just 7% consumers say they would pay for a YouTube subscription service without ads and including extra content (little surprise considering Google makes it so easy for consumers to get apps like AdBlock and YouTube rippers). But 25% say they will never pay for a subscription service because they get all the music they need for free from YouTube. The net balance is clearly negative. If we discount both rates and apply them to the US and UK population, Music Key would contribute about $400 million dollars in revenue in one year but would be responsible for more than $2.6 billion in lost subscription revenue, meaning its net impact would be around -$2.3 billion.

Streaming transforms promotion into product

YouTube is more important as a promotional platform to labels and artists than ever but the demarcation between discovery and consumption is becoming indistinguishable. For most YouTube users, it is the destination not the discovery journey. It is time for more record label execs to understand that their advert is now actually the product too. This is why the stakes are so high with YouTube.

If YouTube can fully harness its rich set of non-core catalogue assets, such as live concert streams, artist hangouts, YouTube sessions etc. then Music Key has the potential to be the most compelling music subscription offer yet. But YouTube’s innovation has never been the problem, it is its impact on the wider market that matters most. Fair or not, YouTube cannot be judged by the same standards that are applied to the rest of the marketplace.

Here’s why Beyoncé hasn’t used Twitter since August 2013

November 10, 2014

Stuart Dredge Musically.com 11/05/14

Beyoncé has 13.7 million followers on Twitter, but her account is mothballed: it has only ever tweeted eight times, and the last one was on 19 August 2013. Yesterday, I got to find out why, by interviewing Lauren Wirtzer-Seawood on-stage at the Web Summit conference in Dublin.

She handles digital strategy for Beyoncé’s Parkwood Entertainment, a company that’s part management firm, part digital agency and part creative studio for its founder, president and CEO: Beyoncé Knowles.

Wirtzer-Seawood’s job thus encompasses social networks, Beyoncé’s own website, and partnerships – as part of the close-knit Parkwood team – of the kind that saw her boss’ last album shock the music industry and fans alike with a surprise iTunes release in December 2013.

On social networking, then. “We take a very strategic approach to platforms. Primarily we use Facebook and Instagram at this point,” said Wirtzer-Seawood. “Instagram is something that Beyoncé most of the time uses directly herself: she posts pictures. It’s her way of communicating to fans a little bit of what her personal life is like.”

So Instagram is essentially a “personal communications tool” for the star, while Facebook is used more for promotional purposes. “We’re very careful not to be too salesy in anything that we do,” stressed Wirtzer-Seawood. “That’s not the kind of relationship that Beyoncé has with her fans. She wants it to be organic, and she wants it to really come from her. And it does.”

But no Twitter. “Currently, we don’t use Twitter at all. It is a personal choice. I think as an artist, Beyoncé really prefers to communicate in images. It’s very hard to say what you want to say in 140 characters,” said Wirtzer-Seawood. “This is just a personal preference to her at this time. But also the Twitter channels are so crowded: it’s a different kind of experience that the fan has…”

One of the most interesting parts of her role at Parkwood is keeping clued-in on new social networks and apps as they emerge, including messaging apps from WhatsApp and Snapchat to Line and Kakao in Asia. But Wirtzer-Seawood warned that none of them will be adopted lightly.

“I would never open an account and not expect that we can continue to fill that channel forever: that it will continue to grow, and we’ll need to continue to fill it. That’s a huge responsibility,” she said.

“Beyoncé is a bit of a fringe case, and it’s not the same for all artists, celebrities or brands. But I find it really frustrating and annoying to see when somebody launches something new, whether it’s a new Facebook account or a new Snapchat account, and they do it for a period of time, then they go away for six months. It’s frustrating as a fan. I want to make sure if we use them, we use them well, and we use them strategically and we continue to fill the channel for a long time.”

Naturally, the last album launch cropped up in the conversation. Wirtzer-Seawood said it was a deliberate effort to present “a body of work” to fans without having it pre-judged or criticised by the media. “Giving this full package to the consumer allowed them to hear all of the content in the way that she wanted it to be heard, in the way she wanted it to be experienced,” she said.

There were quite a few people involved, with videos shot during Beyoncé’s tour, but “a very small group” knew all the moving parts: a team shooting one video wouldn’t know that a completely different team was shooting another, or that the video was for an album to be released so soon. Apple was a key partner, and as ‘partners able to keep a secret’ go, it’s one of the better ones.

beyonce album cover small P“It was essential to the process, working with a team that also understood the value of maintaining a very small group of people who kept the secret, and understood how valuable it was to record sales ultimately,” said Wirtzer-Seawood.

We also talked about data during the Web Summit session: Wirtzer-Seawood worked at social games company Zynga for a couple of years before Parkwood, which she said gave her an appreciation of the value of gathering, analysing and acting on big data – but also a sense of the potential hazards.

“We pay very very close attention to data. I’m more interested in data than probably most people I know in the business, after spending a couple of years at Zynga,” she said. “I’m a little bit more keen on the importance of data and how to use it. I make sure I deep-dive into every piece of content… and really try to use that information in a meaningful way.”

She warned against the risks of simply collecting data without making sense of it, or in the case of artists, accepting the data given to them by their label without questioning what it means.

“Oftentimes bands will have access to something that the label might give them with topline information on YouTube and Vevo and Facebook and whatever else, but they don’t actually tell you what the data means, and why it’s important,” she said.

“It’s one of the reasons our website is so valuable. Although we have the social platforms, we also have Beyonce.com, which is a place where I can really dig deep into that data and figure out who the fans are and what they’re sharing, and how to communicate with them really effectively. Data is key.”

What data doesn’t do is influence the creative work itself: Wirtzer-Seawood isn’t going into meetings with Beyoncé and suggesting that her next album be 12 more Drunk In Loves, but with 10 more beats-per-minute and a mention of the word ‘ring’ in every chorus, because the data suggests that will be popular.

Unthinkable? Yes, but one thing Zynga was criticised for in the past was that its data was exerting too much influence over its games: the creative product. “At Zynga I was exposed to the importance of data, and they had so much detail,” said Wirtzer-Seawood, stressing that this was a positive thing. “But what oftentimes would happen: it seemed like some creative decisions were based on that data.” Which was not so positive.

“You take the data, so that when Beyoncé comes in and says ‘hey, I have something new for you to market or sell or communicate, I can say ‘I know who’s going to want to use that and share it’,” she said.

What is Beyoncé like as a boss? “She’s brilliant: she’s a creative genius, she knows who she is, and she has definitive opinions about all things related to creative. Anything that you see posted to the public has gone through her approval. Every single item,” said Wirtzer-Seawood. And all of that content has been created in-house at Parkwood.

I wondered how YouTube and video fits in to the Beyoncé digital strategy? Her deal with Columbia means that her official music videos go onto a Vevo-branded channel, but there is a separate Beyoncé YouTube channel for other kinds of clips: “Anything that’s not a music video: something backstage at a concert, or a charity event that we’ve done,” said Wirtzer-Seawood.

Interestingly, though, Facebook native video – uploading videos to Facebook itself rather than posting YouTube videos on the social network – has become a big priority for Beyoncé’s team.

“A couple of months ago, I noticed that the traction of Facebook native video increased exponentially. I would say May or so to July. So I started to upload quite a bit more content as a native to our channel, and saw unbelievably impressive results,” she said.

“So much so, that I asked the Facebook team to make the view counts public, because a fan can be much more inclined to watch a video with 70 million views than 270! And as of last month, Facebook made view counts public, so that everybody can see that.”

For example, a recent video of a performance from Beyoncé’s HBO special has been watched more than 11.2 million times. “We’ve had great success with it, but again, we don’t flood the channel with stuff that won’t be really important to fans,” she said. “It’s about the right content: things that people want to see, and which are relevant and authentic to the Beyoncé brand.”

That said, YouTube remains important as a “secondary support channel” because, as Wirtzer-Seawood put it: “YouTube is a place for video, and if you search for something that is a Facebook native

it’s virtually impossible to find it.”

All of these Facebook views are organic, rather than paid-for: Parkwood isn’t juicing its views through Facebook ads, which bucks the trend of digital marketers fretting about declining organic reach for their posts. But isn’t Beyoncé an outlier in that regard? “Yeah,” said Wirtzer-Seawood. “I think it’s the nature of the fanbase. She has around 70 million Facebook fans: it’s a huge number, and the fans really want content all the time.”

Might they want that content delivered through an official Beyoncé mobile app? As things stand, there isn’t one, and that’s another decision taken by Parkwood after considering the technology options and fan behaviour patterns (data, again).

“The problem with an app is very similar to what I was mentioning before about newer social channels. If an artist is going to develop an app, it has to be compelling content that they continue to feed, day-in day-out, on a regular basis. And that is very hard to do,” said Wirtzer-Seawood.

“For most artists, they don’t have content available every single day. They finish the tour, and so there’s nothing there! An app ends up becoming this place for Twitter feeds to be pulled in, and it gets quite boring.”

But she also questioned whether fans want dedicated apps for their favourite stars. “As a fan, if I’m 15 years old and i have five artists that I love, am I going to download those five apps and switch between each app as I want see what’s going on? No. I’m going to still be on Instagram and Snapchat and perhaps Facebook, and i’m going to consume all their content anyway,” she said.

“I don’t really know at the moment whether there is a place for an artist-focused app in the ecosystem. If it does get to that point, it has to be something that clearly hasn’t been done before and is compelling in lots of ways.”

Warner Music Group strikes licensing deal with SoundCloud

November 5, 2014

Tom Pakinkis Musicweek.com 11/05/14

Warner Music Group is the first major music company to forge a partnership with SoundCloud.

The deal covers SoundCloud’s ad-supported, creator partner program, On SoundCloud, and its subscription streaming service, which is due to launch in the first half of 2015.

The agreement includes licensing terms that will provide WMG and its artists greater ability to manage the availability of content, according to the major, “while providing a path towards delivering additional revenue from user-generated mixes and mash-ups of WMG music”.

It will create new commercial and promotional possibilities for both WMG’s roster of recording artists and songwriters signed to Warner/Chappell Music.

On SoundCloud launched two months ago with 20 partners representing creators from the platform. Today, On SoundCloud has over 40 partners including labels, publishers, emerging artists and audio creators.

Rob Wiesenthal, chief operating officer/Corporate, WMG, said: “This leading-edge partnership reflects WMG’s commitment to establishing new and alternative business models that recognise the value of music for our artists. SoundCloud is a platform built on music innovation and it has a rare ability to drive music discovery while enhancing the connection and collaboration between an artist and their following. Our deal will foster that relationship, while providing a powerful range of income opportunities for WMG’s artists and songwriters.”

Jonathan Dworkin, EVP, digital strategy and business development, WMG, said: “SoundCloud is a distinctly artist-driven service, with a highly engaged global fan community at its heart. This deal will enable SoundCloud to further develop its product as well as its massive user base, and will deliver multi-tiered monetisation while preserving the elements that have made the service so popular. It’s a win for artists, for rights-holders and for consumers.”

Alexander Ljung, SoundCloud’s founder and CEO, said: “We’re thrilled that Warner Music Group will be the first major label to join our new creator partner program. We expect to generate significant revenue for Warner and its artists in the months and years ahead as we roll out an ad-supported offering and subscription service that delivers real value to the industry.”

Taylor Swift Pulls All Of Her Albums From Spotify

November 5, 2014

Pamela Engel Businessinsider.com 11/03/14

Taylor Swift has refused to put her new album “1989″ on Spotify since its release last week, and now she has also pulled her old albums from the streaming service.

It doesn’t appear that any of Swift’s songs are available on Spotify, and a Spotify spokesperson confirmed to Business Insider that Swift removed all of her albums from the streaming service.

Artists don’t make nearly as much money putting their music on Spotify as they do selling digital albums and songs on services like iTunes.

Earlier this month, Jimmy Buffett asked Spotify CEO Daniel Ek for a raise, saying artists who stream their music on Spotify are “at the end of the pipeline” when it comes to the money Spotify pays labels for permission to stream albums.

Spotify says it pays 70% of its revenue to labels — which will amount to about $1 billion this year — but some artists feel they don’t get a big enough cut.

The streaming service revealed last year that it paid artists an average of less than a penny per play.

In an op-ed for The Wall Street Journal earlier this year, Swift wrote that “piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically.”

Swift wrote the editorial to express confidence in the future of music, noting that she hoped artists didn’t “underestimate themselves or undervalue their art.”

Spotify is working hard to change Swift’s mind. Here’s a statement that was just posted on the company’s website:

We love Taylor Swift, and our more than 40 million users love her even more — nearly 16 million of them have played her songs in the last 30 days, and she’s on over 19 million playlists.

We hope she’ll change her mind and join us in building a new music economy that works for everyone. We believe fans should be able to listen to music wherever and whenever they want, and that artists have an absolute right to be paid for their work and protected from piracy. That’s why we pay nearly 70% of our revenue back to the music community.

PS — Taylor, we were both young when we first saw you, but now there’s more than 40 million of us who want you to stay, stay, stay. It’s a love story, baby, just say, Yes.

Swift initially refused to release her 2012 album “Red” on Spotify, but she relented several months later.

Spotify is valued at $4 billion and reportedly wants to sell for more than $10 billion, according to The Journal.

This highlights one issue with Spotify’s business model — artists have quite a bit of power over the streaming service if they can yank their albums at any time.

Read more: http://www.businessinsider.com/taylor-swift-pulled-all-of-her-albums-from-spotify-2014-11#ixzz3IC6l03pS


Follow

Get every new post delivered to your Inbox.

Join 1,879 other followers