Hello, I hope you readers are doing well this week. Just kicking off with a couple housekeeping notes. The first Wednesday of September there won’t be a normal newsletter. Instead it’ll contain a small announcement about the future of Penny Fractions that I’m excited to share.
My other note is that over the months I’ve gotten comments about issues with grammar and typos within the newsletter. I'll admit this is a one person show and no editor of mine would say copyediting is a strength, still I’ll be working more to reduce the number of errors and stumbles that make the newsletter harder to comprehend. I owe that to y’all at the least for continuously reading and sending positive comments. All thoughts and questions can be sent to email@example.com.
Earlier this week for Music Business Worldwide I wrote about the slow bundlification of music streaming and cell phone providers and what it potentially means for the broader music industry. That’s where I’m gonna jump off for this week’s newsletter even though I know it’s a relatively broad topic. I hope this week I can drill a little bit more into the implications of such partnerships. Now let’s just look at some recent deals.
Spotify has announced a new “long-term” partnership with electronics manufacturer Samsung, making the streaming platform the “go-to music provider” across all Samsung devices going forward.
The new Tidal-bundled plan will also include Hulu access, a 15GB mobile hotspot, global roaming and unlimited talk, text and data within the United States. It's set to cost $22 per month per line for up to five lines with a new or existing phone, and $42 per month per line for a leased phone.
In partnership with Apple, the telecommunications conglomerate has offered a new bundle — 6 months of Apple Music for free. The promotion starts on August 16th and is available to users on Verizon’s high-priced Unlimited plans – Go Unlimited, Beyond Unlimited, and Above Unlimited.
The first is of particular interest for those keeping a close eye on the ‘streaming wars’: T-Mobile customers will get the chance to access a year-long free subscription to Pandora Plus.
The overwhelming message of these partnerships is the same: Your phone company is now your music service. A majority of these recent announcements are just expanding upon already known deals; still this late summer cluster of news got me wondering a bit more on the end game of music streaming and telephone company relations?
Last month when Billboard reported on the Sprint and Tidal deal, Dan Rys hinted at a potential reason:
Sources tell Billboard that the telecom bundle involved a different type of negotiation with the major record labels than those other types of bundles, with the labels looking to promote more competition in the subscription streaming space as Spotify and Apple Music continue to dominate the market.
If the concern of major labels down the line is a potential duopoly between Apple and Spotify, then it certainly makes sense to support a Tidal/Sprint or Pandora/T-Mobile deal. This opens up a new lane for competition to start gaining traction. Yet when Spotify and Samsung made their announcement the immediate press headline reaction was to say that this was Spotify’s move to compete head-to-head against Apple. The implication was that the fight for market share wasn’t between Apple and Spotify, rather Apple and Samsung. That raised the question to me if that’s the real competition here, then why doesn’t Samsung just full absorb Spotify?
I’ve cited this before, but one of my favorite tech headlines came from Recode last year: “Jay Z is selling a third of Tidal, which makes sense. Sprint is buying a third of Tidal, which makes less sense.” The irony is that of course it makes sense.
What Is Happening to the Music “Business”
There are only a few major western cell phone providers and only a handful of music streaming companies. What is one of the most basic things that people do with a smartphone? Play music. Instead of letting your consumers choose what platform they wanna stream music make that choice for them. The market for music streaming instead of pushing into wildly different and unique services, nearly all of them followed the Spotify model. A model built from a company that received early investment from the major labels and its been heavily reported still hold a fairly strong grip on what music is and isn’t promoted on the platform—occasional moments of drama aside. The differences between these platforms is mostly observed by music obsessives. If a music service is folded into a phone bill will average consumers care about what service gives them the latest Migos track? I’d guess no.
Sprint buying Tidal, at this point feels like a when not an if. Last year Pandora introduced the ability to play individual songs instead of their beloved radio feature, which appeared to be less of a play for consumer rather than adding another feature for a potential suitor to show “We (Pandora) can also play the Spotify game.” Rumors swirled around Samsung and Tidal a couple years back, but if you’re Samsung the clear winner in this market is Spotify.
This potential outcome is what I started to wrestle with in my Music Business Worldwide piece where the companies in the end who benefit the least from this consolidation are the music labels themselves. When cell phone companies and music streamings services are potentially one and the same labels will hold almost no leverage at the negotiation table. That’s why I was intrigued these two quotes from a recent MBW story on current label relationships with Spotify (emphasis mine):
“We’re always, always looking at Spotify’s free tier,” one major label source tells MBW. “If we pulled it completely, we might lose [a nine-figure sum] each year. But would that mean that subscription revenue would actually grow at a stronger rate? It’s an ongoing debate.”
“We’ve re-thought the charts [to give better weighting to premium streams] and we may do so again; there is a strong argument to eradicate ‘free’ from the charts entirely. It’s not just about volume of streams anymore – per-stream [royalty] rates are considerably better on Apple Music.”
Let’s make a little jump and say within five years every music streaming platform is either owned by a cell phone company or major tech company. How will labels measure success? Certainly not subscribers but simply by how much money is being generated by the platform. My hunch is that subscribers served to be a strong placeholder for how success this for pay model of music streaming might work and the result appear to be fairly clear in the United States/western countries its working and so labels are shifting priorities. Once a Spotify payment is just tucked into a phone plan then what will labels raise ire over: royalty rates.
I’ll step back out of music for a second, because this scenario is playing out in a different manner with film and television. Massive consolidation is happening across that industry, while at the same time a company like Netflix is spending billions to keep pumping out new content. The number of companies feels similar to music with Amazon, Apple, Disney, Hulu, Netflix, and a couple other more niche companies in the mix. This can work in television where consumers are used to paying for blocks of content but doesn’t smoothly translate to catalog music.
Music streaming works partly because of abundance, not niches. Bandcamp, SoundCloud, MixCloud, and other services cater to markets who might be okay with catalog gaps but phone companies aren’t partnering up with music streaming to service SoundCloud rappers. Instead these companies are attempting to become one-stop shops that provide the technical means for content consumption and also the providers of that content. The only issue is that while these major phone and tech companies can attempt to spend billions of dollars to produce television and film content that isn’t an option within music. They must rely on major labels and thus they must reply on the relatively few music streaming platforms that hold deals with major labels. The most popular music streaming services are morphing into awkward buffers for these larger companies to simply gain access to music. Do any of these massive shifts in wealth meaningfully trickle down to the average musician? I’m sure you know the answer.
6 Links 2 Read
I can’t ever say I know what stories will blow up in the world of music streaming but I certainly didn’t see Nicki Minaj taking swipes at Spotify and Travis Scott being on that list. The quickest summary is that Minaj accused Spotify of blackballing her most recent album Queen because he premiered it first on Apple Music. She also shot at Travis Scott with accusations of inflating his album sales with tour bundles. The latter accusation appears to be false, as both artists did tour promo deals, and the former also seemed incorrect as she was still put on major playlists. However the mere fact an artist of Nicki Minaj’s stature decided to come direct for a streaming service felt like too much of a story to ignore, even if the substance is light.
The young academic Rob Arcand spoke with the National about PEOPLE, their new experimental music streaming platform / festival. I’ll touch on this next week, but I do think that smaller music communities like this can offer new ways of reconsidering the music streaming space. Aaron Dessner’s aversion to the idea of constantly being tracked and followed being against the type of music discover this platform is trying to encourage I find is really interesting. Often I think when people complain about Spotify / algorithm in the abstract sense my response is that one can always opt out of that form of music consumption. Constant digital music surveillance is over, if you want.
Did someone say fraud in music streaming? My favorite topic! Cherie Hu in Variety runs through all the ways fraud and misleading numbers are worming their way into the music industry. What I do want to raise is a little music adjacent, but how much money is being invested right now into measuring audio advertisements engagement? If any of y’all are experienced in that space please do ping me.
Does Tencent Music Deserve a Spotify-Like Valuation? - The Information
The headline is formed as a question but this article really did sell me on the future prospects of Tencent. Not that increased concerns over licensing aren’t a worry for the Chinese company but the fact it’s already making money outside of subscriptions is a favorable sign. Even more so since subscriptions for them are so low even with growth.
Chartmetric continues to offer the kind of insight into the world of music streaming that honestly I wish I could duplicate on a week-to-week basis. Last week Jason and the team over there looked at major label artist against some reported “direct deal” ones. I wouldn’t say the information to take way is super thrilling but I appreciate seeing people diving into these numbers.
Facebook’s Story Problem—And Opportunity - Stratechary
Before I talk about this article I wanna say Ben Thompson’s 'Facebook Lenses' is one of the most clear headed pieces I’ve read on Facebook in recent months. I’ll admit a bit of frustration about seeing Facebook’s recent stock hit being attributed to a bad press cycle rather than publicly stated business decisions. Much Thompson’s logic in that piece carries over here in examining Facebook’s business paths between the newsfeed and stories. His takeaway purposefully doesn’t lean in one direction but I certainly wouldn’t regret heavily leaning on stories advertising just based on the unmatched success of the newsfeed.