Why is India Caught Between Spotify and Major Labels?

Hey, I hope y'all are doing well this week. There was a lot of music news this week so please do bug me if I missed anything that you'd wanna discuss. My email is: pennyfractions@gmail.com, and if you like the newsletter please do tell a friend, sent out a tweet, create a poster for an office bulletin board, call into your local sports radio station and tell people subscribe. Whatever works for you, otherwise let’s chat about Spotify, India, and those pesky direct deals.

Last week the Financial Times reported on the increased tensions between major labels and Spotify over its direct artist deals. The report centered on major labels starting to play hardball in the India, a markets Spotify hopes to launch and tap into over the coming years. Daniel Ek in the company’s Q2 call even mentioned that movement into India was moving slower than expected but reiterated that getting licensing deals across major and local labels in countries isn’t always easy. Not a lie by any means.

Now like other big ticket music business news this wasn’t a brand new story. Music Business Worldwide reported on this fissure back in June as soon as the first direct licensing deal was reported in Billboard. Tim Ingham wrote:

"MBW is told that Spotify plans to roll out its service in India – first in beta, and then publicly – in the coming months. This, we understand, will be the first step in Spotify’s next stage of global expansion, something the company’s Wall Street watchers are understandably very keen on. After India, in order, Spotify is looking to land in South Korea, then Russia, and then to ramp up its presence in the Middle East and Africa. To fulfil this roadmap, however, Spotify’s going to need territorial licenses from the Big Three. And, right now, those licenses are not forthcoming."

Now do I think that Spotify and the majors won’t come to some agreement within a matter of time? Of course not. They’ll find a way to make this work, because there are over a billion people in India and potentially hundreds of millions of future music consumers. That's too money to potentially pass. Still this rather public airing of grievances gives an opportunity to ask a question that's lingered in my head for a while: How will Spotify approach a market where it isn’t first, second, or even third large music streaming option?

I’ve mentioned before that while some of the biggest individual artists on YouTube are Latin American artists like Ozuna and J Balvin, YouTube's biggest music channels are all based in India. According to social media analytic site SocialBlade two of the five most popular YouTube channel are Indian music channels. And I’m not talking about Ed Sheeran numbers I’m talking about daily views of over 100 million. Those kinds of numbers always make me ask what is going to be Spotify's offering in this space to appeal to all of those people consuming music on YouTube. Yet that isn't at all the only company already trying gain control of Indian music streaming.

Earlier this year the Indian telephone company Reliance, who own the music streaming service JioMusic, announced it was merging with Saavn, another music streaming app. Except where JioMusic is connected through a phone plan, Saavn is much more like Spotify and can be found across platforms and also hosts its own web browser. Not only did this partnership present a stiff challenge to Amazon Prime Music that recently launched in India, but also against Gaana, another Indian music streaming platform that just happens to be owned by India’s biggest media company the Times Group. This isn't to mention that Apple Music and Google Play Music, are also offered in the country. Not exactly light competition for Spotify.

This is where my speculation begins because I’m sure the battleground of India over direct deals is simply because it’s a market Spotify still hasn’t entered and thus major hold a much stronger position to fight. Yet, I wonder how much they were assessing the situation on the ground in the country, where there are already three major local streaming services, one with a major telco company and the other a major media company, along with the other big three western streaming services and thought “This could be battle we could potentially win.” I'll throw scare quotes around “win” and reiterate I think a deal will be hashed out, but as the music industry is rebounding there does appear to be a bit more of a swagger with labels at the moment.

Yesterday in unsurprising news Troy Carter, Spotify’s public face to artists announced he was going to be leaving the company. Though the small in details this from the Bloomberg piece stuck out to me:

"Carter’s departure creates a vacuum just as the company is about to enter a new round of negotiations with the three major record labels. Spotify has sought to reduce the rate it pays to labels so that it can one day be profitable."

Carter’s opening got filled rather quickly by Nick Holmstén, Spotify's former VP, Global Head of Shows & Editorial. The question that’s now lingering increasingly in my mind is what do labels want out of Spotify in these next rounds of contracts. I think the existential concerns of over direct deals will never go away because that’s the devil’s bargain, which the music industry agree to in return for seeing their profits rise. So, I don’t want to blow anyone’s minds here but even though last quarter Spotify saw increased growth in premium to the detriment of its free tier, when they do make inroads in India that’ll be on the back of free users. And how does Spotify make money off free users: Advertising. What’s gonna be interesting to me is just how much does a Spotify streaming in non-western pay on the free tier? How much will it be paying when they do eventually launch in India?

One advantage Spotify had in markets like the United States, Latin America, and many European countries was that it was the first fully supported and legal music streaming app to enter the market. Of course Pandora and YouTube existed, along with other tried and failed attempts at legal music streaming, but Spotify to their credit made the concept mainstream.

India doesn't contain the same vacuum. There are already numerous apps that offer music streaming and again a platform like YouTube is seeing 9 figure streaming numbers a day on a single channel devoted to Indian music. That’s to say there is certainly an audience but even without majors trying to slow its progress I wonder how successful Spotify could be in this market. Daniel Ek always says there can be space for multiple music apps, but I always wonder if down the road how many app people will support that can truly offer unique content.

6 Links 2 Read

Are Record Labels Facing an A&R Crisis? - Midia Research Blog

Data! Streaming! Numbers! Forgive me if I read Marc Mulligan’s analyst of the current role of A&R and record labels and didn’t slightly chuckle. Not I disagree with his conclusion: Informed and contextualized usage of data is better than simply looking at one single metric. Yet in 2018 if you work at a label and need to be taught that less, then idk tell them to read my newsletter (jk). I could spend an entire month of newsletters identifying what songs are “lean back hits” what artists have real fan bases, etc and I don’t even have access to all the numbers labels do (“When the label went back to the streaming stats, it transpired that the vast majority of plays were passive.”). I’m being glib only because I expect in 2018 that people shouldn’t be fooled by a single hit and misallocating resources cause a track or two did well on some playlists. Not that duplicating success is easy, but not following the wrong path shouldn't be hard.

The Most Important Instagram Stories Metric - Delmondo

Well since we’re talking about numbers. Here is a great blog by the social media analytic company Delmondo that tries to better understand what are the most useful metrics for judging Instagram Stories and arrived at not views, but instead exits. Thus charting users by when they’re choosing to disengage from content. Obviously this wouldn’t be the end-all be-all stat, and obviously this is marketing for their own product, but I found it a compelling case for trying to understand a still very new platform.

How Bebe Rexha Broke the Country Charts - The Ringer

I honestly wish I wrote this story, cause I haven’t read a really good genre specific chart dive in a minute, so it was interesting to see just how Bebe Rexha’s “Meant to Be” became one of the biggest country songs of all time. This partly a story about streaming and the power of streaming even in country music, but also in how the arbitrariness of genres can help even the most unlikely of songs find an audience.

Watch Out Billboard: Variety and Rolling Stone Owner Buys into Nielsen Rival BuzzAngle for ‘Aggressive’ Music Charts Push - Music Business Worldwide

I’ve spent too many newsletters to on the Billboard charts to not mention that the charts might be getting some stiffer competition. I have a lot of terrible ideas of how I’d try and start a rival Billboard chart, but I’ll save those for another week.

The Tech Backlash We Really Need - The New Atlantis

A thoughtful account of what is going on not just in tech’s recent response to public pushback, but an even greater ask of how the public can and might want to re-frame its conceptualization of these companies that truly do dominate our lives. Also, as an aside I find it interesting just how accepting we are that all of these platforms are inescapable. Another topic for another newsletter/platform, but not being to escape the grip of a single company should be a rather big concern.

Vivendi to Sell up to Half of Universal Music Group: Who Are The Potential Suitors? - Billboard

This is a nice breakdown of what may or may not happen with Universal Music Group as it looks for a buyer. My heart did skip a bit when private equity investment for the company was mentioned, but that’s probably a more personal fear.