Mu­sic stream­ing battle loom­ing as Spo­tify com­pe­ti­tion heats up

The China Post - - COMMENTARY - BY TOM SUL­LI­VAN

This week’s all-star launch of U.S. rap­per Jay Z’s stream­ing mu­sic ser­vice may not have caused Spo­tify’s man­age­ment to lose sleep — but an­a­lysts pre­dict tough days ahead as tech gi­ant Ap­ple pre­pares to en­ter the fray.

The glitzy re­brand of the Ti­dal ser­vice which Jay Z bought from an­other Swedish firm Aspiro for US$56 mil­lion (52 mil­lion eu­ros), was billed as a new de­par­ture in stream­ing: higher qual­ity au­dio and owned by artists for artists, not record la­bels and tech com­pa­nies.

Af­ter a day’s si­lence the news was wel­comed by the world leader Spo­tify, de­spite the barely veiled crit­i­cism of stream­ing com­pa­nies like it from U.S. su­per­stars in­clud­ing Madonna and Ali­cia Keys at the launch in New York.

Jonathan Forster, Spo­tify’s vice pres­i­dent for Europe, told AFP in Stock­holm that his com­pany wel­comed the artists’ ini­tia­tive.

“I like the ral­ly­ing cry that artists should get in­volved ... We’re def­i­nitely not try­ing to keep any­one down,” he said.

Spo­tify has come un­der fire from artists like Bri­tish band Ra­dio­head and U.S. pop star Tay­lor Swift — who has shifted her cat­a­logue to Ti­dal — protest­ing that Spo­tify does not pay artists their fair share.

Its founder Daniel Ek has hit back, say­ing it had paid out US$2 bil­lion (1.85 bil­lion eu­ros) to artists and record la­bels since it launched in Swe­den in 2008.

And mu­sic in­dus­try watch­ers have been quick to point out that the artists’ beef is not with Spo­tify but with their own record la­bels.

“When it comes down to artists’ pay­ments, all stream­ing ser­vices play by the same rules dic­tated by the record la­bels,” said Mark Mul­li­gan at Lon­don-based mu­sic in­dus­try re­search firm Midia.

Ac­cord­ing to a study by French mu­sic in­dus­try trade group SNEP and ac­count­ing firm Ernst & Young, record­ing la­bels pocket 46 per­cent of stream­ing sub­scrip­tion rev­enues, while artists, pub­lish­ers and song­writ­ers share 17 per­cent, with the rest go­ing to stream­ing providers and taxes.

‘Ap­ple con­trols the de­vice’

With an es­ti­mated 60 mil­lion users in 58 coun­tries, in­clud­ing 15 mil­lion who pay for ad-free mu­sic, Spo­tify dwarfs Ti­dal, which had just over half a mil­lion users in 31 coun­tries when Jay Z bid for it in Jan­uary. Spo­tify also costs half the price at US$9.99 com­pared to US$19.99 for Ti­dal.

Stream­ing — which al­lows users to play un­lim­ited on-de­mand mu­sic on­line — has quickly shaken up the in­dus­try, nar­rowly edg­ing out CD sales in rev­enues last year in the United States at US$1.87 bil­lion.

But the world num­ber one in stream­ing is a min­now com­pared to Ap­ple in over­all mu­sic con­sump­tion.

The U.S. gi­ant, which plans to launch its own ser­vice in the com­ing months fol­low­ing its US$3.2 bil­lion pur­chase of Beats Mu­sic last year, has about 500 mil­lion iTunes users.

“The Ap­ple mu­sic ser­vice is the one I’d be run­ning scared from if I was Spo­tify. At the very least 50 per­cent of Spo­tify sub­scribers also hap­pen to be iOS (Ap­ple) de­vice users,” said Mul­li­gan.

“There are end­less things Ap­ple can do ... be­cause it con­trols the de­vice and the op­er­at­ing sys­tem and ev­ery­thing on it. You could sud­denly find this mu­sic ser­vice on the front screen of your phone.”

In a sur­vey pub­lished by Midia this week, 62 per­cent of mu­sic sub­scribers in the U.S. said they were likely to sign up to the new ser­vice.

‘Al­most ev­ery­one on Earth’

While Ap­ple also has to deal with record la­bels — re­port­edly fail­ing re­cently to se­cure lower li­cens­ing fees — Spo­tify ar­guably faces an even big­ger chal­lenge from YouTube which of­fers free mu­sic videos avail­able on all de­vices with an In­ter­net con­nec­tion.

“As a mar­ket leader you’re prob­a­bly more wor­ried about where peo­ple are lis­ten­ing to mu­sic on the In­ter­net. More peo­ple are lis­ten­ing via YouTube which is owned by Google — the big­gest In­ter­net com­pany of all,” said Olle Aron­s­son, at the Swedish tech news site Breakit, adding that stream­ing is still in its in­fancy, rep­re­sent­ing less than 15 per­cent of mu­sic sales rev­enue in the U.S. and the UK.

But Spo­tify, un­der fire from record la­bel bosses and artists to cut back on its own ad-sup­ported free mu­sic — which it uses to at­tract pay­ing clients — sees free mu­sic as the fu­ture.

“We’ve al­ways thought that ‘free’ has been a huge part of mu­sic wher­ever you look — his­tor­i­cally you had (free mu­sic on) the ra­dio and you went out and bought vinyl or cas­settes,” said Forster, adding that il­le­gal down­load­ing has made charg­ing for mu­sic dif­fi­cult.

“We also felt that it’s about scale. If you’re talk­ing about a bil­lion or a half a bil­lion users you can start build­ing re­ally in­ter­est­ing free busi­nesses. If you’re an ad­ver­tis­ing busi­ness you can tap into Google or Face­book lev­els of rev­enue,” he said.

“The global mar­ket of peo­ple who like mu­sic is al­most ev­ery­one on Earth.”

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