AGAINST THE CURRENT
Why music-streaming services face uphill climb,
“What I tell artists these days is don’t worry about getting paid, worry about being ignored.”
ERIC ALPER EONE DIRECTOR OF MEDIA RELATIONS
Canadians are used to getting the short end of the stick when it comes to digital services.
While Americans usually get the first look, we’re used to waiting for the latest version of the iPhone, we’re still waiting for a better Netflix catalogue, and with music, in particular, we are still waiting for Spotify and Pandora.
But while those two best-known music streaming services mull over a Canuck launch, in their absence many players such as Rdio and Songza are proving there is potential fertile ground here.
From Deezer, Slacker and CBC Music to fairly recent additions HMV’s The Vault and Xbox Music on the 360 game console, there’s no shortage of places to find music online in Canada.
However, growing the audience beyond the cutting-edge, tech-literate music fan has been a slow process.
The trouble has been in getting the word out about streaming services, how to use them and changing music lovers’ habits.
“It’s a major kind of consumer shift and change in behaviour, to go from CDs to downloads and then to streaming music on a subscription basis, so there needs to be an education with consumers,” said Scott Bagby, Rdio’s vice-president of international partnerships, who was in Toronto earlier this week for Canadian Music Week (CMW).
“It’s taken a while. If you look at (all streaming) subscription services all over the world, I believe it’s approximately around 15 million subscribers, with all (of the industry’s) services together. So if you think of all the music lovers around the world, this has really just kind of scratched the surface.”
Rdio launched in Canada in August 2010. The Canadian market, Bagby said, is one of the company’s fastest growing. With a catalogue of 18 million songs, including hits from Lady Gaga and classic tunes from Led Zeppelin, the company has a tiered subscription model of $10 a month for unlimited music on all devices. To grow their audience, Rdio in January launched a sixmonths-free promotion that is attracting new listeners.
Rdio uses an all-you-can-listen model, where users can search by song, artist or album.
Songza, on the other hand, offers curated playlists, grouping songs under lists such as “1980s Dance Party” and “Vodka Escapades,” with a concierge that suggests music depending on your mood. It’s completely free and nabbed one million users in its first 60 days in Canada after launching last August. Canadians have a fear of missing out on services around the world, but a recent New York Times Bits post compared and praised Rdio — particularly it’s interface — over its better known competitor Spotify. The overall problem, though, is the majority of people don’t know of these services or what they can do. A recent study from entertainment analyst firm NPD Group stated that 67 per cent of Americans don’t know what Spotify is, and that brand recognition is even less prevalent for players like Rdio. “The problem is that the vast majority of people in U.S. have no idea or clue or what these services are,” Russ Crupnick, senior vice-president of industry analysis at NPD Group, said at a presentation earlier this week at the Digital Media Summit, a partner of CMW. “One of the biggest challenges that the industry is going to have . . . is making folks aware these services exist. Helping understand what the benefits are, and helping them to understand how it works with their devices. Helping them to understand, period, that there are these great streaming services out there, because one of two things will happen: either we will not reach the full potential for streaming and see another one of these revenue dips that we saw between CDs and digital downloads, or you’re going to have a lot of services simply go out of business.”
The Digital Music News reported earlier this week that song downloads are projected to go down this year for the first time ever, potentially by 3 per cent, and point to a potential “surge” of music fans embracing streaming services. However, music industry analyst Mark Mulligan pegs streaming at 4 per cent of the global market, so there’s still massive growth opportunity.
Streaming is still an industry with structural problems. Licensing music libraries is expensive and artists don’t get paid a lot of for their songs.
Companies are secretive about numbers, but according a New York Times report in February, Spotify pays out between 0.5 and 0.7 cents per stream, considerably less than what an artist makes on a download. Bagby said two-thirds of Rdio’s revenue goes to the labels, and it’s the deal between them and the artist that determines how much the musicians make.
“What I tell artists these days is don’t worry about getting paid, worry about being ignored,” said Eric Alper, director of media relations at music label and distributor Eone.
“The whole reason these music sites have risen in the first place is because more people are listening to music than ever before, but how they are doing it is vastly different than ever before.”