More discovery, more from mobileA few years ago depth and volume of catalogue were keybattlegrounds among digital services. Today, with major servicesoffering up to 37 million tracks, competition has shifted torecommendation and discovery. Francis Keeling, global head ofdigital business, Universal <strong>Music</strong> Group, says: “To fully engageusers, services need to provide a well-curated experience.<strong>Music</strong> fans love to discover new music, and digital services needto be experts at music recommendation.” Streaming servicesare particularly focused on developing a mobile-first offer andincreasing scale through ISP partnerships.With smartphones now the primary point of internet accessfor many people, Spotify recently introduced a free mobile tierwhich aims to encourage more users to engage and ultimatelysubscribe to the full Premium service. A new ‘Discover’ featureoffers enhanced recommendations as well as playlisting. Spotifyalso introduced the Browse editorial pages, which curate playlistsby mood, genre or news item. Spotify entered 38 new marketsin 2013, including Argentina, Hong Kong, Malaysia, Mexico,Singapore and Taiwan, as well as countries across EasternEurope. The service is now live in 55 markets and has a payingsubscriber base of more than six million.Ken Parks, chief content officer at Spotify, believes musicsubscription has hit a tipping point. “This is the way peopleare consuming music, so the debate about whether it’s amodel to embrace has been put to rest over the last year.Unlike the distribution of physical product we can reach everyperson on the planet, at least every person with a smartphone.It opens up huge opportunities in the developing world, wherecountries have leapfrogged fixed line internet and gonestraight to wireless.”“This is the way people are consuming music,so the debate about whether it’s a modelto embrace has been put to rest overthe last year.”— Ken Parks, SpotifyAlready present in more than 180 territories, Deezer hasfive million paying subscribers, 12 million active unique usersand partnerships with mobile operators across 31 territories.CEO Axel Dauchez says good editorial is vital to bring throughnew acts and meet the long-term needs of the consumer —both of which are critical for the long-term future of the musicbusiness. He says Deezer’s focus on editorial — with emphasis oncurating new, domestic repertoire through a network of editors— is a compelling point of difference. “Being a jukebox solves theshort-term need. But in the long run you have no differentiationversus your competitors or piracy. If you want to thrive it cannotbe a market of what you already know, but helping people buildtheir own musical identity by cracking the discovery process.”“If you want to thrive it cannot be a marketof what you already know, but helpingpeople build their own musical identity bycracking the discovery process.”— Axel Dauchez, DeezerGoogle Play <strong>Music</strong> All Access was the fastest-growingsubscription service in 2013. Having launched the subscriptionservice in the US in 2013, Google Play <strong>Music</strong> now has threecomponents — the Play <strong>Music</strong> Store (à-la-carte downloads),Scan and Match (locker) and now All Access (subscription) —live in 21 countries on four continents by early <strong>2014</strong>.All Access is designed to work seamlessly alongside theexisting Google Play free scan-and-match locker service thatallows users to store their existing music library in the cloud andstream it remotely or access it offline from any Android or iOSdevice. Zahavah Levine, director of global music partnerships forAndroid, says the rapid take up of Google’s smartphone operatingsystem has driven the success of Google Play as it provides easyaccess to a massive global smartphone audience. “Subscribersare the best music customers we have. 120 dollars a year issubstantially more than the average user spends on purchasingtracks. Relative to the industry’s overall revenue, subscriptionrevenue is still a small piece but it’s growing fast.”Beats <strong>Music</strong>, an offshoot of the consumer electronicscompany owned by Dr Dre and Jimmy Iovine, launched itssubscription service in <strong>2014</strong>. CEO Ian Rogers believes the paid-forUS music subscription business is achieving only a fraction of itshuge potential. “There are 100 million people paying for cableFigure 10: Total paying subscribers worldwide (m)281382010 2011Source: IFPI estimates2020122013will.i.am photo by The Bridge18
and satellite TV subscriptions in the US, but only a few millionmusic subscribers today. We see the US subscription marketgrowing to 50 million and beyond.” Unlike most subscriptionservices, Beats <strong>Music</strong> will not offer a free tier. It believes its rootsas an artist-oriented company focused on curation will providea point of difference that encourages people to pay for apremium product.“We’re aggressively marketing a uniqueoffer for the entire family to mainstreamAmerica.”— Ian Rogers, Beats <strong>Music</strong>Rogers says partnership with AT&T will have a major impactand allow them to market the service to customers on familypackages. “Until recently, major US operators have only dabbledwith music services rather than using music as a marketingdifferentiation. With AT&T, we’re aggressively marketing a uniqueoffer for the entire family to mainstream America.” The serviceintends to expand internationally.Subscription services are also opening up new opportunitiesbeyond mobile handsets and tablets. rara has recently launchedEurope’s first integrated in-car on demand music streamingservice with BMW. Available in virtually all new BMW models acrosssix European markets, rara with BMW Online Entertainmentstreams directly to the vehicle’s embedded SIM with no need toplug in a smartphone. The service, which offers instant access toover 24 million tracks and more than 200 curated music channels,includes a cross-border unlimited data roaming package and costs€390 in the first year and €220 in subsequent years. It is believedthat the market for integrated in-car audio streaming will growexponentially in the next few years.38Streaming:“A sustainable income”Artists in countries with high rates of streaminghave recognised the benefits to them, both financialand creative.Carl Vernersson is from the managementcompany At Night Management who managethe international best-selling Swedish DJ Avicii.He points to three key benefits to artists ofstreaming services. First, financial: “From a financialperspective, streaming gives songs a longer life andsustainability, meaning that you receive incomeover a long time. It may not be as much as when youget something peaking on a download service inthe first three or four weeks. But with streaming, itgenerates income for ten, fifteen or twenty years,and that is royalties, not just publishing income.Looking outside Sweden, I think that once serviceslike Spotify are established for a couple of yearsit will show artists that streaming is a sustainableincome, not a six-month-per-album income.”A second benefit Vernersson points to is creative:“With the streaming revenue model, it’s even moreimportant to deliver a solid album and not just abundle or a single. That is something that I likeabout streaming from a creative perspective. Peoplearen’t forced to go for a bundle-only download toget a single. They can make their own playlist andexplore music in a way that wasn’t possible before —even though the concept of playlists has existed fora very long time.”Third, Vernersson says streaming services havehelped revive a market formerly driven by piracy:“The big success for piracy was the accessibilityit gave — people didn’t have to go to the recordstore, they could download the single and have it.Now, streaming services have achieved the sameaccessibility as piracy and more — but the differenceis that they are making money and are able to payartists. And that is great in so many ways.”new marketsin 20135mpayingsubscribersAvicii photo by Alex Wessely21Streaming has driven a revivalSwedish market with increasedinvestment in A&Rcountries19
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