Labels start making more money from streaming than downloads

Streaming is starting to overtake digital downloads as a source of revenue for independent labels, according to a new blog post from British indie music heavyweight PIAS (hat tip to Hypebot). The company, which runs a couple of indie labels itself but also provides funding and distribution services to other indies, saw higher revenues from streaming than downloads in 24 markets last year, including countries like France, the Netherlands and Spain.

The transition seems to be a little slower in bigger markets like the U.K.. Here’s how PIAS commercial operations manager James Howdle put it:

“I certainly expect streaming will overtake downloads in the next two years in the UK market. It’s hard to say how that will then compare to physical CDs, which continue to be the biggest single format for driving revenue in the territory … I think we will reach a point of equilibrium where physical sales continue to generate a significant proportion of sales while streaming becomes the dominant form of digital consumption.”

In other words: Paid music downloads may just fade away as more people get used to either paying a monthly fee for ad-free streaming or tuning into ad-supported streaming services.

Howdle has especially high hopes for YouTube’s streaming service, which is still in closed beta, as well as Apple’s yet-to-be-announced plans to launch a streaming service as part of iTunes this year. “Apple and YouTube’s entrance into the subscription streaming market this year will definitely change and accelerate the market considerably,” he wrote.

Sony’s Spotify partnership shows me-too services don’t pay

Are you a PlayStation user? The Sony’s got a music service for you. Again. Except, this time, it’s not its own: Sony announced a new partnership with Spotify Wednesday that brings Spotify’s music service to PlayStation users in 41 markets around the world. At the same time, Sony is shuttering its Music Unlimited service, which had been trying to compete with Spotify and others in 19 countries.

This isn’t the first time Sony failed at music: The company was amongst the first to try its hand at music subscriptions with Pressplay, a music service jointly launched with Universal Music in 2001, but sold to a third party in 2003. The company went on to launch a music download store dubbed Connect in 2004, which was supposed to bring digital music downloads to the company’s portable music players. Those didn’t sell, so Sony closed Connect in 2008.

Those two failures didn’t stop Sony from trying again in 2010, this time with a service curiously called Qriosity that was soon after rebranded as Sony Music Unlimited. This service, which will now close on March 29, was closely tied to Sony’s game console, with a Sony representative telling me a year ago that PS4 users made up for close to 40 percent of all streams.

But in the end, Sony Music Unlimited was just one more service to offer what all of its competitors already have: The same 30-plus million tracks from all the major and most indie labels, delivered at the same price, with the same all-you-can-eat value proposition.

The only thing that differentiated Sony from the rest of the pack was its access to PlayStation users. As a platform gatekeeper, it could make sure that no one else was competing with it. Or so it thought. But that’s not how the world works anymore.

Users want to access their services across multiple platforms. For music, mobile really is first. Connected speakers are quickly gaining steam as well, and automotive integration could be a major factor in the future.

But owning one of those device platforms and building a me-too service that just does what popular competitors offer elsewhere isn’t enough. Sony isn’t the only company to realize this. Samsung shuttered its paid music service earlier this year, and lots of other hardware vendors, including Nokia and Blackberry, have shut down their music services over the past few years as well.

One of the last ones standing is Microsoft with Xbox Music. But Satya Nadella’s cost-cutting course already put a halt to the company’s ambitious Xbox video production plans, and I wouldn’t be too surprised if we see the company shut down its music service soon as well.

Why Apple just spent up to $50 million for a music data company

Apple has acquired U.K.-based music data startup Semetric, which is better known for its Musicmetric service. Apple declined to provide details on the acquisition, which was first reported by Musically, but the company spent as much as $50 million for Semetric, according to the Financial Times.

So why did Apple spend up to $50 million for music data? An easy answer is that the company is working on relaunching its Beats subscription music streaming service, with the goal of possibly integrating it into iTunes. Musicmetric could help to add social components to it by analyzing which tracks and artists are most popular.

Musicmetric's Fantracker.

Musicmetric’s Fantracker.

However, there seems to be more to this acquisition: Musicmetric is first and foremost an industry resource, providing artists and labels with detailed statistics on their performance on Twitter, Facebook and select music services. The growing importance of this kind of data shows that the music industry itself is changing — as the business is moving from the sale of music as a product to services and experiences, data is becoming increasingly important, and helping bands and labels make the most of it could help to make up for some of the lower royalties that have irked musicians, and occasionally pushed them to remove their music from streaming services altogether.

To learn more about the importance of data in this new music industry, make sure to check out our Structure Data conference in New York in March, where Spotify’s Principal Music Scientist Brian Whitman will be talking about how his company is trying to reinvent the music business with computers that can hear.

Chasing waterfalls? TLC hits Kickstarter to finance its final album

20 years after the release of CrazySexyCool, TLC is back for one last album: The two remaining members of the iconic RnB band took to Kickstarter Monday to raise funds for the production of a new and final studio album.

TLC is looking to raise at least $150,000, and promises to give fans who pledge $5 or more a chance to vote on one of the songs included on the album. From their Kickstarter page:

[blockquote person=”” attribution=””]”Every penny we raise during this campaign will go towards making this final album together with you! The initial goal of $150,000 will go towards a writing session in the studio with a producer and engineer. The money beyond that will go to booking music producers, writing sessions, mixing sessions, recording sessions, and SO much more. We want to work with the best in the business, so the more we raise means access to the best.”[/blockquote]

TLC isn’t the first band that is taking to Kickstarter to raise funds, but the RnB trio was notable for being a very public manifestation of questionable music industry practices. The band’s label generated more than $100 million in sales with the bands two first albums, but TLC had to file for bankruptcy in 1995.

Those experiences may have been one more reason for TLC to take their case directly to fans this week. Here’s how the band put it on Kickstarter:

[blockquote person=”” attribution=””]”While major labels offer artists multimillion dollar recording and marketing budgets, they don’t often give artists complete control of their own music. It is essential that we create our final album completely on our own terms, without any restrictions, with you.”[/blockquote]

Spotify’s bet for short-term growth pays off

Spotify now has 60 million active users, and 15 million of those are actually paying users, according to a post on Spotify’s blog. The announcement comes just two months after the company revealed it had 12.5 million paying users, which means it grew around 17 percent in just two months.

That’s impressive, but also no accident: [company]Spotify[/company] launched a deeply subsidized promotion in early December, offering consumers three months of music for just $1. That price obviously helped to convince a lot of people to sign up — but as I noted back then, it was also designed to boost Spotify’s numbers in another way.

Spotify usually lets consumers try its paid service for free for a month. The downside of that approach is that the company can’t account for trial users as paying customers until the second month, when credit cards actually get charged. And had the company decided to give its users three free months, then it wouldn’t have been able to account for them until March at the earliest.

The promotion it unveiled in December on the other hand had users paying on day one, even if it was just one dollar. That means it was able to grow its paid user base a lot in a very short time frame — which matters for a company that tries to raise more money, or even go public.

Deezer buys mobile-focused Muve Music from Cricket / AT&T

Paris-based music streaming service Deezer has acquired Muve Music, the mobile-focused music service from Leap Wireless. Leap is a virtual mobile operator better known for its Cricket service, which was itself acquired by AT&T early last year. Details of the acquisition weren’t disclosed, but Deezer North America CEO Tyler Goldman told me during an interview at CES in Las Vegas this week that the acquisition was “material” for his company.

Muve Music has been a bit of an enigma for the industry; the music service was a huge success amongst Cricket users, and reached more than two million paying subscribers by the end of 2013. This made Muve one of the most popular subscription music services in the U.S., second only to Spotify. But part of Muve’s success was due to its close tie-in with Cricket, which at one point bundled the music service with all of its Android data plans.

Muve was also very much unlike Spotify and any of its better-known competitors in that it focused solely on music downloads as opposed to streaming, in part due to the lower data speeds for its customers. And Cricket operates as a prepaid business, which led some in the industry to wonder how much those Muve subscribers were really worth. I’ve talked to some industry insiders over the past few months who told me that AT&T asked for too much per subscriber, which may be one of the reason why the sale took so long: The operator had reportedly been looking for a buyer for Muve since at least May of last year.

However, Goldman argued during our conversation that the industry has been ignoring the typical Cricket customer, who tends to be lower-income and is more likely to be hispanic. He argued that catering to this audience is consistent with Deezer’s approach to online music, which is about segmenting the market. The company launched a subscription tier for HD audio aficionados last year, and has been looking to target other audiences with more fine-tuned tiers as well. “Almost every segment is underserved today,” he told me, adding that other services have been trying to sell the same product to very different groups of consumers. “That silver bullet strategy doesn’t work,” he said.

Deezer will offer Muve users a free trial, and afterwards only charge $6 per month, which is significantly cheaper than the typical $10 fee that competing music services are charging. It’s also a lot cheaper than Deezer’s high-definition audio service, which charges consumers up to $20 per month. Goldman said that the company plans to add tiers for additional segments over time, but also launch a bundle of multiple service components later this year.

Spotify’s new promotion: three months of music for just a buck

Still on the fence about music subscription services? Spotify would like to change your mind with some deep discounts: Three months of Spotify’s ad-free premium tier will cost new subscribers just $0.99, it announced Friday.

Spotify’s regular premium tier fee is $9.99 per month, but the service usually gives new users a one-month free trial. Under the new plan, this means that by signing up now they can save $19 over the course of their first three months. For Spotify, it means that users are starting to pay from the very first day, which could mean that they are less likely to cancel later on.

But there is also another side to this: Users who sign up for a free trial can’t be counted as paying users until the second month of their premium membership, whereas getting users to pay $1 for 90 days turns them into paying subscribers from day one. That looks better on paper, especially if Spotify was trying to raise more money, or if the company was trying to get itself in shape for an IPO.