Streaming Report Card 2014

2014 was the year streaming broke through to mainstream consciousness, not because of the marketing prowess of Spotify but because Taylor Swift decided to withdraw her content from the Swedish streaming heavyweight and other freemium services. It was a mixed year of momentous achievement and intensifying controversy, which makes it an opportune moment for an end of term report card.

Growth – 8/10

No complaints here. Impressive growth for both paid and free streaming with a likely combined annual growth of about 50% and total subscribers getting to about 35 million. Although there are some signs of slowdown this is to be expected as much of the addressable audience for the 9.99 price point is reached. In fact the growth slowdown was less pronounced than expected in some markets. If it hadn’t been for the fact that download sales for the year will be down about 10% this would have been a 9/10.

Transparency – 2/10

Two years ago I asked the CEOs of 10 leading streaming companies what the coming years would hold. Unfortunately for 5 of them it meant looking for a new job. One thing most were in agreement on however was the need to introduce far greater transparency for artists. Two years on and the issue is every bit as problematic. For the most part the discontent has been voiced by smaller artists or those later in their careers, but not by frontline artists in their prime. Until last week that is, when Ed Sheeran told the BBC that it is ‘fact’ that labels are holding money back from artists. Some time soon, some time very soon, labels are going to have to get on top of this if they want the model to work.

Platform – 5/10

I had high hopes for Spotify’s app platform, it looked like it was heralding the dawn of the ‘music platform’ that the digital market has needed, well, forever. Unfortunately label wrangling ensured that Spotify was not able to get the deals to allow app developers to monetize their apps so the venture was effectively still born, save for the highly credible efforts of some traditional media brands, such as the BBC, Now! And Deutsche Grammophon who didn’t have to worry about making money from the apps. Luckily the streaming companies haven’t given up on the ‘streaming as a platform’ vision and a host of integrations with the likes of Bandpage and PledgeMusic have the potential to help artists transform streaming cents into digital dollars.

Pricing – 3/10

I’ve been banging the pricing drum for so long the stick has broken. Unfortunately there was pitifully little progress in 2014, with label fears of cannibalising 9.99 dominating thoughts. On the plus side there is a huge amount of negotiating activity taking place right now and that should bear fruit in 2015. Expect Apple to try to get to market with the same 7.99 that YouTube’s Music Key is currently in market with (and expect that short term promotion for YouTube to eventually become permanent). And if 7.99 is the new 9.99 then prices will have to cascade. 4.99 will be the new 3.99, 3.99 will become 2.99 and so forth. And there remains the super urgent need for PAYG pricing leveraging in app payments. I predicted pricing innovation in 2012 and 2013 and it didn’t happen. Here’s to third time lucky.

Global expansion – 6/10

Deezer had already set a great precedent for rolling out into a vast number of global territories and Spotify played an admirable game of catch up in 2013 which continued with another five new countries in 2014. Rdio’s acquisition of Indian streaming service Dhingana was another interesting move.  Meaningful revenue is yet to follow in these Rest of World markets though – the US and Europe accounted for more than four fifths of global streaming revenue in 2014.  But the foundations have been laid and that in itself is an important step worthy of credit.

Sustainability – 4/10

The ripple effects of Taylor Swift’s windowing antics will be felt throughout 2015 with countless other big artists and their managers already making it very clear to labels that they want to do the same. The sooner Spotify can agree to having the free tier treated as a distinct window the sooner the streaming space can start rebuilding.   The whole ‘changing download dollars into streaming cents’ issue continues to haunt streaming though. And with streaming services struggling to see a route to operational profitability the perennial issue of sustainability remains a festering wound. The emerging generation of artists such as Avicii and Ed Sheeran who have never known a life of platinum album sales will learn how to prosper in the streaming era. The rest will have to learn to reinvent themselves, fast, really fast.

Overall Streaming gets a 6/10 for a year that saw huge progress but also the persistence of perennial problems that must be fixed for the sector to succeed.

And Then There Was the Facebook Play Button…

Last week we saw the launch of the Facebook Timeline for Artists and the Spotify Play Button, neither of which were without controversy (click on the links for more).  Now we have the two trends pulled together with the Facebook Listen Button.  The Facebook Listen Button gives artists a Listen button integrated into the front-end of their profile page which when clicked starts their music playing in the music app of the user.

The Good News: Elegant User Experience

  • This is an elegantly simple integration, that is uncluttered and allows a user to achieve their goal quickly and simply
  • It brings further consistency to Facebook artist pages, putting into practice the lessons learned from the anarchic chaos that was MySpace artist pages
  • It will help drive usage of streaming music services

The Bad News: Problematic Integration

  • The same player-integration issues apply to the Facebook Listen Button as do to the Spotify Play Button: a visitor has to a) be a user of one of the supported streaming music services and then b) has to have the app open.  Both of which are speed bumps in the user experience, especially if the visitor isn’t a user of a supported music service, perhaps because they live in a country where the services aren’t yet available
  • Following being shunted off the artist profile front page by the Timeline, artist apps like BandPage, Reverb Nation and FanRX have effectively had their usability further downgraded by their play buttons being a couple of clicks away from the front page compared to the front page click of the Facebook Listen Button

Conclusion

Overall the Facebook user wins here.  The Listen Button is not intended as the consumption mode of choice for aficionado fans, it is a quick discovery tool for people new to the artist who want to learn more.  And with this key use case in mind, the design and implementation is clean, elegant and (reasonably) convenient.  But the flip side is that those artist apps find themselves further let down by the implementation.  Strategically this matters not so much for those apps (though of course to the companies themselves it will feel like a kick in the ribs while on the floor) but instead for what it says about Facebook’s ecosystem and platform aspirations.  Though these apps are a miniscule detail in Facebook’s Socially Integrated Web Strategy, developers will be looking at their experience and trying to learn whether this is a precedent for how Facebook treats its developer partners or just a blip.  Facebook needs to ensure that it is the latter and that this is known clearly and widely.

For now, Facebook has momentum to spare and developers will willingly swallow the risk for a stab at reaching the largest single digital audience on the global web.  But Facebook’s Socially Integrated Web Strategy depends upon those developers helping ensure that momentum is maintained.  Long term Facebook needs the developers as much as they need it.  Facebook may be the future for now  but that confidence could be beginning to beget hubris.  Remember, MySpace used to be the future too.