Facebook Aims To Bring The Fun Back Into Music

Facebook has announced its long mooted move into music. As widely anticipated the service offering focuses on using music to add context to social experiences. The official blog outlines two key use cases:

  1. Adding music to videos
  2. Doing live stream lip syncs in Facebook Live videos

For now the roll out is limited, which will give Facebook the opportunity to hone the service and learn from the behaviour of a relatively narrow user group. A wider roll out will follow.

facebook music midiaIt’s not about subscriptions, nor should it be

Facebook was never going to try be a Spotify clone. Let me rephrase that, just in case anyone in Facebook’s management team is getting tempted to – wrongly – make the wrong move – Facebook should never try be a Spotify clone. Not only is it the wrong fit, it simply doesn’t need to. Streaming music is a low margin business that is being competed over by a number of very well established heavyweights. Facebook may be embarking on a content strategy like the other tech majors, but unlike Apple and Amazon, its core focus will be ad supported, not premium. (MIDiA subscribers – check out our forthcoming inaugural ‘Tech Majors Quarterly Market Shares’ report to see how Facebook’s content strategy stacks up against Apple, Alphabet and Amazon, and where it will be heading.)

YouTube now has a social music competitor worthy of note

For a whole host of reasons which warrant a blog post of their own, streaming music has coalesced around a very functional value proposition. In short, the fun has been taken out of music. Apps like Dubsmash and Musical.ly showed that it doesn’t have to be that way. These apps were small enough to be able to do first and ask forgiveness later. Even though Facebook has all the ingredients to do what those guys did, but at scale, it is far too big to try to get away with that strategy so had to get licenses in place first. YouTube is the only other scale player that really brings a truly social element to streaming. Now it has got a serious challenger that just upped the ante beyond comments, mash ups and likes / dislikes. The music industry so needs this right now. Especially to win over Gen Z.

Is Facebook bottling it when it comes to messaging apps?

For the moment, Facebook’s strategy is squarely focussed around its core platform. There’s no mention of Instagram (surely the best outlet for this kind of functionality). This hints at a degree of strategic wobbles in Facebook towers. By going all in with its messaging app strategy Facebook took a brave move few big companies do: it decided to disrupt itself before someone else did. It realised that the future of social was in messaging apps not traditional social networks. It is now the world’s leading messaging app company, with only Chinese companies truly challenging it (South Koreas’ Kakao Corp, Japan’s Line and Chinese players excepted). But that shift of user time to under monetized ad platforms threatens Facebook’s ad revenue growth. Hence the focus of music to drive usage back to its core platform where it can generate more ad revenue.

Not a Musical.ly killer, at least not yet

Although some have been quick to liken Facebook’s lip sync functionality to Musical.ly and co, in reality it is not competing head on with those apps because it is initially launched as a Facebook Live feature. Betraying Facebook’s strategic imperative of building its Live business. Expect a true Musical.ly ‘killer’ sometime within the next nine months.

Facebook is not here to compete with Spotify, but it is here to compete with YouTube and Snapchat and to steal some of the clothes of Musical.ly and co. The currently announced features just scratch the surface of what Facebook can do. In many respects music has taken a series of retrograde steps socially speaking since the days of imeem, MySpace and Last.FM. Now Facebook has picked up the dropped baton and is running with it.

Finally for anyone at MIDEM, I will be there from Weds PM to Thursday evening, including doing a keynote Q+A with Napster’s new CEO early Thursday evening. Hope to see you there. My colleagues Zach Fuller and Georgia Meyer are there too, both are speaking, so be sure to say hi.

Musical.ly Sells For $800 Million But Peaked By Being Too Silicon Valley

Untitled

News has just emerged that lip synching app Musical.ly is to be sold for between $800 million and $1 billion to Chinese company Jinri Toutiao, which also bought Musical.ly predecessor Flipagram. I’ve long held the belief that Musical.ly and competitor companies like Dubsmash represent some of the only genuinely needle moving user experience innovation in music of recent years. Musical.ly introduced the concept of the 15-second song and shone a light on how to engage Gen Z with music-led experiences by playing by their rules not the traditional music industry’s rules. In doing so it created a whole generation of Musical.ly stars, such as Baby Ariel with 20 million Musical.ly followers.

But as with all previous lip synching and music messenger apps, Musical.ly has run into its inevitable user base peak and is now starting its equally inevitable decline. According to data from MIDiA’s Quarterly Brand Tracker, weekly active users (WAU) across the US, UK, Canada and Australia and was just 1.4% in Q3 2017, down from a high of 2.1% in Q1. Dubsmash is following a similar trajectory.

So, what’s gone wrong for Musical.ly?

To be clear, Musical.ly is not a failing company but it is beyond its peak. Musical.ly did an amazing job of laser targeting, becoming one of the destinations of choice for teen and tween females. More than four fifths of its user base are female. It recognized that the opportunity for this segment wasn’t full albums, nor even full tracks. It was short clips of music that they could use to express, and identify, themselves. In Musical.ly, music was the tool for Gen Z identity, not consumption. It tapped into Gen Z’s desire to digitally peacock, or to show off and say who they are. The problem for Musical.ly is that Snapchat and Instagram do a great job of this for these consumers too. Musical.ly became a one trick pony that suffered from not being able to use its core functionality as a beachhead for something much bigger. In the 20th century the railroad companies were disrupted by cars because they thought they were railroad companies and didn’t realise they were transportation companies. Similarly, Musical.ly got caught up with being a social music company rather than a social company.

In many respects Musical.ly was a victim of the West Coast VC bubble, following the mantra of obsessing with doing one thing really well. As a result, Silicon Valley has a habit of churning out feature companies rather than product companies. This isn’t a problem for VCs as it is easier for a company to buy and integrate a feature company, than it is a product company. But, it does leave the digital landscape unbalanced.

Jinri Toutiao has every opportunity to build a music messaging powerhouse with its acquired assets but to succeed, it will need to recognize that these are features not products.

Spotify, Netflix And Instagram Make Gains In Q2 2017

Since Q4 2016 MIDiA Research has been fielding a quarterly tracker survey across the US, UK, Canada and Australia to build a proprietary dataset that provides a unique insight into how digital consumer trends are evolving quarter-upon-quarter. Through the tracker we monitor weekly active usage of apps for streaming music, streaming video, games, social and messaging. We also measure the shifts in key consumer behaviours, such as curated playlist listening, binge watching and subscriptions, in each of these sectors each quarter. We have structured the data so that clients can explore each app and behaviour by demographics, and, crucially, users can examine how much each app overlaps with others and with all the 40 different behaviours we track. We recently published a report for MIDiA’s paid subscribers analysing key trends across the first three quarters of our tracker. Here are some of key insights from the report. To find out more about how to get access to MIDiA’s Quarterly Trends report, email stephen@midiaresearch.com.

The leading apps in each of the categories tracked are largely consistent across all of the countries surveyed and they are also the big names that are familiar to all (see figure above). However, where things get interesting is in a) the variations in penetration across countries and b) how usage has evolved over successive quarters. For example:

quarterly trends midia figure 1

  • Messaging apps on the rise: Weekly Facebook usage was up slightly in the US between Q4 2016 and Q2 2017, but down in the UK. Over the same period WhatsApp was flat in the US but up slightly, along with Instagram, in the UK. WhatsApp penetration stood at just 11% in the US in Q2 2017 but 33% in the UK, while penetration in Australia and Canada laid in the middle of those two points.
  • Netflix growing but not in the UK: YouTube is still the standout video destination in terms of weekly usage across all the markets tracked. However, growth has slowed in these markets, with penetration going down slightly over the three quarters. YouTube’s loss is Netflix’s gain, with the streaming TV platform’s usage increasing each quarter. Though, again, there is an intriguing country level exception: Netflix is growing everywhere except the UK where weekly usage was flat over the period.

top streaming music apps in q2 2017, spotify, youtube, apple music, soundcloud, amazon, musical.ly

YouTube is the world’s leading streaming music app and this is true of the larger, mature markets. The continual breaking of YouTube music streaming records by the likes of Shakira and Luis Fonsi point to a renaissance in YouTube as a music streaming platform. However, the origin of those artists point to the location of YouTube’s music momentum: Latin America. Meanwhile, across the US, UK, Canada and Australia, weekly usage of YouTube as a music app was flat, and down actually in Australia. Most of the music apps we tracked had a dip in Q1 2017 but in the main held ranking and overall usage. Deezer saw a small rise while Soundcloud fell slightly. Spotify was the big winner, gaining penetration to close the gap on YouTube, and becoming the leading standalone music app. In the UK, Spotify surpassed YouTube for music among 16-19 year olds, hinting at a strong future for Spotify among Gen Z. Talking of Gen Z, lip synching apps Musical.ly and Dubsmash maintained momentum across the period, something other music messaging apps have previously failed to do this late on in their lives. These sort of apps, though niche in scale, point to what Gen Z want from their social music experiences.

These are just some of the very high-level trends, and there is much more in the report itself. If you are a MIDiA subscription client you can access the report and data right away here. If you are not yet a client and would like to learn more about how to get the report and the other benefits of being a MIDiA client email Stephen@midiaresearch.com.