Music Streaming Needs a New Future

While doing some research on the Chinese streaming market I came across this fantastic UX tear down of Xiami Music. I recommend you read it in full. The day before I found this – also must-read –article on Beyoncé’s streaming strategy, which explains how she uses different platforms to segment her fanbase (Tidal – super fans, Spotify engaged fans, Netlix, passive fans). These two articles may seem entirely unrelated, but they are in fact two sides of the same coin: fandom.

Regular readers of MIDiA’s output will know that we have made fandom one of our central research themes, most recently identifying it as one of the next five growth drivers for the music business. We have also discussed at length how Chinese streaming services have built businesses around monetising fandom while Western streaming services instead simply monetise consumption.

Now I am going to take this thinking one step further by proposing a new way to consider how to segment the music consumption journey and how Western companies can become part of this new vision.

the three srtags of the music journey

Consider music consumption as three key steps:

  1. The song
  2. The (artist) story
  3. The fan

Streaming services now own the song. Social is doing an okay, but far from perfect job of owning the artist story. But no one – digitally – is owning the fandom. Music fans have to hop from one place to another to join the dots. This of course contrasts sharply with Chinese streaming services which own all three steps in the music journey. Let’s take a look at Xiami Music to illustrate the point.

XiamiI have written a lot in the past about Tencent Music’s portfolio of apps. Alibaba’s Xiami Music is one of the smaller players and its end-to-end value proposition is all the more impressive for that: this sort of functionality is table stakes for competing for audience attention in the Chinese market.

Delivering the music is almost just the starting point for Xiami Music, wrapping the music with endless additional context and features including (but by no means limited to): music videos, lyrics, commentaries, reviews, news, comment streams, virtual tipping, badges, trophies, lyrics poster, you can even grow your own Tamagotchi. As Siew writes in his UX tear down:

“Every piece of music has its own entourage — live versions, videos (the official one and the live ones), behind-the-scene footage, outtakes, remakes or covers, reviews etc.

Xiami has taken a leaf out of WeChat’s playbook. Everything you need about a song, an album, or an artiste/band, you can get it on Xiami. No need for you to google for lyrics, head to YouTube for a video, or launch Twitter/Weibo for news.”

Time to stop leaning back

Another insightful observation that Siew makes is that Xiami Music – as with other Chinese streaming apps – has a white background to make it easier to read and interact with lots of content. Whereas Western streaming apps have dark backgrounds as they behave as largely passive vehicles for delivering music: find your playlist, press play, close screen.

There is a fundamentally different UX ethos:

  • Western apps: lean back, listen with minimal friction
  • Chinese apps: lean forward, dive in, interact

Years ago (11 to be precise) I laid out a vision for lean forward music experiences, where interactive context and social features were built around the music. Now is the time for Western streaming services to push themselves out of their UX comfort zones and start to own stages two and three of the music journey.

Lead, don’t follow

It is important that they do not all follow the same path. Differentiation – or the abject lack of it – is the Achilles heel of Western streaming services. The hope here is that they each pursue their own path and use this blank canvass to develop their own unique identities. Which will make it easier for record labels and artists to follow Beyoncé’s approach of segmenting their audiences across different platforms.

Of course this will take time. It may even take another 11 years (though hopefully not). In the meantime radio companies should be seeing this as a great opportunity to carve out a role for themselves in step two (artist story telling). Most have realised by now that they cannot compete with streaming but instead should compete around it. Get it right and radio could become the home of artist storytelling, a genuine complement to streaming consumption. Meanwhile, TikTok may well be best placed to act fast to own step three (fandom) before the Western streaming services can get their respective acts in gear.

There is nothing quite like some fierce competition to focus the mind.

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.

Streaming Music Apps – Three’s Not A Crowd

You wait months for a streaming music app announcement and then three come along on the same day….buses come to mind.

Deezer App Studio

Deezer have just announced the launch of a Spotify-like app platform ‘App Studio’ for third party developers and will soon also launch an ‘App Centre’ for users to discover apps. It is a welcome development from Deezer and as I have said for some time, streaming services can play an invaluable role of providing the infrastructure and music content on which third parties can then develop innovative and differentiated user experiences.  Streaming itself is not a product, it is a delivery mechanism.  Streaming apps turn the streaming user proposition into a rich set of products and features.  Of course Spotify set the agenda here and Deezer’s announcement is almost a year to the day later than Spotify’s app announcement (read my take here on Spotify’s bid to turn music into the API).  This isn’t the first time that Deezer have followed Spotify’s lead and they need to be careful they do not develop a reputation for shadowing Spotify’s strategy.

PLAY GUETTA

Meanwhile on Spotify’s app platform comes the launch of David Guetta’s ‘PLAY GUETTA’ app. Back when Spotify launched artist apps back in June I said that they were a great start on the rod to relevance for streaming music services and music discovery but that there was a long distance to go (which was a polite way of saying that the first wave of apps weren’t very good).  The David Guetta app is a different kettle of fish altogether.  Whereas the first wave of apps had an air of unfulfilled promised ‘PLAY GUETTA’ is a rich, immersive and – crucially – massively social app.  As a testament to the importance of Spotify’s app ecosystem, ‘PLAY GUETTA’ is built using the Soundrop SDK, itself a Spotify app.  ‘PLAY GUETTA’ demonstrates three crucial elements of value that streaming apps can deliver:

  • Coalesce fan communities of likeminded fans: leveraging some of the core Soundrop functionality Guetta fans can help shape what music is played and recommended, even at a country level (see graphic).
  • Create immersive experiences: apps allow streaming services to focus on the business of acquiring customers while third party developers can develop cutting edge user experiences.
  • Open up the long tail: for an artist like Guetta who has an extensive back catalogue, artist apps create a fantastic opportunity for connecting fans with older material.  For the consumer, because they have unlimited music access, listening to older albums is a pure added value rather than added cost, but for the artist and the label it is extra revenue.

‘PLAY GUETTA’ shows the potential of what streaming music apps can achieve.

 

Rdio iOS and Android Apps

The third and final streaming app announcement of the day was the launch of refreshed iOS and Android clients for Rdio.   Though obviously a different type of app announcement than the previous two, Rdio deserves credit for forging their own way in the streaming space, focusing on building a differentiated user experience.  Rdio do also have their own API, but they have worked hard to create a user experience that is rich and immersive out of the box.

It is perhaps a little overblown to claim that the future of streaming music depends upon apps, but be in no doubt, apps will play a major role.  Expect this space to hot up in 2012.