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Streaming Music Services and the Battle for Subscribers

Radiohead audience Moda Center, Portland Oregon April 9th 2017 Image: Dave Allen

Radiohead audience Moda Center, Portland Oregon April 9th 2017 Image: Dave Allen

Before I go any further, I want to say that I'm a fan of Horace Dediu's writing on his Asymco website. Asymco is a project of Dediu's, an expert in complex data analysis. I recently read a post of his, Contact Less, that inspired some thoughts for this essay. In it, he describes the ongoing issues around online payment platforms, such as those offered by the likes of Samsung Pay, Google Pay, and Apple Pay.

Dediu offers an interesting term for how hard it can be to win over new customers to these new Pay platforms - "attritional competition with non-consumption."

Here's an extract from his post that explains that term and what he's getting at. In his own words:

"Apple Pay is in what could be considered an attritional competition with non-consumption. There are no decisive battles won or lost, only the relentless pressure to make progress against a reluctance to change.

Before I go on, I should make the attrition/decisive type of conflict clear. The terms come from military science. A war of attrition is one where two sides essentially grind against each other and the winner is the one which lasts longest. A decisive battle is one where a conflict is won through a single, acute encounter where, due to either demoralizing or circumstance reasons, one side gives up. It’s the knock-out punch vs. the fight to exhaustion.

When applying this dichotomy to competition, we need to be careful about who we define as competitors. Note that I said that Apple Pay is in a fight with non-consumption. It’s tempting to say Apple Pay competes with some other payment system like Samsung Pay or Google Pay. But none of these alternatives are as powerful as the existing mix of contact payment systems: cash, credit card magnetic swiping and some other hybrid of codes and user experiences (especially online.)" [Link]

As one person commented on the post "Is your product/service in a fight of Attrition, or of Decisive blows?" That's a good question for many companies and is probably one that also applies very well to startups.

I read all of the above as being analogous to what is happening in the streaming music world. Are the streaming music services bound up in the "attritional competition with non-consumption" world? Or, I wondered, are they in the fight of attrition vs decisive blows world? Is there even an opportunity for a decisive blow? I'm not entirely sure there is.

It may be a stretch but I see some similarities between what Dediu describes as the Pay platform's issues and the streaming music service's ongoing battles for subscribers. For the former, banks, banking systems and regulations, credit card companies et al, can be immovable objects in their path (not to mention privacy and security.) There's also, as Dediu points out, consumer resistance.

For the latter, the recording industry, comprised of record labels, publishers, and sometimes the artists themselves, (just recently Jay-Z removed all of his music from Spotify,) can be the immovable objects as they own just about all of the music catalogs that are licensed to the streaming music service companies; and here too there can be consumer resistance.

In this case, though, the term consumer resistance may be a misnomer. We are talking about music fans. There may be fan resistance. Music is not some kind of 'product,' nor is it a good that sits on a store shelf to be 'consumed.' Nor is it 'content.' It is art.

In this new world of access, music fans most likely ignore the size of the corporations behind those music apps that bring you an endless buffet of songs and albums, presumably they are also not overly concerned about which record label Beyoncé is signed to.

Also, one could argue that the expansion of global music access brought music's own, new, containment - digital media still needs a physical medium; consider how many people are listening on their smartphones, their laptops, and even iPods. The containment has shifted from vinyl records and CDs, and that's not necessarily a bad thing as Sasha Frere-Jones pointed out in a recent article. He says "sound is a physical event, whether it's delivered via vinyl, CD, or Wi-Fi."

Some stats: According to Midia, there were 100.4 million global streaming subscribers at the end of 2016. Spotify was the leader in those fan subscriptions at the end of 2016. And the RIAA announced that in 2016 the recorded music industry made 7.7 billion dollars, mainly from streaming.

As I began this essay with regard to Horace Dediu's post and the fight of attrition vs decisive blows scenario, it appears that Spotify and Apple, the two leaders in subscriptions, will continue to dig into this subscriber-winning theater of competition. To be clear, I don't believe Apple Music and Spotify are in competition with each other - it's just that the pool of music fans not already using streaming services, is being drained, as both companies are trying to woo the same non-consuming music fans. I wonder, when does this cap out?

Recently I have spent quite some time thinking about the future of music distribution, and what I fear is becoming the commoditization of music culture. I'll explain what I mean by that.

The image in the header of this essay is one I took at a recent Radiohead concert in Portland, Oregon. Most images of concerts tend to focus on the action onstage. I took some shots of the band, but I was more intrigued by the audience. Radiohead hadn't played Portland since 1996 so expectations and emotion were running high.

The concert was a flawless, searing confirmation of Radiohead's amazing ability to never self-aggrandize, nor look down upon their fans; their ability to make an arena that was packed with thousands, feel like a much smaller club, is a testament, not only to their talent but to their humbleness. There was work to be done, art to be delivered, no pandering. This unique experience is hard to receive via the current containers of recorded music. I say that because although A Moon Shaped Pool is a wonderful album, (however you choose to listen to it,) live the songs took flight, becoming unencumbered and transitory. Sound, is indeed, a physical event.

Here, I'd like to introduce you to the liner notes by Mary Gaitskill for a Talking Heads CD compilation Once In A Lifetime. They can be found in her latest book of essays Somebody With A Little HammerThe liner notes begin with David Byrne's lyrics below, taken from "Crosseyed and Painless" from the Talking Heads album, Remain In Light.

Lost my shape - Trying to act casual! Can't stop - I may end up in the hospital

Is Byrne saying that he's operating on the edge of a culture that he can't quite fathom, where he needs to make music for himself to shape-shift and identify with it?

I'm going to jump to a paragraph in those liner notes where Gaitskill explains how those lyrics became meaningful to her in her own life shape-shifting moment:

"It was around then that I started waking up in the morning and having no idea who I was or where I was. I had to remind myself, and it took several minutes. [Edit] It was during this time that I heard "Remain In Light." It was like meeting an enemy and realizing he's an ally. It was like the hard, clever form of their old songs had burst, and something was pouring out of it - something that had always been there. [Edit] It was something I understood deeper than words, in a way my mind could only glimpse. The understanding was like a seed, and it would be a long time before it began to germinate. It would be even longer before I had the means to communicate what was being grown. I knew it was there. I heard it."

Both of those examples, the Radiohead concert and Gaitskill's "meeting of the enemy and realizing he's an ally" speak to the power of music. It's not a Rorschach test administrated by a third party, music can be a mind-opening experience where, if you'd like, you can psychoanalyze yourself.

When every song on the planet is available to be streamed to everyone for $9.99 a month, I'd say it becomes easier to say "I knew it was there. I heard it." Yet to what end? Did you meet the enemy and realize he was an ally? Or did you just skip to the next song in the playlist?

In a world of streaming music, we will continue to see the biggest artists taking home the most money. Same as it ever was. And clearly, the streaming of music is the preferred access by millions, and for now, it's here to stay.

With that in mind, and with the knowledge that the top streaming artists are mopping up all of the income, what happens to the next 10,000 up and coming artists trying to pay the bills? The answer to that question would be - don't sign away your copyrights. Use platforms such as BandCamp, where fans can pay what they like for your music. There are also distribution companies like STEM, and customized label services available to indie artists from ADA, and others. And of course, playing live shows.

While the large streaming companies continue their attrition battles perhaps companies such as those I mention above, as well as others that are yet to surface, may deliver the first decisive blows by reigning in the next 10,000. Beyond those 10,000 the pool is deep.

Then fans can say - "I knew it was there. I heard it. Then I bought it."

This essay was originally posted to my LinkedIn Influencer page.

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Further thoughts 6/14/2017:

Music is an art form that, as we know, is experienced on a global scale that is arguably larger than any other. Its cultural influence in arts and society is also experienced on a landmark scale; It helps shift our political views, our social activities, and our worldview. It is not hyperbole to say that music is in our DNA. After all, the first beat we hear is our mother's heartbeat in the womb.

In the last two decades, the music industry has been battered by a variety of new technologies; the most impactful was the arrival of the MP3 which in turn led to the rise of the streaming music services - Spotify, Apple Music, Deezer et al, not to mention YouTube.

The massive shift to accessing music via streaming by music fans has led to a 'same-as-it-ever-was' situation for music artists. The top ten percent reap the rewards and benefits of the system, while the other ninety percent scramble to gather as many scraps as they can. If you look back to the early decades of music sales, you can see from music chart data why I use the phrase 'same-as-it-ever-was.'  Those making the most money from album and single sales were the best-selling artists. In an open marketplace for music sales that makes a lot of sense.

Today though, it is far harder to achieve a living income from music if you are not achieving the streaming play numbers achieved by artists such as Beyoncé, Drake, Ed Sheeran, Frank Ocean etc.

When I was at Beats Music, acquired by Apple when it purchased Beats By Dre almost four years ago, I spent time with Trent Reznor the creative force behind Nine Inch Nails who was a partner at Beats Music. We would discuss the plight of a musical cohort we called 'The Next Ten Thousand.' This referred to the upcoming artists who were battling the headwinds of the streaming music world. Trent and I wanted to solve the problems those artists encountered. It turned out that Apple Music wasn't the place for me to get it done.

I left Apple Music in March 2017 to rejoin NORTH, the company I'd left to join Beats Music. Music has always been in NORTH's DNA and I felt the timing was right to find a way to help those 'Next Ten Thousand' artists. I homed in on one area to help artists - the realm of music licensing and syncs for brand campaigns, TV and movies etc.  Me and the NORTH team realized that we could create a new model for how brands and bands work together when music is required for a brand campaign.

The idea is to create the right context when music is required by a brand by having the artist or band work directly with the brand to emphasize both parties requirements, in essence by creating a longer term relationship. It will work especially well if the artist or bands own their own copyrights. They could provide original music for brand campaigns, movies or TV, while owning their own masters and publishing on the original content. This would also cut out the third parties that take a large cut of the artist's licensing incomes.

As more artists either drop off labels or don't sign away their rights in the first place, savvy artist managers see opportunities for new income streams. I look forward to working with them.

NORTH and I will be focusing on this plan for the rest of 2017.

*Disclaimer: I recently resigned from my Artist Relations role at Apple Music. This essay contains references to Apple, and I'd like to assure my readers that everything I've written here is by no means a critique of my former employer or any of its services.

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