A few weeks ago I was driving in my car listening to NPR during a pledge drive. As I listened to the announcer hawk mugs and even special solar/crank powered radios in exchange for signing up for a monthly “pledge” and heard him referring to donors as members, I realized that public radio is actually selling subscriptions, but calling it something else.
As we know, NPR is an audio service supported by its members (as well as some other revenue sources). In 2011, which was the most recent year I could find info for – NPR received an average weekly donation of just under ten bucks per listener per week. (That’s the total $ amount of pledges divided by listeners and weeks.)
While Pandora One and Spotify struggle to get users to pay less than $10 a month for their service, NPR manages just fine, netting 4 times that per listener.
Why is NPR is so successful at getting listeners to pay for programming? For one thing, they don’t call them subscription fees. Instead, they call them pledges – a far more honorable term, and they make every listener who donates a member, and send them a hat or a mug. It’s a clever marketing approach!
What else are they doing that online audio subscription services can do as well? Well, for one, they hold annoying on-air pledge drives, where they stop the programming, not for a few short commercials, but for highly intrusive on-air begging by personalities. It’s really obnoxious, and it works. Listeners respond.
Other tactics that NPR uses to extract donations – err, I mean pledges – from its listeners include bribery (as in the mug, hat, or solar powered radio mentioned above), flattery (our listeners like you are so smart), making listeners feel guilty, and – this is the best one – threatening to continue the on-air fundraising tirade unless everyone calls in with pledges right away.
So what can subscription services learn from NPR? I think the membership approach is a good one – remember the old American Express campaign “Membership has its privileges?” Creating a strong brand that people want to associate themselves with, and then selling that association – that seems to be a formula that works for public radio and a strategy subscription services may want to go to school on…
The big boys have arrived. Last week brought the news that YouTube’s subscription based streaming music service will launch before the end of the year, adding another massive player to the standing room only arena of streaming audio platforms. According to Billboard, there will be a free tier to the service as well, although it’s hard to imagine exactly how that will be delineated significantly from YouTube’s current free and on-demand offering of just about any music video. The subscription tier will add the ability to play full albums and cache music for offline listening, and probably playlist building as well.
YouTube has been the dominant on-demand streaming music platform in the land for a long time, although many folks didn’t think of them that way. The powers to be at Google have likely decided that the size of ad revenues and level of interest from advertisers in the streaming audio space have gotten big enough that it’s time to get serious about branding their service as a player.
The launch of iTunes Radio probably had something to do with the imminent rebranding of YouTube as well. Last week, Apple announced that their months old streaming service had 20 million users and 11 million uniques in 5 weeks. Of course, this is another service that’s self-reporting their own numbers, which to date are unchecked by third party measurement. But who expected less from an Apple launch that was well timed to sync with an OS upgrade that put the service front and center on everyone’s iPhones and iPads? The real data comes a little later when we start to see and hear metrics coming from other sources on the traction of iTunes Radio with consumers.
Meanwhile, we’re still waiting for the much discussed Beats streaming service to launch, and keeping an eye on Microsoft’s Xbox Music, not to mention Pandora, Spotify and other significant players. One thing is for sure – the consumer has plenty of choices at this point. With minor distinctions between each one, branding has become the key factor in the streaming music game…
This morning in my email, one from Spotify offering me a bunch of ready made playlists for New Year’s. The Top 100 Songs of the Year on Spotify, Most Popular artists, Most Popular Female Artists, Most Popular Male Artists…you get the idea. All waiting for me to listen to and share with my social networks to celebrate the arrival of 2013.
This is very smart marketing by Spotify. The biggest party night of the year and they’re offering up easy soundtracks for the party. It’s an excellent use of playlist based streaming, and a great way to highlight their music library. I’ll bet they get a lot of traction and new listeners from it.
Pandora is offering a slate of End of the Year genre stations as well, including 2012 Top Pop, Adult Rock, College, R&B and Hip Hop, and New Years Eve Party Radio. Built in soundtracks for your party. iHeartRadio is offering one channel, called Party 2013 Radio.
In 2013 streaming audio services will continue to look for ways to grow audience by making their offerings as enticing as possible. Personalizable channels that can be tailored for special events are an easy way to highlight interactive features and hook listeners. In fact, those channels are quite possibly a platforms best marketing tools..
Happy 2013 to you and yours, may you enjoy the streams of your dreams in the coming year…
Spotify recently closed a new $100 million in funding, which brings their total funding to $288 million. Mary Meeker is a partner in the firm Kleiner Perkins Caulfield and Byer, which has lead the last two rounds of $100 million each. Meeker is widely respected for her ability to see and report trends in technology, last year she predicted that mobile and audio were “the next big thing.” Apparently she thinks Spotify is as well.
Another interesting thing about this recent investment is that Coca-cola is a player as well, owning about ten percent of that latest $100 million. Last spring we began to hear of Coke’s relationship with Spotify, which was described as a marketing partnership, in which Spotify would enable Coke’s music platform, and Coke would feature Spotify on its Facebook page and advertising. It was announced then that there would be a cash investment, so now the details on that are emerging.
The value of a global brand like Coke is huge to an upstart like Spotify. Spotify is in 17 countries, and has 15 million users, so they are a long way from global. But their goal is to have everyone use their on-demand service like a song library, where you can listen to whatever you want to hear. Coke’s a brand that has associated itself with the idea of music as the universal language for a long time, which is why I like the relationship with Spotify. If you’ve been around awhile like me then you remember this ad:
Last week’s debut of RAIN Summit Europe in Berlin was . The event, which was held at the nhow Hotel Berlin, featured a really strong list of speakers, including keynote presenter Jonathan Forster of Spotify. Forster started his talk by saying that Spotify isn’t radio, and I think he was half afraid he might get pelted with rotten tomatoes for saying so. Not so — despite the fact that Spotify isn’t “radio” in the sense that it offers songs and artists on-demand to listeners, it is streaming audio. There’s a joint mission for all forms of streaming audio to attract advertisers, and Spotify is working hard on that and making some really nice progress. Forster spent a lot of time illustrating ad campaigns that they have created for advertisers, and it was very inspiring stuff.
The quality of the discussions at RAIN Summit Berlin were excellent and featured lots of experts outside of the Internet radio industry who contributed their expertise. There was a great agency roundtable discussion featuring advertising executives from Starcom MediaVest (UK), Pilot (Germany) and Havas (France). A discussion on Connected Dashboards featured an expert from BMW. The founder of Mixcloud joined a panel discussion on personalized streaming.
Whether you are streaming in Europe or not, there was a lot to learn about the marketplace among the folks at RAIN Summit Europe. We had a strong showing from US companies who are either already there or thinking about expanding to Europe with their services. We had far less interest from US based content providers, who declined our invitations to speak, and decided not to come. Which is fine, although I would say they missed out on an opportunity for some fantastic inspiration.
The hotel was beautiful, a hip and trendy setting along the River Spree in Berlin. The room was crowded – we exceeded our expectations, registering over 150 people for the event. And everyone that I spoke with said they learned a lot and were happy to be there. All in all, a good day for Internet radio (and streaming audio)…
After launching in the US last summer, Spotify has more than doubled its revenue to €187.8 million, but is spending nearly all of that. Paid Content reports that Spotify’s annual loss widened to €45.4 million in the 2011/2012 12 month period. Spotify’s challenge is to expand rapidly enough to cover expenses, while battling the high cost of streaming music laden with hefty licensing fees.
Unlike platforms like Pandora, iHeartradio and other streaming broadcasters and online only webcasters, Spotify is an on-demand platform that negotiates licenses directly with the labels. In fact, the major labels all have a stake in the company as part of those negotiations.
Spotify’s business model is different as well — subscriptions are a more important part of their revenue strategy. Spotify is spending lots of time and energy pursuing the widespread use of its API and third party app, and in fact hopes to become the world’s source for streaming music. When you think about the fact that the labels have a stake in this, it makes quite a bit of sense.
The main problem is that expansion is difficult, margins are slow, and losses are becoming hefty. Which could necessitate more funding. Which would in turn dilute the labels and prompt them to negotiate higher rates in future licensing deals. A merry-go-round of a business model…
In a move that will further extend Spotify‘s brand as the go-to platform for on demand streaming music, Spotify and Yahoo have announced a partnership. Spotify will replace Rhapsody as the music platform within Yahoo Media network and Yahoo will get an app within Spotify’s platform.
While times have been a little tough for Yahoo, this still represents a big deal for Spotify in terms of extending its reach and gaining new listener registrations. Spotify reportedly has 10 million registered users. Their reach in the US has been growing, but still small compared to Pandora.
Yahoo has had several twists and turns in its streaming music path – in the early 2000s they had their own Yahoo Launchcast, one of the biggest streaming services at the time. They eventually terminated that service due to expenses, primarily royalties, and signed a deal with Rhapsody and CBSRadio in 2008. While there was never any announcement, it looks like the Launchcast service, which was “powered by CBSRadio”, stopped streaming mid last year.
This is a great deal for Spotify, and one that compliments its global brand and reach. From the Facebook deal to this one, Spotify’s CEO and Founder certainly has the capacity to get the big deals done. He’s made no secret of his vision that Spotify become the world’s on-demand music library, and deals like this will certainly help him extend that plan.