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…
eMusic has always had a slightly left of center approach to selling digital downloads. eMusic offers music consumers the opportunity to pay a monthly subscription fee for access to their song catalogs and download a certain number of songs per month – $12 bucks gets you 24 songs, $32 bucks a month allows you to download up to 73 songs a month. That’s a lot of music for a pretty good price – certainly a lot cheaper than your average iTunes song.
They used to be primarily focused on independent labels, lacking the deals to add the big four record label’s music to their catalog. But that has changed in the last couple of years and now eMusic has deals with all four. They also started selling audiobooks a few years back as well.
Now they are launching genre based Internet radio streams as well. Join the club! According to Billboard, eMusic will offer streams of music curated by eMusic’s editorial staff. There are a wide variety of offerings from punk and alt-country to electronica and “fresh jazz”. Streams are available to eMusic U.S. subscribers for free for up to ten hours of listening per month. Non-subscribers may get to try them out soon as well.
So eMusic wants to take on Pandora and Spotify? I doubt it. It sounds like eMusic – and perhaps the labels it’s partnered with as well – are noticing that streaming has a positive effect on music purchases. They’re planning to add a buy button to the player, and they certainly have the buy in of their record label partners. Though it hasn’t been quantified in a while, I’ve seen data out there that shows Pandora selling lots of songs for iTunes and Amazon to their listeners.
Music sales are up this year, bucking a several year annual decline. Led by strong digital downloads of albums and songs, music sales in the US are up 1.6% through May 8th. That’s according to Nielsen. Physical album sales continue to drop, but the rise in online sales is compensating for the first time. Digital album and track purchases went up 16.8 percent and 9.6 percent respectively.
A contributing factor in this would be the release of the Beatles catalog online which drove catalog album sales to a 5.4% increase. CD sales were down, but only 8% compared to double digit declines for several previous years. And strangely enough, Vinyl album sales were way up – 37% year over year, after growing 14% last year.
So what does all of this mean? Well, the future’s not as bad as it seems. Perhaps precipitous drops in revenue are a thing of the past for the record companies.
Digital music sales grew globally by 6 percent last year to $4.6Billion. That number accounts for 29% of record company revenues around the globe. According to a new report by IFPI, consumer choice for accessing music via digital channels continued to grow in 2010. It’s recently released Digital Music Study makes a very clear case that digital music piracy has stifled and eroded the music industry.
Case studies included in the presentation cite examples such as in France, where government regulation, awareness campaigns, and even subsidized legal downloads have made headway in lowering the amount of piracy and stemmed the loss of revenues, and in Spain where a once flourishing and highly creative music scene has gone the other way, with nearly half the residents using illegal download sites to obtain music and fewer and fewer new artists are emerging.
The study calls for government action in the form of ISP regulation, consumer awareness campaigns and content protection. It’s an interesting read – certainly worthwhile for anyone hoping to do business in the online music marketplace. You can access the summary and download the study here.
When the record labels told Joe Purdy he could have a record deal as long as he changed his sound, Purdy decided to build his fanbase online instead. Eleven albums later, you can hear all of his music on his website and buy songs for download there as well but you won’t find his music available for sale in a record store anywhere.
Purdy’s story is one of online success. No record label, indie or otherwise. No record stores selling his stuff. His distribution is completely online.
He took his music direct to his fans, and it’s worked out just fine for him thank-you-very-much. His songs have been featured on TV shows like Lost, Grey’s Anatomy, & House, not to mention in a Kia ad that aired in the Superbowl. You can hear his music on Pandora, Rhapsody, Last.fm and other popular streaming platforms.
He writes, sings and produces all his music himself, and he’s sold lots of music from his website, without any label. What’s more, all his songs are available for streaming on his website for you to listen to before you decide to buy. He says he treats his career like a small business, and it seems to be working out just fine. Yep, Joe Purdy’s alive and well, with a thriving musical career online..