Tag Archives: music business

Apr 23 2015
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Business, Digital Strategy, Planning

Loalty is Laziness: Would You Change to Apple Music From Spotify

Apple will launch its streaming service Apple Music June 30th.

Although there was not anything mind-boggling with the launch, it will dramatically shake up the music streaming service landscape. Below I am answering all the questions that you are thinking about the launch, because I can:

Will Apple Music be bigger than Spotify?
Yes.

In terms of paying customers, Apple Music does not offer free version, which is probably a wise move. Currently paying customers create 26 more times the revenue compared to free customers in Spotify.

Spotify has 70 million users (of 20 million are paying). Apple has over 800 million iTunes accounts. Do the math. Just converting 2,5% of the current user base (of which not all are naturally downloading music) gets them even.

However it might not be as easy or as profitable it would seem at first glance.

Paying for streaming music is a niche activity. Only 5% of the people over 13 years old pay for streaming services. During the digital download heyday, 25% of the people were regularly paying to download music and astonishing 80% of people were regularly buying cd´s when that was popular. Those days will never come back.

Optimist would say that there is an opportunity to increase the amount of subscribers. Pessimist would say that we will never reach a level again where even 25% are paying for music. My thinking is somewhere in between: there is opportunity to increase the paying streaming category but it requires cheaper options than the current default 9.99$/month. In terms of people paying for music streaming services are the best bet for record labels, because ownership of music seems quite expired concept in 2015.

Because of its ecosystem and deeper pockets, Apple has better opportunity to grow the category if it is to grow. Free streaming services will remain in the mix, because too aggressive clampdown for free streaming would probably retort people back to pirating the music. Also those who pay for music are not necessarily the tastemakers of what is hip and cool. In 2015 the investment to music is not necessarily an indication of its popularity.

Is Apple music then a better service than Spotify?
No.

At least based on the current information.

In terms of library they are in parity (30 million songs both, no Beatles in either of them). The main features Apple was talking about were nice-to-haves, but nothing that would immediately make people to switch. Beats 1 is essentially just a tradtional radio. Curation from tastemakers is something that sounds nice in powerpoint, but masses don´t really care. Same thing with Connect, music fandom is way more niche activity than non-committal music consumption on background.

Will people flood from Spotify to use Apple music?
Well, it depends.

If you are invested in Apple ecosystem and have been buying from iTunes music before, that is likely to happen. Over half of the Spotify users are also using iTunes. If you do not have that legacy, you are not likely to switch from Spotify unless Apple manages to bully its way with labels to worsen the current Spotify.

Why?
We are lazy.

Brands often mistake the laziness of users for loyalty. It is natural for people to try to avoid stressful situations and change (even how big or small) is always stressful.

It is hard to unlearn your habits, whether they are good or bad (especially the bad ones). It is also hard to learn new habits even how beneficial they would be to you. Therefore just making things easy-to-use is not enough for people to make a switch. They need incentives and motivation: the right balance of stick & carrot. People keep using hard-to-use methods (like pirating) because that is the way they have accustomed themselves and cost of learning something new feels too hard.

In many ways both Spotify and Apple will benefit from the laziness of their users.

Current Spotify paying users will not flood to Apple. Those who are using the free ad-fueled version are different target audience altogether, so Spotify will also be growing in terms of overall users. If you are Spotify free user and have not turned to paid version with Spotify, it is quite unlikely that you will start paying with Apple. On the other hand, testing the Apple Music will be just a click away and it works seamlessly with your iTunes library. So those people who have been postponing moving to streaming services and have still been paying for digital music downloads, don´t have that many excuses anymore.

And to answer the question posed on the title of this: no, I will not switch to Apple Music. On the other hand, majority of my investment in music still goes to vinyl records. Like said before, old habits die hard.

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Dec 22 2014
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Business, Marketing Strategy, Strategy

Everything I Have Learned From Business, I Have Learned From Wu-Tang Clan

The most duplicated, anticipated, validated
Urban legends in the books with the ones who made it
Highly celebrated, everything was work related
Current top 40 got the Wu deep in all their business
20 years Killa Bees, yeah, we hold the pennant
Monumental stance on the cover with my co-defendants
Drop her sentence, in remembrance
Construct these jewels so they can live through my descendants
-U-God (A Ruckus in B Minor)

As some of readers of this blog might know, I have always been quite deeply involved in hiphop. Although I don´t rhyme or deejay as much anymore, I still collect records and try to follow latest music as closely as possible. Recently I was asked to write a story about Wu-Tang Clan for the biggest Finnish music magazine Rumba. If you are Finnish reader, I recommend reading it.

Wu-Tang Clan has been one of the most influential bands for me and they shaped my teenage years profoundly. What is remarkable of Wu-Tang Clan, that they were not only able to do classic albums, they build a successful business imperium as well. Regardless of your personal preference regarding hip-hop, there is quite a lot to learn from Wu-Tang Clan:

1.You Need A Good Logo
wutang

Wu-Tang Logo is legendary. The basic version with black & yellow colorway shines like Batman pattern at night. The logo is also flexible and works in different shapes, colors and adaptations.

2. You have to have a strong leader
rza

The musical peak of Wu-Tang Clan is still their debut album. That was also the time, when their leadership was most firmly at the hands of one person: RZA. He produced the album and fierce members of Wu-Tang were freestyling against each other in studio to secure a slot on the album. In later years, the egos of certain members of the group have gotten bigger and there has been more turmoil regarding the artistic direction. Unfortunately the democracy has not necessarily been that successful for them artistically.

3. Do your own thing

Wu-Tang Clan borrowed its subject matter from old Kung-Fu movies and the sounds were lifted from dusty soul albums. That was totally unique at that time. It was not tested in focus groups, did not have market research behind or was not anything really that was ever done before. Quite often you cannot predict what people want, you just do something you believe and hope for the best.

4. Nurture your talent
““We reinvented the way hip hop was structured, and what I mean is, you have a group signed to a label, yet the infrastructure of our deal was like anyone else’s. We still could negotiate with any label we wanted, like Meth went with Def Jam, Rae stayed with Loud, Ghost went with Sony, GZA went with Geffen Records, feel me? And all these labels still put “Razor Sharp Records” on the credits. Wu Tang was a financial movement”
–RZA

Wu-Tang Clan as a band has sold 6.5 million albums in US. Overall they have sold 40 million albums worldwide. That number includes the individual solo albums. What was a strike of genius from RZA, was that every member of the group was able to get their own record deals from another record label. This enabled that almost every major record label had at least one Wu-Tang artist on their roster. Solo albums might have diverted the attention from the group effort, but from individual artists it was great. Especially in the beginning the sales figures were outstanding for the each individual Wu-Tang solo album as well.

5. Expand

Wu-Tang Clan was not only about music. It was about merchandise (Wu-Wear), tours, movies and even video games. The business part was always totally integrated to the music as well. Above song is called Wu-Wear: A Garment Reneissance and it is a legitimate song, but at the same time you can also view it as a blatant advertising. Wu-Tang Clan never sold out, they sold in.

6. But Don´t Expand Too Much

At some point, there was new album coming from random Wu-affiliate almost every month. This was the time before streaming, online mixtapes or even well-developed piracy, so if you wanted the records you had to buy them. Naturally the quality was not always that good and there was definitely certain Wu-fatigue at the end of the century. For example, the video below features “the youngest” member of Wu Shyheim. That song in question was probably as good as it gets, but generally no one really remembers him or any other of those loosely affiliated Wu-wannabes. Already in 1994 there was over 300 Wu-Tang affiliates.

Licensing business is the best business there is, as you it is essentially opportunity to print money. You should not license your brand to anyone, as you want retain some scarcity and appeal of your brand. Stamp of Wu-Tang Clan was commoditized at the turn of the century, but lately they have tried to regain some exclusivity. Maybe it is too late already?

7. Keep Innovating

This December Wu-Tang Clan released their new studio album “A Better Tomorrow” (which was also distributed as a bluetooth speaker). That is no the whole story though, there is also album called “Once Upon Time in Shaolin”, but there is one catch. There is only one of them in existence. Apparently someone has already offered 5 million of it as well. The music business is in ruins, but at least these hiphop-veterans keep on trying.

If you are interested more about hiphop and business, I recommend reading “The Big Payback: The History of The Business of Hip-Hop”, a brilliant book by Dan Charnas. It has great coverage of Wu-Tang Clan as well. Besides that I also recommend listening to Wu-Tang Clan regularly. It is good for you.

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Nov 17 2014
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Business, Digital Strategy, Insight, Marketing Strategy, Planning

Streaming Services Are The Last Hope of Music Industry

Last week Taylor Swift has been applauded as a crusader of music rights as she withdraw her album from Spotify:

“[People] can still listen to my music if they get it on iTunes. I’m always up for trying something. And I tried it and I didn’t like the way it felt. I think there should be an inherent value placed on art. I didn’t see that happening, perception-wise, when I put my music on Spotify. Everybody’s complaining about how music sales are shrinking, but nobody’s changing the way they’re doing things. They keep running towards streaming, which is, for the most part, what has been shrinking the numbers of paid album sales”

Taylor Swift´s comment is just a hypocrite sugarcoating of a smart business move and a great marketing stunt. She is still able make a platinum-selling album (the only one this year for that matter), so she concentrated on maximizing the physical sales. She would have left her albums in Spotify, if they had paid her more through premium service. She is smart businesswoman, so she definitely did the right thing for herself (proven by those platinum sales). It is not clear though, would she make even more money if she would have left her album in Spotify?

The last point of the quote is however just pure stupidity. Paid album sales have been shrinking way before no one had ever imagined music streaming. Streaming services kill downloads (both legal & illegal), because downloads are inferior format. Music streaming has been a truly a blessing for music industry. I might listen the new Taylor Swift album once on Spotify because all the publicity. She would get something out of that listening, but more than from me not listening that album or using BitTorrent. I would not buy or even illegally download that album in any case, because I am not that interested. Big stars benefit more from lurker listeners than smaller artists.

Essentially there is only one important thing to really understand about current music industry:

People will not be paying for physical music anymore. Period.

This is called progress and you cannot stop it. Taylor Swift is an outlier with her platinum sales. Increase of vinyl record sales is just a too well covered hipster activity. You have to be a total moron to think that vinyl sales could help even slightly the struggling music industry. The real question is: are people willing to pay for streaming services? They are the last resort to make any money from the actual songs. Currently it seems positive and with the launch YouTube Music Key, there is enough competition to keep it interesting for the near future.

It is naturally disheartening to read about that Iggy Pop cannot live with his music or how little Aloe Blacc gets royalties from writing one of the biggest songs of the year:

Avicii’s release “Wake Me Up!” that I co-wrote and sing, for example, was the most streamed song in Spotify history and the 13th most played song on Pandora since its release in 2013, with more than 168 million streams in the US. And yet, that yielded only $12,359 in Pandora domestic royalties— which were then split among three songwriters and our publishers. In return for co-writing a major hit song, I’ve earned less than $4,000 domestically from the largest digital music service.

But what is truly the alternative?

Iggy Pop makes his money from advertisements. He could not do those without being a musician first. Although he remains fit, I doubt it is from starving.

I appreciate Aloe Blacc tremendously. I have been supporting him by buying physical records made by him from the start of his career with indie group Emanon. Is Aloe Blacc better off now or when he was pressing and self-publishing his records? Although the revenue share from “Outside Looking In” was probably more favorable than the terms and conditions of Spotify, he is now more successful by every account. “Wake Me Up!” would not be as big song without Spotify and the exposure of that song has benefitted Aloe Blacc way more than the petty 4000$ from the streaming royalties. The sad fact just is that the individual hit song will not necessarily make you money anymore. That song is more of advertising. Is it right or wrong is a philosophical question, but does not change the shifted dynamics of music business.

I agree that 4000$ looks shameful for making one the biggest songs in the universe, but life is not fair. People do not want to pay for physical music anymore, expect for old luddites like me, who still get excitement from the special box sets. Actually I am more worried about the viability of Spotify´s business model. They are currently handling over 70% of their revenues to different rights holders according to Spotify CEO Daniel Ek:

Spotify has paid more than two billion dollars to labels, publishers and collecting societies for distribution to songwriters and recording artists…that’s two billion dollars’ worth of listening that would have happened with zero or little compensation to artists and songwriters through piracy or practically equivalent services if there was no Spotify.

They are not profitable yet, either.

“Wake Me Up!” has been estimated to generate almost million in Spotify royalties. Someone is getting paid (and there might be a master plan behind it). The history of music has not really been a financial success story of artists. Record labels, shady managers and other Svengalis have exploited the creative work of musicians. So either the artist are afraid, smart or just increasingly naïve by pointing the finger to Spotify instead of their employers, record labels with whom they have signed their contracts.

You can still make money out of music, especially if you are strong brand, innovative or just really good. Dave Grohl (from one-of-the best live bands in the world) sums it up nicely on Reddit discussion:

Me personally? I don’t f*cking care. That’s just me, because I’m playing two nights at Wembley next summer. I want people to hear our music, I don’t care if you pay $1 or f*cking $20 for it, just listen to the f*cking song. But I can understand how other people would object to that. You want people to f*cking listen to your music? Give them your music. And then go play a show. They like hearing your music? They’ll go see a show.

Amen to that.

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Dec 16 2013
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Business, Insight, Marketing Strategy, Strategy

How to Disrupt the Marketplace like Beyonce

“I didn’t want to release my music the way I’ve done it. I am bored with that. I feel like I am able to speak directly to my fans. There’s so much that gets between the music, the artist and the fans. I felt like I didn’t want anybody to give the message when my record is coming out. I just want this to come out when it’s ready and from me to my fans.”
-Beyonce Knowles

Sometimes the best marketing is just let the product speak for itself. Just as the speculation for the albums of the year seemed to slow down, Beyonce dropped a bombshell. In this era of leaking albums way ahead their release dates, Beyonce actually was able to release her record “in a secret”. Last Friday morning without  advance single, marketing campaign, radio airplay or TV performances. That naturally was not a secret for long as every media jumped to cover that. What is also notable that the album is currently sold only as an album exclusively in iTunes. What can we learn from this approach?

1.    Reward your fans first
As the average life cycle of hit song is only weeks at best, who actually buys albums anymore? Who remembers that Harlem Shake happened this year? Beyonce is one of the few artists who still have a fan base big enough to move considerable amount . Why you should not treat your most loyal customers well and give them something they hold in high value? The approach has been successful: the album sold 430k units on one day. The rest can cherry-pick their songs later (see point 3)

2.    Good content is the best marketing
When you are superstar and you really believe in your music, it is only natural to believe that every song in that album is a potential single. The most-sold and most solid pop album ever Thriller was quite close to it: having seven of the nine songs as singles. Beyonce has done video out of every song of her new album (17). Actually some radio stations are currently having all the songs in rotation. Don´t be misunderstood though, this is not cheap way to do it. Although you save a little in media spend, having Hype Williams to produce your video is still costing you quite a much.

3.    You do not really need to disrupt everything, just one thing
What is really brilliant with Beyonce-approach is that it is rare instance when you can have the cake and actually eat it too. Beyonce just skipped the pre-launch PR & advertising bits. The download is album-exclusive only for a week. Then it is back to the usual: streaming services start, there will be singles from the album and I bet that Beyonce will not decline interview requests.

4.    Finding the right partner is crucial
Beyonce partnered with iTunes to make this happen, her husband Jay-Z partnered with Samsung to make other hyped album launch of the year. From the bigger artist perspective, the music business is increasingly more B2B than B2C:

5.    Understand what business you are in
So what is music business nowadays? It is not about selling albums or even singles. It is about creating experiences. This is obvious when analyzing how much the biggest artists get from touring. Experiences are not limited to real-life, but are happening more in digital. Before you made music video to promote the song. Now you do song to be able to do the YouTube-video.

To pull something like this out and with this effect, you need to be an artist of Beyonce-calibre (there is not that many) and also you have to be first to do it. Free publicity of the stunt is something you cannot duplicate. So this approach per se is not the future of music business. What is the future, that the money does not come from only music, it comes from the whole package.

Although for this week, we can try to believe that music album still matters like in 1980´s. The album is actually quite good, but naturally not the Thriller.

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