11/14/13: YouTube the top music source for teens

Brad Hill
November 14, 2013 - 1:10pm

Nielsen released its annual Music 360 survey report this week. Two of the headline points are that radio is the dominant music-discovery medium, and that teens listen to music in YouTube more than any other source.

RAIN spoke to David Bakula, SVP of Analytics and Client Development at Nielsen, about radio, YouTube, streaming service, and music consumption.

RAIN: When it comes to recommendation, discovery, and perceived value, it seems like radio and YouTube are the two touchstones of the Music 360 report. That’s interesting, as it seem to juxtapose analog vs. digital, old tech vs. new tech.

DB: There is quite a dichotomy. Terrestrial radio has been a trusted medium for years. YouTube has become, for certain demographics: “The minute I want to hear something, that’s where I go.” It’s different from asking radio “Tell me what’s popular, and give me something I don’t know.”

Twenty-nine percent [of respondents] report using YouTube the way they would want radio to be. On-demand, this is what they want to listen to now. That’s almost a third of people -- amazing.

People still feel that radio understands them, and still is on the cutting edge of what’s new. It is the greatest discovery tool out there.

Then there is on-demand as consumption. Radio is still a major driver of consumption, and drives a lot of YouTube consumption. There is a type of YouTube content, like Gangnam style videos, where YouTube is a visual medium. They lose impact when you only hear them, and don’t see them. There’s always going to be a way in which YouTube has an advantage, because of the video component.

RAIN: Interesting point, that radio drives YouTube consumption. In addition to the reason you’ve mentioned, YouTube also offers secondary products, like studio outtakes or live performances.

DB: Right. It’s a slightly higher level of engagement. There’s a lot of specialty content. There is also the social aspect -- the ease of sharing a YouTube video. There is not the same level of engagement around sharing a love for a radio station.

One of the things we look at in the 360 is: not only how are people consuming music, but when are they doing so. Car audio is a popular [venue] to look at. YouTube is never going to get there. YouTube premium [a new subscription music service reportedly in development] might become more of a background thing, where you listen to a playlist. Video is the money shot for YouTube. That video is never going to permeate the car audio experience. Exercising is another example -- you’re not going to watch video while jogging. But you do want to listen to music.

RAIN: The Music 360 report is a snapshot. Are there any trends to note?

DB: Some of the questions change from year to year. We do see growth in streaming. The year-over-year growth in the number of consumers who reported streaming was 40 percent. Certainly the trend is up. We track all kinds of streaming -- 2.2-billion streams per week.

RAIN: Are subscription services included, as well as Internet radio platforms like Pandora?

DB: Yes, [the study] includes questions about all the streaming services. We measure streaming as a whole, and also behavior within individual services. Now, this survey was conducted in August. Sometime around December we’re going to have YouTube premium rolling out, and nobody knows what that’s going to look like. That’ll be an interesting shift next year, to see how many YouTube users switched to premium.

With Arbitron in the house, I think you’ll see that we do more frequent consumer research around radio, around listening, The 360 report is meant to be an annual snapshot. That’s a good time frame to look at. But this is an industry that changes quickly and dramatically . By Q1 next year we might have YouTube premium, Beats Music, who knows what Deezer’s plans are -- potentially dramatic shifts. Look at how much the landscape changed since Spotify launched a couple of years ago.

RAIN: It has become a crowded field, jammed with platforms and brands with indistinguishable feature sets.

DB: Absolutely. In the music business we get a little lost by in how much we talk about these things internally, making differences bigger than they actually are for consumers. There was a lot of excitement when Spotify launched [in the U.S.], but actually it wasn’t that much different from Rhapsody, Rdio, and MOG.

The expectations for Spotify were that it was a cool service and probably would do well. It became like a club where the cool kids were. It was a little like the Facebook launch, where you had to be in a certain subset of the population just to get in. Spotify actually changed the culture, and started to get streaming on the map. The general public started to be aware that streaming services were out there. Certainly Pandora was making inroads. But this was more about on-demand streaming.

RAIN: Perhaps one of the reasons Spotify had such an impact is that ad-supported listening provided an easy on-ramp for first-time user to discover the value proposition of subscription music.

DB: We’ve learned during the last few years that when Spotify came in, took hold, and started to grow, the other streaming services were growing along with it. It wasn’t that people using other services left those services. Spotify grew everything as streaming became a more common thing for the general consumer. It’s more common for consumers to say, ‘This is the way I’m going to consume my music.’

RAIN: Your report indicates that consumers are still buying music, either as CDs or downloads. But there have been decreases, especially in older demographics.

DB: There are many consumers who report being able to spend more money on music than they actually do. It has to be put in a format that they want to consume. If we do that, people are willing to spend money on it.

Brad Hill
November 14, 2013 - 1:10pm

If you visit the Deezer website (www.deezer.com) on a computer in the U.S., you see this notice: “Deezer’s music services are not yet available in your country.” That will reportedly change soon, as Digital Music News posts that the Paris-based streaming music subscription service will expand to the U.S. in January.

Though blacked out in the U.S., Deezer has rolled out an aggressive global expansion, serving users throughout Europe and in nearly 200 countries altogether. Geographic footprint is one measure of success, and usage footprint is another. On the second point, Deezer recently announced that its paid-subscriber base reached five-million users. 

Deezer has attracted several funding rounds, and is currently capitalized at $149-million

Can Deezer cut through the noise?

Streaming music has become a crowded segment in the last six years. Deezer, which started in 2007, preposterously claims to be “the world’s first music streaming service,” ignoring many pre-existing subscription and Internet-radio outlets, some of which were operating as early as 2001. Historical whoppers aside, the Deezer platform is robust, with 30-million tracks in the library and a strong reputation.

The U.S. market has been slower than parts of Europe to recognize the value of online jukeboxes such as Deezer. Swedish-based Spotify is Deezer’s most head-to-head competitor in non-U.S. territories, and it was Spotify’s U.S. launch in July, 2011 which helped whet American taste for on-demand streaming music. Other music services had been operating in the U.S. before Spotify’s invasion, but Spotify’s ad-supported free listening was the on-ramp to the experience for many uninitiated users. 

Deezer might not make a U.S. splash similar to Spotify’s impact in 2011. It is tough to differentiate in this market. Territorial accessibility is a waning claim to specialness, and the basic features of subscription services (random access to tracks, downloading for offline listening, artist-based stations, personalization via preference tools, social sharing) have become nearly indistinguishable from one platform to the next.

In this light, future business success might depend on distribution avenues that push brands in front of users on unavoidable, often-used screens. Car dashboards represent one such environment, which is why the “connected car” has become such an important and combative arena in the streaming music business.

Another must-own screen is the smartphone. Most music services deploy custom app experiences, but uptake depends on the user’s initiative to download and use them. A more forceful solution is to partner with a telecom company, as Rhapsody has recently done with its major Telefonica deal.

There are two major advantages to telecom distribution of music. First, pre-installation of the app and placement of the brand on the smartphone home screen. Second, the phone company owns a billing relationship with its users, making sign-up to a built-in music service easy and seamless. 

Deezer is executing the telecom tactic already, having partnered with Deutsche Telekom and several others. There is some speculation that Deezer will coast into the U.S. on a telecom backbone (Verizon is mentioned, but not substantiated). Doing so would have less free-market impact than an unaffiliated launch, but might make business sense.

However this plays out, it will be good for U.S. streaming fans to finally break through that “not yet available” Deezer roadblock.

Brad Hill
November 14, 2013 - 1:10pm

SoundCloud, the audio upload site sometimes positioned as the audio version of YouTube, turns five years old this week. The company blog celebrates the milestone, and mentions a few eye-opening usage statistics.

Upload traffic is intense, with an average 12 hours of content posted by users every minute. Also impressively, 90 percent of uploaded tracks get a listen, and more than half of them get played in the first hour. (In Spotify, only 80 percent of available tracks ever get played.) 

That last metric points to SoundCloud’s effectiveness as a social network. Users who develop large groups of followers can use on-site notification mechanisms to drive attention to uploaded tracks. In our testing, these attention-grabbing tools can start the “play” turnstile ticking away within seconds of posting. 

Sharing of original audio was SoundCloud’s founding mandate. More recently the site has made design and usability changes that encourage pure listening as the main engagement focus. It has worked -- SoundCloud reportedly has 250-million monthly active listeners. (Pandora has about 70-million.) 

Brad Hill
November 14, 2013 - 1:10pm

Music service Slacker today announced a partnership with Time Warner Cable in which Slacker will be bundled into TWC subscriptions, presumably both via TV and Internet screens.

Slacker pursues a vigorous distribution strategy, pairing with media networks (ABC, ESPN), telecom companies (Verizon, AT&T, Sprint, T-Mobile), and major car companies.

The TWC Slacker outlet is supposedly on the Time Warner Cable Central site (www.twcc.com and twcc.slacker.com), but testing this afternoon, immediately after the announcement, resulted in an experience less satisfying than the government health care site -- endless blank page loads.

Request for comment was not immediately answered. Stay tuned for updates.