The genius of digital music services can be in the simplicity

Paul Maloney
December 12, 2012 - 12:10pm

Pandodaily's Erin Griffith has some food for thought for digital music startups: Hold the bells and whistles, and just start forking over the music.

(She opens her column be reviewing the discussion of how expensive and complex music royalties make it onerous for digital music start-ups (in RAIN here), but her ideas that follow aren't really related to that discussion.)

Griffith reminds us of the concept of "FNAC" -- that is, "Feature, Not a Company."

"If its pitch is something like, 'Spotify is great, but don’t you wish you could (fill in blank with one missing feature)? That’s what StartupX does,'" she writes, "it’s probably a FNAC."

In other words, the only real differentiator many (potentially-failed) music start-ups have is in the presentation of music -- the "features."

But "the last thing listeners want in a music streaming service is more features. Typically when a user opens a music application, he or she wants to listen to something right now, not to browse for 15 minutes discovering new artists," she argues.

Who's "keepin' it simple?" The revamped Songza. The "streamlined" update to Spotify. And "If you think about it, traditional radio is the simplest of all... when I get into the car, I almost always listen to radio. I even have my phone out for navigation, but it’s just not worth the trouble of booting up an app," she says. "That could change if I ever upgrade to a fancier car with built-in apps. But the point is that simplicity — with as few options and features as possible — will always win."

Read Griffith's column in Pandodaily here.

Paul Maloney
December 12, 2012 - 12:10pm

We've heard (at the recent House Subcommittee hearing on the Internet Radio Fairness Act for one, but elsewhere too, and often) the recording industry:

  • doesn't like the amount of royalties streaming services pay to play copyright recordings, and wants more;
  • really doesn't like that U.S. broadcasters don't pay at all; but should, like the good folks of the non-U.S. broadcast world.

So, how much does, say, a UK radio broadcaster pay to play a copyright sound recording per listener, and how does that compare to other services, like Spotify or Pandora?

Enter David Touve (you may remember him as the Washington and Lee University Assistant Professor of Business Administration who estimated that U.S. broadcasters would owe the recording industry $2.5 billion a year if they were required to pay at the webcasting rate here).

Using data from PPL (which collects royalties from UK radio) and RAJAR (which measures listening), and estimating 12 songs per hour, Touve estimates "the value of a single radio play to a single listener in the UK for only that portion of the royalties that are paid to record labels, featured artists, and performing artists" is £0.000073, or $0.00012.

"For comparison, I believe the value estimated above is 1/36th the rate reported by Zoe Keating ($0.0042) [Touve's referring to this] for her receipts from streaming music services (e.g., Spotify), 1/10th the rate ($0.0011) paid by Pureplay Webcasters in the U.S. (e.g., Pandora), and 1/18th the CRB-established default Webcaster rate ($0.0021) in the U.S."

Put another way: Pandora currently -- under the settlement "discount" rate -- pays at a rate ten times what UK radio pays to perform sound recordings.

(The difference in audience size between Pandora and the broadcast industry of a country like the UK, much less the U.S., naturally means the recording industry's take from broadcasters will be much larger. But what Touve is putting in high relief is the discrepancy between the rates.)

Read Touve's latest Rockonomics blog entry here.

Paul Maloney
December 12, 2012 - 12:10pm

Here's more newsworthy news, slimmed down to a low-carb format:

Clear Channel has secured another deal that apparently has them pay a small on-air royalty to a group of labels and artists in exchange for a discount on streaming royalties -- this time with rpm entertainment, "a new country music label, management, and publishing company." Read more in a press release here.

Digital audio tech provider AdsWizz has secured a deal to connect digital pureplay and streamed AM/FM radio groups like 1.FM, Hall Communications, and Rich Broadcasting to TargetSpot's digital audio ad network. Read more in a press release here.