B Story

2013 a big year for Pandora local sales

Wednesday, December 11, 2013 - 3:10pm

Pandora is scrutinized for its usage metrics -- active listeners, listening hours, and share of market. Behind all that is the sales effort which funds the enterprise. 2013 has been a pivotal year in which Pandora built out a local sales network that resembles the revenue support systems of large media companies.

Steven Kritzman, SVP of Sales at Pandora, made that point to us in a conversation a few weeks ago. “Looking a couple of years down the road, our local/national advertising mix will look pretty similar to most major media companies.”

Pandora does not break out that mix, but the local effort is clearly outlined by the number of local sales offices and size of the local sales force. NetNewsCheck reported this week that Pandora now has 30 offices, doubling its local presence in 2013, and 250 sellers operating in city markets.

Kritzman sees the national/local balance as an equal-footed hybrid. “Both are important pieces of our business. With the scale we have now, north of 70-million people nationally every month, we are a national branding opportunity. It’s a huge piece of our business. In the last two years, our scale has gotten to a point at the local level where we are, from an audience perspective, as large as many of the biggest radio stations in any individual market. We’re getting as exciting responses locally as we did nationally.” 

Pandora recently introduced audience segmentation that goes beyond location. Ad targeting that surpasses the capability of broadcast radio is a differentiator for Pandora that is certainly part of the local sales conversation. But Pandora is not alone among Internet audio companies in pushing that advantage. The Echo Nest, a music intelligence firm that provides user-intelligence technology to hundreds of competing music services, recently released its own audience segmentation product. TargetSpot, the largest digital audio advertising network, is The Echo Nest’s first partner and client. But Jim Lucchese recently told RAIN that he regards music services as highly qualified customers.

As Pandora continues to build its local sales network, the larger story is the gold rush for advertising dollars, national and local, across broadcast and online audio. On the Internet side, precise audience targeting is a reality that has been ignited in 2013, and will doubtless accelerate in 2014.

Yahoo steps into live concert streaming

Monday, December 9, 2013 - 12:20pm

Yahoo acquired concert-streaming platform Evntlive, which immediately shut down its ongoing operation. The Evntlive site carries an announcement of the takeover. No world on how much Yahoo spent. Evntlive was seed-funded at $2.3-million.

In a takeover/shutdown of this sort, it is unclear whether the service brand will re-start as a stand-alone property. Its technology platform could be integrated into an existing Yahoo service such as Yahoo Screen, which is cited in Evntlive’s announcement. 

The frontier of targeted ads in streaming music

Friday, December 6, 2013 - 12:35pm

Streaming music is gaining popularity fast, but lags behind the web in understanding its users.

Internet content sites can tag, track, and categorize people as they move about the web, creating deep and accurate user profiles that follow most of us as we move among digital properties. Combined with programmatic ad buying, it means that when a user visits a certain website for the first time, that site can display an ad that is more-or-less precisely relevant to that user. Advertisers pay more for effective targeting.

Dedicated music apps like Pandora or Spotify exist as islands, separated from broader engagement with the oceanic Internet. They are years behind the web in understanding their users. Two advances have sparked what promises to be an intensely developed intelligence layer that can understand, profile, and target the users of streaming music services.

First, Pandora announced audience segmentation based on user-registration information. (RAIN coverage here.) The first segments released by Pandora to advertisers are Hispanic users and Spanish-speaking users. More segments are doubtless forthcoming as Pandora develops and refines its testing and predicting methods.

Second, and more recent, The Echo Nest released its Music Audience Understanding platform, which leverages that company’s immense data intelligence about music choices to better profile online music users. (TargetSpot, a leading digital audio advertising network, was the launch partner and first client.) The premise of The Echo Nest’s development is that a proper analysis of music preferences can predict non-music attributes of a person and cohorts of people.

Does it work?

“The Echo Nest’s technology delivers predictions that are at least as accurate as registration data, or more so,” said Mitch Kline, CEO of TargetSpot. “Some advertisers think registration data is gospel, but we believe The Echo Nest’s technology is more accurate.”

It is certainly more ambitious than Pandora’s first venture into segmenting. The Echo Nest has released 20 audience segments that cover demographic categories (age, gender) and lifestyle inclinations (automotive, parenting, etc.). That starts to get very interesting to advertisers.

“It is increasingly important,” Kline affirmed. “Our clients are trying to get more and more targeted. Dumb inventory doesn’t do anything for them anymore. People are now looking for advanced targeting. Automobile manufacturers want to target auto intenders. Or, an insurance company wants to target people who are in the car market because they will need auto insurance. In digital audio, this is fairly new." 

Can music taste really predict whether someone likes cars, or is a parent? We put that question to Jim Lucchese, CEO of The Echo Nest, and he described elaborate methods of testing against the “ground truth” of music-service users, gleaned from multiple sources. Correlating music choices against populations that live in a certain “ground truth” segment (like auto enthusiasts or parents), results in a prediction reliability score.

“That’s part of what took us so long getting to this point. The segments that we’ve released are ones where we’re confident that the results are predictable enough, and reliable enough, to take to market. There were a number of things that weren’t successful. Music can’t predict everything about a person.” 

Big Data and privacy

Though it might seem that the inference level is high when connecting music choices to lifestyle interests, that’s what “Moneyball” and Big Data are all about, and why there is such promise that analytics can illuminate previously unknown connections between all sorts of things.

Lucchese told us that the Music Audience Understanding platform was in pre-release development for two years, and that the launch timing, close on the heels of Pandora’s audience-targeting system, was coincidental, and probably favorable to both companies.

“[The timing] was awesome! The internal conversation we had was, ‘OK, cool, there’s going to be market discussion about this.’ Prior to that, you didn’t read much about it. [Our] timing was set well in advance -- we needed to have an initial customer lined up; we needed to have a product ready. We saw the Pandora announcement as we were preparing our own announcement. I saw that as a huge plus, educating the market around music as a powerful predictor of people and applying a level of data vocabulary around streaming music.”

Interestingly, Lucchese also noted, “I don’t view Pandora as a competitor; I view it as a prospective customer. Pandora is one of the most forward-thinking companies in the space.” (Pandora does not use The Echo Nest’s music intelligence platform, which is utilized by over 400 other music services.)

All of this makes privacy advocates uncomfortable. Lucchese hit that issue head-on: “We really wanted to make sure anything we were doing was not only compliant from a privacy standpoint, but better the current state of the market. [Our system] is not only non-personally identifiable, we’re not even tracking users. Because we can look at anonymous clusters of listeners, and make predictions based on those clusters, we’re not tracking people around the Internet or dropping cookies.”

Mitch Kline expresses the natural enthusiasm of a launch partner, while looking beyond the first-mover advantage: “We believe in The Echo Nest and this technology. We’re the first ones to dive into this space, and we think others will dive into it also. Then we’ll have to think of other ways of targeting!”

SpotifyArtists vs. SpotifyForArtists spoof site

Thursday, December 5, 2013 - 12:10pm

The “Spotify Debate” has been raised to a new level. It features the same debate points, but now presented as dueling websites. Until now, the war of words and philosophies was waged in sniping blog posts and interview quotes among well-known musicians and pundits on both sides of the streaming music fence -- such as David Lowery, Thom Yorke, David Byrne, Billy Bragg, and Bob Lefsetz.

Here’s what’s going on this week. 

On Monday, subscription music service Spotify launched SpotifyArtists, a resource site for musicians that also (naturally) advocates for Spotify as a distribution platform. The site presents an anatomy of Spotify royalty infrastructure, demystifying how payouts are calculated and clearing up misunderstandings. The site received widespread media attention for its transparent revelations and its resourceful reach-out to musicians.

Although Spotify’s website is named “Spotify Artists” in the page header, the browser-tab branding is “Spotify for Artists,” and a banner on the home page reads, “Welcome to Spotify for Artists!”

That’s important because today a new site appeared: SpotifyForArtists. With a similar look-and-feel, and nearly identical logo and trademark branding, it is confusing and fooling people, including Radiohead-affiliated producer Nigel Godrich, who nearly burst into flames on Twitter before being set straight about the hoax.

The spoof site is a poker-faced takeover of Spotify’s voice, realigned to the priorities of its most vehement critics. “We’ve really changed our ways,” the opening header declaims. Scrolling down the page reveals Spotify’s faux-intention to begin selling albums (with 95% of proceeds going to the artist), offer a consulting service to help musicians write better contracts with labels, and eliminate “secret math” describing how artists get paid.

It’s all entertaining (if arguably actionable), but with a serious purpose of continuing the debate and opposing the educational and peacemaking intent of Spotify’s real artist resource site. Whether it succeeds depends on individual viewpoint.

YouTube’s (rumored) music service on hold

Wednesday, December 4, 2013 - 11:00am

But probably not for long. Keep in mind that everything written about YouTube’s entry into the subscription-music market is rumor, based on undisclosed sources. The latest twist: AllThingsD reports the rumored service will not meet its rumored launch timeframe (end of year), but is rumored to be planning a 2014 debut.

Despite the Big Question surrounding this speculation, we believe that Google will indeed put YouTube into play against Spotify, Rhapsody, Rdio, and other online jukebox platforms. What is the Big Question? This: Where is the added value to justify a subscription? YouTube is already the dominant listening service for teens, absolutely free of charge, easily shareable, robustly social, astonishing in scope, and rapidly expanding every day. 

But despite the odd fact that YouTube is already in the market, and dominating portions of it, Google probably perceives a business imperative to formalize the service and capture some portion of its roughly one-billion users as paying customers.

According to AllThingsD sources, the delay (in a timeline not acknowledged by the company) is due to product development complications, and not due to content licensing complications. Google already has relationships with music owners on both the YouTube and All Access sides of its music business. 

CEO of record industry group defends streaming services

Tuesday, December 3, 2013 - 12:40pm

Frances Moore, CEO of the International Federation of Phonographic Industries, made some waves and splashed some cool water of long-term thinking on the hot debate over artist payouts from streaming music services. Moore spoke at the ARIA Masterclass in Sydney, Australia.

In her remarks (PDF transcript here) about a global recovery of a recording industry disrupted by the digital shake-ups of MP3, piracy, download stores, and streaming music, Moore directly addressed controversy stoked by outspoken musicians David Byrne and Thom Yorke. Byrne and Yorke have objected to Spotify particularly, with product boycotts and sometimes scatalogical language. Moore’s overview on all that: “I do believe their concerns are overstated.”

Moore dove deeper into the IFPI’s perspective on streaming:

“Yes, such services shift us from a world where rights holders receive the bulk of their revenues in the weeks after an album or single’s release to one where they receive micropayments each time their work is played. That can be disconcerting. But the evidence is starting to build up which suggests that, over a period of time; income from streaming services can surpass that from download stores. It is easy to forget that services such as Spotify are just five years old, and it has been present in Australia since May last year. They are still in their infancy. But with time and scale, they can significantly add to industry income and they attract music fans away from pirate services which pay nothing to artists and record labels.”

A secondary argument that has recently entered the “Spotify debate” centers on the contractual terms by which recording artists are paid by their labels for streams of their tracks. Artists aggrieved by micro-royalty checks, the argument goes, should determine whether their labels are paying out the artist share by the old product model (low royalty percentage) or the new access model (higher licensing percentage). That line of reasoning, which applies to artists who don’t own their recorded masters, shifts responsibility from streaming services to record labels -- the constituency represented by Frances Moore and the IFPI.

On a related note, Spotify itself launched an anchor site for musicians and anyone else interested in the business side of streaming music distribution. Called Spotify Artists, the site offers help guides for maximizing exposure, and -- in what will surely be the most scrutinized portion -- a clarifying explanation of how Spotify calculates royalties. 

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