B Story

Rhapsody losses deepen; is a turning point at hand?

Tuesday, November 12, 2013 - 12:45pm

Music service Rhapsody’s net revenue and gross profit declined in two year-over-year measurements, according to an SEC filing by joint-venture partner and former parent company RealNetworks. Net loss also deepened in both timeline comparisons.

Rhapsody separated from its subsidiary relationship with RealNetworks in 2010, and now RealNetworks owns 47% of Rhapsody.

Comparing the first nine months of 2013 with the same period in 2012, net loss deepened from nine-million dollars to nearly $15-million. Looking at just the third quarter, year over year, the net loss increased from $3.4-million to $5.6-million.

Rhapsody has had an eventful year. Following a leadership change and 15% staff layoff sweep in September, the company revived its app products in October, bringing them to parity (and, in some ways, beyond parity) with competing music service apps. Also in October, Rhapsody closed a meaningful international distribution deal with telecom giant Telefonica. The company has said it expects to expand its global footprint to at least 25 countries (from three countries pre-Telefonica) in the next 18 months.

Spotify courting major new investment; would increase funding level by 41%

Monday, November 11, 2013 - 12:20pm

Spotify is reportedly in late-stage discussions to obtain 200-million dollars in new venture funding from Technology Crossover Ventures (TCV). Added to Spotify’s current funding total of $288-million, the new investment would raise the startup’s valuation by 41 percent. Spotify has received $288-million since its founding in 2008.

Technology Crossover Ventures invests in high-growth tech companies with a long-term horizon. TCV owns equity stakes in Zillow, Expedia, Facebook, Go Daddy, Genesys, Netflix, and many other companies. Year-to-date, RCV has invested at least $337-million dollars in some of its holdings.

Consumer-facing Internet music services have not been venture capital magnets for the most part. There is fear around the cost of content and the variability of that cost in the U.S. and around the world. At the same time, publicly traded Pandora is valued in the open market at $4.6-billion.

If the reports are true, and the number is accurate, Spotify’s imminent $488-million investment total is majestically higher than competing services Rdio ($17.5M), Slacker ($68.1M), Songza ($4.7M), SoundCloud ($63.3M), and 8tracks ($1.2M).

Spotify adds Songkick tour info

Friday, November 8, 2013 - 11:50am

Songkick, which identifies music tour stops by city, has joined Spotify’s app ecosystem. The concert tracking service can be accessed in Spotify’s desktop program.

Songkick hooks into the user’s Spotify music collection to recognize bands and artists of interest. It starts with that basic information to deliver immediate concerts and club dates in your home town. Everything is configurable; you can add cities and change your artist lineup. In the latter case, the app pulls you into Songkick proper makes you register there, so your Spotify settings don’t get altered by your Songkick preferences.

When Songkick suggests a concert, the information panel includes the venue name (obviously), a map, and a track list of the artist/band for instant listening. There is also a planning tool to keep your concert-going life organized.

We like this integration. It’s a perfect enhancement of Spotify’s native knowledge of your music taste. There are several other tour sites, but plugging that intelligence layer into your subscription music collection is an elegant convenience.

Listn gets funded for social music listening

Thursday, November 7, 2013 - 11:50am

Listn is a music app owned by MFive Labs that expands the social possibilities of music listening by connecting people, and their music collections, across platforms and services. The company received $500-thousand in seed funding this week, giving it a foothold for future growth.

The presumption is that many people use more than one music service, or have more than one collection source -- for example an iTunes collector might also have a YouTube account and be registered at Spotify. Listn solves the “walled garden” problem by providing an encompassing space in which to share content from multiple sources, and develop a social network that likewise crosses boundaries.

Currently, Listn has connection agreements with YouTube, Spotify, Rdio, and SoundCloud. An Apple-only app presently, Listn also soaks up information about your iPod or iPhone collection purchased from iTunes, adding those tracks to YouTube favorites, and your music associated with membership in the other services.

Listn provides a twofold benefit. First, the user doesn’t have to hop from one app to another -- one’s entire macro-collection is presented in a single location. Second, the realm of social sharing and following is greatly expanded. In Listn you meet new people and are exposed to more facets of a person’s music life.

That second point has yet to be fully proved out, in our opinion. Listn provides an interesting way to meet new people, but does not transfer social relationships from connected music service, as it does with music. So, while you can listen to your Spotify tracks in Listn, you cannot listen to your Spotify friends’ playlists unless those friends pile into the Listn app. A socially active subscriber to Spotify, for example, would probably fall back to Spotify where his or her friends are.

Listn’s core mission is reminiscent of the Instant Message startups which pulled that form of communication out of the early web services (CompuServe, Genie, Prodigy, AOL), and unleashed it to the open web in the mid-1990s. That transition can be difficult, when users are reluctant to jump off their islands into the ocean. But the idea behind Listn is solid. People who use multiple music services are forced to engage with separate social schemes. The social aspect of online listening would be more useful and enjoyable if it were more open.

The push-pull relationship of streaming and albums

Wednesday, November 6, 2013 - 12:15pm

Can streaming music help album sales?

Last week’s SoundScan charted the lowest number of single-week album sales since 1991, when that measurement started informing Billboard charts, and there was immediate apocalyptic talk that streaming killed the album.

Pessimism might be justified when it comes to the album’s product legitimacy in 2013 and beyond. Bob Lefsetz applies his characteristically blunt futurism to the topic in a reaction to weak sales performance of Katy Perry’s new Prism collection.

Streaming music is not the cause of declining album sales, although it does reflect and support changing consumer demands and expectations. Consumer choice has been evolving for 15 years. Whether that marketplace shift is blindingly sudden or laboriously slow depends on whether your clock is set to Internet time or normal-world time.

The album suffered its first collision with digital reality when the mp3 format was unleashed, along with corresponding computer apps that enabled recording CD tracks. The term “ripping” resonated with illegality (“ripping off”), but copying tracks to mp3 files was just a legal as copying them to cassette tape.

It was the widespread sharing of mp3 tracks that was legally problematic. Sharing mix tapes on cassette was illegal, too, but so cumbersome and one-to-one that nobody much cared. When the original Napster hit the net in 1999, a one-to-many file-sharing revolution occurred. Horrified record labels complained that they couldn’t compete with free music, an obvious though arguable point, but two other values made Napster popular: a long tail of music unavailable elsewhere, and tracks separated from albums.

The iTunes Music Store rescued labels by wrapping a commerce solution around some Napster attractions. Doing so demystified and sanctioned single-track consumption. Steve Jobs had to talk the labels into breaking apart their albums for sale, and gave them digital rights management (DRM) in exchange, at least temporarily -- mostly solving the copy problem for iTunes-purchased tracks.

Music as e-commerce was off and running, but the album was a seriously broken product by 2003. A CNN Money article in 2010 reported skidding album sales in nine of the decade’s ten years.

Streaming music was operating in various forms before iTunes Music Store launched, including webcasts (AM/FM and pureplay), eMusic (subscription to download) and Rhapsody (subscription to stream). The combination of all these forces -- unauthorized file-sharing, iTunes price-per-download, subscription jukeboxes -- ushered the playlist era, a mix-your-own-album type of music consumption. Music became increasingly granular, smashed from album boulders into playlist gravel.

The mobile computing revolution, which started with laptops and accelerated with smartphones, furthered the trend. As cell phone data speeds increased in rapid technology cycles, the concept of accessing music from anywhere became viable for an enlarging class of well-equipped consumers.

Something else happened: a new streaming business framework based on advertising unlocked the “celestial jukebox” to people unwilling to pay for a music subscription. Spotify, Rdio, and their ilk offered an easy, no-charge on ramp to the so-called access model, where music exists as an always-on cloud of content available anywhere, synchronized across personal technology devices.

More than just granular, music has become atomized. The musicians’ complaint is that atoms of music consumption don’t pay as well as selling the big rocks (albums) or little rocks (price-per-track). The streaming industry’s response is that the liquification of music is still in early days, and when streams become tidal, everyone will prosper.

Recent experiments in iTunes Radio indicate that streaming access can stimulate old-world music purchase habits. iTunes Radio streamed Eminem’s new album for week before its release as a download or disc. The service did something similar with Justin Timberlake’s latest release; we noted then that “album release date” had taken a new, more liquid definition. We also noted that Timberlake’s album was perched atop the iTunes Store album-sales chart, while its individual tracks were far down the singles chart.

Whether streaming is driving album purchases is difficult to determine, but there does appear to be correlation of iTunes Radio pre-release streaming and iTunes Store chart performance. The Eminem experiment seems to be producing the same effect. The album’s pre-sales have propelled it to the #1 chart position. At the same time (either connected to pre-release streaming or not), Billboard reports that the Eminem album will start its Billboard 200 life in the top slot, and notch the second-highest album-sales week of the year.

So, while general music streaming might not support album sales, targeted promotional streaming on a major platform might funnel users who still enjoy outright ownership into traditional music stores. Especially when, as with Apple, the streaming service sits side-by-side with the music store.

Pandora grew audience share in October, dropped listeners

Tuesday, November 5, 2013 - 11:50am

Pandora released its internal audience metrics for October, in a Morgan Stanley conference late today in San Francisco. Pandora CFO Michael Herring presented the October results. The October report carries special significance inasmuch as it represents the first full month of iTunes Radio operating in competition with Pandora.

Pandora’s monthly metrics report contains three key indicators:

  • Share of total U.S. radio listening
  • Number of hours of music consumed
  • Number of active users

In October, Pandora’s reported listening share in the U.S. rose to 8.06 percent from a September share of 7.77 percent.

There was also month-over-month growth in consumed hours, from 1.36-billion hours in September top 1.47-billion in October.

The much-discussed “active users” measure dropped in October from the previous month, settling at 70.9-million users, a 2.5% drop from September’s 72.7-million figure. The share of U.S. radio listening measurement is controversial in the radio industry, and has been disputed by industry executives. When RAIN asked Pandora about the methodology of the share-of-listening metric, we received this reply:

"Pandora arrives at this calculation using data from Triton Digital, Arbitron and the U.S. Census. The estimated total hours include satellite radio. There is no one group that measures total radio metrics. We welcome all third-party research from a variety of established partners, including Triton Digital, Edison Research, The Media Audit, comScore and Nielsen. Ultimately, we would like to see all radio measured side-by-side."

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