A Story

Baboom music service semi-announced by Kim Dotcom

Thursday, November 21, 2013 - 12:40pm


A raft of new music services is heading to market in the next few months: YouTube, Beats Music (“Daisy”), Deezer in the U.S. Another might might join those ranks: Baboom, founded by notorious entrepreneur and hacker Kim Dotcom.

New Zealand-based Dotcom specializes in creating upload and file-sharing operations, and is generally loathed by media companies for his alleged large-scale copyright infringements. As a general hacker, he has been convicted of fraud and espionage crimes. He is presently fighting a U.S. attempt to extradite him from New Zealand to face Justice Department charges.

During all this, Kim Dotcom juggles several enterprise and music ventures. For nearly two years he has mentioned his intent to start a music listening, downloading, and/or purchasing business. Today Dotcom leaked a bit of specific information about Baboom, including the name.

Baboom’s business model, if executed, would be unique, and, without doubt, controversial. Dotcom discussed the way music would be purchased by users, and the information he teased strongly resembles his earlier product called Megakey. The plan centers on a browser plug-in which the user installs, and which hijacks ads on any site the user visits. In place of the site’s ads, the plug-in substitutes ads sold by Baboom through a private ad network. Ad revenue is shared with the user as credit, which can be applied to song and album purchases through Baboom. Dotcom promises 90-percent of the music price goes directly to the artist. (Artists who own their own labels, presumably.)

We think this scheme, admittedly clever, must open a legal question or two. Ad-blocking software is not new. But ad-hijacking software, which monetizes other sites for the benefit of Baboom, seems like a deeper level of irregularity.

Putting all this aside, and also sidestepping the possible issue of malware, if Baboom launches before the end of Q1 it will add to an intensely complicating music service landscape. With or without Baboom, it’s going to be an interesting 2014.

Rdio’s deep cuts and the troubling future

Wednesday, November 20, 2013 - 10:50am

Rdio, competing for audience in a crowded online-music market, made significant workforce reductions to lower costs. Layoffs are reported to have carved out about a third of the company.

The subscription music service competes directly with Spotify, Rhapsody, Google All Access, and Xbox Music in the U.S., and more generally with Pandora, iTunes Radio, Songza, Slacker, and other radio-style streaming platforms.

In the wake of the layoffs, Rdio made confident noises about its future destiny: “Rdio confirms making workforce reductions yesterday to improve its cost structure and ensure a scalable business model for the long-term.” But the road will get rockier in the short term.

Rdio started in 2008, and opened its platform to the public two years later, about one year before Spotify expanded into the American market. Despite the early-mover advantage in the U.S., and without the significant European listenership Spotify built up since its 2008 launch, Rdio lags in audience metrics. The company did not release updated numbers today, but Digital Music News is quoting 250,000 paid members. Spotify boasts six-million paying subscribers.

At least one departing Rdio worker was a contractor, not an employee -- Ian Gilman, a freelance app developer, who documented his exit on Twitter and called Rdio his largest client. It is common for companies trimming costs to look hard at their contracted labor force. But little is known about the “Who?” and “How many?” of today’s action.

Jukebox service Rhapsody, the grand old uncle of subscription music, underwent a layoff sweep in September, and a management shakeup that ushered its CEO out the door. Coincidentally, Rdio’s chief executive had announced his departure, but is still in place while the headhunters look for a successor.

Rdio operates a sister site, Vdio, which rents movies on a one-by-one basis. There has been speculation that Vdio would eventually move into the subscription model, and would somehow integrate with Rdio. The movie/TV subscription business is dominated by Netflix, Amazon Prime, and Hulu.

Speaking of daunting competition, the already crowded music landscape is about to be glutted with three additional major players in the U.S. YouTube is reliably rumored to be building a music service. Beats Music has announced that its “Daisy” listening venture will launch within months. And Deezer, a popular Paris-based international service is reportedly coming to America early in the new year.

So, by the end of Q1, the streaming music industry will be more top-heavy than it already is. The good news for consumers will be the bounty of choices. The bad news on the business side is that, to many consumers, the listening options are indistinguishable. That is a scenario in which the rich get richer, and the others get bought.

BIA/Kelsey: Online/digital powers local revenue growth

Tuesday, November 19, 2013 - 12:00pm

BIA/Kelsey today released its Annual U.S. Local Media Forecast for the next four years, with data covering 2012-2017. In it, two pillars of local-media revenue growth are identified: digital, and mobile. Traditional revenue (such as over-the-air and print) are forecast to remain essentially flat.

The report’s top-line forecast is bullish. Local media revenue growth is predicted to pace at a compound annual growth rate (CAGR) of 2.8 percent. That forecast maps dollars to grow from $132.9-billion to $151.5-billion after four years. The growth is driven by an optimistic online/digital forecast, which sees that revenue segment growing at a CAGR clip of 13.8 percent. Traditional ad revenues will experience fractional growth during the period, with an annual growth rate of one-tenth of a percent.

At a quick glance, the report might seem uninspiring for radio, whose participation on the digital side rises from 0.4 percent to 0.5 percent. But Mark Fratrik, Chief Economist at BIA/Kelsey, refutes that as a gloss: “It’s a half percent of the total advertising marketplace. The total marketplace [will experience] about a $19B increase. Radio will have a higher percentage of a larger pie.”

Doing the arithmetic, a slightly larger portion of a much bigger pie translates to substantial dollars. Radio’s ownership of the 2013 digital pie is worth approximately $532-million, and radio’s slightly increased share of the larger 2017 pie will be worth about $758-million. That dollar growth over the four-year period is 42 percent.

Talking to RAIN this morning, Fratrik emphasized the lumpiness of a radio industry which unevenly pursues digital-revenue opportunities.

“Some radio companies are much more aggressive than others at generating digital, online revenues. The increase of digital share is good news, [and] there are some broadcasters who are doing better than that. Any radio station has the potential to do better [than the forecast numbers]. Radio has assets that many other media companies covet. The local content, the local sales staff, and relationships with local advertisers.”

The real threat of Google Music on Apple devices

Monday, November 18, 2013 - 11:55am

Last week’s drop of Google’s All Access music subscription app into Apple’s app store was a milestone moment in both the music-service wars and the larger tech-ecosystem land grab. We had fun with our “Google invades Apple” headline, and every media site covering the convergence of music and Internet hit the same note.

The invasion metaphor is apt, more than just for its imagery of two tech/media giants engaged in business warfare. Google’s Play Music All Access, awkwardly-named thought it might be, offers a more complete music platform than Apple does -- and likewise for Spotify, Rhapsody, Pandora, and Rdio. The competitive thrust is more feature-specific than merely inserting the Google brand into the music choices of iPhone and iPod users. Its features connect with the three major ways that people connect with Internet-delivered music as a 21st-century type of radio.

Three Types of Listening

There are three types of app listening. By “app listening” we mean listening that happens through a desktop program, a web browser, or a mobile app. There are three cornerstones of app listening:

  • Radio: Broadcasters understandably bristle at the re-definition of “radio,” which used to denote a technology, not a behavior. Now, “radio” commonly means lean-back app listening that simulates the traditional passive radio experience. Pandora is the poster child for “Internet radio,” but Pandora is more interactive than thousands of Internet pureplay stations which don’t offer any customization.
  • Jukebox: The “celestial jukebox” is lean-forward listening in which access to music replaces ownership of music. Spotify, Rhapsody, and Radio are leading examples of app services that provide access to huge song catalogs on demand, with suites of features that personalize the jukebox around the user’s taste.
  • Cloud storage: Even with the rise of Internet radio and the celestial jukebox, people own personal music collections in digital file formats. Amazon, Apple, and others provide apps that allow uploading those files to the cloud, from which they can be accessed from any connected device.

Integrating these three modes of listening is not easy, or common. How do personal collections (the ownership model) fit into subscription services (the access model), and how do those users integrate the existing value of their collections with the new value of music access?

It’s Called “All Access” for a Reason

That is the key issue addressed by Google Play Music All Access, and a key selling point of its subscription service. All Access provides the usual access features -- jukeboxing, playlisting, favoriting, downloading for offline listening. At the same time, All Access (living up to its name) is a cloud storage service which invites users to upload 20,000 tracks. Those collections are integrated into the jukebox service, and intelligence derived from scanning the owned music helps personalize the music Google suggests to the user.

Apple has a cloud service, too, and of course iTunes is the world’s biggest music store, still a champion of the ownership model, widely predicted to be waning. The two-month-old iTunes Radio service provides lean-back radio-style listening, a second rung of the app-listening ladder. But Apple does not have a celestial jukebox function for random access and full listening of songs and albums.

That missing piece is the opening through which Google has driven its All Access platform, and why the invasion is meaningful. Google provides both models -- access to an owned collection on the same platform which accesses the celestial jukebox, and plays radio-style streams.

Google craftily makes it easy to convert an iTunes collection to Google’s cloud. Doing so gives Apple users a full, three-point app-listening experience on iPhones and iPods. Google provides the purchasing dimension too, through Google Play song-buying, which emulates the synergy of Apple’s iTunes Radio and iTunes Store linkage.

It’s not only iTunes that could be hurt by Google. Spotify, Rdio, and Rhapsody lack cloud integration of personal collections. Google sits in the iOS store as the complete problem-solver -- in that light, the awkward “All Access” name is justified. The extra value it brings signifies why Google invaded Apple. Time will tell how disruptive the invasion will be.

Google invades Apple

Friday, November 15, 2013 - 12:05pm

Long rumored and finally accomplished: Google dropped its tortuously-named Google Play Music All Access app into the iOS store today, extending its subscription service to Apple mobile-device users. (The launch was announced by Google here.)

Pointless, you say, because Apple device users are loyal to iTunes? And furthermore because iTunes Radio, less than two months old, is a huge boulder crashing into the streaming music pond?

Those are good points. But the launch of iTunes Radio is a good reason, by itself, for Google to establish a competing benchmark in Apple’s operating system. Beyond that, distribution of streaming service is guided by the principle of ubiquity -- be everywhere. If it doesn’t hurt to be there, be there.

Inside the app, you’ll find mostly identical features and layout as in the Android version, but with iOS 7 beautification. It is beautiful beautification, as in all the other music apps which have updated, and Google would do well to note its pleasing effect and upgrade Android’s aesthetics.

In our quick (for today) but intense examination, the iOS app lacks one major feature, which is sharing. We could not easily find a way to publicize our listens or favorites within a paid account. The apparent omission is all the more puzzling because Google Plus is available in the Apple store.

Some settings are different also, comparing Apple to Android; the Apple version is less informative and controllable. It lacks the Android EQ module, the user’s billing date, and download/streaming setting such as restricting bandwidth-consuming activity to WiFi.

Overall, the two app experiences are similar enough to make any Android user feel instantly at home with an Apple phone.

Will Apple reciprocate with an Android version of iTunes and iTunes Radio? If you’re not laughing out loud right now, you didn’t hear the cynicism of the question. Apple creates ferociously closed systems, and besides that governing principle, iTunes Radio is woven into the iTunes Store as a support system and purchase funnel. That brings up one other missing piece in Google’s iOS app: the Buy button, which in Android goes to the Google Play store. Google is evidently willing to separate streaming from buying, but Apple probably is not.

Nielsen’s “Music 360” report: Digging in with David Bakula

Thursday, 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.

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