Forbes: The Myth of Cord Cutting February 8, 2015Posted by Bill Rosenblatt in Business models, Uncategorized, United States, Video.
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In my latest piece in Forbes, I examine the idea of “cord cutting” in light of recent announcements from Viacom, Time Warner, and DISH Network of over-the-top (OTT) streaming video services that enable people in the US to watch pay TV channels without a pay TV subscription. Cord cutting means cancelling one’s subscription to cable or satellite TV and just getting TV programming over the Internet (or broadcast).
My research turned up two findings that were surprising (at least to me) and support a conclusion that cord cutting is mostly a myth. The first finding is that most people are unlikely to save money on programming if they pay for the increasing number of subscription OTT video services at their expected monthly prices. The second is that most American broadband subscribers get their TV and Internet services from the same company, and there isn’t really such a thing as a broadband Internet company that doesn’t also provide TV; therefore “cord cutting” in most cases really means “calling your cable or phone company and changing to a cheaper service plan.” I also conclude that, economically, cord cutting is a wash for everyone involved, particularly if the FCC is unsuccessful in its new attempt to pass meaningful net neutrality regulations.
As always, I eagerly welcome your feedback.
Why Does Apple Want to Halve the Price of On-Demand Music? October 26, 2014Posted by Bill Rosenblatt in Business models, Music, Services, United States.
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Apple is asking record labels to agree to a $5/month subscription price for its Beats Music on-demand service, instead of the going rate of $10/month that it and others (Spotify, Rhapsody, etc.) charge in the US market. This development started as rumor a few weeks ago, then rose to specific evidence of record label conversations confirmed by musician and artists’ rights champion David Lowery at the recent Common Ground intellectual property conference at George Mason University near Washington DC. As of this past Friday, the evidence became strong enough for the Wall Street Journal to treat it as fact.
Re/code also reports that despite the major labels’ apparently cool reception to the new pricing, Spotify is already responding by offering a family plan in which additional family members can add their own subscriptions to a $10/month plan for $5/month. (Beats Music has been offering discounted family plans through AT&T wireless accounts for a while.) As Re/code reports, one reason that Apple has given for the change to $5/month is that it has found that its best iTunes customers spend about $60/year on the service. Given that music download revenue has begun to drop rapidly, Apple apparently believes that it can entice iTunes users to an all-you-can-eat subscription service at the same spending level, instead of losing those users to free music services (or illegal downloads). In other words, $5/month subscriptions are being offered to labels as a way to shore up revenues at $60 ARPU (annual revenue per user) from people who actually still pay for music .
This reasoning is clearly designed to appeal to record labels, which are known to be unhappy about the accelerating decline in purchases. But is it Apple’s real motivation for halving the price of on-demand subscriptions? I don’t think so.
The first thing to understand about on-demand music services is that despite all the talk about monthly subscription fees, the vast majority of users do not pay for them. Research from Edison Research and Triton Digital has determined that the use of YouTube as a de facto on-demand music streaming service draws a US audience of four times all other on-demand services combined — including Spotify (paid and free). Put another way, only about 8% of US users of on-demand music services actually pay for them. Spotify’s percentage of paying US users has stabilized at 25% — which I am proud to say that readers of this blog predicted three years ago — while Google Play, Rhapsody, Rdio, and Beats Music do not offer free tiers for on-demand music.
On-demand music use is growing rapidly, but Apple only has a tiny piece of the market. Beats Music has merely a few hundred thousand users, compared to the estimated 60 million who use YouTube as an on-demand music service and Spotify’s 12 million total US users. Even when one counts only paying users, Beats Music still accounts for well below 10% of the market.
Apple clearly must do something dramatic to become a serious contender. Integrating Beats Music into iTunes (and thereby marketing it heavily to the enormous iTunes audience) by itself isn’t going to expand the market enough to be meaningful to Apple. And even if Apple thinks it can increase the paying user base disproportionately by halving the price, that’s not much of an increase in audience size — especially since the vast majority of the on-demand audience already gets it for free.
No, my view is that Apple’s primary purpose in halving the price is to throw the on-demand market into disarray. Services like Spotify and Rhapsody have been operating their businesses based on the expectation of $10/month revenue for years. Obviously, if Apple comes out with a rebranded Beats Music (iTunes On Demand, iTunes Beats, iTunes Unlimited, iTunes Jukebox, or whatever they end up calling it) at $5/month, all of the other on-demand services will have to offer the same price. Spotify, Rhapsody, and Rdio would find themselves with unsustainable financial structures and/or the necessity of renegotiating their record label deals. The best that any of these “pure play” services could hope for is to become acquisition bait for companies that are big and diverse enough to be able to cross-subsidize them (Yahoo and AOL come to mind). A move to $5/month could even cause Google to rethink its plan to launch a paid subscription music service associated with YouTube.
In short, I predict that if Apple gets record companies to agree to $5/month for on-demand music, we will see a repeat of the shakeout that occurred around 2007-2008, which left only a handful of on-demand services in the market. When the smoke clears, Apple could well find itself with a much larger chunk of the on-demand music market than if it were to try to grow its share organically.
The remaining mystery is whether Apple intends to add a free tier to Beats Music, such as a limited on-demand capability under the iTunes Radio banner. The advent of free, legal on-demand music from Spotify and (effectively) YouTube in 2011 did cause the on-demand model to grow from a niche product for music geeks to a mainstream offering. On-demand is still not quite as popular as Internet radio — I estimate the on-demand audience to be about 60% of the size of the audience for Pandora, iHeartRadio, etc. — but it has surpassed the user base for paid digital downloads.
On-demand is clearly a big part of the music industry’s digital future. Apple is behind in the transition from downloads to access-based models and needs to catch up. Only dramatic, disruptive gestures can make this happen, and halving the price is certainly one of them.
UPDATE 29 March, 2015: It looks like we were wrong. Although the majority of respondents to the poll predicted that Apple would succeed in lowering the price of subscription music to $5/month, the major labels are holding the line at $10/month. That’s the pricing that Apple expects to maintain when it launches its rebranded on-demand streaming service later this year.
Ghosts in the UltraViolet Machine September 24, 2014Posted by Bill Rosenblatt in Business models, Music, Publishing, Services, Video.
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A few brief items of interest this week. First is a reminder about Copyright and Technology London 2014 next Wednesday – there’s still time to register! We have a great lineup of keynote speakers, including Shira Perlmutter, Maria Martin-Prat, and Dominic Young of the Copyright Hub, as well as panels on hot issues such as ISP responsibility for policing infringement and content protection for “4K” video content. I look forward to seeing some of you in London next week.
Apple and Amazon Add UltraViolet-Style Family Accounts
Amazon and Apple recently announced the addition of “family accounts” for sharing content. These enable up to six users who share a billing address to link accounts and get access to each other’s content, including e-books, apps, music, and video. Apple’s Family Share is a feature of the new version of its mobile operating system, iOS 8, while Amazon’s Family Library feature is expected to launch later this Fall.
The primary difference between the two is that Apple Family Share enables the sharing of all videos downloaded from iTunes while Amazon only allows sharing of video streamed via Amazon Prime Instant Video, as opposed to videos purchased by non-members of Amazon Prime. (In other words, this is yet another gambit to entice more users into Amazon’s US $99/year Prime service.) Some websites have commented that Amazon’s service does not allow sharing of purchased music, while Apple’s does; but this is a bit silly given that music downloaded from both services is DRM-free.
It’s not particularly surprising that Hollywood studios have given both Amazon and Apple the rights to extend purchases to family accounts. That’s because the rights are similar to those that the studios already extend for the same types of content under UltraViolet usage rules. In fact, the availability of family access to video content from two of the biggest digital movie retailers eats into the advantages that UltraViolet offers. (UltraViolet’s principal retail partners are Nook (Barnes & Noble), Target, and Best Buy).
More surprising is that one of these retailers decided it was worth the development effort to add this feature (causing the other to add it as well); perhaps this is a sign that UltraViolet is catching on? Either way, this is yet another example of how the mainstreaming of digital content products and services has exposed deficiencies in the rights that users get to digital content compared to physical products such as DVDs (not to mention print books) and has led to innovation. I would expect a similar announcement from Google Play in time for the holiday shopping season.
Garth Brooks Launches GhostTunes
Finally, a minor hypestorm erupted in the music industry recently over the beta launch of GhostTunes, a new digital music retail site spearheaded by country music superstar — and longtime digital holdout — Garth Brooks. Contrary to initial reports, GhostTunes does not only sell albums; it also sells single tracks — though only at artists’ or labels’ discretion. Purchased music is available in an online locker and can be streamed or downloaded as DRM-free MP3s. Some items are multi-album packages that contain multimedia items, in the vein of Apple’s iTunes LP.
Many musical artists will surely like GhostTunes’ willingness to sell single tracks only if the artist permits it. The recorded music industry has been looking for ways to prop up the sales of albums in the digital age — just as UltraViolet was originally intended to help Hollywood studios prop up sales of movies while all of the growth is in streaming. According to RIAA statistics, single track sales accounted for about 1% of unit volume when the iTunes Music Store opened in 2003 and have grown to over 80% today.
Yet GhostTunes looks like it is shaping up to be the music industry’s Pluto Nash moment: an expensive undertaking whose primary function is to cater to the whims of a big influential star rather than to be successful as a business. Although GhostTunes is billed as an “artist-friendly” retail site, there’s little reason for anyone to go there other than the exclusive availability of Garth Brooks’s music in digital form… legally. The music selection comes from all three major labels but is limited: the press release touts “a million tracks” (compared to more than 20 million on iTunes or Spotify), while the site itself appears even more limited to a few dozen releases in each of several genres. The highlight of the current catalog is a bundle of a dozen albums plus a concert video from Brooks himself for $30.
GhostTunes received a moderate amount of attention two weeks ago, ranging from neutral and factual to critical and skeptical. The press release contains a combination of vague hype (“music fans and artists deserve more”) and either falsehoods or anachronisms (“Just as it seemed fans would be left buying music in an increasingly more restrictive configuration without the ability to take the music they purchase anywhere they please, GhostTunes.com offers a new way.”)
It’s hard to see what GhostTunes can possibly offer that isn’t available on iTunes or Amazon — other than low prices for album bundles — but we’ll see what it does offer when (or if) it goes from beta to full launch.
Disney and Apple’s UV FUD March 26, 2014Posted by Bill Rosenblatt in Business models, Technologies, United States, Video.
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Last month Disney launched Disney Movies Anywhere, a service that lets users stream and download movies from Disney and associated studios on their Apple iOS devices. You can purchase movies on the site or from the App Store app and stream them to any iPhone, iPad, or iPod Touch. You can also get digital copies and streaming access with purchases of selected DVDs and Blu-ray discs. And you can connect your iTunes account to your Disney Movies Anywhere account so that you can gain similar streaming and download access to your existing Disney iTunes purchases.
A couple of things about Disney Movies Anywhere are worth discussing. First, this is yet more evidence of the strong bond between Disney and Apple, a relationship formed when Disney acquired Pixar from Steve Jobs, who became a Disney board member and the company’s largest shareholder.
More particularly, this service is a way for Apple to experiment with video streaming services without attaching its own brand name. Disney Movies Anywhere works with only iOS devices, and there’s little indication that it will add support for Android or other platforms. For whatever reason, Apple has shied away from streaming media services until quite recently (with iTunes Radio and the latest iteration of Apple TV).
More importantly, Disney Movies Anywhere is the first implementation of Disney’s KeyChest — a rights locker architecture that is similar to UltraViolet, the technology backed by the other five major Hollywood studios. The idea common to both KeyChest and UltraViolet is that when you purchase a movie, you’re actually purchasing the right to download or stream it from a variety of sources; the rights locker maintains a record of your purchase.
One of the main motivations behind UltraViolet was to prevent content distributors or consumer electronics makers from dominating the economics of the digital video supply chain in the way that Apple dominated music downloads (and Amazon may dominate e-books), and thus from being able to dictate terms to copyright owners. By making it possible for users to buy digital movies from one retailer and then download them in other formats from other retailers, the five studios hoped to create a level playing field among retailers as well as interoperability for users. UltraViolet has several retail partners, including Target, Walmart (VUDU), and Best Buy (CinemaNow).
The problem with these technology schemes is that it is very hard to make them into universal standards. Just about every software technology we use settles down to twos or threes. In operating systems, it’s all twos: Windows and Mac OS for desktops and laptops; Android and iOS for mobile devices; Unix/Linux and Windows for servers. Other markets are similar: in relational databases it’s Oracle/MySQL (Oracle Corp.), DB2 (IBM), and SQL Server (Microsoft); in music paid-download formats it’s MP4-AAC (Apple) and MP3 (Amazon); in e-books (in the US, at least) it’s Amazon, Barnes & Noble, and Apple iBooks. Antitrust law prevents a single technology from dominating too much; market complexity prevents more than a handful from becoming roughly equal competitors.
It would be a shame if this also became true for rights lockers for movies and TV shows. It does not help the studios if consumers get one flavor of “interoperability” for movies from all but one major studio and another flavor for movies from Disney. Disney surely remembers the less-than-stellar success of its last solo venture into digital movie distribution: MovieBeam, which launched around 2004 and lasted less than four years.
And that brings us back around to Apple. The only plausible explanation for this bifurcation is that Apple is really in charge here. UltraViolet is not just an “every studio but Disney” consortium; it is also an “every technology company but Apple” initiative. The list of technology companies participating in UltraViolet is huge, though Microsoft occupies a particularly important role as the source of the UltraViolet file format and the first commercial DRM to be approved for use with the system. In other words, the KeyChest/UltraViolet dichotomy is shaping up to look very much like Apple vs. the Microsoft-led Windows ecosystem, or Apple vs. the Google-led Android ecosystem.
Still, the market for digital video is still in relatively early days, and things could change quite a bit — especially if consumers are confused by the choices on offer. (Coincidentally, there’s a good overview of this confusion and its causes in today’s New York Times.) UltraViolet is enjoying only modest success so far — compared, say, to Netflix or iTunes — and the introduction of Disney Movies Anywhere is unlikely to help make rights lockers any clearer to consumers.
In that respect, the UltraViolet/KeyChest dichotomy also has a precedent in the digital music market. Back in 2001-2002, the (then) five major record labels lined up behind two different music distribution platforms: MusicNet and pressplay. MusicNet was backed by Warner Music Group, EMI, BMG, and RealNetworks, while pressplay was backed by Sony Music and Universal Music Group. MusicNet was a wholesale distribution platform that made deals with multiple retailers; pressplay was its own retailer. In other words, MusicNet was UltraViolet, while pressplay was Disney Movies Anywhere. Yet neither one was successful; both suffered from over-complexity (among other things). Apple launched the much easier to use iTunes Music Store in 2003, and few people remember MusicNet or pressplay anymore.*
In other words, there are still opportunities for new digital video models to emerge and disrupt the current market. And consumer confusion is a great way to hasten the disruption.
*The two music platforms did survive, in a way: MusicNet is now MediaNet, a wholesaler of digital music and other content with many retail partners; pressplay was sold to Roxio, rebranded as Napster (the legal version), and resold to Rhapsody, where it still exists under the Napster brand name outside of the US.
Awareness Grows over Digital First Sale February 19, 2013Posted by Bill Rosenblatt in Business models, Law, Publishing.
What would happen if the law were to definitively decide that users should get the same rights of ownership over digital downloads as they do with physical media products such as books, CDs, and DVDs? A growing crescendo of events over the last few weeks indicates a growing awareness of this fascinating topic.
Let’s start with late last month, when Amazon was granted a U.S. patent on a scheme for reselling digital objects. The patent describes a scheme for transferring “ownership” of digital content objects from one user to another, possibly with limits on the number of transfers, and handling the e-commerce behind each such transaction.
Digital resale is possible now. For example, the startup ReDigi is doing it for music downloads from iTunes and Amazon. The question is not whether it’s technically feasible to support digital resale with reasonable safeguards against abuse of the process (i.e., “reselling” your content while keeping your own copies). The question is whether doing so requires a license from content owners, or whether users have a legal right to resell their content without permission.
In the former case, any service (like ReDigi) that facilitates resale would have to pay royalties to copyright owners on every transaction. In the latter case, it need not pay anything. Since resold digital content is identical to “new” content, this would have highly disruptive implications for publishers and others in the value chain. The law is not clear on this point, but it may become clearer within the next couple of years through litigation, such as Capitol Records’ lawsuit against ReDigi, and the efforts of a lobbying group called the Owners’ Rights Initiative.
Amazon’s patent does not take a position on whether digital resale requires the copyright owner’s permission; it simply discloses a mechanism for doing digital resale. And of course just because Amazon has a patent does not mean it intends to implement such a system; Amazon was granted about 300 patents in 2012. Still, the issuance of the patent prompted Wired to run an article about digital first sale and its implications two weeks ago.
That brings us to last week, when the O’Reilly Tools of Change for Publishing (TOC) took place in NYC. TOC is the preeminent conference on technology and innovation in publishing. Just before the conference, the TOC folks held an invitation-only Executive Roundtable featuring John Ossenmacher, CEO of ReDigi. O’Reilly Media, a publisher of books and other information for IT professionals and a bellwether of technological innovation in publishing, confirmed that it is in talks with ReDigi to take the company into resale of e-books. The room was filled with traditional publishing executives who had a more skeptical view, though Ossenmacher survived the ordeal well.
The TOC organizers had asked me to give a talk on digital first sale at the conference; I did so later in the week (slides available on SlideShare). The room was packed with a broad mixture of editorial, business, and technology folks from the publishing industry. Publishers Weekly, the leading trade publication of the book publishing industry, decided that the topic was important enough to feature in an article summarizing my presentation. Most of the attendees were surprised at the highly disruptive implications for publishers, retailers, and libraries as well as users, though a few expressed the idea that digital resale is yet another inevitable type of change to legacy business models in the content industries.
Music Subscription Services Go Mainstream September 17, 2012Posted by Bill Rosenblatt in Business models, Music, Services.
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While revisiting some older articles here, I came across a prediction I made almost exactly a year ago, after Facebook’s announcement of integration with several music subscription services at its f8 conference. I claimed that this would have a “tidal wave” effect on such services:
I predict that by this time next year, total paid memberships of subscription music services will reach 10 million and free memberships will cross the 50 million barrier.
So, how did I do? Not bad, as it turns out.
The biggest subscription music services worldwide are Spotify and Deezer. Let’s look at them first.
Spotify hasn’t published subscribership data recently, but music analyst Mark Mulligan measured its monthly membership at 20 million back in May of this year. Judging by the trajectory of Mulligan’s numbers, it ought to be about 24 million now. In fact, Mulligan shows that Spotify’s growth trajectory is about equal to Pandora’s. Furthermore, that’s only for users whose plays are reported to Facebook. A redoubt of users — such as yours truly– refuse to broadcast their plays that way (despite constant pleas from Spotify), so make it at least 25 million.
Deezer, based in France, is Spotify’s number one competitor outside of the US. A month ago, PaidContent.org put Deezer’s numbers at 20 million total but only 1.5 million paid, and added that Spotify’s paid subscribership is at 4 million.
Rhapsody is the number two subscription service in the US market. Unlike Spotify and Deezer, Rhapsody has not embraced the “freemium” trend and has stuck to its paid-only model. Rhapsody passed the 1 million subscriber milestone last December.
The next tier of subscription services includes MOG, Rdio, and MuveMusic (where the monthly fee is bundled in with wireless service) in the US; regional players including WIMP, simfy, and Juke (Europe); Galaxie (Canada); various others in the Asia-Pacific market; and Omnifone’s recently launched multi-geography rara.com. These should all be good for a few hundred thousand subscribers each.
So among all these services, 50 million looks pretty safe for the number of total subscribers.. As for the number of paid subscribers, IFPI put it at 13.4 million for 2011 in its 2012 Digital Music Report, published in January. Given that this represents a 63% increase over 2010, we can be confident in saying that the figure now is more like 17-18 million, but I’d back it off somewhat because IFPI probably counts services that I would not categorize as subscription (such as premium Internet radio). So let’s say 13-15 million paid – way past my prediction of 10 million.
It’s also worth noting that if these figures are correct, the percentage of paid subscribership is in the 26-30% range. That’s in line with the 20-30% that readers predicted here when I ran a poll on this a year ago — the most optimistic of the poll answer choices.
To put this in perspective, 50 million still falls far short of the audiences for paid downloads, Internet radio, and even YouTube, which are all well above 100 million worldwide. But it proves that the public is catching on to the value of subscription services, and they are no longer a niche product for “grazers.”
Who’s Subsidizin’ Who? February 9, 2012Posted by Bill Rosenblatt in Uncategorized, Services, Publishing, Music, United States, Business models.
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Barnes & Noble has just announced a deal offering a US $100 Nook e-reader for free with a $240/year subscription to the New York Times on Nook. Meanwhile, MuveMusic, the bundled-music service of the small US wireless carrier Cricket Wireless, passed the 500,000 subscriber mark last month. MuveMusic has vaulted past Rdio and MOG to be probably the third largest paid subscription music service in the United States, behind Rhapsody and (probably) Spotify at over a million each.
MuveMusic isn’t quite a subsidized-music deal a la Nokia Ovi Music Unlimited, but it does offer unlimited music downloads bundled with wireless service at a price point that’s lower than the major carriers. (The roaming charges you’d incur if you leave Cricket’s rather spotty coverage area could add to the cost.) Cricket is apparently spending a fortune to market MuveMusic, and it’s paying off.
It looks like the business of bundling content with devices is not dead; on the contrary, it’s just beginning. The fact that both types of bundling models exist — pay for the device, get the content free; pay for the content, get the device free — means that we can expect much experimentation in the months and years ahead. Although it’s hard to imagine a record label offering a free device with its music, we could follow a model like Airborne Music and think of things like, say, a deal between HTC and UMG offering everything Lady Gaga puts out for $20/year with a free HTC Android phone and/or (HTC-owned) Beats earbuds. Or how about free Disney content with a purchase of an Apple TV?
As long as someone is paying for the content, any of these models are good for content creators. device makers, ane consumers alike. Bring them on!
Facebook: Making the World Safe for Music Subscription Services September 25, 2011Posted by Bill Rosenblatt in Business models, Music, Services.
Facebook’s announcement of the integration of several music services at its f8 conference last week attracted a lot of hype and even more breathless press coverage. But what exactly will it do for these services?
A lot. A huge amount. In fact, this could be a tipping point in favor of subscription services against the iTunes paid-download model.
First I must get some personal bias out of the way: I have always been a fan of subscription services, and I’ve never had much use for iTunes. I’ve tried them all. I feel that subscription services have suffered from a lack of marketing resources and from negative treatment in the press, which — at least until the hype started to build around Spotify’s US launch — dismissed them as “rental” and thus inferior to the iTunes ownership model.
I always felt that this was a naive and unfair characterization of subscription services, which offer a value proposition that happens to be unfamiliar to people who are used to radio and record stores. iTunes is a digital version of a record store; Pandora is digital radio, taken to the limits that the law (specifically Section 114 of the Copyright Act) will allow. That familiarity is why each of them have more than 100 million users today.
But subscription services have languished at a lower order of magnitude. Even Spotify, with its free, ad-based offering, claims total membership somewhere between 10 and 15 million. Paid subscription service membership is said to total around 5-6 million worldwide, with the top two (Spotify and Rhapsody) making up at least half of that total.
And it’s true that even if people understand the value of subscription services — the celestial jukebox, with libraries of over 10 million tracks available on demand at any time, for the price of about one downloaded album per month — they are not for everybody. They aren’t good deals if you have a few favorite songs that you want to listen to over and over again. They are much better for “grazers” like myself, who like to try all sorts of music before (in most cases) losing interest and moving on to something else.
But I wonder about cause and effect here. Do people listen to the same few songs over and over again because they have been conditioned to the record-store model — where every song represents a financial investment — or would they still do so even if the model changed? (Did I become a grazer while being a radio DJ for 12 years and enjoying access to large music libraries at three radio stations?) It’s hard to say in general, but I bet that at least some people will change their habits once they see the advantages of the alternatives.
That’s where Facebook comes in. Subscription services have competed with each other by offering more and more features that are likely to appeal to the same core audience, attempts to be all things to all people, or pure bloatware. Rhapsody, MOG, and Napster in particular have become many-headed beasts that try to appeal to all types of listeners while not succeeding in attracting many beyond the cadre of grazers.
Facebook integration should change all that. The basic idea of Facebook integration is that whenever you play a song on one of the integrated services, it shows up on your Facebook page for all your friends to see. They can click on a link and play the same song on the service on which you are playing it. The participating services have set up various flavors of free trials and restricted free tiers of service a la Spotify. This will introduce subscription services to a vast new audience of people, many of whom would otherwise not have considered subscription services at all.
Subscription services have “share” features, through which users can post their songs playing or playlists to Facebook, Twitter, blog posts, email, etc. But how many people actually do this, and how many people actually respond? Not very many. It’s not consistent, it doesn’t scale well, and most users probably treat this kind of thing as an annoyance, a form of spam. The new Facebook integration amounts to an opt-out version of this: if you connect with Facebook, all of your plays get posted there. Given Facebook’s enormous reach, that’s one hell of a lot of “I’m listening to this song” posts; they will become a fact of life on Facebook and virtually impossible to ignore.
I don’t know of any financial terms between the participating services and Facebook (e.g. commissions on paid subscriptions), but as they say, you can’t buy this kind of publicity.
Yet I am a little concerned about how all of the subscription services are falling over each other to offer freemium deals to take advantage of all that publicity. There are just too many subscription services now. Spotify and Rhapsody are the top two, and there are enough differences between their feature sets to keep them both viable for a while. I worry that second-tier services like MOG, Rdio, and Slacker will try to compete on price or by extending their free offerings to the point that the public will come to expect more and more for nothing.
I have little doubt that the market can’t support more than two or three of these services and that the others will wither and die. (Rdio, which depends too heavily on features that Facebook integration now renders redundant and has a lackluster mobile client, ought to be the first to go.) Let’s just hope they don’t take the entire industry down with them by setting public expectation that they should be free while hemorrhaging money all the while.
Facebook integration is the marketing tidal wave that subscription services have needed ever since Rhapsody became the first to launch with major label licensing back in 2002. I predict that by this time next year, total paid memberships of subscription music services will reach 10 million and free memberships will cross the 50 million barrier. iTunes and Pandora certainly aren’t going away, but subscription services will finally join them as the viable music business model that they deserve to be.
How High Will Spotify’s Paid Subscribership Go? August 10, 2011Posted by Bill Rosenblatt in Business models, Europe, Music, Services, United States.
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More on the direct consumer revenue trend: the first set of results of Spotify’s US launch are in, courtesy of the Wall Street Journal’s All Things D. As of earlier this week, only a month into the service’s US presence, Spotify has signed up 1.4 million subscribers, of which 175,000 are paying. At 12.5%, that’s a bit lower than the 15-16% paid subscribership Spotify is enjoying in Europe, but it doesn’t change Spotify’s overall paid-subscriber rate very much.
All Things D’s Peter Kafka points out that the US conversion rate from free to paid is likely to be lower because US subscribers get more free music during the first six months of the US launch than European free subscribers do. But I would also argue that the conversion rate is lower because Spotify is new in the US, and people are just trying it out — many of whom may already subscribe to a competing service such as Rhapsody.
Given that the addressable market for Spotify increased by 150% when it launched in the US (about 150 million Internet users in the seven European countries in which Spotify operates vs. about 220 million in the US), Spotify’s total subscribership could end up in the multiple tens of millions fairly quickly. But to me, the more important question is: given the steep growth in its percentage of paid subscribers, where does that growth stop?
Here’s a poll:
Good News for the New York Times July 22, 2011Posted by Bill Rosenblatt in Business models, Publishing, Services.
A short postscript to yesterday’s article on the strong recent uptake in paid subscription music services:
Today the New York Times revealed that 281,000 users are paying to receive its content digitally, including 224,000 in its new Digital Subscriber program and the remaining 57,000 paying for Times subscriptions through e-readers. The Digital Subscriber service launched in March. The Times has already beaten its stated goal of 200,000 digital subscribers by the end of the first year. 224,000 is 26% of the paper’s daily print circulation; the figure does not include the 756,000 print subscribers who also have digital subscriptions. The 26% ratio is about the same as the percentage of digital to print subscribers to Cook’s Illustrated.
To put those numbers in context: the goal that the Times surely has in mind is 400,000. That’s the number of paid online subscribers to the Wall Street Journal. The other interesting number in the periodical publishing space is that of Consumer Reports, which is the largest paid online publication at 3.3 million online subscribers (as of November 2010). Neither Consumer Reports nor Cooks Illustrated carries advertising.
Different subject: How do you like the new site layout?