Welcome to the blog of Dr. Lisa Burns' Media Studies senior capstone class (2 pm section) at Quinnipiac University. If you're looking for the latest on media industry trends and insightful media analysis, you've come to the right place!
Tuesday, March 27, 2018
Music Blog 8, Question 2 (April 3rd)
Which streaming service has the most
sustainable business model? And which one do you think is struggling?Limit: 6 responses
In my opinion, there are two streaming services that dominate the music industry and they are Spotify and apple music. According to an article by Reuters, Spotify is the global market leader when it comes to paid subscribers. The article notes, “more than 60 million, and 140 million active users. It offers over 30 million songs and features include bespoke playlists made for users weekly” (Reuters.) Part of the reason why Spotify is so popular is because it can be used for free. However, there is a catch. If you want to use it for free, you are only allowed a certain amount of skips, you have to listen to a decent number of advertisements, and you are not allowed to pick which song you want to listen to. Instead, you have to shuffle your songs. I believe this is a successful business model because after people eventually get sick of the advertisements and would just rather pay the monthly subscription.
While Spotify is very popular, Apple Music gives them a run for their money. In his article, Ed Christman states, “Sources that represent almost 60 percent of music industry market share in the United States tell Billboard that Apple Music currently has about 15 percent of the market of overall music purchases from United States record labels, while Spotify has about 17 percent of that market. But when the iTunes download stores is brought into the equation and its revenue is added to the subscription revenue from Apple Music and its Beats Digital Radio service, the combined market share of the Apple-owned digital services rises to 30 percent. That makes Apple almost two-thirds larger overall than Spotify in the U.S., although that may not be the case for certain independent labels and distributors” (Christman.) I think Apple Music has the most sustainable business model because of the deals that they have with arguably the most popular artists in the music industry today. According to an article from Rolling Stone, “At the same time, labels aren't the money machines they were in the CD era, and Apple Music gives artists an alternate revenue source. Over the past year, it has funded videos by Taylor Swift, M.I.A. and the Weeknd, and given artists from Drake to DJ Khaled their own Beats 1 shows, not to mention TV advertising. In September, Travis Scott's Apple Music exclusive, Birds in the Trap Sing McKnight, became his first album to hit Number One on the charts. Superstar exclusives, in turn, have helped Apple and, to a lesser extent, Tidal generate millions of new customers, intensifying competition with Spotify” (Knopper.) This is actually the reason why I use Apple Music. I used to use Spotify to free, until it was announced that Drake would only originally release his album “Views” on Apple Music. That is when I made the decision that the monthly subscription was worth it.
The streaming service that I believe is struggling the most is SoundCloud. Every reason why I think this is outlined in the article by Reuters. The article notes, “The Berlin-based company was born a decade ago. It has over 175 million users—more than any other service—but almost all are non-paying. SoundCloud is widely used by DJs and electro music fans, with its user-generated content a key differentiating factor. But the company has repeatedly faced financial problems, forcing it to introduce advertising in 2014 and an ad-free subscription of about $10, SoundCloud Go, the following year” (Reuters.) The article goes on to talk about how the company has fired more than 170 people last July and it has turned to investors to rescue it from bankruptcy. In addition, SoundCloud’s valuation has fallen from $700 million to $150 million.
Reuters. “A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services.” Fortune
Christman, Ed. “Apple Music, Spotify Battle Heats Up Again as Race for US Subscribers Gets Closer.” Billboard
Knopper, Steve. “How Apple Music, Tidal Exclusives Are Reshaping Music Industry.” Rolling Stone, Rolling Stone, 5 Oct. 2016
The music industry has taken a massive leap towards anywhere-anytime access. Not so long ago, record deals, album releases, and digital DVD copies were the dominant moneymakers of the industry. Downloading digital audio files off iTunes and LimeWire became popular in the early 2000’s. Today, it’s all about on-demand streaming. Apps and Websites such as Spotify, Apple Music, Pandora and Sound Cloud are all music streaming platforms.
Spotify and Apple Music are currently the top two preforming providers and are both subscription-based. Both offer “free music with ads, $10 per month for ad-free, 15$ ad-free for families, and $5 per month ad-free for students”(Hall). These two platforms are user-friendly, downloadable playlists for premium members and unlimited access to a library containing millions of songs.
Spotify is the number one music streaming platform because its usability and features surpass even Apple’s model. Even though Apple Music has a larger market audience, according to The Hollywood Reporter,“[Spotify] has around 159 million users and 71 million paying subscribers in 61 countries, according to the Spotify prospectus, which makes it larger than rival Apple Music. Europe is the company's biggest market with 58 million users, accounting for 37 percent of its total user base, as of Dec. 31, 2017. That's up 26 percent year-over-year” (Vlessing).
In the midst of the competition, Pandora is barely staying afloat. Head CEO, chief of marketing, and president of the company abandoned ship. The company has not turned over a notable profit in quite some time. Their net income doesn’t come from subscriptions but advertisements. According to Billboard, “Pandora’s adjusted EBITDA net loss in Q3 2017 was $5.3 million -- a 20 percent improvement year-over-year versus $6.6 million in Q3 2016, but not quite enough to convince onlookers of a path to profitability, especially considering the arduous cycle of recovery that so many corporate shakeups in a row leave in their wake” (Hu). With the loss of users, advertisers have been backing out as well. Pandora doesn’t have the power to come back unless they make some severe changes to their business model and even then, there’s a good chance it won’t be enough. Ultimately, the users are demanding easier, user-friendly access, low prices, and a good bang for their buck. Spotify offers all of these things whereas other platforms simply do not have the means or the user attention. Apple Music is definitely on the rise because of the massive reach and budget they have to pour into the service. Unfortunately, we may be saying goodbye to Pandora in the foreseeable future because they simply have run their course and it may be too-little-too-late for a comeback.
Works Cited
Hall, Parker. “The Best Music Streaming Services.” Digital Trends. 2 Feb, 2018. https://www.digitaltrends.com/music/best-music-streaming-services/
Hu, Cherie. “Pandora Is Losing Active Listeners, Selling Fewer Ads - What Will New CEO Roger Lynch Do?” Billboard. 3 Nov, 2017. https://www.billboard.com/articles/business/8023105/pandora-losing-active-listeners-selling-fewer-ads-ceo-roger-lynch
Vlessing, Ethan. “Spotify Files for Public Offering.” The Hollywood Reporter. 2 Feb, 2018. https://www.hollywoodreporter.com/news/spotify-files-public-offering-1089394?utm_source=Sailthru&utm_medium=email&utm_campaign=THR%27s%20Today%20in%20Entertainment_now_2018-03-01%2010:10:08_rrahman&utm_term=hollywoodreporter_tie
Spotify has the most sustainable business model compared to the failing Pandora music streaming app. One hundred and forty million active users continue to use Spotify`s ad-supported streaming service to access its original content and expansive music library. Its business model is unique because it doesn`t rely on major celebrity deals or physical hardware devices to promote its service. According to Reuters, Apple music and Amazon Prime music take second and third place in the music streaming industry. However, Daniel Sanchez, a contributor to the Digital Music News website, said that Apple music is the most popular music streaming app. Sanchez says, "Interestingly, most people streamed Apple Music on their smartphones — that is, 99% of them. Only a few users their tablets, and even fewer listened on PCs or Macs. With a 55% mobile-only share, the Swedish streaming music service had much higher usage on computers" (1). While Spotify is highly successful, it faces some profitability and hardware challenges. Cherie Hu, a Billboard writer, mentions how Spotify needs to address its technology and content issues to compete against big tech media companies. In her article, "Why Music Streaming`s Greatest Hopes Are Spotify`s Toughest Challenges", she explains Spotify`s marketing and content business approach to support its streaming platform. Unfortunately, the top-down business module influenced global programming coordinator, Tuma Basa, to leave Spotify` for Youtube. His separation from the company was the company`s wake- up call because, "(If) Spotify leans too heavily into top-down, exclusive content, it might lose ground ahead of rival services Apple Music and Tidal, which have arguably cornered the celebrity- and content-centric market but trail behind Spotify on algorithmic sophistication" (HU p.3). However, if Spotify values tech-savviness, it will continue to compete against Google Play and Apple Music.
Pandora has the worst business module amongst all the music streaming apps. Pandora isn`t changing fast enough to stand out in the crowded music streaming industry. Pandora has struggled to maintain its active users due to fierce tech media competitors. One future trend is keeping Pandora as an ad-supported service for its subscription division, which may cause a problem for 'cord-nevers' in the music industry. Cherie Hu writes about Pandora`s problems and successes in "Pandora Is Losing Active Listeners, Selling Fewer Ads - What Will New CEO Roger Lynch Do?". She explains that Pandora has actually had an increase in total subscription revenue. However, Pandora struggles to handle the active users issue because, " In Q2 2017, when it was still under Westergren’s wing, Pandora had declared to investors that it would prioritize growth and retention of active users over pushing for conversion to paid subscriptions. Yet, the service’s active user base declined once again in Q3 2017 -- dipping by 6 percent year-over-year to 73.7 million active users, versus 77.9 million in Q3 2016" ( Hu p.1). Pandora will fail if it continues to lose active listeners and valuable music leaders and executives. Therefore, the company needs a turnaround fast before they become obsolete like Rhapsody and Napster.
Works cited Hu, Cherie. “Pandora Is Losing Active Listeners, Selling Fewer Ads: What Will New CEO Roger Lynch Do?” Billboard, 3 Nov. 2017, www.billboard.com/articles/business/8023105/pandora-losing-active-listeners-selling-fewer-ads-ceo-roger-lynch. Web, 3 Apr. 2018.
Hu, Cherie. "Why Music Streaming's Greatest Hopes Are Spotify's Toughest Challenges" Billboard, 3 Aug. 2018, https://www.billboard.com/articles/business/8231963/spotify-biggest-challenges-music-streaming-greatest-hopes. Web. 3 Apr. 2018.
Third source below, i couldn't add this before because it was over the limit.
Sanchez, Daniel. "Apple Music, Not Spotify, Ranks as The Most Popular Streaming Service" Digital Music News, 29 Mar 2018, https://www.digitalmusicnews.com/2018/03/29/verto-analytics-study-apple-music-spotify/. Web. 3 April 2018.
As the technology in our culture continues to advance, the way in which consumers purchase, listen, and view music also continues to change. Previously, when an artist released new music consumers had to buy the album in order to listen to it. Now with advancements in online services and mobile devices, streaming music online has become the preferred method for consumers and has also become a multi-billion dollar market. According to Fortune magazine, some of the big producers in the music streaming service include Spotify (global market leader), Apple Music, Good Play Music, SoundCloud, Tidal, and Pandora. These streaming companies make a profit by having either paid subscribers or a “freemium” option for users that displays paid ads. While the number of companies providing streaming services was originally limited, larger corporations are now seeing the success these services can bring and using them as templates to create their own streaming platforms. This does not mean, however, that smaller, international companies are not finding success. In fact, it is quite the opposite. According to Billboard Biz Music, many small companies that offer streaming services are finding long tail success through offering niche music to their users (Bromley). According to Bloomberg Businessweek Amazon’s streaming service, Amazon Music, has become a formidable player in the streaming service competition. Amazon Music is unique to the streaming market because it offers a monthly subscription price below the market standard of $10 a month. They also are the second listened to paid subscription service behind Spotify but ahead of Apple Music. With the Amazon brand being so recognizable, Amazon Music has also been able to expand to over 28 countries, thus increasing its consumer base(Ovide). I think that the streaming companies that will have the most success going forward, like Amazon Music, are the ones who not only have both national and international exposure, but also are able to offer a price point for similar services that is below their competitors. The company that I feel is struggling the most is also one of the first companies to get into the streaming service, Spotify. On average, streaming services take 30% of their earned income for overhead, which does not cover the companies’ costs. In fact, despite their large music database and their large subscriber base, Spotify has reported financial losses over the years (Bromley). This could create issues for their company as new companies emerge that offer the same services as Spotify, but at lower prices. While Spotify is the largest music streaming service available, without future innovation and larger profit margins, their future sustainability may be unclear.
"A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services," Reuters 11 Sept. 2017. Web.
Bromley, Jordan. "The Future of the Streaming Economy: 5 Things to Watch," Billboard 23 Jan. 2018. Web.
Ovide, Shira. “Amazon Music Makes Giant Strides Against Apple and Spotify.”Bloomberg.com, Bloomberg, 11 Dec. 2017, www.bloomberg.com/news/articles/2017-12-11/amazon-music-makes-giant-strides-against-apple-and-spotify.
None of the current business models for streaming services are a sustainable model for the long term. The largest streaming behemoths are not even turning profits as is pointed out by Billboard’s Cherie Hu. In Hu’s article ‘Why Music Streaming’s Greatest Hopes Are Spotify’s Toughest Challenges’ she points out that both Spotify and Pandora have yet to turn a profit, “illuminating the fact that the two companies are the norm, not the exception, when it comes to multibillion-dollar global music streaming corporations struggling to make ends meet. ” Hu argues this is why Spotify can never be the “Netflix of music,”; the costs of paying rights owners of music is where most revenue goes. Right now however music streaming is dominant and consumers will not turn back towards the dark ages of purchasing every record they listen to.
The power of these streaming services in the short term is in the power of the brand. Which service can accumulate the most users? Which service can provide the best total package to consumers? In this sense Spotify will likely be dominant for the near future. Spotify has built up a large user base by using a freemium business model. According to Reuters article, ‘A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services’ Spotify has 60 million paid subscribers and 140 million active users. The next largest user base for a music streaming service is apple music, which has 28 million paid users and does not offer a free model. Spotify offers so many different services to their users such as their entire music catalog, podcasts, playlists, and radio. But, the number one aspect of Spotify that sets it apart from the rest for the near future is the social side of things. Spotify allows for friends to share playlists and to follow one another. The social aspect of the streaming service constantly gives the user something to always come back for. As a paid user of Apple music this is the aspect of streaming I wish was more accessible with my platform of choice.
I think that the streaming services that are in the greatest danger of going extinct are Tidal and Pandora. The service that Pandora offers consumers is available in its entirety on most other streaming services as is. While the exclusive deals Tidal has with artists seem to do little in terms of converting people to paid subscribers. The one time I had Tidal was when Kanye West’s The Life Of Pablo was exclusive to the service, and once the free trial was over I never thought to use the platform again.
Felix Richter points out in his Statista article ‘Will Music Streaming Ever Be Profitable’ the main advantage that Apple Music and Amazon’s music streaming service have over Spotify, Tidal, and Pandora: they don’t need to ever be profitable. Spotify is the Spotify’s business whereas Apple Music is just another reason to join the apple hardware ecosystem and Amazon’s streaming service is a thrown in bonus for Amazon prime users who give the company $100 a year. Richter summarizes this best as he ends his article stating, “Spotify and Pandora don't enjoy the luxury of a profitable billion dollar business supporting their services though, and will at some point need to figure out how to actually make music streaming profitable.”
Hu, C. (2018). Why Music Streaming's Greatest Hopes Are Spotify's Toughest Challenges. [online] Billboard. Available at: https://www.billboard.com/articles/business/8231963/spotify-biggest-challenges-music-streaming-greatest-hopes [Accessed 3 Apr. 2018].
Richter, F. (2018). Infographic: Will Music Streaming Ever Be Profitable?. [online] Statista Infographics. Available at: https://www.statista.com/chart/577/revenue-and-net-loss-of-pandora-and-spotify/ [Accessed 3 Apr. 2018].
Reuters. (2018). A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services. [online] Available at: http://fortune.com/2017/09/11/spotify-apple-music-tidal-streaming/ [Accessed 3 Apr. 2018].
Apple Music has the most sustainable business model to date, but that has to do with being associated with Apple products, and not with being a superior streaming service. The model that is struggling is Amazon Prime music, but that is because it is not solely a streaming service, it is an add-on with their Prime program.
Since Apple is such a large company and their music services are comorbid with all of their products, it is easy to attract an already attentive audience. Spotify is preparing to go public, which will bring in a lot of money for the company, but there will still be little profit for pure streaming companies (scmp.com, 2018).
If being publicly traded proves to be beneficial for the streaming service, then that is an indicator of how successful their business model is. However, if it fails, then the other streaming services continue with their models without fear since they are funded by large companies that don’t rely on music for close to 100% of their profit.
The best business model seems to be: don’t put all of your eggs in one basket. Music may be the leader in harnessing the internet and using it to fix rather than supplement an industry, but it is only one component of a person’s day (Cullins, 2018). An integrative model, similar to Amazon, Google, and Apple, is the only one likely to succeed in a constantly changing digital world.
Competition always ends well for consumers. Promotional deals, more genre variation, and less ads are some of the benefits that Apple can bring. A three-month free subscription to Apple Music can survive because Apple can afford to take a loss in profit on music bought as an exchange for download and streaming numbers (Christman, 2018). Spotify only has its music whereas Apple can sell a new iPhone to meet their bottom line.
Music is challenging because of the deals that have to happen out of the public eye. Facebook made a deal with Universal Music Group to legalize what every teenager was illegally doing on Myspace and putting music to posts and personal pages (Burch, 2017). Most people who use this function aren’t going to turn to Apple Music and stream the song unless they truly like it. This raises ethical problems about taking advantage of new artists. Are they being paid the same in this deal as the would be on Apple Music, or is it going to be an unpopular system like Prime Music?
Prime Music is an add on feature with Amazon Prime. The company isn’t worried about its success as a streaming service, but it is more as a video-on-demand service. It doesn’t take up space on your phone because it is on a cloud, but the service is going to struggle the most in the dense competition of streaming services because only Prime members have access.
Once Spotify goes public it will be easier to tell what is in store for the music industry. If “SPOT” fails in the New York Stock Exchange, then there is no hope for independent streaming services, only large companies like Amazon and Apple that don’t need to rely on one service (Vlessing, 2018).
As Spotifys profits still stagnate, is music streaming dying out? (2018, March 06). Retrieved April 03, 2018, from http://www.scmp.com/culture/music/article/2135689/spotifys-profits-stagnate-music-streaming-dying-out-enjoy-it-while-you
Christman, E. (2018, February 5). Apple Music, Spotify Battle Heats Up Again as Race for US Subscribers Gets Closer. Retrieved April 03, 2018, from https://www.billboard.com/articles/business/8098161/apple-music-spotify-streaming-wars-subscribers-advantage
Cullins, A. (2018, January 27). Music Experts Discuss Why the Internet Is Now Saving the Recording Industry. Retrieved April 03, 2018, from https://www.hollywoodreporter.com/news/music-experts-discuss-why-internet-is-saving-recording-industry-1078058
Vlessing, E. (2018, February 28). Spotify Files for Public Offering. Retrieved April 03, 2018, from https://www.hollywoodreporter.com/news/spotify-files-public-offering-1089394?utm_source=Sailthru&utm_medium=email&utm_campaign=THR's Today in Entertainment_now_2018-03-01 10:10:08_rrahman&utm_term=hollywoodreporter_tie
In my opinion, there are two streaming services that dominate the music industry and they are Spotify and apple music. According to an article by Reuters, Spotify is the global market leader when it comes to paid subscribers. The article notes, “more than 60 million, and 140 million active users. It offers over 30 million songs and features include bespoke playlists made for users weekly” (Reuters.) Part of the reason why Spotify is so popular is because it can be used for free. However, there is a catch. If you want to use it for free, you are only allowed a certain amount of skips, you have to listen to a decent number of advertisements, and you are not allowed to pick which song you want to listen to. Instead, you have to shuffle your songs. I believe this is a successful business model because after people eventually get sick of the advertisements and would just rather pay the monthly subscription.
ReplyDeleteWhile Spotify is very popular, Apple Music gives them a run for their money. In his article, Ed Christman states, “Sources that represent almost 60 percent of music industry market share in the United States tell Billboard that Apple Music currently has about 15 percent of the market of overall music purchases from United States record labels, while Spotify has about 17 percent of that market. But when the iTunes download stores is brought into the equation and its revenue is added to the subscription revenue from Apple Music and its Beats Digital Radio service, the combined market share of the Apple-owned digital services rises to 30 percent. That makes Apple almost two-thirds larger overall than Spotify in the U.S., although that may not be the case for certain independent labels and distributors” (Christman.) I think Apple Music has the most sustainable business model because of the deals that they have with arguably the most popular artists in the music industry today. According to an article from Rolling Stone, “At the same time, labels aren't the money machines they were in the CD era, and Apple Music gives artists an alternate revenue source. Over the past year, it has funded videos by Taylor Swift, M.I.A. and the Weeknd, and given artists from Drake to DJ Khaled their own Beats 1 shows, not to mention TV advertising. In September, Travis Scott's Apple Music exclusive, Birds in the Trap Sing McKnight, became his first album to hit Number One on the charts. Superstar exclusives, in turn, have helped Apple and, to a lesser extent, Tidal generate millions of new customers, intensifying competition with Spotify” (Knopper.) This is actually the reason why I use Apple Music. I used to use Spotify to free, until it was announced that Drake would only originally release his album “Views” on Apple Music. That is when I made the decision that the monthly subscription was worth it.
The streaming service that I believe is struggling the most is SoundCloud. Every reason why I think this is outlined in the article by Reuters. The article notes, “The Berlin-based company was born a decade ago. It has over 175 million users—more than any other service—but almost all are non-paying. SoundCloud is widely used by DJs and electro music fans, with its user-generated content a key differentiating factor. But the company has repeatedly faced financial problems, forcing it to introduce advertising in 2014 and an ad-free subscription of about $10, SoundCloud Go, the following year” (Reuters.) The article goes on to talk about how the company has fired more than 170 people last July and it has turned to investors to rescue it from bankruptcy. In addition, SoundCloud’s valuation has fallen from $700 million to $150 million.
Reuters. “A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services.” Fortune
Christman, Ed. “Apple Music, Spotify Battle Heats Up Again as Race for US Subscribers Gets Closer.” Billboard
Knopper, Steve. “How Apple Music, Tidal Exclusives Are Reshaping Music Industry.” Rolling Stone, Rolling Stone, 5 Oct. 2016
The music industry has taken a massive leap towards anywhere-anytime access. Not so long ago, record deals, album releases, and digital DVD copies were the dominant moneymakers of the industry. Downloading digital audio files off iTunes and LimeWire became popular in the early 2000’s. Today, it’s all about on-demand streaming. Apps and Websites such as Spotify, Apple Music, Pandora and Sound Cloud are all music streaming platforms.
ReplyDeleteSpotify and Apple Music are currently the top two preforming providers and are both subscription-based. Both offer “free music with ads, $10 per month for ad-free, 15$ ad-free for families, and $5 per month ad-free for students”(Hall). These two platforms are user-friendly, downloadable playlists for premium members and unlimited access to a library containing millions of songs.
Spotify is the number one music streaming platform because its usability and features surpass even Apple’s model. Even though Apple Music has a larger market audience, according to The Hollywood Reporter,“[Spotify] has around 159 million users and 71 million paying subscribers in 61 countries, according to the Spotify prospectus, which makes it larger than rival Apple Music. Europe is the company's biggest market with 58 million users, accounting for 37 percent of its total user base, as of Dec. 31, 2017. That's up 26 percent year-over-year” (Vlessing).
In the midst of the competition, Pandora is barely staying afloat. Head CEO, chief of marketing, and president of the company abandoned ship. The company has not turned over a notable profit in quite some time. Their net income doesn’t come from subscriptions but advertisements. According to Billboard, “Pandora’s adjusted EBITDA net loss in Q3 2017 was $5.3 million -- a 20 percent improvement year-over-year versus $6.6 million in Q3 2016, but not quite enough to convince onlookers of a path to profitability, especially considering the arduous cycle of recovery that so many corporate shakeups in a row leave in their wake” (Hu). With the loss of users, advertisers have been backing out as well. Pandora doesn’t have the power to come back unless they make some severe changes to their business model and even then, there’s a good chance it won’t be enough.
Ultimately, the users are demanding easier, user-friendly access, low prices, and a good bang for their buck. Spotify offers all of these things whereas other platforms simply do not have the means or the user attention. Apple Music is definitely on the rise because of the massive reach and budget they have to pour into the service. Unfortunately, we may be saying goodbye to Pandora in the foreseeable future because they simply have run their course and it may be too-little-too-late for a comeback.
Works Cited
Hall, Parker. “The Best Music Streaming Services.” Digital Trends. 2 Feb, 2018.
https://www.digitaltrends.com/music/best-music-streaming-services/
Hu, Cherie. “Pandora Is Losing Active Listeners, Selling Fewer Ads - What Will New CEO Roger Lynch Do?” Billboard. 3 Nov, 2017.
https://www.billboard.com/articles/business/8023105/pandora-losing-active-listeners-selling-fewer-ads-ceo-roger-lynch
Vlessing, Ethan. “Spotify Files for Public Offering.” The Hollywood Reporter. 2 Feb, 2018.
https://www.hollywoodreporter.com/news/spotify-files-public-offering-1089394?utm_source=Sailthru&utm_medium=email&utm_campaign=THR%27s%20Today%20in%20Entertainment_now_2018-03-01%2010:10:08_rrahman&utm_term=hollywoodreporter_tie
Spotify has the most sustainable business model compared to the failing Pandora music streaming app. One hundred and forty million active users continue to use Spotify`s ad-supported streaming service to access its original content and expansive music library. Its business model is unique because it doesn`t rely on major celebrity deals or physical hardware devices to promote its service. According to Reuters, Apple music and Amazon Prime music take second and third place in the music streaming industry. However, Daniel Sanchez, a contributor to the Digital Music News website, said that Apple music is the most popular music streaming app. Sanchez says, "Interestingly, most people streamed Apple Music on their smartphones — that is, 99% of them. Only a few users their tablets, and even fewer listened on PCs or Macs. With a 55% mobile-only share, the Swedish streaming music service had much higher usage on computers" (1). While Spotify is highly successful, it faces some profitability and hardware challenges. Cherie Hu, a Billboard writer, mentions how Spotify needs to address its technology and content issues to compete against big tech media companies. In her article, "Why Music Streaming`s Greatest Hopes Are Spotify`s Toughest Challenges", she explains Spotify`s marketing and content business approach to support its streaming platform. Unfortunately, the top-down business module influenced global programming coordinator, Tuma Basa, to leave Spotify` for Youtube. His separation from the company was the company`s wake- up call because, "(If) Spotify leans too heavily into top-down, exclusive content, it might lose ground ahead of rival services Apple Music and Tidal, which have arguably cornered the celebrity- and content-centric market but trail behind Spotify on algorithmic sophistication" (HU p.3). However, if Spotify values tech-savviness, it will continue to compete against Google Play and Apple Music.
ReplyDeletePandora has the worst business module amongst all the music streaming apps. Pandora isn`t changing fast enough to stand out in the crowded music streaming industry. Pandora has struggled to maintain its active users due to fierce tech media competitors. One future trend is keeping Pandora as an ad-supported service for its subscription division, which may cause a problem for 'cord-nevers' in the music industry. Cherie Hu writes about Pandora`s problems and successes in "Pandora Is Losing Active Listeners, Selling Fewer Ads - What Will New CEO Roger Lynch Do?". She explains that Pandora has actually had an increase in total subscription revenue. However, Pandora struggles to handle the active users issue because, " In Q2 2017, when it was still under Westergren’s wing, Pandora had declared to investors that it would prioritize growth and retention of active users over pushing for conversion to paid subscriptions. Yet, the service’s active user base declined once again in Q3 2017 -- dipping by 6 percent year-over-year to 73.7 million active users, versus 77.9 million in Q3 2016" ( Hu p.1). Pandora will fail if it continues to lose active listeners and valuable music leaders and executives. Therefore, the company needs a turnaround fast before they become obsolete like Rhapsody and Napster.
Works cited
Hu, Cherie. “Pandora Is Losing Active Listeners, Selling Fewer Ads: What Will New CEO Roger Lynch Do?” Billboard, 3 Nov. 2017, www.billboard.com/articles/business/8023105/pandora-losing-active-listeners-selling-fewer-ads-ceo-roger-lynch. Web, 3 Apr. 2018.
Hu, Cherie. "Why Music Streaming's Greatest Hopes Are Spotify's Toughest Challenges" Billboard, 3 Aug. 2018, https://www.billboard.com/articles/business/8231963/spotify-biggest-challenges-music-streaming-greatest-hopes. Web. 3 Apr. 2018.
Third source below, i couldn't add this before because it was over the limit.
ReplyDeleteSanchez, Daniel. "Apple Music, Not Spotify, Ranks as The Most Popular Streaming Service" Digital Music News, 29 Mar 2018, https://www.digitalmusicnews.com/2018/03/29/verto-analytics-study-apple-music-spotify/. Web. 3 April 2018.
As the technology in our culture continues to advance, the way in which consumers purchase, listen, and view music also continues to change. Previously, when an artist released new music consumers had to buy the album in order to listen to it. Now with advancements in online services and mobile devices, streaming music online has become the preferred method for consumers and has also become a multi-billion dollar market. According to Fortune magazine, some of the big producers in the music streaming service include Spotify (global market leader), Apple Music, Good Play Music, SoundCloud, Tidal, and Pandora. These streaming companies make a profit by having either paid subscribers or a “freemium” option for users that displays paid ads. While the number of companies providing streaming services was originally limited, larger corporations are now seeing the success these services can bring and using them as templates to create their own streaming platforms. This does not mean, however, that smaller, international companies are not finding success. In fact, it is quite the opposite. According to Billboard Biz Music, many small companies that offer streaming services are finding long tail success through offering niche music to their users (Bromley).
ReplyDeleteAccording to Bloomberg Businessweek Amazon’s streaming service, Amazon Music, has become a formidable player in the streaming service competition. Amazon Music is unique to the streaming market because it offers a monthly subscription price below the market standard of $10 a month. They also are the second listened to paid subscription service behind Spotify but ahead of Apple Music. With the Amazon brand being so recognizable, Amazon Music has also been able to expand to over 28 countries, thus increasing its consumer base(Ovide). I think that the streaming companies that will have the most success going forward, like Amazon Music, are the ones who not only have both national and international exposure, but also are able to offer a price point for similar services that is below their competitors.
The company that I feel is struggling the most is also one of the first companies to get into the streaming service, Spotify. On average, streaming services take 30% of their earned income for overhead, which does not cover the companies’ costs. In fact, despite their large music database and their large subscriber base, Spotify has reported financial losses over the years (Bromley). This could create issues for their company as new companies emerge that offer the same services as Spotify, but at lower prices. While Spotify is the largest music streaming service available, without future innovation and larger profit margins, their future sustainability may be unclear.
Works Cited
Delete"A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services," Reuters 11 Sept. 2017. Web.
Bromley, Jordan. "The Future of the Streaming Economy: 5 Things to Watch," Billboard 23 Jan. 2018. Web.
Ovide, Shira. “Amazon Music Makes Giant Strides Against Apple and Spotify.”Bloomberg.com, Bloomberg, 11 Dec. 2017, www.bloomberg.com/news/articles/2017-12-11/amazon-music-makes-giant-strides-against-apple-and-spotify.
None of the current business models for streaming services are a sustainable model for the long term. The largest streaming behemoths are not even turning profits as is pointed out by Billboard’s Cherie Hu. In Hu’s article ‘Why Music Streaming’s Greatest Hopes Are Spotify’s Toughest Challenges’ she points out that both Spotify and Pandora have yet to turn a profit, “illuminating the fact that the two companies are the norm, not the exception, when it comes to multibillion-dollar global music streaming corporations struggling to make ends meet. ” Hu argues this is why Spotify can never be the “Netflix of music,”; the costs of paying rights owners of music is where most revenue goes. Right now however music streaming is dominant and consumers will not turn back towards the dark ages of purchasing every record they listen to.
ReplyDeleteThe power of these streaming services in the short term is in the power of the brand. Which service can accumulate the most users? Which service can provide the best total package to consumers? In this sense Spotify will likely be dominant for the near future. Spotify has built up a large user base by using a freemium business model. According to Reuters article, ‘A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services’ Spotify has 60 million paid subscribers and 140 million active users. The next largest user base for a music streaming service is apple music, which has 28 million paid users and does not offer a free model. Spotify offers so many different services to their users such as their entire music catalog, podcasts, playlists, and radio. But, the number one aspect of Spotify that sets it apart from the rest for the near future is the social side of things. Spotify allows for friends to share playlists and to follow one another. The social aspect of the streaming service constantly gives the user something to always come back for. As a paid user of Apple music this is the aspect of streaming I wish was more accessible with my platform of choice.
I think that the streaming services that are in the greatest danger of going extinct are Tidal and Pandora. The service that Pandora offers consumers is available in its entirety on most other streaming services as is. While the exclusive deals Tidal has with artists seem to do little in terms of converting people to paid subscribers. The one time I had Tidal was when Kanye West’s The Life Of Pablo was exclusive to the service, and once the free trial was over I never thought to use the platform again.
Felix Richter points out in his Statista article ‘Will Music Streaming Ever Be Profitable’ the main advantage that Apple Music and Amazon’s music streaming service have over Spotify, Tidal, and Pandora: they don’t need to ever be profitable. Spotify is the Spotify’s business whereas Apple Music is just another reason to join the apple hardware ecosystem and Amazon’s streaming service is a thrown in bonus for Amazon prime users who give the company $100 a year. Richter summarizes this best as he ends his article stating, “Spotify and Pandora don't enjoy the luxury of a profitable billion dollar business supporting their services though, and will at some point need to figure out how to actually make music streaming profitable.”
Hu, C. (2018). Why Music Streaming's Greatest Hopes Are Spotify's Toughest Challenges. [online] Billboard. Available at: https://www.billboard.com/articles/business/8231963/spotify-biggest-challenges-music-streaming-greatest-hopes [Accessed 3 Apr. 2018].
Richter, F. (2018). Infographic: Will Music Streaming Ever Be Profitable?. [online] Statista Infographics. Available at: https://www.statista.com/chart/577/revenue-and-net-loss-of-pandora-and-spotify/ [Accessed 3 Apr. 2018].
Reuters. (2018). A Quick Guide to Apple Music, Spotify, and More Top Music Streaming Services. [online] Available at: http://fortune.com/2017/09/11/spotify-apple-music-tidal-streaming/ [Accessed 3 Apr. 2018].
Apple Music has the most sustainable business model to date, but that has to do with being associated with Apple products, and not with being a superior streaming service. The model that is struggling is Amazon Prime music, but that is because it is not solely a streaming service, it is an add-on with their Prime program.
ReplyDeleteSince Apple is such a large company and their music services are comorbid with all of their products, it is easy to attract an already attentive audience. Spotify is preparing to go public, which will bring in a lot of money for the company, but there will still be little profit for pure streaming companies (scmp.com, 2018).
If being publicly traded proves to be beneficial for the streaming service, then that is an indicator of how successful their business model is. However, if it fails, then the other streaming services continue with their models without fear since they are funded by large companies that don’t rely on music for close to 100% of their profit.
The best business model seems to be: don’t put all of your eggs in one basket. Music may be the leader in harnessing the internet and using it to fix rather than supplement an industry, but it is only one component of a person’s day (Cullins, 2018). An integrative model, similar to Amazon, Google, and Apple, is the only one likely to succeed in a constantly changing digital world.
Competition always ends well for consumers. Promotional deals, more genre variation, and less ads are some of the benefits that Apple can bring. A three-month free subscription to Apple Music can survive because Apple can afford to take a loss in profit on music bought as an exchange for download and streaming numbers (Christman, 2018). Spotify only has its music whereas Apple can sell a new iPhone to meet their bottom line.
Music is challenging because of the deals that have to happen out of the public eye. Facebook made a deal with Universal Music Group to legalize what every teenager was illegally doing on Myspace and putting music to posts and personal pages (Burch, 2017). Most people who use this function aren’t going to turn to Apple Music and stream the song unless they truly like it. This raises ethical problems about taking advantage of new artists. Are they being paid the same in this deal as the would be on Apple Music, or is it going to be an unpopular system like Prime Music?
Prime Music is an add on feature with Amazon Prime. The company isn’t worried about its success as a streaming service, but it is more as a video-on-demand service. It doesn’t take up space on your phone because it is on a cloud, but the service is going to struggle the most in the dense competition of streaming services because only Prime members have access.
Once Spotify goes public it will be easier to tell what is in store for the music industry. If “SPOT” fails in the New York Stock Exchange, then there is no hope for independent streaming services, only large companies like Amazon and Apple that don’t need to rely on one service (Vlessing, 2018).
Works Cited:
DeleteAs Spotifys profits still stagnate, is music streaming dying out? (2018, March 06). Retrieved April 03, 2018, from http://www.scmp.com/culture/music/article/2135689/spotifys-profits-stagnate-music-streaming-dying-out-enjoy-it-while-you
Christman, E. (2018, February 5). Apple Music, Spotify Battle Heats Up Again as Race for US Subscribers Gets Closer. Retrieved April 03, 2018, from https://www.billboard.com/articles/business/8098161/apple-music-spotify-streaming-wars-subscribers-advantage
Cullins, A. (2018, January 27). Music Experts Discuss Why the Internet Is Now Saving the Recording Industry. Retrieved April 03, 2018, from https://www.hollywoodreporter.com/news/music-experts-discuss-why-internet-is-saving-recording-industry-1078058
Vlessing, E. (2018, February 28). Spotify Files for Public Offering. Retrieved April 03, 2018, from https://www.hollywoodreporter.com/news/spotify-files-public-offering-1089394?utm_source=Sailthru&utm_medium=email&utm_campaign=THR's Today in Entertainment_now_2018-03-01 10:10:08_rrahman&utm_term=hollywoodreporter_tie