6 Predictions for Music Streaming

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Forget Taylor Swift’s futile Spotify boycott. The real news emerging from the music industry this week was the launch of YouTube’s streaming service. The new service consists of YouTube with streaming functionality (as opposed to being a new product with a different name, thus benefitting from YouTube’s brand reach). On November 17, YouTube is also launching (in beta form) YouTube Music Key, a paid streaming option offering ad-free online and offline listening for $9.99. YouTube now enters an increasingly crowded streaming industry that ranges from all-purpose services such as Pandora and Spotify to specialty offerings such as Muzooka (which matches emerging artists with both fans and members of the music industry). And YouTube, owned by the world’s most valuable brand, has more power to disrupt the game than anyone. In the aftermath of YouTube’s entry to the streaming field, I predict six possible directions for the streaming business:

1. We will see a shakeout among major streaming platforms. The survivors, faced with fewer competitors, will call the shots on artist compensation even more so than they do today.

2. We may see the emergence of a few more specialty streaming services, such as Muzooka, to act as the intriguing alternatives to big players. For instance, we could see an alternative boutique streaming service by an artist consortia (involving someone like Jay Z, whose brand transcends music). We also may see the launch of private-label services from music-savvy brands such as Pepsi. A house service by an American Express, offered exclusively to its customers, could act as an effective music discovery platform as well as a customer acquisition and retention tool. (Moreover, in a combination of the artist-owned and corporate private label approaches, we could see a a corporate service launched in association with a star like Jay Z acting as investor, brand partner, curator, or any combination of those roles.)

3. The conversation about fair artist compensation that Taylor Swift reignited with her Spotify boycott will subside without effecting any change in artist compensation, just as the debate eventually petered out after Thom Yorke and the Black Keys boycotted Spotify. Another artist may make the topic trend again with a well-publicized boycott, but the conversation will remain contained to pundits who won’t move the needle.

4. The have-not artists — the vast majority of artists who are not superstars — will keep their content on streaming services and continue to be compensated as they are now. Why? Because they lack the choices that Taylor Swift has.

5. Savvy artists will learn how to use streaming as a promotional platform together with other digital platforms. They will rely on their recorded content to support touring, merchandising, song licensing revenue, and co-brands with businesses.

6. Finally, and most importantly: fans will continue to stream music, legally or illegally (as they are doing with Taylor Swift’s new album, 1989). When it comes to music streaming, fans are loyal to songs, not artists. Fans don’t care about boycotts. And fans are no longer willing to risk money on an entire album’s worth of songs from artists they do not know. Fans don’t necessarily take time to write Wall Street Journal editorials about fair compensation or blog posts about the future of streaming. Fans simply shape the future of music with their listening and buying habits. Album sales continue to slide, and Apple’s iTunes business is slumping. As Adele’s manager, Jonathan Dickins, says, “Streaming is the future.” Why? Because fans make it so.

Oh, and here’s one more related prediction you can take to the bank: Taylor Swift will continue to build her empire from touring, brand deals, and merchandising sales. Any revenue lost from boycotting Spotify will have little impact on her success. The release of the album 1989 in 2014 is all about priming the pump for the 1989 World Tour, which kicks off in May 2015 — which is where the real money is going to be made. (Her Red tour, which concluded in 2014, grossed $150 million.) Taylor Swift’s approach to building her career — writing her own songs, creating music that crosses genres, building a fan base through touring, and honoring her fans in person and on social media — is the blueprint for aspiring artists to emulate. And artists will need to include streaming in the process.

What are your predictions?

Apple Pays Dearly for U2’s “Free” Music

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Photo credit: Marcio Jose Sanchez, AP

Let’s get something straight: U2 did not give away its new album, Songs of Innocence. To be sure, if you have iTunes, on September 9 you received a free copy (without asking for it) of Songs of Innocence. But Apple paid U2 an undisclosed amount to distribute copies of U2’s album to as many as 500 million iTunes subscribers — a deal announced on September 9 as part of Apple’s roll-out of the iPhone 6 and Apple Watch. Now, let’s do some math: in 2013, Samsung paid Jay Z $5 million to distribute 1 million copies of Magna Carta Holy Grail. Consider the lucrative sum U2 must be scoring ($30 million according to one estimate). And ponder, if you will, the $100 million marketing campaign the band is getting courtesy of Apple. These old rockers from Ireland have found a way to make a killing off a dying art form.

The distribution deal has created some backlash for both Apple and U2. For instance, music blogger Bob Lefsetz wondered why U2 would choose iTunes as its distribution platform, when more popular (e.g., YouTube) and hip (e.g., Spotify) distribution platforms are available. “They’d have been better off releasing it on YouTube, that’s where the digital generation goes for music,” he wrote. “iTunes is a backwater. It may be the number one sales outlet, but it’s not the number one music platform, not even close.” Plus, the approach of a forced distribution of content on to 500 million iTunes accounts is being viewed by many as obtrusive.

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Photo credit: Peter Neill

On the other hand, what is a rock group supposed to do in order to make money off its music in the digital age? Album sales have reached an all-time low. Getting noticed for your art is harder than ever at a time when music is just background noise for our digital games, advertisements, and movies. Musicians are not making money off streaming services, and YouTube is hardly a sure bet to monetize music. No wonder Kiss frontman Gene Simmons recently declared that “rock is finally dead.”

Yes, dropping content into our iTunes account without our permission is a controversial move. But the approach is fresh and new, and the old ways are not working anymore in the music industry. The relationship with Apple has given U2 two precious assets: money and attention. By participating in the most important and high-profile day in Tim Cook’s history as Apple’s CEO, U2 has turned an album launch into a global event. Tell me: who else can do that? The $100 million marketing campaign will keep the album in the public eye in the run-up to Universal’s official release of Songs of Innocence October 13 — and, more importantly, will serve as advance notice for the inevitable tour.

And you can be sure a tour is coming. Because that’s why albums still matter: as a launching pad for other revenue streams, such as tours and merchandising deals. U2’s last tour raked in $736 million from 2009-2011. U2 just primed the pump for what comes next.

Update, 22 September 2014: since I wrote this post, the backlash against Apple and U2 that I mentioned has intensified, obviously. As Adweek reported, social media sentiment dropped for U2 by 41 percent in the wake of the deal. My take: years from now, the U2/Apple (and similar Jay Z/Samsung album drop from 2013) will be viewed as flawed but necessary experiments in monetizing music, and others will improve upon those approaches.

Apple Buys Beats: The End of an Era for Apple and Dr. Dre?

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Now that Apple has officially purchased Beats Music and Beats Electronics, we are left to ponder its broader meanings as the man who once rapped about gangbanging and reefer now becomes a high-profile Apple employee. I believe the deal symbolizes the possible end of an era: an end to Apple as an innovative brand, and a farewell to Dr. Dre as a music maker.

The Deal

As reported widely, Apple officially acquired music service Beats Music and Beats Electronics (which makes Beats headphones, speakers and audio software) for a total purchase price of $2.6 billion. As part of the deal, Beats co-founders Jimmy Iovine and Dr. Dre have joined Apple to take on unspecified roles.

The acquisition is widely viewed as Apple playing catch-up to streaming services such as Spotify and Pandora. Apple’s own press release stressed the importance of Beats Music. As a sign of respect for the Beats brand (and lack of belief in its own), Apple will keep the subscription Beats Music intact, alongside Apple’s own iTunes Radio. Beats Music has hardly taken the world by storm as a streaming competitor to Spotify and Pandora since being launched in January 2014. But Apple Insider reports that the service has a strong conversion rate, with the vast majority of tracks being streamed by paying customers. Meantime, iTunes, which relies on a download model, has seen its sales slump as consumers latch on to streaming services. iTunes Radio, Apple’s answer to streaming, has yet to take hold.

Apple Buys into Innovation

When I first heard the rumors of Apple buying Beats weeks ago, I remembered back in 2011 Farhad Manjoo of Fast Company touting Amazon, Apple, Facebook, and Google as the four economic titans fueling the “great tech war,” pitted against each other in a “battle for the future of the digital economy.” Apple emerged as the clear favorite of consumer innovation, reeling off one game-changing product after another. Facebook? Well, Mark Zuckerberg was riding the momentum of a business built off one compelling idea, that as naturally social creatures, human beings would flock to a digital place where we could emulate our offline social behaviors online. But on top of the core innovation of launching Facebook, Zuckerberg’s massive wealth, and Facebook’s phenomenal growth, was built off pedestrian advertising programs and ongoing tweaks to the core product as opposed to anything newsworthy (unless by “newsworthy” we want to count noticeable gaffes such as Beacon).

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Why We Can’t Stop Talking about Steve Jobs

Apple CEO Steve Jobs introduces the new mini iPod in San Francisco in 2004

If Steve Jobs were alive today, he would be the first to tell you he was not the only person responsible for making Apple succeed. But let’s face it: Steve Jobs defined the Apple brand, a reality that has been underscored lately by grumbling among the pundits that Apple is in danger of losing its swagger and cool (examples here and here). Maybe Jobs defined Apple too well. But the reason we can’t stop talking about him today is that he transcended the Apple brand and did more than sell products. He was a market maker. I recently introduced the term market maker to describe business people who act like artists and change the world with their personal visions. Successful marketers sell things; but market makers inspire people to act, to believe, and to live their lives differently. Jobs is one of four market makers, including Ahmet Ertegun, Anita Roddick, and Guy Kawasaki, whom I profile in my recently published white paper, How to Be a Market Maker.  Jobs influenced entire industries, ranging from consumer products to music. But is he so extraordinary that everyday people cannot relate to his achievements? I think not. I believe we can adopt a little of Steve Jobs at his best by living our lives with passion no matter what we do.

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Steve Jobs is the kind of market maker we might call a creator. Creators are directly involved in the development of products and services for a company. Creators have a vision for how the world should work and are bold enough to impose that vision on those around them through the products and services they develop.

By now Jobs’s life is so well known it plays like the plot of a movie we’ve all seen hundreds of times (and, of course, we’ll soon be able to see a real movie about him): his explosive early years at Apple, when his company introduced a new vision for fusing design, user experience, and computing; the exile from Apple, when he founded the revolutionary Pixar Animation; and his glorious second act as CEO of Apple, when the company completely disrupted industries ranging from music to telecommunications by introducing wave upon wave of innovative mobile devices that changed how we consume content.

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Throughout his storied career, Jobs, more than anyone, humanized technology. So great was his impact on popular culture, that upon his death, his image graced the covers of publications ranging from The New Yorker to Rolling Stone. Macs came along when personal computers were widely perceived as the province of a nerdy few. Apple did something that still seems astounding: turned an impersonal computing device into something warm and desirable.(My family still owns our clamshell iMac from the late 1990s — even though we don’t use it anymore, we just love having it around because with its sleek cover and aqua green finish, it looks like a piece of art.)

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With the iPad, Apple essentially made a computing device a natural extension of our sense of touch. The iPhone transformed the mobile phone from a boring utility to a playful toy that we can’t do without. In fact, half of all Americans now say we sleep next to our mobile phones.

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And of course Apple helped disrupt the entire music industry through iTunes and the iPod — liberating music from the limits of analog and empowering consumers to make music part of their mobile lifestyles. As Randy Lewis of the Los Angeles Times wrote, “With Apple’s iTunes and iPod, [Steve Jobs] revived the single, put music libraries in fans’ pockets and posed a challenge to brick-and-mortar record stores and radio.” Record companies, betting on the long-term success of the compact disc, failed to respond to how Apple was helping to turn consumers from album aficionados to snackers of individual digital downloads. The music industry is still trying to catch up.

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Jobs’s legacy at Apple is so astonishing that it’s easy to overlook what he accomplished by founding and developing Pixar. Pixar would eventually do far more than create high-quality blockbuster entertainment. Pixar changed movie making. Pixar movies taught Hollywood how to gracefully fuse technology, humanity, and storytelling. The Pixar team created movies that somehow turned animated objects like toy cowboys into fully realized characters injected with humanity.

Pixar-Characters

In doing so, Pixar made it cool for anyone to enjoy a family film: single gay male urbanites, suburban parents, children, teens too self-consciously hip for Bambi — to name but a few demographics. Pixar has touched. Pixar launched animated movies that children can enjoy again as fully-grown adults — and that adults can enjoy for the first time without children in tow. By contrast, even Disney classics like Snow White and Pinocchio are forever remembered as animated family movies that children appreciate the most.

As Brent Schlender wrote in a Fast Company recollection of Steve Jobs, Pixar upended the entire business model of animation. Although Jobs’ contributions to Pixar were more financial than creative, the company succeeded because Jobs recognized that at its core, Pixar is a content company, not a creator of computer animation.

Steve Jobs best exemplifies a trait common to all market marketers: a burning passion. Steve Jobs “put passion into products,” noted James B. Stewart in one of the many heart-felt tributes to Jobs written in the aftermath of his death in 2011. In his acclaimed biography, Steve Jobs, Walter Isaacson describes the moment when unveiled iTunes to jazz trumpeter Wynton Marsalis, who turned out to be an indifferent audience:

“Watch what it can do!” Jobs kept insisting when Marsalis’s attention would wander. “See how the interface works.” Marsalis later recalled, “I don’t care much about computers, and kept telling him so, but he goes on for two hours. He was a man possessed. After a while, I started looking at him and not the computer, because I was so fascinated with his passion.”

Isaacson also recounts the time Jobs decided to make a major overhaul to the design of the iPhone as the project neared completion, telling designer Jonathan Ive that “‘I didn’t sleep last night because I realized that I just don’t love it’ . . . Ive, to his dismay, instantly realized Jobs was right.”

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In fact, Jobs expressed his passion for design in every aspect of his life. He personally supervised the construction of an old-fashioned brick factory-style building for Pixar, and according to Brent Schlender, if the colors of the custom-made bricks were not distributed evenly enough, Jobs made the bricklayers tear apart the bricks and start over. (But those exacting standards also had a down side. When people failed to live up to what he wanted, he could be brutal and insufferable, as you can read in Ben Austin’s Wired August 2012 cover piece, “Do You Really Want to Be Like Steve Jobs?”)

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All the market makers profiled in this white paper demonstrate passion.

Anita Roddick, founder of the Body Shop, was passionate about human rights, and, in particular, women’s rights. The entire premise behind the Body Shop was selling cosmetics without sexism and eschewing the cult of youth. Guy Kawasaki is passionate about injecting enchanting values and practices in the work place — and if you’ve ever worked with him, you know he has an equally strong zeal for clear, simple communication. Ahmet Ertegun, co-founder of Atlantic Records, was so passionate about music that he sometimes lived in the studio with the artists on his label.

It doesn’t matter whether you work for a pet food store or write for a living: you can be a market maker by acting with passion.

Old bands, great brands shine in 2010

There seems to be no end to the merchandising of so-called legacy rock stars, and 2010 was no exception:

  • Elder rockers ranging from Robert Plant to Roger Waters made headlines with new music (in Plant’s case) and an updating of a rock classic via a stunning tour (Waters).

As I’ve blogged before, legacy rockers (sometimes from the grave) provide a relatively young art form (rock) the gift of perspective as they come to terms with their past and chart a course for the future. What did they say about themselves in 2010? Here’s my take:

  • “The king is dead. Long live the king.” God bless Robert Plant. After re-uniting with three quarters of Led Zeppelin to perform at London’s O2 arena in 2007, Plant endured tremendous pressure to tour again with his old band mates under the Led Zeppelin banner. But Plant would have none of that. Instead in 2008 he toured with Alison Krauss to promote their celebrated Raising Sand. In 2010, Plant continued to firmly keep Led Zeppelin in his rear-view mirror by releasing his latest solo album, Band of Joy (the name is a reference to one of his bands prior to Zeppelin). Anyone hoping for a Zeppelin reincarnation was disappointed. He chose a quirky mix of Americana covers spanning folk and rock (recorded with lesser known musicians) and embarked on a modest tour in places like the Robinson Center Music Hall in Little Rock, Arkansas. He was rewarded with some of the best reviews of his career.

  • “Remember us.” The Beatles, Bob Dylan, Elvis, and the Rolling Stones kept their names in the public eye without releasing any new music. Amid much hoopla, including a weeklong celebration on Late Night with Jimmy Fallon, the Rolling Stones unveiled the remastered Exile on Main St. Months later, Keith Richards, surprising fans with a still-intact and lucid memory, published his 565-page autobiography, Life. In August, Elvis Presley’s entire catalog was released via a massive 30-CD box set retailing for more than $700 — and in an era in which CDs are supposed to be dead, the first-edition limited release sold out. In October, Sony released mono CD editions of Bob Dylan’s seminal recordings from the 1960s (the box set included a thoughtful essay by noted rock historian Greil Marcus). I think that Dylan, the Stones, and the caretakers of Elvis’s brand essentially were re-establishing their places in history for newer generations of rock critics (and it sounds like John Jurgensen at The Wall Street Journal wasn’t convinced). None of them technically released new material (the previously unreleased Exile tracks date back to the making of the original album). Instead, they continued to keep their past achievements relevant (even to the point of the Stones successfully licensing “Gimme Shelter” for use in a video game). I think it’s also significant that the Beatles finally made their music available digitally through iTunes. I don’t think the move was about generating sales (although sales did result) but rather passing the band’s legacy down to digital generations both today and tomorrow.

  • “I am an artist!” It’s no secret that Roger Waters and his ex-Pink Floyd band mates have fought bitterly over who is the rightful owner of the Pink Floyd legacy. In 2010, Waters made a statement in the best way possible: performing the 1979 Pink Floyd classic The Wall as a high-concept solo tour, replete with the construction of a giant wall in the elaborate stage act (as Pink Floyd with Waters did via a limited series of concerts decades ago). So how was The Wall tour different from the re-release of Exile on Main St.? Because Waters re-interpreted and updated the music he wrote in the 1970s as a modern-day statement against corporate greed and bellicose governments (the U.S. war in Iraq among the topics he explored with the modern-day performance of his songs). And having attended one of The Wall concerts, I think he suceeded.

In 2010, we also heard from many other legacy rockers, including Bruce Springsteen, Jimi Hendrix, and later, in the year, the king of pop, Michael Jackson. I expect 2011 to bring more of the same. And I have mixed feelings about what’s happening here. I think we should give the giants of rock history their due just as newer generations of readers should continue to buy books by Hemingway or pay admission to see the works of Picasso. But for every dollar we spend honoring the gods, rock fans need to be supporting new music financially. How many new and emerging artists have you supported lately by actually paying money to enjoy their music (whether recorded or in concert)?

I hope you’ll make a commitment in 2011 to both the old guard and the vanguard.

By the way, which one’s Pink?

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You don’t have to be a classic rock fan to celebrate Pink Floyd’s recent legal victory over its label, the troubled EMI.  For those who missed the news, a judge agreed with Pink Floyd that EMI may not distribute the band’s songs as individual tracks (as it has been doing on popular outlets like iTunes) but as part of complete albums only.  As a band spokesperson put it, “This is an art debate, not a commerce debate.”

Well, I’m not so sure I agree completely.

On the one hand, as an unabashed Pink Floyd fan, I am glad that a judge upheld the integrity of the band’s work.  Pink Floyd’s music is meant to be experienced in album form.  The band helped establish art rock in the 1970s, with albums like The Dark Side of the Moon becoming masterpieces, thematically and sonically.  Songs like “Us and Them” from The Dark Side of the Moon or “Comfortably Numb” from The Wall are meant to be heard like chapters from a book.  Taken out of context as singles, the songs sound powerful, but their meaning is diminished.

Moreover, listeners of digital content compromise the quality of the band’s work.  By their nature, digital downloads suffer from sound distortion and degradation in order to make musical files portable. Sound distortion can occur with compact discs, but more so with digital downloads, as Rolling Stone reported in 2007.  I suppose distortion isn’t a tragedy if you’re listening to “My Sharona,” but “Hey You” is another matter.  So I hope publicity around the Floyd/EMI flap inspires child of the digital age to discover the Floyd on vinyl or CD.

But on the other hand, how many consumers really care about the album as an art form — and how many artists can afford to do so?  By now recorded music has become so commoditized that any band hoping to succeed today has to look at touring, merchandising, and licensing for legitimate revenue streams, with the recorded product used to simply raise awareness for the musician.  Moby has famously licensed many of his songs to musical soundtracks — a shrewd business move that at the same time has made him a singles act.  Can you blame him?

And lest we forget, in 2001, Pink Floyd itself cooperated in the release of its songs as individual tracks on an anthology, Echoes: The Best of Pink Floyd.  To be sure, producer James Guthrie took great care to present the songs thoughtfully, even providing a surprise: a new mix of “Shine on You Crazy Diamond” that blending Parts 1 and 7, which appear separately on Wish You Were Here.  But a singles collection it was.

I don’t think Pink Floyd is guilty of hypocrisy.  Rather I think the legal victory over EMI is a matter of artistic control from the band’s standpoint — and artistic integrity from the fan’s standpoint.   In that sense, I think the Floyd has scored an even bigger victory especially for lesser known bands.  Integrity is a matter of interpretation and debate between an artist and its fans.  But for the debate to even happen, control of the content must reside with the artist.

Your thoughts?

What Facebook Connect means to marketers

My Razorfish colleagues Shiv Singh and Jesse Pickard just published a provocative point of view that analyzes the impact of Facebook Connect on the way marketers operate in the digital world.

Shiv and Jesse assert that by extending social media more aggressively to the digital world outside of Facebook, Facebook Connect (and other portable social graphs) will transform how consumers interact with digital technology and each other.

They contend that a new breed of websites is emerging — sites that contain an unheard of amount of information about consumers as well as the ability to integrate more seamlessly wth FacebookS. Shiv and Jesse discuss some interesting “what-if” scenarios to show how Facebook Connect could change Amazon, iTunes, and the iPhone.

This point of view dovetails nicely with an essay published by Marisa Gallagher of Razorfish, “Designing Experiences for the Facebook Generation.” Marisa argues that “social networking is evolving and morphing. It’s now about making the entire Web social intead of just creating a ghetto of destination sites where people have to go to socialize.” She discusses how retailers and even search engines are embedding social media into their everyday experience.

Here’s where you can learn more about the points of view published by Shiv, Jesse, and Marisa:

I’d love your feedback . . . do you agree or disagree?