Beware false narratives. A false narrative is an unsubstantiated conclusion that snowballs (usually online). There might be kernels of truth in the narrative, but the viral nature of a false narrative makes the facts irrelevant. Case in point: Spotify’s financial performance.
During the week of January 24, Spotify’s stock value dropped amid the #BoycottSpotify backlash that happened after musician Neil Young demanded to have his music removed from Spotify because Spotify hosted Joe Rogan’s controversial podcast. A narrative rapidly spread that the controversy was hurting Spotify’s stock. But it was a false narrative.
In fact, Spotify’s stock price had been dropping 45% year over year amid disappointing quarterly results. What happened the week of January 24 was not exactly an aberration. It was also difficult to untangle Spotify’s declining stock price from factors such as an overall market cooling off, political instability abroad (e.g., the Ukraine/Russia crisis), economic uncertainty in the United States (e.g., inflation), and the ripple effect of Netflix’s gloomy forecast in its own disappointing quarterly earnings (Netflix is a bellwether for digital-first stocks).
The questionable nature of the “Neil Young crushed Spotify’s stock” narrative that proliferated among news media was underscored when the value of Spotify’s stock soared on January 31 — only to plummet again on February 2.
So what happened on January 31 and February 2?
Well, on January 31, an analyst issued a bullish analyst rating on the company. And we also possibly witnessed opportunistic investors “buying the dip” following the previous week’s stock plunge. But then on February 2, Spotify reported another quarter of underwhelming financial results, leading to another big drop in the company’s performance.
I’m not ignoring the potential for the Neil Young Joe/Rogan controversy to affect Spotify’s stock price, too. Hey, the controversy could be a factor. But we just don’t know to what extent the matter has played a role due to the other factors cited above. I suspect the false narrative with Spotify happened for a few reasons:
It is a compelling story. David versus Goliath. The hippie versus the evil corporation. The truth seeker versus the spreader of false information.
It is a negative story. People love to pile on when they see someone stumble and when stocks tumble.
Digital, well . . . digital spreads narratives like brushfire. All takes is one retweet to keep the narrative snowballing.
Spotify hasn’t commented on the potential impact of #BoycottSpotify. We don’t know, for example, how many people who use Spotify for free simply deleted the app (versus paid subscribers fleeing, which would be more serious). From a financial standpoint, we may not get any fact-based insight from Spotify for another quarter yet. Sometimes it takes time for the to facts to emerge.
One narrative you can be sure of: quarterly earnings move stock prices. It’s why disclosure rules exist.
When your brand takes a stand, brace for impact. Case in point: Neil Young versus Spotify.
Neil Young is both an artist (whose work I admire and listen to often) and a multimillion-dollar brand. At age 78, he keeps cranking out new music and taking care of business. He was the 11th-highest paid musician in 2021, pulling down $78 million as a result of selling half his song catalog to Hipgnosis. He’s built a loyal following through his music and a personal brand that embodies the hippie idealism and social consciousness of the 1960s. So when, on January 24, he criticized Spotify for hosting the controversial podcast The Joe Rogan Experience, no one who knows what Neil Young stands for was surprised. The Joe Rogan Experience has been accused of spreading misinformation about the coronavirus and vaccines. Young angrily demanded that his record label and management team take Young’s music off Spotify unless Spotify dropped Joe Rogan’s content.
“They can have [Joe] Rogan or Young,” he wrote in an open letter on his website (which he later deleted). “Not both. I am doing this because Spotify is spreading fake information about vaccines — potentially causing death to those who believe the disinformation being spread by them. Please act on this immediately today and keep me informed of the time schedule.”
By January 26, Spotify responded by dropping Neil Young’s music and keeping Joe Rogan’s podcast.
Young, who had more than 6 million monthly Spotify listeners, was hailed as a hero and brave tilter of windmills for taking a stand although he was also accused of being a censorious person. Spotify was cast as a villain for siding with Rogan, whose December interview with vaccine skeptic Dr. Robert Malone had been condemned widely by physicians. #DeleteSpotify began trending as customers (we don’t know how many) ditched Spotify.
Spotify’s stock price tumbled, too. The decline was widely attributed to the Neil Young controversy even though the cause-effect wasn’t as clearcut as the popular narrative would have us believe. In fact, Spotify’s stock price had lost 45 percent of its value over the past year amid a general market pullback, disappointing financial results, a slowdown in subscriber growth, and a declining market share. It was certainly possible that skittish investors were selling their Spotify stock for fear of a boycott and the possibility that other musicians would make similar demands. It was also certainly possible that Spotify’s stock was affected by a January slump across the tech sector, political instability in the Ukraine, and a ripple effect caused by Netflix’s disappointing earnings report.
Two notable musicians followed Neil Young’s lead, including the beloved Joni Mitchell and guitarist Nils Lofgren. Both said they wanted their music removed from Spotify in solidarity with Young.
And then things got complicated.
On January 28, Neil Young posted a public letter in which he doubled down on his stance on Joe Rogan and curiously reintroduced a longstanding beef he has had with how streaming services degradate sound quality of music. The letter was a confusing and poorly written diatribe that seemingly elevated sound fidelity in the digital age to the same level of importance as free speech.
He wrote, “AMAZON, APPLE MUSIC and Quobuz deliver up to 100% of the music today and it sounds a lot better than the s — — y degraded and neutered sound of SPOTIFY . . . AMAZON, APPLE MUSIC and Quobuz now deliver the real thing. SPOTIFY is ripping you off and has been since day 1. Switch to one of the alternatives — companies that support the arts. Real sound is available there. AMAZON, APPLE Music and Quobuz. You just have to leave Spotify and go to a new place that truly cares about music quality.”
That Young would complain about the sound degradation was entirely consistent with his brand. He has been raging against the evils of digital sound for years, taking all streaming services (not just Spotify) to task in the process.
But the January 28 letter diluted his message and made him come across as an out-of-touch elitist. Most people who stream music don’t care about the compression of sound on Spotify. It’s not a hill they’re going to die on. Young also buried the lead — a passionate articulation of his position on free speech — at the end of the note. There would be no #DeleteSpotify if he had come out of the gate with the letter, shown below:
The letter was also noteworthy for what it omitted: the ongoing controversy about how little Spotify compensates musicians who earn far less than Young does. It seemed like a natural issue for firebrand Young to tackle, and it’s one that has been in the public eye for quite some time. Now was the time for him to elevate the issue. But he was surprisingly silent on the matter.
Things got even more interesting on January 31 when he announced an apparent partnership with Amazon Music. “All folks looking for my music can easily head to AMAZON MUSIC and click here https://bit.ly/NYA_AmazonMusic” he tweeted. “all new listeners will get four months free.”
The announcement was greeted with some skepticism. Wren Graves of Consequence of Sound wrote:
Young is fighting the battle that he thinks is most important. He seems to be winning, too; Spotify has added “content advisories” on COVID-19 content, and on Sunday, Rogan posted a video responding to the controversy, pledging to “balance things out” and “research topics.” But if Young’s fans and Spotify’s detractors want to accomplish more than that, even as the platform pushes ever lower payout rates, we’ll have to do it ourselves.
And social media dunked on him, too, as some of these tweets demonstrate:
But Neil Young Inc. is a brand, too. He has a business to run, and being a multimillionaire in the music industry has meant making trade-offs: like no longer owning all his music. Selling half his catalog to Hipgnosis meant giving up total control over his music. And because technically he does not call the shots on where his music can be streamed, anyway (he needed to work with his record label to demand that his music be taken down from Spotify), it is unlikely that he could take his music off streaming completely and, say, distribute it all on his website even if he wanted to do so. He was going to need to make a deal with another streaming platform. He must have known that all along based on the conciliatory nature of his January 28 letter in which he cozied up to Spotify’s rivals seven years after condeming all streaming services when he tried to take down his music from multiple platforms (a move he rescinded).
Meanwhile, on January 30, Spotify CEO Daniel Ek vowed that the company would become more transparent about its content guidelines although he did not address Joe Rogan specifically. “We haven’t been transparent around the policies that guide our content more broadly,” he wrote in a blog post Sunday. “It’s become clear to me that we have an obligation to do more to provide balance and access to widely accepted information from the medical and scientific communities guiding us through this unprecedented time.”
As for Joe Rogan, he posted an Instagram video pledging to be more balanced and informed about controversial topics and guests. “If I pissed you off, I’m sorry,” he said. ““It’s a strange responsibility to have this many viewers and listeners,” he said. “It’s nothing that I’ve prepared for. I’m going to do my best to balance things out.”
The next day, January 31, Spotify’s beleaguered stock roared back, more than recovering its losses from the previous week.
Was this rebound a result of Spotify publishing a policy and Joe Rogan speaking out? Not likely. In fact, the rebound happened after an analyst issued a bullish report saying that Spotify stock is undervalued and worthy of investment. In any event, the “Neil Young dragon slayer” narrative was losing its luster given Spotify’s strong rebound.
I see three lessons learned here:
Beware runaway narratives. The runaway narrative here was that Neil Young was unleashing hell on Spotify’s stock value.
Taking a stand is never easy. Neil Young chose to focus on a podcaster accused of spreading misinformation, an understandable stance as the world remains in the grip of the COVID-19 pandemic. He has done so imperfectly and set himself up for criticism. Any brand that takes a stand needs to assess the risks, prepare for blowback, and stand firm unless new information comes to light that would affect their stance. To his credit, Neil Young has stuck by his guns.
Someone always benefits from controversy. Neil Young has emerged a winner. His public visibility has skyrocketed, and his songs have a new home on Amazon Music. Joe Rogan is also enjoying increased visibility; but I hesitate to say he has emerged as a winner yet. Let’s see what happens to his subscribership and support from Spotify, especially as the glare of the spotlight draws attention to comments he has made about race.
Spotify is also winning — for today. But the longer-term challenges that have caused the company’s stock to decline remain.
How about Joni Mitchell and Nils Lofgren? They’ve stood in solidarity with Neil Young, but will their music also find a home?
Neil Young will keep rebelling and biting the hand that feeds him. The truth of the matter is that for years, he’s exposed himself to criticism by taking a public stand on social issues. He sticks by his guns. He does not apologize for his actions. In that sense, the Neil Young brand possesses an important attribute: consistency. You may not agree with him, but you know what’s coming.
Two leading voices of their generation, Neil Young and Joni Mitchell, are leaving Spotify because the streaming service hosts controversial podcaster Joe Rogan. On January 26, Spotify took down Young’s music after he issued an “either Rogan goes, or I go” ultimatum regarding Spotify’s most popular podcast “The Joe Rogan Experience.” The podcast has been accused of spreading misinformation about the coronavirus and vaccines.
Mitchell, a kindred spirit of Young whose roots with the rocker go back decades, then posted the following statement on January 28: “I’ve decided to remove all my music from Spotify. Irresponsible people are spreading lies that are costing people their lives. I stand in solidarity with Neil Young and the global scientific and medical communities on this issue.”
It is premature to conclude that dropping Neil Young and Joni Mitchell is hurting Spotify’s bottom line. Between them, their monthly listeners total 9.8 million (6.1 million for Young and 3.7 million for Mitchell) — a sizable number, but nowhere near the 47 million+ monthly listeners that Spotify’s Top 20 artists have as of January 2022. And it remains to be seen how many listeners will #boycottSpotify. My guess is that the boycott will have less impact on among the coveted Millennial and Gen Z listeners, who care more about the Weeknd and Dua Lopa than Neil Young and Joni Mitchell. The super users will be reluctant to delete their carefully curated playlists, too.
To be sure, rivals such as Apple Music are going to benefit by luring disenfranchised listeners, which Apple is currently doing by cleverly stepping up the promotion of its Neil Young catalog (and most certainly its Joni Mitchell library now).
Now, what would happen if Gen Z and Millennial friendly artists pulled their music? Like The Weeknd, the most popular artist on Spotify with 86.3 million monthly listeners? Or Taylor Swift, with 53.8 million monthly listeners – and plenty of clout in the music industry? Keep an eye on these heavy hitters. If they stand up to Spotify (as Top 5 artist Adele has done twice throughout her career for other reasons), then Neil Young will have sparked a fire.
Spotify’s biggest threat consists of a stock price that has lost 45 percent of its value over the past year amid a general market pullback, disappointing financial results, a slowdown in subscriber growth, and a declining marketshare. The company’s stock price dropped the week of l’affaire Neil Young, but I am always cautious about attaching a stock price fluctuation to a single event. On any given day, many factors influence a stock price, including forces outside the control of a business, such as the larger market slowdown occurring in January amid inflation and the Ukraine/Russia crisis. I put little credence in news media stories assigning immediate cause and effect. If we are going to conclude that the Neil Young/Joe Rogan controversy caused Spotify’s stock price to drop, then what are we to make of the fact that the company’s stock began to climb in after-hours trading after Joni Mitchell made her announcement? We do not yet know the long-term impact of what is happening. For now, Spotify has a growing PR battle on its hands going into its February 3 earnings announcement.
And for Neil Young, who sparked the firestorm? His next move appears to be to expand his argument. On January 29, he posted an update in which he doubled down on his stance on Joe Rogan and then re-introduced a longstanding beef he has had with the sound degradation on streaming services. Here is his letter:
I believe Neil Young risks overplaying his hand. He has been complaining about digital sound quality for years, and frankly most of the world does not care. He risks diluting his original message and coming across as an out-of-touch elitist. The above letter is a case in point. He literally buried the lead — a passionate articulation of his position on free speech — at the end of a convoluted, poorly written diatribe about sound fidelity. Also, in his letter, he praises Apple Music’s sound fidelity, and a casual Google search shows that he has taken shots at Apple Music, too, which now creates a distracting question about why Apple Music is now acceptable — thus detracting from his original position. Put it this way: there would be no #DeleteSpotify if he had come out of the gate with the above letter. If Neil Young wants to expand his argument, how about taking on Spotify’s notoriously poor compensation of artists?
As the world knows, Adele recently unleashed her new album, 30, amid the fanfare and fan love that we are accustomed to seeing whenever she records new music. Adele is an artist who understands the power of big moments to create awareness and to build loyalty. She also cares about how her music is shared and sold — which is why she has clashed with streaming services over the years. For instance, in 2015, she initially restricted her album25 from Apple Music and Spotify because she believed that they devalue music by giving too much of it away for free. This time around, she’s taken Spotify to task for how it serves up albums to listeners through random shuffle play. And she has enacted a change that will benefit artist and fans.
Adele’s Victory Explained
For some time, when we listen to albums on Spotify, the app has defaulted to playing the entire album on auto shuffle. This means that Spotify has prompted listeners to experience songs in some random order dictated by Spotify instead of people listening to songs in the sequence that the artist intended. Well, until Adele put her foot down.
She tweeted that she has convinced Spotify to disable the default auto shuffle mode. Going forward, an album can still be played on shuffle mode if a listener chooses that. But Spotify will default to playing an album in its intended order of songs.
She tweeted, “We don’t create albums with so much care and thought into our track listing for no reason. Our art tells a story and our stories should be listened to as we intended.”
Now that’s what I call leverage. One artist enacts a change that will affect all artists.
Why Adele’s Victory Matters
So, why does all this matter? When I shared an article about the demise of default auto shuffle on Facebook, my post inspired several comments. They fell into two camps:
1 It’s high time that Spotify respects musicians and fans.
One of my Facebook friends put it best, “Spotify strongly discourages users from listening to albums: its absurd, mystifying UX design makes that very clear. The service wants me to shuffle and graze an infinite playlist, and I refuse to do that, for the same reason I won’t read a single chapter of a novel or memoir and then set it aside to read another chapter by another writer with similar background or influences. I listen to music the way Adele makes and releases it.”
Here’s another representative comment: “GOOD. I hate spotify for that very reason. Artists create their albums in a certain way for a reason.”
2 Music listeners really don’t care.
On the other hand, I noticed a number of comments asking whether music listeners will even notice or care about Spotify presenting albums in their original order of songs the way artists intend.
One writer commented that people who actually listen to albums from start to finish are a vanishing breed. “ . . . our style of listening is disappearing, as surely as 8-track tape,” wrote one Facebook friend who grew up in the era of album-oriented music.
Another commented, “Modern and younger listeners are single-driven and the current pop scene generates singles and assembles album listing order aesthetically, with no underlying theme or concept. It is almost non-existent to have a concept record. Last popular one that comes to mind is Green Day’s American Idiot record.”
My take: Adele’s victory over Spotify matters. Here’s why:
Human beings matter more than algorithms. A machine no longer decides for you. A human being does. That’s a victory for humanity in my book.
Music listeners and artists win. Yeah, we like to remix music. Customized playlists are fun! In fact, music listeners have been making their own mixes since the days of cassette tapes. But it’s important that listeners have a choice by having access to the original source material recorded and shared the way the artist intended rather than have an app choose for them. Adele did something right for the listener. She restored the integrity of the artist/fan relationship.
”Singles first” is neither new nor permanent. It’s true that today listeners are conditioned to consume music in bite-sized morsels while we go about our days exercising, working, and playing — which means we gravitate toward singles. But this behavior is not new. People consumed music mostly through singles decades ago until artists such as Bob Dylan and the Beatles ushered in a new era of album-oriented music, aided by the popularity of FM radio. But the resurgence of vinyl record sales underscores the reality that people do care about listening to albums. The point is that Spotify needs to allow listeners to adapt their preferences to their lifestyles, and that’s what Adele is forcing Spotify to do.
There are times when artists respond to fans. There are times when artists lead fans. Adele is leading through her actions.
The glory years for the record album are over, but the record album isn’t dead yet. In the age of streaming, it actually might benefit artists to release long albums consisting of multiple tracks, as the success of Drake’s Scorpion demonstrates.
Drake released Scorpion on streaming services on June 29, and a compact disc released followed July 13. The CD is inconsequential. The real barometer of Scorpion’s success consists of streams. Within two weeks, Scorpion sold more than one million copies based on streams (per Billboard, 1,500 on-demand streams equals one LP).
Incredibly, all 25 of the album’s tracks hit the Billboard Hot 100 charts. As Rolling Stone explained, the long-form format of Scorpion– clocking in at one hour and 30 minutes – was crucial to the album’s success:
Drake’s supremacy on the Hot 100 was made easier by the popularity of music streaming. Because streaming services like Spotify and Apple Music charge a buffet-style monthly fee to listen to music rather than a per-song price à la iTunes downloads, long albums benefit artists by giving them more chances to rack up listens. Drake also partnered with Spotify for an all-out “takeover” of the platform in the days after his album dropped, which forced tens of millions of users to encounter his album. (They weren’t required to actually stream it – but the all-you-can-listen model of streaming services made it appealing and cost-free to do so, and the real estate on their homepage contributed to the average listener’s awareness Scorpion.)
Drake is not the only artist to capitalize on the vagaries of streaming. As Rolling Stone reported earlier this year, Migos released an album, Culture II, that clocked in at a whopping one hour and 46 minutes. Culture II debuted at Number One on the Billboard album chart. Culture II was eventually certified Platinum by the Recording Industry Association of America (RIAA) for combined sales, streaming and track-sales equivalent of a million units.
Because an album’s sales via streaming are measured by 1,500 cumulative streams, it behooves an artist to release a longer album with more tracks to stream, which can lead to Gold and Platinum status. These accomplishments still matter as a barometer of an artist’s marketability to corporate sponsors.
But releasing lengthy albums to encourage streams comes at a cost. Listeners have short attention spans in the streaming era. Reportedly, one quarter of all songs on Spotify are skipped within the first five seconds. The typical listener skips a song once every four minutes, and there is nearly a 50 percent chance that a song will be skipped before it ends. In addition, according to Midia, “58% of subscribers report listening to individual albums and tracks just a few times while 60% are doing this more than they used to because they are discovering so much new music.” Continue reading →
Being a Netflix investor (which I am) is not for the faint of heart. Within the space of a few days recently, Netflix stock reached an all-time high, then fell off a cliff after Netflix reported disappointing quarterly earnings, only to rebound in stunning fashion the following day, before dipping the day after. The wildly gyrating stock price certainly makes for dramatic headlines. But the real legacy of the company is not its market capitalization but its ability to change human behavior.
Netflix CEO Reed Hastings is a market maker. Market makers do more than make money. They shape behaviors of people and companies. Netflix is undeniably shaping how people live going back to its founding in 1997. Along with Amazon, Netflix ushered in the era of on-demand living. If Amazon made it possible for people to buy things on their own terms, Netflix did the same for entertainment. Arguably Netflix and Amazon laid the groundwork for Uber’s disruption of the transportation industry through on-demand ride sharing. Together these companies ushered in an economy based on on-demand living.
A Cultural Phenomenon
The idea of giving viewers a digital catalog of movies to stream not only knocked Blockbuster out of business but made Netflix a cultural phenomenon as viewers embraced a new way of experiencing entertainment on demand. In 2009, Twitter users began using the phrase “Netflix and Chill” to describe the increasingly popular practice of simply hanging out with Netflix like a friend. Soon, “Netflix and Chill” became a euphemism for people hooking up to have sex, which is how we commonly think of the phrase today. The phrase “Netflix and Chill” became an internet meme and topic of much analysis and controversy. Netflix was shaping how we communicate as Google has done (“I’ll Google the movie time”). Continue reading →
The great disruptor is just another player in the entertainment space. Amazon Studios, its TV and movie arm, is still looking for a blockbuster like Game of Thrones to compete in an elite league defined by HBO, Hulu, and Netflix. Amazon Music is a follower behind Spotify and Apple Music.
But recently Amazon has made some moves in a bid to transform itself from a follower into a leader. Let’s take a closer look. Continue reading →
Three years ago, Apple looked like a music dinosaur. The company was reeling from the embarrassment of foisting upon iTunes customers digital copies of U2’s Songs of Innocence – an incident that laid bare Apple’s reliance on downloading at a time when the music industry was marching inexorably toward streaming. But Apple has regained its groove, and the purchase of irresistibly fun and popular music discovery app Shazam is but one indication.
After licking its wounds in the aftermath of the U2 debacle, Apple focused its considerable resources on launching a streaming service, Apple Music, in 2015 — and then proceeded to show how quickly one of the world’s most powerful brands can right the ship.
Apple Music now boasts 30 million paid subscribers. Although its biggest rival Spotify has double that amount, Apple has eclipsed nearly everyone else in the streaming industry within 24 months, making it and Amazon the only alternatives to Spotify to lead the streaming music business. Just as remarkably, Apple had developed its own brand of cool by building a well-regarded catalog and affiliating itself with the right artists through endeavors such as Beats 1 radio.
A Deep, Well-Curated Catalog
Apple Music’s mix of algorithms and human curation appears to be working. The company put the right talent in place to curate its catalog, starting with Scott Plagenhoef, Apple’s global head of programming and editorial. Formerly editor of the oh-so-hip Pitchfork, he joined Beats Music in 2012, and then joined Apple in 2014 when the Apple bought Beats. And although Apple Music’s playlists haven’t gained as much acclaim as Spotify’s vaunted artificial intelligence-based curation, Apple is earning respect. Recently Apple Music scored a major coup when hip-hop tastemaker Andrew Barber agreed to curate Apple Music’s New Chicago playlist, which provides exposure for up-and-coming Chicago talent as Barber’s Fake Shore Drive blog has done for years.
Artist Affiliation
No longer is Apple the brand that forced uncool U2 down our throats. Apple Music is now where you go to stream radio shows hosted by the likes of Charli XCX, Drake, Frank Ocean, Continue reading →
Apple’s newly announced HomePod smart speaker is more than Apple’s answer to Amazon Echo and Google Home in the battle for your home – it’s quite possibly Apple’s major advantage in the music streaming wars.
In unveiling the HomePod June 5 at its Worldwide Developers Conference (WWDC), Apple announced that the voice-activated speaker will be a music-first experience that combines both the quality of high-fidelity Sonos speaker and the intelligent interface of the Amazon Echo – with a focus on providing users access to the Apple Music catalog. As Apple noted in a press release,
Designed to work with an Apple Music subscription for access to over 40 million songs, HomePod provides deep knowledge of personal music preferences and tastes and helps users discover new music.
At WWDC, Apple Chief Executive Tim Cook said the speaker has “amazing sound and incredible intelligence that will reinvent home music.”
Why the focus on a high-fidelity experience with an emphasis on music? One reason is that Apple wants to be the leading music streaming provider – badly. After disrupting the music industry through iTunes and the iPod, Apple found itself looking behind the times when consumer tastes shifted from downloading songs on iTunes to streaming them on apps such as Spotify. And looking outdated is strange ground for Apple. Apple’s desire to play catch up with streaming was a big reason why the company paid $3 billion for Beats in 2014. Months after buying Beats, Apple launched its own service, Apple Music, in 2015.
The good news for Apple is that within two years, Apple Music has become the Number Two streaming service as measured by paid subscribers. And these are heady times for streaming services such as Apple Music and Spotify. In 2016, for the first time ever, streaming music platforms generated the majority of the U.S. music industry’s revenues. As the RIAA noted, the biggest contributor to growth was a doubling of revenues from paid streaming services. But for Apple, there is also some bad news:
Amazon has been rapidly encroaching upon music streaming. It offers a limited service to Amazon Prime customers (Amazon Prime Music) and recently launched a subscription service, Amazon Music Unlimited.
Spotify and Amazon are significant competitors with their own strengths and weaknesses:
Spotify enjoys the strong brand affiliation with music, its customer base, and outstanding personalized playlists, but the company is losing money.
Amazon enjoys an advantage with its deep pockets and the popularity of Echo speaker, which provide a natural platform for streaming music. But Amazon Music Unlimited is an upstart (and Amazon Prime Music is a feature of Amazon Prime, not a pure streaming service, per se).
And in addition, Echo is also a platform for playing music through voice commands (“Play the new Lorde song”), something Spotify does not offer. In 2017, according to eMarketer, 35.6 million Americans will use a voice-activated assistant device at least once a month, and 71 percent of them will use Echo. (Google Home has the second highest marketshare behind Echo, at 24 percent, but Google does not release user figures for its Google Play streaming service.)
No wonder Amazon offers Amazon Music Unlimited at its lowest price to owners of Amazon Echo speakers: Echo is a Trojan Horse for Amazon’s music streaming product.
But Swiss Army knives, while being useful, are not great at everything. The Echo is not engineered specifically to listen to music. HomePod is. At WWDC, Apple Senior Vice President of Global Marketing Phil Schiller said that HomePod will provide the high quality of a Sonos speakers and the smart interface of the Echo.
“These aren’t smart speakers, Schiller said of Sonos. “They don’t sound so great when you listen to music,” he said of the Echo. But HomePod will sound great and act as a home musicologist, he said.
He indicated that the HomePod will make it possible for consumers to call up music using complex voice searches and then listen to music through a product that provides state-of-the-art sound including spatial awareness, which adjusts the audio depending on where you are sitting in the room.
But the ace in the hole is the integration with Apple Music. As Apple announced,
By saying, “Hey Siri, I like this song,” HomePod and Apple Music become the perfect musicologist, learning preferences from hundreds of genres and moods, across tens of thousands of playlists, and these music tastes are shared across devices. Siri can also handle advanced searches within the music library, so users can ask questions like “Hey Siri, who’s the drummer in this?” or create a shared Up Next queue with everyone in the home. HomePod, Apple Music and Siri deliver the best music experience in the home that streams ad-free directly to HomePod.
HomePod will also provide the same functionality as Echo, providing functions ranging from turning on the lights in your home to providing sports and weather information.
Subscribing to Apple Music because it’s so easy to listen to music with voice commands on HomePod. (I wouldn’t be surprised if Apple offers an incentive for bundling Apple Music paid subscriptions and HomePod.)
It’s an interesting bet. Consumers have been indifferent to sound quality on mobile devices, not caring enough about sound quality to buy high-end mobile streaming products such as Pono. Meanwhile in the home environment, the growth and popularity of Sonos speakers for years showed that people would pay for premium sound – but then Amazon’s encroachment on Sonos suggest that consumers were willing to sacrifice the fidelity of Sonos for the convenience of Echo. And now Apple believes consumers will do the same with HomePod.
Apple won’t put a dent in Echo’s 71-percent market share anytime soon, but Apple doesn’t need to. Apple is not offering a utility that competes on price as Echo does. Apple is selling a high-end experience first and utility second. Apple Music is central to that experience. Will HomePod be a catalyst for Apple Music to eat into Spotify’s lead?
The music industry finally has some reason to celebrate, thanks to artificial intelligence.
The Recording Industry Association of America (RIAA) recently announced that music revenues in 2016 grew 11.4 percent to $7.7 billion — the highest year-over-year growth rate since 1998. Although the industry is only half the size it was in 1999, double-digit growth is encouraging after years of either declines or flat results. Why the growth? According to the RIAA, the answer is simple: streaming is taking hold. And streaming services — especially Spotify — are lapping the field with AI.
As the RIAA noted, the biggest contributor to growth was a doubling of revenues from paid streaming services such as Apple Music, Spotify, and Pandora. In fact, for the first time ever, streaming music platforms generated the majority of the U.S. music industry’s revenues.
Younger streaming platforms such as Tidal are still too new to contribute significantly to the $3.9 billion that streaming services generated in 2016. Rather, the established streaming leaders, especially Spotify, are hitting their strides by offering better products fueled by AI.
Pandora and the Power of Personalization
Streaming services such as Pandora and Spotify have always created customers by personalizing their vast inventories of music. If you stream music, you already know how well Pandora and Spotify create engagement by offering you customized listening choices based on your personal tastes. I still remember how exciting it was when I first started using Pandora years ago and created my own Pandora radio stations based on names of artists or songs that appealed to me. If I wanted to create a station based on my love of Massive Attack, I could do so. If I wanted to create a station of music inspired by the Cure song “All Cats Are Grey,” I could do so. And Pandora refined my stations even further when I gave a thumbs up or thumbs down to songs that Pandora suggested to me based on my listening tastes.
