CMO Today: Spotify To Stream Into Web Video.
Here’s your morning roundup of the biggest marketing, advertising and media industry news and happenings. According to the Wall Street Journal’s report, Spotify has been “reaching out to companies that specialise in making content for YouTube.” Spotify is hoping to get its hands on existing content, and may want to join forces with these companies to try out original content too. Send tips, suggestions and complaints to steven.perlberg@wsj.com NEW JAM: Spotify has shaken up the music industry in recent years, and now the music streaming company is laying plans to enter another competitive market: Web video. WSJ reports that Spotify has reached out to traditional publishers and other companies that create YouTube videos–known as multi-channel networks–about acquiring some of that content and working together on original series’ for a service that could eventually include advertising. The European commission, US Department of Justice and Federal Trade Commission are all reportedly asking questions about Apple’s plans for the relaunch, which is expected to be announced during the keynote at its worldwide developers conference (WWDC) event on 8 June.
The company appears to be heading towards an initial public offering, having recently hired Goldman Sachs to raise $500 million, which would value it at more than $8 billion. – Copyright The Financial Times Limited 2015 However, since the financial crash, standard variable rates (SVRs) charged here “decoupled” from their traditional correlation with ECB equivalents as Irish banks tried to compensate for loss-making tracker mortgages, which account for almost half of the Irish mortgage market. The move, which could be formally announced as early as this month, comes amid increasing pressure in Spotify’s core business: Pandora, Apple, and new buzzy entrants like Jay Z’s Tidal are all vying for the streaming throne. Spotify, which competes with Pandora Media and Apple’s Beats, said in January it had 15 million subscribers and 60 million active users at the end of 2014. – Reuters Has a comment offended you? Like Spotify, it will be an “on-demand” streaming music service – you play whatever you like from its catalogue in whatever order you want – although in Apple’s case it’s likely to be subscription-only rather than also having a Spotify-style free version funded by advertising. Things are arguably even more cutthroat in the burgeoning Web video space, with companies like Netflix, Amazon, Hulu, YouTube and, increasingly, Facebook all jockeying for attention.
Adding video, and taking cues from rival services such as Tidal, will only strengthen its offering and position as one of the major players in the streaming industry. In a surprise move, Minister for Finance Michael Noonan this week told the Dáil he might consider introducing legislation to give the Central Bank control of variable mortgage interest rates. Spotify has approached so-called multichannel networks that specialize in creating and distributing video for YouTube to discuss both acquiring their material and co-creating original video series, the people said. It has since poached BBC Radio 1 DJ Zane Lowe to work on the latter’s relaunch, while negotiating with music labels and publishers for the necessary licensing deals, and buying the startup behind music analytics startup MusicMetric. Mr Noonan is awaiting a report on the matter from Central Bank governor Patrick Honohan and has indicated that on foot of this he will open up discussions with the State’s six main mortgage providers.
While AIB announced a cut of up to 0.38 per cent on standard variable rate (SVR) mortgages last week, the group complained that the bank is still charging up to 1.5 per cent more than it is charging in Northern Ireland. Yelp is a wellspring of consumer reviews of shops and restaurants (it derives ad revenue from businesses looking for a leg-up across its service), but growth has dwindled. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles.
Meanwhile, the user-generated review space has gotten more competitive with TripAdvisor building up its stable of sites and Priceline acquiring OpenTable last year. Most recently, Bloomberg published a similar report focusing on the FTC’s investigation “looking at whether Apple is using its position as the largest seller of music downloads through its iTunes store to put rival music services like Spotify Ltd. at a disadvantage”. First: the question of whether it is persuading music labels to cripple the business model of Spotify specifically, by restricting or even removing its free, on-demand tier.
Spotify currently has 60m active users, including 15mi paying subscribers – and it has said publicly that 80% of the latter started off as free users. If its free tier goes, so does its main funnel for paying customers, meaning it will have to find a new strategy just as its biggest rival yet launches.
In the world of ad-supported content, Google Inc.’s YouTube is a juggernaut, though Facebook is making inroads, and a range of other players like Vessel and Twitter are in the mix. Some Spider is designed to own an ensemble of news sites working off of the blogging service Cafe.com, which was shut down but will be relaunched as “The Mid.” The blog will focus on 35- to 45-year-olds dealing with midlife issues, and the company also bought parenting blog Scary Mommy. Bharara put it, it’s a “fusion between an online publisher and an identity-focused social network.” SEE IT: For some odd reason, marketers have this notion that they should only have to pay for ads that are capable of being seen, creating consternation among publishers who say new standards are often unrealistic. The second area for investigation concerns exclusivity: reports that Apple is in talks with a number of major musicians to make their new music exclusive to its service, and thus not available on Spotify and other rivals – for a time, at least.
Among subscription video services, Netflix Inc. dominates, followed by Amazon.com Inc., Hulu and others that have a strong presence in individual markets outside the U.S. CMO Today reports that Google, using its pervasive ad server DoubleClick, has found that just 54% of video ads across the Web are viewable (Google says that its own video service YouTube has 91% viewable ads, which is likely because the platform is a video destination unto itself). Jonathan Miller, partner at early stage investment firm Advancit Capital and former chief digital officer at News Corp, pointed to important differences between the digital-music industry, where competitors essentially have the same catalog of songs, and the digital-video business, where rivals bid for the choicest offerings. That, in turn, means the streaming services either have to raise their monthly price (for example from $9.99 to $12.99) to make the same money from an iOS subscriber, or put up with Apple’s share.
As an in-house service relaunched Beats Music will face no such dilemma. “I get that there’s some administrative burden so they should get some kind of fee, but 30% is fucking bullshit,” one source told the site. “They control iOS to give themselves a price advantage,” added another. Verna said there are synergies between music and video entertainment, citing the successful expansion of Apple’s iTunes store from selling digital music to also offering movies, TV shows and podcasts. A recent survey by research firm ParkData claimed that it’s used by just 0.7% of iOS users and 0.6% of Android users in the US, compared to 10.7% and 7.1% respectively for Spotify. For example, music users who elect to listen to songs in Spotify’s “chill” genre may be offered different content than those who listen to music targeted for working out or travel, they say.
The latter is Goliath to Apple’s David in terms of streaming market share, albeit a Goliath whose business relies quite a lot on David’s mobile device and app store ecosystem. In its defence, Apple is likely to point to the competitive nature of the streaming world, where Spotify, Deezer, Rhapsody, Rdio, Tidal and other services are already duking it out – including signing up lots of their users on iOS.
But despite its fast user growth, the company has posted deep losses since it was founded in 2006 by Swedish entrepreneurs Daniel Ek and Martin Lorentzon. Apple might also point to personal radio service Pandora, which despite predictions in 2013 of iTunes Radio being a “Pandora killer”, remains resolutely un-killed.
Pop star Taylor Swift last year pulled her music from the service when it wouldn’t let her put it only on the premium subscription tier, which pays artists far more per listen than the free, ad-supported offering. Exclusives have been happening in the downloads world for some time – the Beatles on iTunes for example – while Spotify (with Metallica) and Google Play (with Take That) have struck similar deals of their own, for varying lengths of time. Short of a smoking gun showing Apple demanding albums be kept off a specific rival like Spotify, exclusives are unlikely to be a major anticompetition issue. Company executives have said they are confident Spotify ultimately can get into the black, adding that the service is already profitable in some of its markets. For now, however, it is focused on plowing more money into building a wider audience. “The company’s priority one, two and three are growth, growth and growth,” Mark Williamson, Spotify’s head of artist services, said in a recent interview.
Expect Spotify and its rivals to be carefully monitoring Apple’s stewardship of its App Store in the months ahead, especially if they see changes that seem to penalise them at the expense of Beats Music – for example, giving the latter access to software or hardware features that their apps cannot use. Earlier this week, Billboard claimed that Apple had yet to finalise all the licensing deals for its streaming relaunch, quoting one music industry source as saying “June won’t be the release date. The deals aren’t done.” Tech site 9 to 5 Mac swiftly responded with its own story claiming that the announcement will go ahead at WWDC, with the new service launching “in a long list of countries in late June”. Music industry licensing deals are notorious for a) going down to the wire, and b) springing leaks in the media right, left and centre, so expect to hear more developments between now and 8 June. It’s a reminder that the future of streaming music will not just depend on which services have the most innovative features or coolest co-owners – but also on which ones have the sharpest lawyers and the most persuasive lobbyists.