Trade Review: Week Thirteen (2/2)

Myspace Lost $42 Million. Here’s Why Launching A Profit-Thin MusicService Could Nail The Coffin Shut

Myspace is the latest fool amongst many companies and entrepreneurs to vie for a slice of the supposedly profitable music streaming industry. An attractive business model with little operating costs and a service that is becoming the norm for music consumers, music streaming still poses the major downside of high costs for music licenses. Despite being one of the first social media-music websites in the digital era, Myspace has lost its market value by more than sixteen folds in just seven years! News Corp first bought Myspace for $580 million in 2005 and sold it to Specific Media in 2012 for $35 million. On top of that, Myspace lost $42 million this past year alone. Furthermore, Specific Media thinks they can make a $10 million profit by 2014 (Constine)!

 Financially proven that Myspace just keeps getting worse and worse, lets breakdown the supposed music streaming endeavor Myspace wants to take on. The most popular music streaming sights like Pandora and Spotify are both losing millions of dollars for the past two years now because the advertisement revenue is not covering the lack of subscription fees to pay for the costly music licenses. Myspace does not even plan to run on a subscription fee and solely plans on advertising revenue to bring in consumers. Myspace hopes that its social network will use the music streaming service, especially since the streaming service will ac on a freemium model. However, with major companies like Spotify and Pandora both having subscriptions, advertisement revenues and also international market presence, how does Myspace plan to make more revenue than these two heavy weights, along with other music streaming services that clutter this market?

Myspace hopes that given its popularity with independent and underground musicians, Myspace will not have not pay royalties for this music, which supposedly makes up 50% of the content. However, the best point the article brings up besides the discouraging financials, Myspace was popular in 2003 with users being in the young 20s at the time. Today, these users are 30 years old. Simply put, 30 year olds are not interested in streaming unlimited music the same way a teenager and young 20 year old is today (Constine)

Trade Review: Week Thirteen (1/2)

Value of Music Streamingis Data

With music streaming becoming the preferred music consumption method, how can the music industry capitalize on its potential growth. The reason why it is only a potentially profitable business is because music streaming sights have yet to break even or make a profit because of heavy license fees for the music. Artists are outraged that although the license for the music is heavy, the labels only get a cut of this revenue and artists are left with pennies in royalties for thousands of plays. However, artists should actually encourage music streaming and suffer the low royalty payout in exchange for the demographic and behavioral data of music streamers. Although streaming series have yet to divulge the secrets and data of their consumers, the partnership between artists, labels and music streamers could jump start the industry and provide a massive chunk of revenue to the industry on all levels.

In a series of trickled down wealth, record labels and artists would pay music streaming companies for the data so that they can target their fans better for concerts, which is “a crucial tool to drive booking strategy” for concert locations (Billboard). Through multiple revenue streams also increasing like merchandise because target markets are more focalized will decrease marketing costs, decrease opportunity costs, increase profit margins and spread the wealth around in the music industry.  The extra payment for data can also provide a new revenue stream to increase potential profit margins for music streaming sights as well.

Artists like Zoe Keating hope that partnerships between labels and music streaming companies can happen so that she can target more of her listeners: “How do I reach those casual listeners? That's more valuable to me than some royalty” (Billboard). The “casual consumers” are those that are not active ticket and merchandise buyers that simply listen to the music. Zoe Keating hopes that this data will allow her to adjust her content, show locations and marketing strategies to target these casual listeners, where “user data from these sites can be a much bigger gold mine to artists, labels, and promoters” (Billboard).

Trade Review: Week Twelve (2/2)

More Than 100 Musicians Unite to Fight Pandora’s RoyaltySlashing Bill

In a united movement by chart topping artists and break out musicians alike, musicians are banding together to stop Pandora from lobbying to lower royalty rate payments to musicians on music streaming sites. Pandora is looking for Congress to cut its royalty rates and make music streaming royalty payouts be equal to terrestrial radio stations. In an earlier blog post, I opened up this topic to touch on the threat of music streaming gaining the same reputation, rights and recognition as standard radio stations. Now, artists are clashing with music streaming sights because music-streaming services want a larger cut in an artist’s musical content. These artists believe music streaming services are not even comparable to radio, music distributors or record stores, where royalty rates are less because these companies provide an actual service, and are simply a medium like YouTube that facilitates and permits unlimited, free music playing.

Moreover, some artists heavily rely on these music royalty rates despite the fact that payment are as low as $0.007 - $0.01 per stream. As a result, musicians are going a step further by “supporting a bill that would increase the royalty rates paid by radio and satellite companies” (Graziano). Not just to obtain a larger cut in royalties, but this is also a defensive, strategic ploy by the musicians to show Congress that not only is decreasing royalties wrong but the rates are already too low, unfair to musicians and the payout needs to actually increase. Musicians believe that music streaming companies need to “go back to the drawing board” and find a new way to derive revenue besides memberships and cheap advertisement spots (Graziano). Music streaming sights need to realize that artists could potentially decline to provide their content to these website, similar to what Taylor Swift and ACDC does. The musicians must be recognized as “the foundation of Internet Radio” and without new, creative content from musicians, the music streaming services will lose foot traffic, memberships and advertisement dollars.

Trade Review: Week Twelve (1/2)

Will Streaming Music Replace MP3s?

            The MP3 music model could be heading for a decline as music streaming boosts in popularity over other models since last year. Music consumers are spending less time on their purchased music and trending towards music streaming because it is a more convenient, free and unlimited way to access all of their favorite music: “A report from research firm NPD Group shows that more people are listening to streaming music and fewer are clicking on the music files stored on their computers. The decline in music files played was small — just 2 percent of people listened less to files” (Gowan). The 2% decrease in files played on MP3s will hopefully also create a downward trend of piracy because music streaming sights consumers can access a song in the same search engine fashion people look for music to download online.

Additionally, music streaming does not need storage space on file sizes, iPods or MP3 players, which will not limit the consumer to what songs they can put on their devices. Consequently, we could also see a decline in products bought from Apple and other mobile music playing devices. However, a major flaw in music streaming services is that the bandwidth support on mobile devices is not as strong as their computer service. Therefore, mobile streaming is not as crisp as an MP3 downloaded song would sound on a mobile device, which may be a strong factor as to why MP3s will always be around. As our guest speaker this past week, San Spink, said that the music industry is a forever-changing business that always seems to freak out whenever a new innovation comes along (cassettes, CDs, MP3s and now streaming). Mr. Spink claims it is just a simple transition period of consumers and industry executives adjusting to the new consumer trends in order to modify their own expectations and business models to create viable, efficient revenue from these new innovations. Therefore, this decline in MP3 plays may not necessarily mean that MP3s are going to vanish from the music industry, but this statistic and others related to the industry that display change towards music streaming is simply natural.