Exciting Or Not, The Future Has Arrived

Michael Hedges January 18, 2016 Follow on Twitter

Radio broadcasters, who once warded off threats of extinction from evil television, are feeling considerable anxiety inflicted by the streaming services and, more importantly, the notoriety they have achieved. Music, popular and otherwise, has filled the radio airwaves, interspersed with ads among many, occasionally DJs, sometimes with jokes, sometimes weather reports. Video, MTV and the like, did not “kill the radio star.” Audio streaming services enabled by mobile platforms are, at least by appearance, grabbing radio’s default audience, music fans.

The passing a week ago of international pop style icon David Bowie was announced, annotated and mourned. Radio stations around the world offered large compliment to the acclaimed artist, lots of music on-the-air, many memories shared. Belgian station Studio Brussels with public observatory MIRA created “a unique place in the galaxy” - a constellation named Stardust for Bowie appearing near the planet Mars in the shape of the Aladdin Sane album cover art lightening bolt.

The music industry headline was the 2,700% play count increase in one day for the Bowie catalogue worldwide on Spotify. Pandora also reported a sharp increase, 36,000%. In the days after his death Bowie tracks had been streamed 19 million times in the UK across the various services, reported Forbes (January 15). Digital downloads of Blackstar, the Bowie album released two days before his death, topped the Apple iTunes sales charts in 60 countries.

Spotify’s worldwide footprint is a big advantage, not only for the obvious expanded potential customer base. Investors are attracted to scale. It’s mobile app is highly rated by users. Investors are attracted to everything on a smartphone. "The second half of 2015 was our fastest subscriber growth ever,” said Spotify’s PR chief Jonathan Prince to Business Insider (January 10).

Only on rare occasion does the company reveal hard numbers on subscribers. Spotify is not publicly traded so financial details remain in that private space. It reports 75 million users in 58 countries, 20 million subscribing, noted Svenska Dagbladet (January 15). The company raised US$526 million in a bond sale to institutional investors and another US$115 million from Swedish telecom TeliaSonera valuing the company in the vicinity of US$8 billion, reported Bloomberg (June 10, 2015)

Apple Music has reached 10 million paying subscribers, reported the Financial Times (January 11), roughly half as many as estimates for Spotify. Considering the service was launched only last June it’s quite an achievement. Considering the enormous Apple brand strength, including ownership of a major smartphone and its operating system as well as 13 years interacting with music fans via the now cannibalised iTunes music store, it’s almost tame. Apple’s market value in 2015 was estimated at US$740 billion with US$203 billion cash-on-hand.

iTunes Radio, a self-curated ad-supported streaming service available only in the US and Australia, will fold at the end of January, reported endgadget.com (January 16). Users have been notified to migrate to either Apple Music for ad-free streaming of channels “curated by our team of music experts” or the Beats 1 service for free music plus ads. Eighteen months ago Apple acquired streaming service Beats Music and headphone/speaker maker Beats Electronics for US$3 billion. The price included the services of rapper/founder Dr. Dre and music industry legend Jimmy Iovine. As Apple Music found its way to the Android mobile operating system last November Beats Music disappeared. Beats 1 is a curated free-for-ads “radio” channel available worldwide.

The best known audio streaming services are not profitable. Neither are their video brothers, mostly. This goes a long way in explaining their popularity. Subscriptions are, indeed, rising. The price-point for music fans is minuscule and holding steady. Pandora Music’s share price, offering free-for-ads streaming plus an ad-free subscription service less expensive than Spotify or Apple Music, took a beating in 2015. That probably explains the “buy” rating for its shares from 37 rating agencies, reported marketbeat.com (January 17).

Paris-based Deezer, a year older than Spotify, postponed indefinitely a planned IPO last October “due to market conditions.” It has about 6 million worldwide users, about one-third paying. Its primary investor is Access Industries, owner of Warner Music.

David Bowie was also widely credited, at least this past week, for seeing deep into the music industry’s future. “Music itself is going to become like running water or electricity,” he said to the New York Times in 2002, recalled by mashable.com (January 11). Eight years before Spotify first appeared in Sweden, 1998, he created Bowienet, an internet “environment where not just my fans, but all music fans could be part of a single environment where vast archives of music and information could be accessed, views stated and ideas exchanged.” Sounds a lot like the business plan for every streaming audio service created since. With “Bowie Bonds” he taught financial management to more than one generation of music performers.

"You'd better be prepared for doing a lot of touring because that's really the only unique situation that's going to be left," said David Bowie, correctly predicting the business model for pop stars in the 2002 NYT interview. "It's terribly exciting. But on the other hand it doesn't matter if you think it's exciting or not; it's what's going to happen."

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