What strategy should adopt the four Majors music brands to face the fast growth of streaming?
The Majors (Universal Music, EMI, Sony and Warner) want to control the Music Industry and help the music to keep value.
To do so, streaming service websites, like Deezer, Spotify, We7, etc, have to pay a tax to use the music catalogue of a music brand. These taxes are high and new startups cannot make a lot of profit from sales.
The Majors also force streaming service websites to pay an expensive price for each title, as a “streaming rate”.
To use the catalogues streaming service websites have to get an authorization and you can imagine it is very hard. It took 2 years to Deezer to get it!
Music’s changing digital landscape | 2004 | 2010 |
Licensed music services | Fewer than 60 | 400+ |
Catalogue available | 1 million tracks | 13 million tracks |
Industry’s digital revenue | US$420 million | US$4.6 billion |
% of industry revenues from digital channels | 2% | 29% |
Moreover, music brands are very restrictive because they don’t want the music to be an appealing product. This is why they enable stable and reliable streaming service websites to get their catalogues. Otherwise another company, like Orange for instance, could buy a frail streaming service company and also could use the catalogue as an appealing product. Nobody in the music industry wants that.
However the Majors are clever and put particular conditions in the contract: if the streaming service company has to be bought, the contract is de facto broken.
Let’s talk about Spotify…
Spotify emerged recently from a foreign country, guess which one! … Sweden!
The software was developed in 2006 by Daniel Ek. The headquarter is based in London. Spotify was launched 7th October 2008 and counts today more than 1 Million of users. You can access to Spotify only from Sweden, Norway, Finland, the UK, France and Spain.
It is the biggest digital retailer in Norway and Sweden.
If you want more information, go on the website: http://www.spotify.com/uk/.
According to the report of IFPI (International Federation of the Phonographic Industry), Spotify reached a number of paying subscribers of 750,000 in all its markets.
“In Europe, digital revenues surpassed the expectations of many in 2010, growing by almost 20 per cent. Record labels saw increasing revenues from download stores, but also from subscription services, with Spotify becoming the second largest source of digital revenue for labels in Europe” explain the report.
The pressure on new artists globally (graph): please click on the following link http://www.ifpi.org/content/library/DMR2011.pdf , and go to page 16 to see the graph.
Album sales were going down and the music industry has been forced to cut lots of jobs.
Today, streaming service websites are keeping pirates away from the market and they seem to be a good alternative to CDs. They propose an innovative way to listen to music and I hope competitivity will boost their offers.
How to use Spotify?
How to use Spotify?
Spotify has apparently found a way to bypass Itunes and get onto mobile phones - that should really help their market!
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