Sony Music: Doug Morris backs streaming but cools on ad-supported models



Ad-supported streaming, the soon-to-launch Apple Music and Steve Jobs’ vision for iTunes were amongst an anecdote-laden speech at Midem by Sony Music boss Doug Morris, earlier today.

The veteran label exec is still flying the flag for premium-only tiers on streaming services like Spotify, and said Apple’s entrance will help return the music industry back to the $30bn business it was a decade ago.

Using Sweden as an example of what he thinks is to come, where streaming revenue represented 80% of the total music market in 2014, Morris said the US and Europe are on the same track.

“Paid streaming tiers are good. Ad-supported, unless there a conversion factor, are not so good. For a company like Spotify, 100 streams equals $1, ad-supported streaming is 900 streams to $1. You can tell which one we like,” he said.

“But I do think this change to streaming signifies a tipping point in the music industry. The [business] has halved in the last 10 years, it was worth $30bn and is now worth $15bn. What caused this? Disruption, internet, piracy, and I think ad-supported streaming will hurt it also.”

“However, I think this tipping point will bring it back to where it was before. Sweden is back to where it was 10 years ago, my guess is that slowly Europe and the US will go the same way and we will have an industry that is healthy, robust and powerful.”

[Editor’s note: Services like Spotify argue that their ad-supported tiers have been crucial to the growth of paying subscribers in countries like Sweden, even if the royalties from those free tiers are much lower than their premium versions.]

Apple’s “great advantage of having $178bn in the bank” plus the details of 800 million of its users credit cards will result in a “rising tide that lifts all ships”, said Morris.

“Spotify has never really advertised because it’s still not profitable. I think that Apple will advertise and the result of this will have halo effect on the entire streaming service [market]: All the companies will benefit.”

“It’s the beginning of an amazing moment for our industry and I think everyone that lives in the industry is going to benefit. I believe in the future most of the consumption of music will be done through streaming.”

Morris also recalled meeting the late Steve Jobs for the first time while chief of Universal Music Group in the early days of Jobs’ vision for iTunes.

Jobs had already signed a licensing deal with EMI and went in to Universal to propose a plan of how to “make money from digital music”. “He came in and laid out a programme to me, from iTunes, to the iPod and what he was going to do. I was so taken by him, I was shocked, he was so articulate,” said Morris.

“The people in my company were really against releasing the music because they thought it would open up the album. They were right, but the album had already opened up on the internet, everything was being stolen and this guy showed us a way of how to make money from digital music.”

“In the record business, we’d put tens of billions of dollars into trying to create a digital system to sell music, none of them ever worked. Steve did it with such grace and class, it was amazing.”

Rhian Jones

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One response
  • KS2 Problema says:

    One of the memes returned to again and again by those opposed to the streaming subscription business model is that ‘unlimited’ plays paid for by a percentage of the ‘fixed pool’ of monthly subscription means that, if subscribers start using such services more, the monthly revenue must be split into ever-smaller per-stream amounts.

    However, an *advertising-driven* model would not be so-capped. The more the ad-supported tier users listen, the more ads will be played or displayed, and the greater the revenue. Of course, a company still needs to convince advertisers that it pays to advertise in that venue. But look at the long and very successful history of advertising on radio.

    And, as listeners become more accustomed to on-demand media, hearing what they want to hear, the more they are likely to chafe against the narrow, label-dictated strictures of radio’s contemporary don’t-call-it-payola largely ‘considerations’-for-exposure model.

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