Analysis

Rdio boss: streaming music is ‘a retail business not an internet business’


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Streaming service Rdio has never said how many users it has, let alone subscribers, but its CEO Anthony Bay is using its underdog status to speak out increasingly candidly about the streaming market and his company’s rivals. As shown by his latest interview with Music Ally.

Bay took aim at Spotify’s business model. “This is a retail business, and that’s the first thing you have to remember. It’s not an internet business. What we do, what Spotify does: it’s a retail business not an internet business,” he said.

The difference? Internet companies don’t (usually) have the same kinds of content licensing costs, according to Bay. “But this [streaming music] business is more like retail: your margins are not high, but they’re understood – they’re in the high 20s to 30s and that’s not moving a ton… That’s where you have to design your business model around that structure, and learn to be incredibly efficient in terms of your cost structure.”

Bay praised Spotify for building the streaming category before questioning its business approach. “This whole concept of a free, on-demand model as a stepping stone to subscription is an experiment. Spotify has an audience of 75 million, so wow, they have 20 million people who pay. You could also say that they have 55 million people who are getting music for free,” he said.

“So they have successfully converted 55 million people to ‘free’. They appear to be behaving like an internet company with internet margins, which is not this business. But whatever anyone says about Spotify, YouTube is worse.”

Bay also claimed that 90% of the people who’ve signed up for his company’s new $3.99-a-month Rdio Select service were new to Rdio, and admitted that the traditional radio industry is “spooked” by streaming music services courting their audiences (and, in Apple’s case, their presenters and producers).

“Although whether Beats 1 itself is going to be as transformational as Apple thinks with this idea of ‘wow, it’s live radio!’. Well, yes, people have been doing live radio for 100 years, and they’re quite good at it actually,” he said. “When you talk about programming, that’s what stations do. But stay tuned, we have a lot of interesting news coming up about radio over the next 6-8 weeks.”

Bay also seized the opportunity to present Rdio as a friend to independent labels: “Yes, we believe an independent label should not be treated worse than a major label. It’s pretty simple. Seriously, it’s as simple as that,” he said, while comparing Rdio and some of its peers to the independent record stores that were a key distribution outlet for labels 20 years ago.

“But then the distribution of music moved towards companies for whom music is a feature, like Wal-Mart and Best Buy, or Tesco. ‘Come in to grab some lettuce and maybe grab a CD on the way out’… and in the digital world, that’s Apple: they offer music, but they offer music in the same sense that Tesco offers music. It’s not bad, but it’s a means to an end.”

The full interview – including hints at Rdio’s next moves and why it’s not following Spotify into video – is for Music Ally subscribers only, but you can sign up from that link to read the full thing.

Stuart Dredge

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