This year’s Midem music-industry conference kicked off with the most logical of topics: music-streaming and subscription services.
The industry ended 2016 with 97 million people paying for a music subscription, according to the IFPI, which reported a 5.9% rise in global recorded-music revenues to $15.7bn.
A panel convened in Cannes to talk about more than past growth, though: the emphasis was on what happens next to keep the streaming market flourishing.
The panel included Darryl Ballantyne, CEO of Lyricfind; Virginie Berger, CEO of Armonia Online; Vincent Favrat, CEO of Musimap; Rishi Mirchandani, director of content acquisition at Amazon; and Malcolm Ouzeri, CMO at Qobuz. The moderator was TAG Strategic consultant Ted Cohen.
“Alexa, play me a Van Halen mix,” was how Cohen introduced the session, brandishing an Amazon Echo. “How many you have played with one of these? It’s changed my life. I carry one on the road with me now…”
The panel talked about the most exciting things in the current music-streaming environment, from their perspectives.
“The availability and connectivity of everything. Being able to tie all the different devices together, and get people to consume music through so many different places, all from the same account and with your profile, your preferences running through all of that. And sharing that with everybody around you,” said Ballantyne.
Berger, from European licensing hub Armonia chose artificial intelligence (AI) technologies as her technology worth getting excited about in 2017 – “and also emotional intelligence” – while Musimap’s Favrat said he’s keen to see even more context around smart speakers and voice assistants.
“I would like to ask Alexa ‘I am feeling in amazing shape, I signed a lot of contracts today, I am with my best friend, and I want you to play music according to the mood I’m in’,” he said.
Amazon’s Mirchandani also chose Echo and Alexa, unsurprisingly. “In my house right now I’ve got two young daughters, and they run around our house talking to Alexa all the time, saying ‘play music’. It’s all they’re ever going to know,” he said.
The conversation turned to what the panelists have learned from their past experiences. Berger, for example, used to work at MySpace.
“We were very young! It was quite complicated because it was in 2007, so it was not so easy to explain to CMOs that ‘we are going to launch a new service, and we don’t want to pay now, because we don’t have money, but sure, in the future in the next 10 years we will be able to pay something’. That was our speech. And I can understand that they would not be so happy or friendly with us. I can understand now!”
Is the landscape for cash-strapped startups any better now? Ballantyne gave a lyrics licensor’s perspective on how LyricFind assesses potential partners.
“Do we believe in what they’re doing? If we believe in what they’re doing and their model, we’re much less likely to ask for money up front, or different terms. We want to see that succeed. If we don’t believe in it, if we don’t think it’s a sustainable model: we’ll still license it, but that’s when we’re going to want a cheque upfront. We’re either going to want a quality service or a quality cheque!”
Mirchandani said the most important thing he’s learned from working at Amazon is that “it’s really important to focus on a customer need and trying to address that”, which has fed in to the company’s strategy of running several music services: from a download store, through the Prime Music service bundled into a membership, to the full on-demand Amazon Music Unlimited subscription.
Cohen asked the panel about music quality. “10 years ago, a digital camera sucked and an MP3 player sucked, and now a digital camera exceeds to some extent what we can do with film, but the quality of music has not improved as much,” he said. Qobuz is focusing on hi-res streaming and downloads, as one of the services trying to change that.
“If you think streaming services had reached maturity, look at the willingness to pay. YouTube’s got one billion users, and no one pays for YouTube,” he said. “So many people don’t pay for a streaming subscription. So streaming subscriptions help level the revenue, as soon as they manage to have this base that have a paid streaming subscription… But willingness to pay is really low, and quality overall is really low.”
Ouzeri’s point seemed to be that the music industry should redouble its efforts to make audio quality part of the evolution of streaming, alongside other technologies.
“It’s really crazy the amount of money spent on R&D when it’s ‘we’re going to talk about voice control, we’re going to talk about artificial intelligence’. But there’s something that lacks in the foundations… the quality,” he continued. “Even the metadata! I’m struggling so much nowadays to find out what the label was for a song, who the performers were, who wrote it…”
Favrat pointed to the growth in streaming, which in turn is fuelling global recorded-music revenues. “$16bn and everyone is excited about that, but I think it’s very disappointing. There’s a value gap that is very huge: a lot of streamers are on YouTube, and Facebook is also very huge,” he said, citing the debate over whether services like YouTube should pay similar royalty rates to Spotify and Apple Music. “If you were to apply this same ratio to the larger guys, the industry would grow by $40bn!”
The conversation turned back to smart speakers, with Favrat saying he is keen for Alexa to have even more information about his habits and preferences, so it can play the best music for his current activity and mood. Ballantyne struck a note of caution though.
“You start to get to the point where people aren’t that comfortable with Alexa knowing that much about you,” said Ballantyne. “If she knows that you’re there with your friend, or what you were doing in your car, or what you did last summer, there’s a level of fear with a lot of people about how much knowledge that device and that company has about everything you’re doing, and your habits.”
Mirchandani responded. “Obviously a company like Amazon takes customer privacy very seriously. We’ve had credit-card information from customers for years, so that’s at the heart of everything we do. When it comes to making better recommendations and being able to play the right music at the right time, that’s the kind of investments we’re making,” he said. “Knowing who’s speaking, knowing what the time of day is and being able to make recommendations is clearly an area of investment for all the services.”
The panel talked about streaming payouts, with Ballantyne talking about a shift from the economics of sales to one of longer-term, steadier streaming income. “The mentality has to shift: we’re not going to get the same number of dollars in year one. You’re going to get many more dollars, hopefully, over the length of your career.”
Berger raised another note of caution. “Studies now show Spotify is creating the new sound of summer, because of their playlists. If you are an artist and you are not on the playlist, it will be very, very, very difficult to get visibility,” she said.
“I had a discussion with a VP from a record label, the biggest, and he told me they have to figure it out: how to release a new song, a new artist, if you don’t get this artist in a playlist of Spotify for example.”
Berger also talked about “the economy of attention” and competition between music-streaming services and other forms of entertainment, like Netflix. Although those companies may have their own plans to expand into music. “We don’t know what, but Netflix say they are going to do something with music,” she claimed.
The panel talked about variable pricing for streaming, with Amazon’s Mirchandani saying there is room for lower and higher price points. “As the market matures, we’ll see a broader range of prices in the market with different features and different functionality,” he said.
What impact will smart speakers and voice assistants have on the streaming market, asked one audience member in the panel’s Q&A section. “We’ve seen from our customers that it just makes interacting with a streaming service so much easier, so we absolutely see more growth coming from there,” said Mirchandani. “It’s like Virginie said about the attention economy: when you’ve got a device in your home, in your bedroom, you can spend more time listening to music.”
How can music services be more transparent about the data they are collecting on their users, and how they are sharing it. “I don’t think you need to unmask anybody, to use a Trump term!” said Cohen. “You could have an interface where it knows about you, but doesn’t know who you are… where it’s not correlating that [music data] with an identity that could be sold.”
The panel finished off with some predictions. “True ubiquity of everybody actually having [subscription streaming] accounts,” said Ballantyne. “And I think recognition of the different parts of value that can be captured in association with music.”
Berger: “Speakers, voice interfaces, chatbots, emotional intelligence that can help people listen to more music, new revenue streams, new markets – China. New ways of streaming, I guess, and new markets.”
Favrat: “I see a big trend in the automotive sector, where connected cars will become even more entertainment platforms… and I see streaming merging different types of media: video and music.”
Mirchandani: “We’re just at day one of voice technology and what that can do, both in terms of driving music ubiquity in the home and the auto”. And Ouzeri talked about the potential for advanced search: the ability to navigate more easily and more deeply through music catalogues. “And I know permanant possession is not going to disappear…”