British virtual-reality startup MelodyVR has completed its set of major-label licensing deals, with Sony Music joining Warner Music and Universal Music on its partnerships slate.
The deal brings MelodyVR a step closer to a commercial launch of its VR music app, which has been in closed beta since late 2016. However, CEO Anthony Matchett has told Music Ally that the company is picking its moment to launch, and may wait until early 2018.
Matchett also said that MelodyVR’s plans have evolved from its original focus on live music performances. Those still make up around 50% of the company’s content, but it is now filming other kinds of video and exploring interactive VR experiences.
The deal with Sony Music, like the startup’s deals with Warner and Universal, a multi-year ‘content development and distribution’ agreement.
MelodyVR gets the rights to create VR content with Sony artists and have it exclusively “initially” before a period of “joint exploitation” – in other words, partner labels will be able to distribute it through other apps, including their own.
Sony is also taking a stake in MelodyVR’s parent company EVR Holdings, which is publicly listed on the UK’s AIM stock exchange. Matchett told Music Ally that the company has been working hard to secure all three deals, in a still-nascent area of licensing for labels.
“It took us a little while. The labels have been incredible in terms of embracing what we do. Frankly, no one had done a deal like this before, so it took a while to work out the kinks,” he said.
MelodyVR wasn’t trying to license 30m-plus tracks like a streaming service would; nor was it – under its original plans – licensing recorded-music at all, focusing instead on filming live performances. Why does it need label deals in the first place?
“We’re still very focused on live events and concerts: that’s 50% of what we’re doing still. But now the other 50% is our own bespoke content, or original content strategy,” said Matchett.
“Instead of a live show, it’s something more intimate, delivering that one-on-one connection between fans and artists. That could be an acoustic performance in a studio; or on a slightly more complex level, putting them in a set and having a bit more of a narrative; and we’re doing a lot more interactive work too: interactive album samplers for example. It’s all sorts of bespoke content.”
That’s why MelodyVR went looking for deals with the major labels. The company is thought to have been offering revenue-share based agreements rather than going down the path of advance payments. Matchett declined to comment on the specifics, although he talked more generally.
“We’re aware that with the traditional streaming services, a lot of people have struggled to turn a profit: to make enough turnover to cover their costs,” he says.
“A lot of streaming services are lossmaking, so with VR we are trying to see how we can inject a bit more value into the premium content, while making sure our deals ensure we’re not lossmaking.”
With its app still in closed beta, MelodyVR isn’t making any revenues at all yet. EVR Holdings’ last financial results showed a net loss of just over £2.6m in 2016. However, the company has been lengthening its runway through new placements of shares: £3.4m in November 2016 then £5m in June 2017.
Matchett said that MelodyVR has already taken several lessons from its closed-beta test. For example, the “sweet spot” for beta users appears to be around 30 minutes per session, although he hopes that will increase as VR headsets improve.
“We tend to find that people either like the really big, grand experiences – where they’re on stage in front of 50,000 people – or the more-intimate experiences with artists in the studio and one-on-one. The stuff in the middle still performs well, but those are the two routes that a lot of people go,” he said.
MelodyVR isn’t yet ready to set in stone its business model for charging for all this content, although Matchett said the likely launch strategy remains an iTunes-style ‘a la carte’ model where people pay per performance/experience.
“From the time we spend with our hardware partners, the headset manufacturers, what we see is that people are still really willing to make purchases [in the VR world] – they like buying things! So we will probably launch with that,” he said.
“We are thinking about other interesting models that play on the way people interact. Not all-you-can-eat [subscription] but maybe they will be able to pay for an hour of any content they want. It’s still early days.”
“We’re a little way out from seeing a subscription models. We’re at around 11m headsets in the market now. When that market gets to 50m or 100m headsets, maybe then will be the time to look at other ways to charge for VR content.”
MelodyVR remains agnostic when it comes to the question of which headsets it supports: from a 2D version of its app designed to run on headset-less smartphones, through mobile VR headsets like Samsung’s Gear VR to the ‘tethered’ likes of PlayStationVR, HTC Vive and Oculus Rift.
“Mobile is very cheap, very accessible and it has the most users, so it’s a huge target for us. Mobile currently rules the roost. But quality-wise, I think the experience with a Rift is great, even though less people have one,” he said.
There will be a middle ground between mobile and tethered VR: standalone headsets with their own screens and computing power, with neither tethered PC nor slotted-in smartphone required. HTC has announced plans to launch one in late 2017, while Facebook is reportedly working on one for 2018.
“$200, with a screen so you don’t need to use your phone, and an all-in-one device with no wires seems like a wonderful thing,” said Matchett of the general category. He is optimistic about the market’s development.
“Over the next year to 18 months, we’re going to see the prices come right down, and every device has its own unique selling points, and pros and cons. PlayStationVR is very interesting: there are 60m PlayStation 4’s in the world,” he said.
“Oculus also powers the Gear VR, there are 7-8m of those out there. Google are fighting very hard with Daydream, so we’re still at the start of that. And we haven’t seen Apple come in yet, so that may be the elephant in the room, even if they’ve been talking more about augmented reality recently.”
The growth in the number of headsets out in the wild (and strapped to people’s faces) is going to have a direct impact on MelodyVR’s plans for commercially launching its app. In fact, it’s this rather than label deals or the number of artists filmed – that’s up to more than 540 now – which will determine the timescale.
“We haven’t announced a launch date, and there are a number of variables. One is the amount of headsets out there in the market. In our eyes we want it to be somewhere between 20m and 30m, and we’re at 11m today,” said Matchett.
“We think that might happen towards Christmas, with a lot of potential new devices coming this year. If it does, that would be an amazing time to launch, but if the market is a little bit slower, maybe we’ll go early next year. But we’re not going to wait forever. There is an opportune moment when the market is the right size.”
Matchett said that MelodyVR is determined to “make a bang” when it does launch, with a three to four-month buildup beforehand of press, social and other marketing activity. That will include videos made with artists – an early example being this “official 360° video” for Lewis Watson.
It’s hoping for more marketing partnerships with VR hardware/platform firms, following its recent agreement with Microsoft around Windows Mixed Reality headsets.
“With someone like Microsoft, it’s partly technical support – they have 20,000 engineers and we’ve got eight, so that’s helpful! – but also about how can they market us to half a billion current Windows consumers?” said Matchett.
“The big goliaths of the technology industry have such great access to consumers. Yes, we’ll be working with everyone to get our app on their devices and in their stores, but it’s also about looking at how we can work together more closely.”
“We just want people to understand that there is music on these VR devices. Music for me is so important on every device: phones, TVs, games consoles. And we think it’s going to be just as important for VR.”
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Melody would need a license from the labels for live music. An artist is under exclusive contract with its label. It cannot record/distribute/stream live performances without their sign off. Once they are out of contract, they can do whatever they want with newly recorded/streamed/distributed live versions.
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