You don’t need to be an industry expert to see that music streaming services have experienced a major boom in the last twelve months, with recent reports from England’s IFPI and America’s RIAA both offering up raw data that shows that the likes of Spotify, Deezer, Rdio and Pandora now make significant contributions to the health and financial growth of the music industry.
In the USA in particular, the RIAA’s 2012 sales report demonstrated that on-demand music subscription services, as well as online streaming sites (like YouTube and Vimeo) accounted for over $1 billion in music sales in 2012, with the report labelling these “access models” has having a 15% share, that has grown five times over since contributing just 3% in 2007.
With numbers like that, it’s no surprise that many IT giants are looking to get in on the act, with Google, Apple, and even Twitter all announcing plans for their own music streaming services; the latest to be added to that list is the internet’s biggest online retailer, Amazon.
As a report from The Verge citing “multiple sources” indicates, Amazon has begun talks with “various music companies” about starting its own on-demand music subscription service, with a model similar to that of market leaders Spotify and Deezer.
Details are scarce, but The Verge notes that the online retailer has had ‘informal’ talks with record companies, presumably over digital rights and licensing rates in putting together a music service that would complement (or perhaps even replace) its current online mp3 service, a major rival to Apple’s iTunes store ever since its launch in January 2008.
A move from Amazon into what is already a very competitive and crowded market demonstrates that despite the ongoing growth of traditional digital music sales models – such as Amazon mp3 and iTunes as demonstrated in IFPI’s Digital Music Report – many are moving towards the new horizons of music streaming. Amazon has begun talks with “various music companies” about starting its own on-demand music subscription service, with a model similar to that of market leaders Spotify and Deezer.
Deezer CEO Axel Dauchez even recently proclaimed that he sees “the end of music downloads as coming this year,” before elaborating that streaming services would mark the death knell of the traditional music download “not in terms of volumes but in terms of the concept.”
“It’s a point, for me, like five years ago when Gmail conceptually killed Microsoft Exchange. You couldn’t imagine having your emails stacked somewhere close to you any more,” said Dauchez, before back-pedalling slightly and saying that the there was “no prediction about the timing of the shift.”
“So many big interests are involved. For example, when will Apple have an interest to sacrifice its current model to move to the next one? Nobody knows,” remarked the Deezer CEO.
A fair point, especially considering the IT giant’s continued struggles in launching a music streaming service modelled on internet radio site Pandora. Codenamed iRadio, the new web based radio service faced a major stumbling block with Apple criticised by record labels as being ‘way too cheap’ for initially offering a meagre US 6 cents per 100 songs streamed – half of what Pandora offers and well below the rate set by the Copyright Royalty Board (21 cents per 100 songs streamed).
But despite those struggles, another recent report from The Verge reveals that Apple has made “significant progress” in talks with record label majors Universal and Warner, with one unnamed source telling the website that Apple was determined to launch by America’s summer (June – September), noting “iRadio is coming. There’s no doubt about it anymore.”
In the same report, RIAA CEO Cary Sherman emphasised the growing importance of “access models” to the music industry’s profitability. “Access models are our present and our future,” said Sherman, emphasising how “vital it is to protect these increasingly important revenue streams.”
Meanwhile, Spotify – which still reportedly runs at a loss despite its large share of the market – has been in negotiations with the ‘Big Three’ – Sony, Warner, and Universal – about renegotiating lower licensing costs, as part of an expansion that will extend its online 30-day ad-backed free trial model to mobile, which currently only supports its premium subscription service. “Access models are our present and our future… [it’s vital to] protect these increasingly important revenue streams.” – RIAA CEO Cary Sherman
The royalty negotiations follow the news that Spotify is also looking into get into the video streaming market, expanding to compete directly with the likes of YouTube and America’s NetFlix service with a video and movie content arm to its current music streaming model.
Spotify has been pushing its expansion to its service, which now as 6 million paying subscribers, following the $100 million investment from the likes of Coca-Cola and Goldman Sachs last year, while leading competitor Deezer recently upgraded its API services to include a rewards scheme, bolstering its growing 3 million paid subscribers across 182 countries worldwide.
Amazon and Apple’s entry into the streaming market aren’t the only big names looking to get a slice of the action. Social media giant Twitter has reportedly bought up Aussie music aggregate We Are Hunted and looking to launch its own music service. Google have also teased plans to announce their own music streaming service, but have drawn criticism from record labels and musicians alike after the revamp of their search engine formula and algorithms last year failed to live up to its promise of discouraging users from visiting illegal music websites.
Closer to home, there’s the recently launched Songl, a partnership between Aussie network giant Southern Cross Austereo and label majors Sony and Universal, while Rdio Australia has a new boss at the helm of its growing local expansion.
Meanwhile, ‘Daisy’ the music streaming service from Beats Electronics and Nine Inch Nails/How To Destroy Angels frontman Trent Reznor, recently received $60 million in funding from investors – including Aussie media mogul James Packer – interested in seeing the on-demand subscription service bring its ambitious ideas to fruition.
Namely, looking to do for the streaming service boom what the iPod did for the mp3 last generation, revolutionising the industry with a new business model that proverbially wraps Amazon, Ticketek, and iTunes all into a one-stop digital location focused on musical exploration, with artists like Reznor as the navigator.