Posts Tagged ‘spotify’

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Online media must not become a paid-for cartel

September 16, 2009

Rupert Murdoch once again gave a boost to media-by-subscription at yesterday’s Goldman Sachs Communacopia conference in New York.  In a speech where he reported a rebound in the advertising market, he reiterated that News Corp media had plans to increase non-advertising revenue.

The media is now lining up behind the idea that there is money to be made through subscriptions, via either a ‘freemium’ model, offering additional benefits to subscribers, or through micro-payments.

Their long reluctance to go down the paid-for route online suggests that their former view – that ad revenue lost through reduced reader/viewer figures could not be recouped by subscriptions – has changed.

So what makes the subscription model seem so appealing now?  Here are three suggestions:

  1. Ad revenue per media channel is projected to fall so far in the near future that the subscription model is now viable. This is quite conceivable, given the proliferation of media channels.
  2. New technologies such as mobile devices and electronic readers offer a point of difference worth paying for. With Spotify and the Wall Street Journal just two channels offering mobile content for a fee, it suggests mobile devices could boost subscriptions in a previously unachievable way.  As Murdoch said at Communacopia : I do certainly see the day when more people will be buying their newspapers on portable reading panels than on crushed trees.
  3. The mainstream media now believes it can corner the market for paid-for news/analysis.  Recent moves to centralise electronic media behind specific techologies, such as mydigitalnewspaper.com , Google Fast Flip and Journalism Online (which is specifically a payments system) mean the mainstream media may increasingly be able to behave like a cartel. Early moves towards paid-for models by the Financial Times and New York Times may be followed by a mass shift to paid-for online news.

Paid-for online services should theoretically be more customer-focused and financially sustainable than those that are ad-funded – but if pricing were to be set in an uncompetitive way, that would be an unfortunate outcome.

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5 Reasons to Pay for Spotify

July 28, 2009

SpotifyI was recently singled out at a music industry event for being the only person of over 100 attendees to pay for Spotify Premium.

“So you’re the one” was called out. There were suppressed sniggers. One or two people actually booed me – which I still don’t quite get.

But what really hit home was the general consensus that I was naive for paying for something that is available for free elsewhere.

So why do I pay? Here are my five reasons for paying for Spotify:

  1. It’s excellent value.  This may not be true for everyone, but through buying CDs, second-hand vinyl and digital music on iTunes, I have spent between £10 and £30 per month on music since I was 18.  Spotify is, to a slightly above-average music user, a bargain.  And as the library grows, it gets better value every week.
  2. Adverts lead to censorship.  I don’t argue against adverts because of the quality of their content (though people tell me Spotify ads are particularly special in this regard).  Rather, I am opposed to the censorial impact advertisers can have.  It is something that has been well-documented, brilliantly summed up by Naomi Klein in No Logo.  For example, if a brand does not like swearing, and Spotify wants to carry that brand’s adverts, it will have to ban songs containing swearing.  Censorship is always just a dollar payment away.
  3. You can’t lose it.  Contrary to some people’s views, music you don’t own is more secure than music sitting on a shelf in your home.  I’ve lost a least 100 songs that I purchased on iTunes in the past two years – once through a computer failure, once through a relationship failure (the songs went with the laptop, TV and sofa).  It’s nothing new – think of all the fights there have ever been over who owned which bits of the vinyl collection.
  4. It’s going mobile.  It is likely that it will be available shortly on the iPhone and other 3G devices, for Premium users only.  If the user interface on the mobile devices is as good as it is on the computer (with the caveat that content discovery could be improved), it will be a huge winner.
  5. The economic sustainability argument.  The music ecosystem requires people to pay for it.  If everyone pays, the music industry and writers profit and there is downward pressure on the price for the service.  If nobody pays, the market fails.  In between, there is an equilibrium.

So, on the grounds that I really like the service, and I would like to pay as little as possible for it, I have to declare a big and blatant self-interest in urging others to join me and enjoy Spotify ad-free.

Update | 13.45 | 28 July  Official UK music industry figures suggest that I am actually quite a heavy music buyer.  According to a story in The Times today:

…Spotify [asks] customers to pay £120 a year for the service, when, on average, music buyers spent half that amount on music purchases last year, according to research for the BPI, the record industry trade association.

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Spotify or Soundcloud: future of music payment

July 16, 2009

Tonight, I was at a great event organised by Chinwag called “Music – who Pays the Piper?”, that examined future revenue generation in the music industry.  It was refreshing that the panel members were unanimous on one thing – music can’t be free.  Or, in other words, artists should be paid for creating something valuable.

But what was most inspiring was the range of ideas put forward about how music creation might be rewarded.  This is a very rough summary of some of the ideas put forward by the panel – Dave Haynes, UK Manager at Soundcloud; Dom Hodge, Associate Director at Frukt Music; Helienne Lidvall, journalist and blogger at The Guardian and a songwriter; Jon Mitchell, Sales Director at Spotify and Richard Jacobs, Head of Radio at MediaCom.

Dave Haynes: the age of the CD is over.  A premium will be put on originality – remixes and music created collaboratively will become more valuable – in fact, music can already be developed entirely in the cloud, enabling collaborative creation of the music itself.  This collaborative creation is where value can be added to the music – what happens then is not important – ad-funding, fan-payments or brand sponsorship – Dave does not really care!

Dom Hodge: one of the most important recent changes to the music industry has been the new emphasis on access, rather than ownership (e.g. the streaming model used by Spotify).  A solution to the stifling of innovation in the music industry would be for the major labels to acquire equity stakes in successful start-ups, rather than to shut them down – an intriguing idea. Fans will pay for music.

Helienne (pronounced as Korean): the obvious revenue generator is touring – but not everyone can make money this way.  The industry rule of thumb is that the break-even point is when you can fill the Shepherd’s Bush Empire (capacity 2,000). Other ways of making money don’t necessarily work: Helienne has received millions of plays on YouTube but been paid only about £30 royalties.  From online sales, record labels make about ten times as much as song-writers.  She argued against flat-rate fees for music.  Brand advertisers will end up funding music.

Jon: Spotify has reached 2m users within five months, but it is still a long way from making money.  The entire room was asked “who has not used Spotify?” – nobody put their hand up to that.  But when asked who pays for Spotify Premium, only one person in the room raised their hand – me.  Jon said artists must be compensated, and alluded to innovations and growth in the ad-funded Spotify service.  He also mentioned that – in the very long term – individuals should have access to Spotify too.  Ads will eventually pay for music.

Richard: brand relationships in the music industry are becoming more important and this is going to continue.  Media buyers such as MediaCom are hearing from countless new music streaming sites every week attempting to pick up ad revenue – but the vast majority are not worth looking at.  Fragmentation is nobody’s friend, and Richard advocated a collaborative approach to media selling among streaming services.  He emphasised that the biggest consideration is the connection between brands and the music site – and in that sense, media buyers are increasingly becoming the financial gatekeepers of the music industry – if the song doesn’t fit the brand perfectly, then it is Richard’s job to pull out of the deal.  He felt an ad- and sponsorship-funded music industry was inevitable.

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The economics of the ad-funded web

March 28, 2009

Why should we have to pay for information and services we receive over the internet?  I have never had to pay before now for things like Facebook, Gmail or Twitter.  I can use Spotify for free.  I have not bought a newspaper for years, but can still read The Times and The Guardian every day.

Right?

Well, I am quickly coming round to the view that this is not nearly as simple an argument as people make it sound.  I think we may have this one wrong.

Here is a confession: I would rather pay £10 a month to use Spotify without adverts.  Why?  Partly this is aesthetic – I just don’t want my playlists interrupted by sponsors’ messages.  But there is also an economic angle – since I am unlikely to buy  many CDs ever again, Spotify will save me much more than £10 a month.  So why on earth would I complain about paying for such a brilliant service?

Yet people feel very strongly about this – why should we pay for something when we got it for free before now?  The truth is, there is no such thing as a free service.  We pay for the services we value, one way or another.  In the main, these services are ad-funded, meaning that some brand is actually paying for its delivery.  They are not doing this for free.  Every time you buy that brand, you just paid for the so-called “free” service too.

What’s wrong with this?  Two things.  If I am a consumer of the brand in question, but not the net service, why should I fund both? Better I pay for what I use.

Secondly, this approach is inefficient. The way to ensure consumers get the best deal is to have price transparency and competition.  If a net service is ad-funded, we have no way of knowing whether the brand is striking a good deal or not.  The problem for consumers here is that, if the brand pays more than it needed to advertise, the only losers are that brand’s consumers, who end up paying more.  And the only winners from this are the owners of the “free” service. The money is flowing from my wallet into their bank account.

I’d rather just pay for what I use, thanks.

(Hat tip to my friend @masoke who got me thinking about this via a 140-chars argument on Twitter!)

Update: Someone pointed out this all-encompassing “how to” on getting paid for online content, and it cited an excerpt from the brilliant Time magazine article on micropayments for newspapers that got me started in the first place: “One of history’s ironies is that hypertext — an embedded Web link that refers you to another page or site — had been invented by Ted Nelson in the early 1960s with the goal of enabling micropayments for content. He wanted to make sure that the people who created good stuff got rewarded for it. In his vision, all links on a page would facilitate the accrual of small, automatic payments for whatever content was accessed.”  He got it!