iTunes Radio a BIG Plus for Musicians

Well its finally here.

For the past couple of years Apple has been teasing us with a music streaming service. To be honest we all knew it was coming, we just didn't know when, and what it was going to do differently.

They finally dropped the hammer on June 10, 2013 at the Worldwide Developers Conference (WWDC) where they showed off the user interface (UI), and then told us we would all have to wait until this fall before we could enjoy it.  You can read their press release on the event here.

And here I am writing about it fifteen days later. Not to on top of it Larochelle.

To be honest when I watched the announcement I wasn't shocked. Like most of us, I knew it was coming. No big deal I thought. Then as the genius of Apple soaked into my brain I realized what just happened.

They found a way to truly monetize streaming.  And that is huge news.

A month before Apple's announcement, the RIAA announced that streaming criteria would be added into their gold and platinum album tallies. For many this is no big deal, but for artists and those in the business of music it was huge. On one side it solidified the fact that streaming was here to stay, and as some will argue (myself included) probably become the main source of how consumers digest music.  The problem with this announcement is that it puts artists in a very awkward spot.

Streaming really doesn't pay. Go ahead Google it and see if artists are making serious money off of the fraction of a cent they get every time someone listens to their intellectual property on their phone or at work. Now the RIAA has solidified it as a true delivery method, which will increase its presence in the market. From here on we are only going to see streaming increase, and with that increase less people buying music.

There are many reasons people won't buy as much music, but one of the biggest is that services such as Pandora, Spotify, and MOG don't offer consumers ways to buy the album from their interfaces. Well some do, but it's not efficient, and the Internet consumer needs efficiency or else they just won't buy.

Apple steps in and solves that problem.  From their UI a consumer can purchase the track they are streaming and instantly add it to their library.

That's the competitive difference between Apple and the other streaming companies out there.

They understand that streaming can be a loss leader (at least it should be with what artists are making from this delivery system), and the moment a consumer is listening to a new track is a prime time to get them to drop $1.29 to own that tune. This is business marketing 101, and without a doubt Apple will reap some serious profits from a huge increase in sales from their iTunes store.

If you are an artist it is time to take note and adopt two simple rules. A.) stop bitching about streaming and get your music through an aggregator ASAP; B.) stop bitching about what Apple pays and get onto their service.  This is now the way music is consumed, and if you want fans you need to be where they will be shopping. You can try all your other ways. You can proposition them on Facebook and Twitter, you can send out Email blasts, you can play shows and sell CD's out of your van. None of these will be as efficient as what Apple is giving you.

They will let people listen to your music a number of ways, for free. And if your song is good enough, if it grabs their attention and encourages them to buy, Apple has given them the easiest way to do that. They can just charge their credit card that is attached to their iTunes account. It's like they aren't really spending money. All this happens without you having to do a thing, and it happens across the planet 24 hours a day, seven days a week.

The bottom line. You are leaving money on the table if you don't. 

Daisy: Direct to (streaming) fans, but not marketed to them.

Two weeks ago Beats Electronics, the company led by Jimmy Iovine and Dr. Dre., announced they were starting their own music streaming service called Daisy that they will launch later this year. In a related move, Beats also made an undisclosed investment in Topspin, the online business that provides back-end digital services for musicians and labels to facilitate the direct to fan model. You can read the full article here from The LA Times.

This business play was recently the theme of serious discussion on this past week's Hypebot's Upward Spiral podcast (by the way if you are a serious musician, or serious about the music industry, you probably should be listening to this podcast). After listening to the show and reading up on the venture. Only one thought comes to mind.

You can seriously tell that the business side of the music industry is run by musicians, and that isn't necessarily a good thing.

 Let me shed some light on this statement.

One of the biggest problems with most bands, is they don't give a damn about the fan, the person who pays for tickets, music, and merch; who, ultimately, puts food on the table for the artist. If they are a cover band, they normally choose songs they want to play, not what the fan wants to hear, and then they complain that nobody is showing up at their gigs. If the band is an all original unit, it is even worse. Most of the time, these groups refuse to play covers and try to force-feed their fans their own (mostly shitty) material. Then, they too, wonder why nobody shows up at their shows.

Now, before I get a million emails from bands telling me they don't do that, I must say this isn't an absolute truth, but I will guarantee it is well north of 80% of the acts out there.

And now we have Beats, run by a musician, moving into the streaming world. And they put another musician, Trent Reznor, in charge as Chief Creative Officer of the new initiative, whatever that means. No offense to Trent, he is one talented guy, and the founder of the CwF=RtB (connect with fans = reason to buy) model, but will this business venture work out with a musician in charge?

I can already see the problem with Daisy. The whole premise behind Daisy, is that it will give fans the chance to buy merchandise, tickets, and downloads direct from the artist, while they stream their favorite tunes. This doesn't appear to be a need set-fort by fans (consumer led marketing), but rather bands and labels (business to business marketing).

So here we go again. We are going to give the world another streaming service with no value proposition for the fans, but for the artists. So what is going to happen? Chances are Joe Blow the music fan won't give a shit, but Jimmy and His Big Dream Band will try, forcing Joe to change from Spotify to Daisy so he will buy concert tickets, merchandise, and music. They will send Joe emails, Twitter feeds, FaceBook Statuses, anything short of aerial cloud writing, hoping to get Joe to switch over from Spotify or Pandora, listen to their music, and hopefully impulse buy tickets.

Does this really appeal to the fan? The person who is the end consumer of the music industry?

My prediction is Daisy will show up with a big splash. It will appeal to bands and record labels, but not to fans. The service will survive with probably the same amount of users as MOG, which is around 500,000, and that will be it. Fans of music will stick to Spotify, Pandora, and iHeart and those ventures will see increased revenue.

That isn't to say the direct to streaming fan model isn't a great idea. It is so great that eventually Spotify, Pandora, and all the other streaming services will adopt Daisy's model. This will kill Beat's new business units value proposition, but will be awesome for musicians and labels. So at least some good will come of this. And for that I say thanks to Iovine, Dre, and Reznor.

What will you do without your own music library?

For years I collected tapes, then CD's, and then digital downloads to build my own personal music collection. When I got hold of a third generation iPod back in 2003 I started to dump all of that music into my iTunes library. Today that library holds about 15,000 tracks.

But over the past year I, like most of you, have switched over from purchasing new music to streaming it through an online music provider. There are many of these services out there. Most notably Spotify, Pandora, and MOG. I choose the later, MOG, and pay about $10 per month so I can download as much music as I want to my fourth generation iPod Touch and iPhone.

Now, I have been pretty impressed with streaming over downloading.  It has allowed me to investigate new music, find new indie bands, and catch up on some old favorites, all without having to drop 99¢ per track or $10 per album. It just seems to make financial sense in these tough economic times.

But with every great idea comes some sort of risk.

I have been following music industry related news for a while now and have noticed two reoccurring themes that trouble me when it comes to my music collection. The first started in October of this year when financial analysts deemed Spotify's business model "unsustainable". You can read the article here.

"In almost a one-for-one scenario, every dollar Spotify is generating immediately exits the company due to licensing fees..."

The second reoccurring theme that is troubling is what is happening right now on Capitol Hill in regards to intellectual property. For months now Pandora has been leading a charge to get Congress to reduce the online royalty payments for artists. It seems investors for the online streaming service need the business to make more money, and they have deemed the best way to do that is by lobbying our Nation's leaders to reduce royalty payments do to the musicians' whose works they are exploiting for profit. Former TuneCore CEO Jeff Prince wrote a great article on this conundrum for Hyperbot. You can get to it here.  

So what do these two themes mean for us streamers?

The answer is simple. The two biggest leaders in the streaming market have been deemed unsustainable. Spotify is surviving through the assistance of venture capital and Pandora is trying to create a stronger business model by challenging the artists they rely on for product. Eventually the venture capitalists backing Spotfiy are going to want out, especially if their forecasts continue to demonstrate they may not get a return on their investment. Investors invest to make money, not for charity. And if Pandora continues to challenge the royalty payments of their artists, those artists are going to stop providing the second giant with product. And if you think musicians need Pandora, just ask Taylor Swift and her management team who proved streaming is a benefit, not a necessity.

This could lead to consumers without a decent streaming service. And for those of us who haven't purchased a CD in months that could lead to thousands of consumers with stale music collections. Imagine what would happen if Spotify and Pandora fell off the map. Sure other companies would take their place. That is the power of capitalism, but consumers would be scared, and chances are they would go back to downloading their favorite music through services such as Amazon and iTunes in record numbers. Maybe Apple and Amazon stock isn't a bad idea at this moment.

Now, I am not saying that streaming will fall off the map, and to be honest I am still streaming over downloading as I write this article, but imagine what would happen if these companies disappeared. How much would you have to charge to your iTunes account in the day after, the week after...the year after?