Online Radio / Music Streaming needs a better Business Model

Over the course of the semester I’ve been writing about developments in the streaming services sector of the music industry.  These services have seen expansive growth in terms of revenue, but to date have been unable to make a profit.

Image

Many critics believe that the main issue contributing to this problem is the high cost of music royalties. (In 2012, Pandora paid 54% of its revenue for “content acquisition, while Spotify CEO Daniel Ek has recently stated his company has paid over 70% of its income to the recorded music industry).   The cost to license music without a doubt contributes to the net losses of these services, one must consider the business models they employ and evaluate the effectiveness of these strategies.  Consider the following charts:

Distribution of Spotify’s revenues from 2009 to 2011

Pandora’s revenues from 2007 – 2012 by source

Pandora’s revenue sources 2007 to 2012

Granted, the Spotify chart displays distribution of revenues by percentage and the Pandora chart displays total revenues by each source, but the message is clear in both cases – Both services (as well as the majority of similar services) heavily rely on advertising dollars, and far less on subscription services while attempting to subsidize their extremely large group of free users.  It’s no question that online radio and streaming services have brought about the new age in music consumption where access is replacing ownership, but as it stands today, the most popular services have yet to made a profit, while copyright holders (labels, artists, publishers, etc) feel they aren’t compensated enough for their works available on these services. One thing is clear, however, that being both online radio/streaming services and copyright holders need each other in order to succeed – A business model that satisfies all parties involved is clearly needed for the music industry to witness growth in the digital age

Are You Scrobbling Yet?

Last week I talked about Contract Riders.  It was fun to write about and hopefully a good read for you guys and I’d like to keep things in the scheme of funny/casual things; it’s nice to talk about the lighthearted things in the industry considering we’re peppered with record label conspiracy a lot.

Today I’d like to bring up Last FM and its popular feature, Scrobbling.  This feature has been around for quite some time and I feel that it has been often neglected in the every day conversation with your fellow audiophiles; it’s a real downer to be honest because this is such a cool feature.

Now the word itself just sounds plain weird.  I’m positive someone who has no clue about it or didn’t see the banner I posted up ahead about it being a feature from Last.fm would assume it’s a code word or slang for some disturbing sexual or criminal act.  The good thing is that it isn’t.  Scrobbling is the feature Last.fm has which transfers your Spotify, iTunes, and various other media players’ data to the Last.fm database.  You first create an account on Last.fm, then you download the Scrobbler app online.  Once you install the Scrobbler, you’ll be given the option to import all the playback data from your iTunes that you’ve been using since you first opened the application.  This includes all of the “column” options in iTunes, from number of plays, number of artists in your library, the date you had each individual play for each individual song, your ratings for your artists, and your trends in genre choice from the relationship between each artist you’ve listened to.  It’s extremely extensive.

On top of taking in all this data, it will from then on work in the background, constantly “scrobbling” your iTunes plays, continuing to update your Last.fm profile with newer data each time you get hooked on the next song.  You can also select tracks you “love” while also “banning” songs you dislike.  It basically serves as a piggyback app that opens automatically as you open iTunes to keep your Last.fm data as an accurate representation of your taste in music, not to mention it runs a neat notification in the upper right area of your screen to let you know what song just started playing.  It even works offline by caching your playback data for up to 2 weeks without wifi/data.  And recently, streaming app Spotify has been optimized for scrobbling through this app as well.

With this data, Last.fm can create custom playlists based on your preference.  It is unlike the regular Last.fm radio because it won’t just stream a random artist that’s “recommended” because you listen to another artist of a similar genre.  It’ll go through your data and pick the artist with the most plays, focus on artists you’ve played recently, and skip out on the songs you clearly haven’t paid a lot of attention to.  The cool part is that if you can get a big enough network of friends on Last.fm, you can check out what your friends are currently listening to and check out their data as well, along with checking your “compatibility,” or common interests in music, with one another.  Of course, Spotify allows you to see what your friends are checking out too; but again, this is an app that piggybacks on Spotify and iTunes: it is constantly shaping an accessible representation of what you believe is good music.

People who are taken aback by this feature are most likely to say “well what if I don’t want people to know what I’m listening to?”  My answer would be: is that really the case?  Why would you be afraid or upset about sharing what you’re listening to or representing what you think is good music?  I always found the point of listening to music is finding out how to be social without needing to be unique or vice verse with fitting in.  There really should be nothing to hide with what we listen to, it is about spreading the word after all.

At first it does not seem like much, and there might be a few of you who have already been using this; however, the true fun of this scrobbling feature will be obvious once a big enough network is created where you can really check out what the identity of your friends’ tastes in music are.  So go to Last.fm right now, set up an account, download the scrobbler, import your iTunes data, and then hop on to iTunes or Spotify and continue to be the audiophile you are, because now you’ll be able to really keep track of what you’re interested in.  Last step?  Tell your friends!