Spotify, Rdio, Xbox Music Reps Debates the Merits of Subscription Music Streaming at SXSW

With the rapid growth of platforms like Spotify and Deezer -- and white hot rumors of competing offerings emanating from the likes of Apple and Google -- it’s no surprise that the rise of music streaming subscription services is some of the most buzzed about topics at SXSW. A panel at the Austin Convention Center on Wednesday took one of the biggest questions surrounding the topic head-on: What’s the outlook for revenues?
 
Representatives from Spotify, Rdio, Xbox Music, Metal Blade Records, and Crush Music and Media Management participated in the panel, which was moderated by Digitalmusic.org’s Antony Bruno.
 
“I think it was [music lawyer and author] Don Passman who made the point recently comparing streaming now to the early days of the CD,” said Dan Kruchkow, head of marketing and media management for Crush. “It wasn’t a giant revenue driver back then, royalties were low, and look at what thatbecame. There’s a lot of opportunity in streaming, particularly with regards to discovery. And I don’t think this is a situation where you can swim against the stream.”
 
Pivoting from that unintentional pun, the topic turned to artists and labels who decide to withhold or delay their music from streaming services and why. Most on the panel expressed frustration and bewilderment with these instances, which they pointed out are becoming few and far between.
 
“I think these are fringe cases that get played up in the media,” said Steve Savoca, head of content for Spotify, responding to a question about the Black Keys’ decision to withhold its Grammy-winning 2011 album, “El Camino,” from the service.

“You can count on one-and–a-half hands the number of artists that don’t work with us,” Savoca said. “It’s the exception rather than the rule, and I don’t understand the reasoning for the ones who decide to do that.”
 
Adam Rabinovitz, director of artist relations for Rdio, concurred. “I think a lot of it is about education,” he said. ”If someone reads about the Black Keys and makes a decision based on that, then they’re making a big mistake. I think the fact is that no one who understands the opportunity presented by these services, especially with regards to discovery, willfully chooses not to be on them.”
 
The panelists seemed to conclude that the justification for withholding, in some cases, is ineffable. “I’ve talked to quite a few managers of artists who are holding out and they can never give me a good reason,” said Christina Calio, director of music industry relations and strategy at Xbox Music. “It’s a gut thing.”
 
Savoca said Spotify is continuing to drive revenue into the music industry by consistently converting users of its free tier into paid subscribers. The Sweden-based service announced a milestone of six million paid subscribers worldwide earlier at this conference.
 
“What we said is if you’re competing with piracy, you can’t expect people to plunk down a credit card right out of the gate,” he said of the company’s now-famous strategy. “But over time, people see the value and they convert. And they’re converting in large numbers.”
 
On Xbox Music, which offers both a streaming subscription and MP3 downloads, Calio said she was surprised to discover that the two aren’t mutually exclusive. “Our subscribers are our biggest purchasers of downloads,” she said.
 
Acknowledging the persistent popularity of downloads despite advances in streaming, Savoca said the distinction between what is considered a download and what is considered a stream will become increasingly nebulous.
 
“The notion of ownership is still very real for people and so consumer behavior hasn’t changed,” he said. “Right now downloads and streams are complimentary to one another. But in the future, as technology improves, they’ll be indistinguishable.”
 
In addition to revenue, the panel discussed the potential benefits to be gained from streaming data. “The number one thing I got asked at MIDEM this year was for more data,” Calio said. “Managers would say to me, ‘We’ll give you the royalties, just give us the data.’”
 
Savoca said the usage of big data to drive decision-making in the industry is still in its infancy. “There are so many interesting things to learn, like how did the existing fanbase respond to the new album? Did they avoid it? Did their numbers grow? People don’t think about this stuff because they’re focused on unit sales,” he said.