As streaming and satellite radio services represent an increasingly larger piece of the music consumption puzzle (the services now account for 27% of global revenues), streaming companies and labels’ monetization question is loud and clear. The two parties have to pay their artists streaming royalties. But where’s the money coming from? It’s no secret that neither Spotify nor Pandora are profitable. Monday’s panels at the New Music Seminar in New York explored how best to monetize streaming music as well as how the changing ecosystem is effecting independent labels.
In “Turning the Stream Into a River,” execs from Sony, Google, SoundExchange and SiriusXM spoke on streaming music’s lessons for success. The panel used satellite radio service SiriusXM as a poster model, lauding its distribution model in cars and wide variety of human DJ-curated music (as well as non-music stations) to drive new subscriptions. The service has grown to 25 million paid subscriptions in the US and Canada, far more than Spotify’s 3 million subscriptions in the U.S. Pandora, which primarily monetizes through ad revenue, claims 77 million active users.
All of the execs agreed that bundling, a la SiriusXM, is integral to the growth of the streaming music industry. “[Bundling] gets over great barriers to entry, provides credit by bundling (with car) and makes it easier for the consumer to pay for the experience itself,” said Dennis Kooker, president, global digital business and U.S. sales, Sony Music. Both Beats Music and Spotify have recently announced plans to bundle their services with mobile phone plans. Growth in the music subscription user base should then help shift more of the $17 billion in radio ad sales each year to streaming services.
In “Independent Labels Coming to Power,” a panel documenting the increasing clout that independent labels have in this new music market (35% of the sales market share in U.S.), indie label execs cited the diminishing power of radio, increased entrepreneurship and changing music distribution models for music as drivers of growth. “‘Indie’ is more of a replacement [word] for ‘entrepreneur,’” said Craig Balsam, co-founder, Razor & Tie. “Ultimately, [they’re] entrepreneurs who found great music.”
The eight label execs on the panel came from a broad spectrum of backgrounds, from a former major label player (Michael Goldstone, owner, Mom + Pop Records) to a rural producer who bred the beginnings of country rap (Shannon Houchins, CEO, Average Joes). Common amongst all of these labels, though, are fewer market pressures, enthusiasm, transparency and an emphasis on personal relationships. Combined with an ever-splintering music industry, indies have more opportunity than before. “Radio and MTV are less important. There are outlets that indies rely upon: non-commercial radio, licensing, NPR, Sirius XM,” said Kris Gillespie, GM of Domino, who helped the Arctic Monkeys to global success even when U.S. commercial radio wasn’t on their side.
The panel did also shed light on the large obstacles that indies still face: small budgets, difficulties getting commercial radio play, lower streaming royalties on a per stream basis, among others. “It’s not a level playing field. It’s a resources issue,” Jon Salter, GM, ATO. “We’re not trying to make it level, we’re just trying to get more exposure. There are other ways to help us build steam… and we stick with artists for a long time.”