Twitter Launches Music Service With Business Partners to Become Major Media Platform

When Ryan Seacrest tweeted about "lovin" the new Twitter #music app, he was playing a small but critical role in Twitter's grand ambitions to position itself as a next-generation media platform--and it's looking to the music business and its artists as a major building block.

The app, released April 18 to the broader public after a prerelease for Seacrest and a handful of music influencers, is the latest attempt by Twitter to branch out beyond the confines of its self-imposed 140-character limit and delve into the world of richer media where bigger business opportunities like advertising exist.

In January, Twitter jumped into video when it released Vine, an app that lets users capture and post videos lasting up to six seconds, and is already being used creatively by bands like Daft Punk. Last year, Twitter bought Posterous with hopes of competing against Pinterest and Instagram for photo blogging. It's also reportedly negotiating deals to distribute video from Viacom and Comcast's NBC, offering to split ad revenue for a Twitter TV-like experience, according to Bloomberg.

"I find it promising the Twitter music app provides a way for fans to both discover and transact with an artist via a very visible and mainstream platform," Epitaph Records VP of digital strategy Jason Feinberg says. "There are a lot of niche or gated services out there that help a fan discover music, then give them multiple options on how to buy, stream or share. But few have the reach and critical mass of Twitter."

Opening up the avenues for additional advertising channels is key for Twitter if the company moves forward with an initial public offering. Last year, it generated $288.3 million in ad revenue, according to eMarketer estimates. This year, that figure is expected to double to $582.8 million, eMarketer says. Compared with Google's annual revenue of $46 billion in 2012, however, Twitter's barely getting started.

For Twitter to have a chance at grabbing a slice of this much larger pie, it needs compelling content like music but also star power-the kind that Seacrest, Jason Mraz, Moby and other major artists wield. Half of Twitter's 200 million active users follow at least one musician. Artists also drive much of the conversation on Twitter. The top five most-followed accounts in 2012 were musicians--Lady Gaga, Justin Bieber, Katy Perry, Rihanna and Britney Spears. The music service is designed to help Twitter users receive suggestions of established and emerging artists based on which artists a user follows and what tracks a user tweets.

According to music analytics provider Next Big Sound, on a per-artist basis, acts are now adding an average of 3,200 new followers on the platform per month, versus 1,800 per month in 2011, an increase of 80%.

Premium content will help build ­Twitter's audience to a size that could command the attention of large advertisers. And it needs many different products for those advertisers besides sponsored tweets and promoted accounts. That's where Spotify, Rdio and, eventually, Vevo come in. Through Spotify and Rdio, Twitter serves up songs without having to pay for music licenses, thereby serving as an even more seamless and efficient music discovery service than it has been so far-something the music biz values highly. Once Twitter finalizes a deal with Vevo, it'll be able to add music videos as well.

In return, Spotify and Rdio have additional opportunities to acquire new customers, and Vevo will get additional distribution.


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