For Spotify and Pandora, Connecting Artists to Fans Is Good Business

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A computer showing Spotify playing "Sgt Pepper's Lonely Hearts Club Band" by the Beatles. 

With newcomer Apple Music already taking a sizable bite out of the market, competing services Spotify and Pandora hope to differentiate themselves by amping up ways to help artists connect with their fans.

Spotify continues to refine its artist portal feature, which makes Spotify listening data available to artists and their managers for free. The service now offers "access to deep data that includes time of day playlists are being played, activities that accompany the playlists and geographic location of listeners," Jeff Levick, Spotify's Chief Revenue Officer, told Billboard at CES.

Access to this type of data unlocks numerous possibilities, he said. "For artists this can even give them the ability to better manage their tours. They can have the knowledge about where they should be playing certain songs, for example, rather than just doing the same set list everywhere."

Spotify Announces Partnership with Genius, Introduces 'Behind The Lyrics' Playlists

Pandora recently bowed a feature that lets artists create and send an audio message directly to their fans who are listening. "This feature is great for artists to promote new content, live events, music for sale, etc.," Pandora Chief Product Officer Chris Phillips told Billboard at CES. "This feature helps artists reach their fans and find new fans."

On Monday the Financial Times reported Apple Music surpassed 10 million paid subscribers in its first six months. Apple has not confirmed the new figure. In October, CEO Tim Cook said the service Apple Music had 6.5 million paying users, with another 8.5 million on the free trial.

Spotify last reported its user base six months ago, noting that 20 million of its 75 million customers were paying subscribers. Phillips told Billboard that of its current 78 million active users, 3.9 million subscribe to its $4.99/month ad-free Pandora One service. "We have plans to continue evolving Pandora free and paid services, and plan to add on-demand in 2016," Phillips said.

What Apple Music and Spotify's Updated Subscriber Count Really Means

While Spotify isn't specifying its current number of paid subscribers, one benchmark the company is sharing is its 2015 ad revenue. Year-over-year for the fourth quarter of 2015, ad revenue was up 100 percent, and mobile ad revenue was up 200 percent, Levick said. That compares to numbers the company last released, in April 2015, stating a Q1 year-over-year increase of 53 percent in ad revenue, and a 380 percent increase in mobile ad revenue. 

"We've had a great year for monetization from the ad side," Levick said. "In terms of monetization levels we think we are equal to industry standards and we're on a trajectory to take us above that."

He noted brands are now better able to target Spotify audiences because the company is providing them metrics that drill down beyond basics like gender and age. We're looking at things like playlist targeting," Levick said, "so brands can connect with consumers around passion points and deliver the right message in the right context at the right time." Levick also has high hopes for video advertising, which the company launched late last year. 

As one recent example of ad-targeting innovation, Levick pointed to Spotify's partnership with Sony Playstation. "This is an exclusive offering within the Playstation community, where brands can target gamers while they are in the gaming environment," he said.

At Pandora, ad sales made up 81 percent of the company's revenue in Q2 2015 and contributed heavily to the company's landmark $1 billion in revenue for the 12 months ended June 30. The company is continuing to augment ad-targeting features while growing out its mobile music reach. A new Pandora app that packs more discovery options under a feature called Broswse is currently available to a "small percentage" of listeners on mobile iOS and Android with broad deployment coming this year, Phillips said.

Pandora will also look to leverage its recent acquisitions. With its October purchase of Ticketfly, "our listeners will enjoy the ability to discover concerts from artists they love while listening to Pandora," Phillips said. With its newly acquired assets from Rdio (including many execs), "we will be adding on-demand features into Pandora's paid subscription in late 2016," he said.

While Spotify and Pandora brace themselves for increased competition, both Levick and Phillips had the same answer to what looked most enticing on this year's CES show floor: Virtual reality.


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