Spotify Defends Its Practices as Another Metal Label Drops Out
Spotify is defending its benefit to artists and labels as another metal label, Prosthetic Records, is pulling its catalog from the cloud-based music service.
“There [does] not appear to be an upside” and payouts are “fractions of pennies,” Prosthetic co-owner E.J. Johantgen told the LA Weekly last week. It’s the third metal label – after Century Media and Metal Blade — to take its catalog down from Spotify. A Century Media statement said “Spotify in its present form isn’t the way forward” and physical sales are “dropping drastically in all countries where Spotify is active.”
At the same time, the blogosphere is alive with commentary on an artist’s blog post with details of payments from various digital service providers, including Spotify. The band, Uniform Motion, which owns its masters, gets 0.3 Euro per Spotify stream, 0.6 Euro for a Deezer stream and about $0.29 per song at subscription download store eMusic.
But Spotify doesn’t want people to think about per-stream payments. “Spotify does not sell streams, but access to music,” it said in a statement sent out members of the media. “Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream.”
Instead, the company argues, the best way to gauge its impact is to measure overall revenues it is generating and how they have grown over time. And that’s actually quite true. Focusing on pre-stream revenue completely ignores the number of times a song is streamed and, thus, ignores total revenue. And since some streaming services are in their early days, the revenue they generate in the future is likely to be far greater than the revenue they generate right now.
But how much listening volume can these services generate? One reason some blog posts about streaming payouts generate so much attention is they show how much volume is needed for streams to equal downloads. For example, a 0.3-cent royalty would have to be earned about 333 times to equal the return from a $1.29 track download. That’s fine if the volume is there, but 333 streams represents a lot of listening. People in the industry know it and everyday consumers know it, too.
The next part to this debate needs to answer the question: Are Spotify and other music services cannibalizing download sales? In other words, what is an artist giving up to be heard on Spotify? ( LA Weekly)
Best Buy’s Stock Down More Than 25%
— Since Best Buy is a major seller of CDs, it’s worth pointing out the company’s stock is down 26.8% in 2011. Its fiscal second-quarter earnings released last week show flat revenue for both the quarter and the first six months of the fiscal year. Revenue from stores open for at least 14 months declined for the fifth straight quarter. And this week there is speculation that Best Buy could close its UK megastores next year. “Best Buy is on a path to becoming a smaller and less profitable company, despite management’s robust efforts,” wrote a Sanford C. Bernstein & Co. analyst in a note to clients, according to Bloomberg.
Comp store sales dropped 3.2% during the quarter while the entertainment category dropped 17.9% — an even sharper decline than the 13.9% deficit in the entertainment category in the same period in 2010. The lone category to improve in the most recent quarter was appliances (up 7.3%) and the only category to experience a decline in the double digits was consumer electronics (down 10.7%). (earnings release)
Daily Deals Still Rock, Study Shows
— Consumers are not tiring of daily deals, according to a study by Rice University and Utpal Dholakia, professor of management at the school lead researcher on the study. Only 13% are buying daily deals less often than they used to and 8% say they have lost interest in daily deals over time. Groupon is faring particularly well: just 1.5% of respondents say they are using Groupon less than they used to. If people aren’t purchasing the deals, there are some good reasons: 45% said they did not know the deals existed and 18% said deals weren’t available in their areas.
Consumers are still interested, but what about businesses? Last year, Professor Dholakia predicted that Groupon would have a difficult time retaining partners. His sample of 150 businesses that ran Groupon deals between June 2009 and August 2010 revealed 42% said they would not run a Groupon promotion again – mainly because the deals attracted low-margin consumers who did not turn into repeat customers. This result, he wrote, is in line with ample academic research that show “price promotions erode brand value and have few, if any, beneficial long-term impacts for businesses.” Another of Dholakia’s studies found that about a quarter of companies lost money on their Groupon promotions.
Perhaps some businesses felt stung by bargain-hunting Groupon customers, but the customers do not appear to have lost their appetite for daily deals. But the bottom line is daily deals must benefit some types of companies and some types of products. After all the criticism and research, Whole Foods must have had more than enough information before deciding to sell 1 million deals ($10 for $20 worth of products) through Groupon competitor Living Social last week. ( AdAge.com)
MySpace’s New Site Delayed
— MySpace has delayed the unveiling of its new site, according to a report at the Wall Street Journal. Instead of a summer news conference, the company’s new owner, Specific Media, will make its debut during the “Advertising Week” conference in New York next month. ( Wall Street Journal)