Quantcast

I.B. BAD ON THE SUBSCRIPTION COMPETITION


SETTING SAIL: 2015 will be a critical year for the music industry. Indeed, what happens during the next few months could seal the fate of the business as we know it, either setting the wheels in motion for a return to real prosperity, or cementing the status quo for a still-viable but contracted business. UMG’s Lucian Grainge and Sony Music’s Doug Morris are united in the belief that subscription is the future, and several entities are vying to become the service that shifts the paradigm. Given the enormously high stakes, it’s little wonder that practically everyone is praying the new Apple premium streaming service succeeds. At this point, a hopeful industry views Jimmy Iovine as its potential champion, buoyed by the notion that if anybody can fix this mess, it’s the most successful music executive of the last quarter century. But negotiations with the rights holders are still going on, and Apple is a tough negotiator with a ton of leverage, determined to strike deals for windows of exclusivity on high-profile acts. The length of these exclusive windows is potentially an issue to overcome, but the concept promises to be a big look for the right artists.

Apple’s forthcoming entry will be engaged in a competition for dominance with established but problematic service Spotify, as well as mighty Google, which is also in the process of developing a premium service in YouTube’s Music Key while attempting to grow Google play, and what promises to be an intriguing new custom entity from Jay Z, about which next to nothing is known thus far.

In recent weeks, Grainge and Morris have been leading the charge in an offensive against unlimited free streaming, a strategy previously embraced by the rights holders that they’ve now concluded is a dead end. Said one impassioned top-level exec, “If you can get something for free, why would you pay for it? College dorms are packed with people who don’t pay for music, and as long as they can get all they want for free, they will never pay.”

The rights holders’ initial target is Spotify, which has failed to convert free users to subscribers quickly enough. UMG, which is attempting to hammer out a more favorable new deal with the Daniel Ek-led company, has been ramping up the pressure on Spotify to modify its business model to cut down the amount of music free users can access. They’re currently looking at setting some sort of time limit on usage in order to motivate super-users to convert.

"College dorms are packed with people who don’t pay for music,
and as long as they can get all they want for free, they will
never pay.”

Against the backdrop of these looming behemoths, Jay Z is making a bold move to claim some turf of this own in the subscription universe. It has been reported that the artist/entrepreneur hosted a top-secret gathering of star artists (including Beyoncé, Madonna, Rihanna, Kanye West, the Daft Punk robots and Jack White, as well as execs and managers, to discuss his proposed streaming venture even before his bid on Sweden’s Aspiro was accepted, causing quite a stir across the biz. Aspiro owns two existing services, WiMP and, more intriguingly, the high-resolution, $19.95-per-month Tidal. Does Jay actually plan to challenge Spotify, Apple and Google? If so, the competition among Apple, Google and Jay Z for content and branding from superstar artists promises to be intense.

Google, the other power player in this sector—and the dominant one in terms of active users—will play a pivotal role in this unfolding narrative, positively or negatively. Google play is showing signs of growth, while Music Key, now in beta, could generate a sizable windfall for rights holders if enough people deem it worth the money. But amid these encouraging signs, Google and the music business are playing a game of chicken, with the music companies threatening to pull or severely limit their content from YouTube if it doesn’t substantially raise its royalty and ad-share rates.

Assessing the overall competition, Ek’s low-key approach is ahead on points so far, but Spotify is hardly wiping out the field, and this game is just getting started.

TROUBLE IN SCOOTERVILLE? That $89m Waddell & Reed paid for half of Scooter Braun’s management enterprise has opened a rift between the Kansas City-based investment firm and Braun. Waddell now wants out of the deal, but conversations about a buyout with Thomas Tull, who helped orchestrate the arrangement, have fallen through, leaving the issue unresolved. Concurrently, financial advisor David Bolno of Nigro Karlin Segal Feldstein & Bolno has been hired by Braun to sort out his money issues. How big a role will Bolno play in this ongoing drama?

MARKETSHARE LEADERS: At the end of Q1, Rob Stringer’s Columbia and Monte Lipman’s Republic are neck and neck for the top spot in both TEA and frontline, continuing last year’s back-and-forth, while Steve Barnett’s CMG remains a strong #3. Peter Edge and Tom Corson’s RCA, meanwhile, is battling for #4 with John Janick’s IGA, with RCA ahead in frontline and IGA in TEA. Expect plenty of action to come throughout the Top 5.

NAMES IN THE RUMOR MILL: Eddy Cue, Michael Lange, Boyd Muir, Kevin Kelleher, Ken Parks, Michael Rapino and John Malone.