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  1. #1
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    [EN] Spotify, YouTube to End Free Streaming In 2-3 Years


    Free streaming contributes a pittance to the overall music industry. So why not just kill it?

    Paul Resnikoff
    August 21, 2017


    Right now, the music industry is losing its war against YouTube. But maybe that’s because they haven’t yet deployed the nuclear option.

    That is, turning the lights off entirely on free music streaming.

    According to separate sources at major music content groups, a free streaming shutdown is now on the roadmap. More specifically, the plan would involve a concerted effort by the ‘big three’ major labels to terminate free access on both YouTube and Spotify.

    The terminations would occur after an agreed-upon threshold of paying streaming subscribers is reached. In just 2-3 years, that threshold could materialize.

    In order to enforce the transition mandate, the labels will threaten pullback on critical music licenses. That is proving a highly-effective tactic, and one used successfully against Spotify several months ago to implement ‘windowing’ for high-profile releases.

    Accordingly, terminating free isn’t a new thought — just as windowing was simmering for years. In fact, a second source said ‘shutting it down’ has been actively under discussion for years. But tricky politics between artists, YouTube, Spotify, and internal debate made that impossible.

    On top of all of that, a faction within the industry has strongly felt that free streaming has marginalized piracy, and that this ‘starvation process’ should continue.

    But not indefinitely.

    Fast-forward to 2017, and piracy is waning. One industry source says it’s become ‘like speeding’ for many rights owners. “It’s always going to be there,” the source relayed, while noting it’s “no longer the focus” for many major label execs.

    All of which is shifting the momentum towards streaming stage two, which involves a ‘hard transition’ away from free tiers. And the logic behind the move is this: more and more people are paying for premium streaming accounts. At a certain point, those subscribers will be contributing enough money to keep the industry healthy.

    So why not shut down the ‘bad customers’ and make them pay?

    Actually, this plan isn’t such a secret. Back in February of 2016, Sony Entertainment CEO Michael Lynton etched out the broader agenda. “I think [free access] stops probably when you get over a — I don’t want to say the number, but… many, many-fold bigger than what we have in the current paying subscription world,” Lynton told Re/Code.

    That was back when Spotify had 25 million paying subscribers. And for the record, Lynton also pointed to premium windowing as well. Several months ago, major labels started inking deals with Spotify that called for ‘gated access’ to content from popular artists like Taylor Swift. Just like clockwork.

    “They’re going to window,” Lynton relayed. “So you’re going to first hear the music in a subscription service, and then later in a free service, rather than the other way around.”

    Bye-bye ‘freemium funnel’

    And what about the ‘freemium funnel’? Historically, Spotify CEO Daniel Ek has reportedly been adamant about protecting the existence of freemium. Basically, the ‘funnel’ theory states that paid subscribers typically start as free users. According to Spotify, it’s a critical stair-step towards getting people to pay. And there’s plenty of data to suggest that this is true.

    Then again, Ek was also strongly opposed to windowing (at least according to our sources). Ultimately, he was forced to concede against heavy label pressure.

    And major labels seem to be deciding when — not if — they should pull this trigger.

    So what’s the magic number? At present, the industry counts more than 100 million paying subscribers worldwide. But what if Spotify itself had 100 million? That’s just one ‘sweet spot’ that was tossed around.

    Currently, Spotify has 50 million paying subscribers, a number that could theoretically double by 2019. At that stage, a massive percentage of music fans are paying, and ample justification to ‘build the wall’ a-la Apple Music.

    Actually, ‘shutting down YouTube Music’ is easier than we thought. On Google Search, links to torrent hubs and MP3 download sites are difficult to scrub, simply because of DMCA abuse. Google removes a link, and it returns the next day. It’s a longtime loophole that Google protects with its life.

    But on YouTube, a sophisticated ContentID infrastructure can both identify and remove content on the spot. And according to the tech CEOs we’ve spoken with, part of the secret is simply knowing how to properly use ContentID (hint: the majors haven’t really learned that part yet).

    All of which opens the distinct possibility that YouTube will soon be forced to transition towards paid. Or, pay a lot more for the content they’re using.

    Piracy concerns

    But won’t shutting down free simply revive piracy?

    According to our sources, that’s a serious consideration. But it’s a counterargument getting overruled, especially since the industry will have more money to shut down pirates. Still, it remains uncertain whether a ‘hard stick’ enforcement regime can actually work. Just recently, a study concluded that major label anti-piracy efforts have had little effect on broader piracy levels. Instead, the ‘fix’ came from ad-supported streaming.

    Enter the Nordic countries, which continue to offer an alternative glimpse at this future. According to a study just released, nearly half of the populations of both Sweden and Norway are paying for streaming music. Even more astounding is that more than 60% of them are using YouTube — concurrently.

    All of which suggests that a free tier can coexist with profitable, robust paid subscription levels. Maybe there’s room between the extremes?

    https://www.digitalmusicnews.com/201...aming-spotify/

  2. #2
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    SEC Is Studying Spotify’s Plan to Bypass IPO in NYSE Listing

    Lucas Shaw
    August 21, 2017

    Spotify Ltd. executives have met with U.S. regulators scrutinizing the music company’s plan to skip a traditional share sale and list directly on the New York Stock Exchange, according to people with knowledge of the matter.

    Senior Spotify executives met with U.S. Securities and Exchange Commission officials last month, said the people, who asked not to be identified discussing private meetings. Regulators asked for the meeting to get details on the plan by the world’s largest paid music streaming service to do an end-run around an initial public offering -- the conventional route to listing shares. The company has remained in touch with SEC officials since the meeting, the people said.

    Spotify aims to list late this year or early next on the New York Stock Exchange. With a stream of cash from its more than 60 million paying subscribers and awareness among investors, the company isn’t seeking to raise money or make itself known to potential stockholders -- key IPO objectives. A direct listing also avoids underwriting fees and restrictions on stock sales by current owners, and doesn’t dilute the holdings of executives and investors.

    It also introduces uncertainty, since underwriters in a typical IPO set a price based on investor feedback and have buyers lined up. Even then, some new issues crater. Just a handful of companies have done direct listings over the past decade on the Nasdaq Stock Market. Spotify would be the biggest, and the first for the New York Stock Exchange.

    While standard share sales can move quickly through approval, it’s common for SEC staff to spend more time examining offerings that involve new types of structures or products. It’s possible regulators simply want a better understanding of how Spotify’s listing will work. The agency declined to comment.

    The company’s plan poses an early test for how far SEC Chairman Jay Clayton is willing to go to boost new U.S. listings.

    The agency has been weighing a proposed rule change at the New York Stock Exchange that would allow the listing to go forward. Clayton, a former Wall Street deals lawyer who took over the agency in May, has for months decried a two-decade decline in the number of public companies as “a serious issue for our markets and the country.”

    While he hasn’t yet laid out a comprehensive policy agenda, he’s widely expected to craft rules that would encourage more companies to go public and do so sooner.

    Spotify has hired Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. to assess its options. The company has already raised more than $1 billion in equity and obtained a $1 billion convertible loan from investors led by TPG in March 2016.

    The conversion was tied to a public offering, with the terms growing more favorable to TPG the longer that takes. By choosing a direct listing instead, Spotify will have to reach a new agreement with the private-equity company.

    Spotify’s equity was valued at $8.5 billion two years ago when it raised $526 million. The company would be one of the largest consumer technology providers to go public in recent years.

    The music-streaming company’s unusual approach to going public is reminiscent of Google’s 2004 IPO, when the tech giant chose a rarely used Dutch-auction format. That approach, which also let Google pay its underwriters less, also drew SEC scrutiny. The complicated share sale suffered from a series of missteps.

    Among online music companies, Spotify has thrived while Pandora Media Inc. and SoundCloud Ltd. have struggled. Pandora has had four chief executive officers in the past two years and is raising money by selling a large minority stake to satellite radio company Sirius XM Holdings Inc. SoundCloud just fired 40 percent of its workforce and sold a majority stake to a pair of financial firms. Even Apple Inc., Spotify’s biggest competitive threat, is a distant second in paid streaming.

    Spotify has grown from 20 million subscribers in two years and had more than 140 million people using the service between the free and paid options as of July. The company reported sales of 2.93 billion euros ($3.45 billion) in 2016, up 52 percent from a year earlier, and its growth has lifted the entire music industry. Record sales have grown two years in a row for the first time since the late 1990s.

    Spotify will still have to convince investors that streaming music is a good business. The company lost 539 million euros last year despite its growth. It pays out more than 80 percent of revenue in royalties to music rights holders and streaming-delivery costs, leaving little margin for investments in technology and new staff.

    The company has dabbled in podcasting and video, content that could bring in new customers and advertisers while reducing the share of sales that go to the music industry, but hasn’t made a commitment to those areas.

    Before going public, Spotify must also sign a long-term licensing agreement with Warner Music Group, the smallest of the three major record labels. Vivendi SA’s Universal Music Group and Sony Corp.’s music division signed new deals with Spotify earlier this year.

    — With assistance by Benjamin Bain, and Annie Massa

    https://www.bloomberg.com/news/artic...n-nyse-listing

  3. #3
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    Dan Rayburn‏ @DanRayburn 1 day ago

    Spotify pays out almost 85% of their revenue in music royalties and streaming-delivery costs. Hard business to ever turn profitable.

  4. #4
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    Spotify reaches deal with Warner Music clearing way for IPO

    Anna Nicolaou
    2017=08-24

    Spotify has reached a licensing deal with Warner Music, clearing the last major hurdle in its path to a public listing.

    The companies reached an agreement after almost two years of tough negotiations, as the Swedish streaming service has looked to pay less money back to the music labels in new long-term contracts.

    Spotify has this year struck similar deals with rivals Universal Music and Sony Music, paying about 52 per cent of its sales back to labels, a reduction from about 55 per cent under previous licensing terms.

    In exchange the company has agreed to restrict some album releases to its paid service for a few weeks — a significant source of contention between founder Daniel Ek and artists, led by Taylor Swift.

    Warner Music, the third largest record label and home to Ed Sheeran, had been the last missing piece in Spotify’s catalogue of 30m songs.

    “It’s taken a while to get here, but it’s been worth it, as we’ve arrived at a balanced set of future-focused deal terms” said Ole Obermann, chief digital officer of Warner Music.

    Spotify has been rapidly adding paid subscribers, reaching 60m last month, bolstering its case with investors as the company looks to go public as soon as the fourth quarter.

    https://www.ft.com/content/94f06770-...4-518c3b9bf2de

  5. #5
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    Spotify’s business model is an unfinished symphony

    The streaming service is closer to an IPO after sealing deals with music labels like Warner. But Spotify’s ability to turn a decent profit is still in doubt since it may not have won much ground on royalties. Apple and Amazon also pose threats that could deter investors for now.

    Liam Proud
    August 25, 2017

    Spotify's business model is an unfinished symphony. The digital-streaming service is closer to listing on the New York Stock Exchange now that it has secured licensing deals with all three major musical labels, including Warner Music, which signed up on Thursday. But with the likes of Universal and Sony reportedly budging only slightly on royalties, Spotify's ability to turn a decent profit is still in doubt.

    The company has 140 million active users, 60 million of whom are paying subscribers, and made just over 2.9 billion euros in revenue in 2016. But its 2.5 billion euro cost of revenue - mostly payments to labels, publishers and other suppliers - meant little was left over to cover product development, marketing and administrative costs. The result was an operating loss of 350 million euros.

    Young tech companies often put expansion before profitability. Take Netflix and Uber. But Spotify looks set to stay loss-making until at least the next round of royalty negotiations. Universal and Sony Music have accepted a cut to 52 cents per dollar from 55 cents previously, the Financial Times reported citing people familiar with the contracts. Assume those terms apply across the board, and Spotify would still have made an operating loss of more than 260 million euros last year, according to Breakingviews calculations.

    True, labels may have to compromise further if they want to maintain pricing power in the face of tech behemoths like Apple Music. But a bet on Spotify is a gamble that the company can either substantially raise subscription prices or persuade artists and their labels to take a much smaller slice of the digital-streaming pie. The first will be difficult if cash-rich rival Apple keeps subsidising its music offering. And there's slim chance of the second coming true anytime soon if the recent round of royalty negotiations are anything to go by. Investors may decide this is one gig they can miss.

    CONTEXT NEWS

    - Spotify said on Aug. 24 it had renewed its global licensing partnership with Warner Music. The agreement represents the last big royalty deal that the music-streaming service needs with major labels before pushing ahead with a U.S. stock market listing.

    - The Swedish company said in July it had 60 million paying subscribers and 140 million active users as of June. Apple reported 27 million music subscribers in June, according to Reuters, up from 20 million in December.

    - Spotify struck deals earlier in the year with Universal Music and Sony Music to pay about 52 cents of each dollar back to labels, from roughly 55 cents previously, according to the Financial Times.

    - Warner Music Group Chief Digital Officer Ole Obermann said in a post on social media site Instagram: "It's taken us a while to get here, but it's been worth it, as we've arrived at a balanced set of future-focused deal terms."

    - Stefan Blom, Spotify's chief content officer, said the partnership will "help grow the new music economy where millions of artists can instantly connect with fans, and millions of fans can instantly connect with artists."

    http://www.nasdaq.com/article/spotif...20170825-00135

  6. #6
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    Taylor Swift’s new single sets records for Spotify streams and YouTube views

    Associated Press
    27 August, 2017

    Spotify said Taylor Swift has set a new global first day streaming record.

    The music delivery site said Saturday it had logged more than 8 million same-day streams for her new single Look What You Made Me Do.

    The 27-year-old singer dropped the much-anticipated song late Thursday to streaming platforms and iTunes.

    ...

    The video for the song was to premiere Sunday on the MTV Video Music Awards. A clip previewed Friday on Good Morning America.

    YouTube said Saturday the song’s lyric video broke a record for that site, with more than 19 million same day views.

    ...

    http://www.scmp.com/news/world/unite...ecords-spotify

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