sign in sign up
<<
Home , Ella Eyre, Google Play Music, Vevo, WiMP

thereport ISSUE 354 | 12 NOVEMBER 2014

Contents 05 Beyond : Social strategy 06 Pinboard: Stats, deals, startups and more 08 Country profile: Mexico YouTube’s subscription music service unveiled

Judgement Day 2 YouTube today is the biggest music ISSUE 354 COVER FEATURE 12.11.14 service on the planet”

e’ll get the basic facts out of the way first. Yes, it’s called YouTube Music Key. It’s launching this week (in beta) Wand it has a full complement of major and independent labels. There will be free and paid tiers: the free tier is YouTube but with new music discovery features and (official) full album streaming , supported by ads. The paid tier will cost £9.99 a month, but the beta will be an invite-only six-month free trial, with those early adopters then getting a discounted £7.99-a-month rate once the trial ends. Subscribers automatically get a Play Music All Access subscription thrown in (and vice versa: All Access subscribers will get Music Key for no additional cost). The new service is mobile-focused, channels are still in the mix and yes, since you ask, there are albums to stream. But no, not the new ones, and Music Key is likely to be as controversial on the free/ premium windowing question as . It’s launching in seven countries from this week – the UK, US, Italy, Spain, Portugal, Finland and Ireland – with the possibility for others to be brought on during the beta. More questions? music:)ally had an early Judgement Day demo of YouTube Music Key alongside other technology and music journalists at Google’s London headquarters this morning, YouTube’s subscription music service unveiled where Angali Southward, who handles music content partnerships at YouTube, outlined YouTube’s plans for a music subscription service have been picked over for months already: rows with the thinking behind the new service. independent labels; speculation about how it fits with Music All Access; debate about “YouTube today is the biggest music whether Google can sell subscriptions; and more. Reports of an indie deal earlier this week prompted service on the planet, thanks to our artists,

report our fans, our partners and the millions suggestions that YouTube’s service would launch within weeks. Well, it’s days: YouTube Music Key is of official music videos, remixes, covers, rolling out from tonight. Here’s our first take on how it works, and what it means. mashups… you name it. We have a very the 3

ISSUE 354 12.11.14 COVER FEATURE

Free users will see the usual varied and creative ecosystem,” she said. ads when listening to Music “We want YouTube to continue to Key – “pretty much as per the be the best place for fans and artists existing service” – but paying to connect: we want fans to be able to subscribers will have the ads connect with more of the music that stripped out, and will also be they enjoy, and artists to have more able to cache songs and albums opportunities to connect, as well as for offline listening. more revenue.” YouTube Music Key is very Few would deny that “biggest music much a mobile service, even service on the planet” claim. A recent though it will be accessible report by Midia Research claimed – from desktop browsers too. “It’s admittedly based on a UK-only survey definitely a mobile proposition, – that 14% of YouTube’s audience watch the subscription,” said Boyd. music videos a few times a week, and “The background and offline 7% every day. on YouTube, and will be the equivalent of in full. Below comes her Vevo channel and features don’t make that much sense [on Based on YouTube’s public figure of 1bn Spotify’s radio or ’s Stations for Music then “organic search results” for remixes, desktop]. Offline maybe, but it’s definitely a monthly visitors, that’s already 70m daily Key – and recommendations based on past cover versions, mash-ups and so on. mobile proposition.” active music users and 140m weekly actives, YouTube and Google Play listening. “It’s a really good mix between the very When the first invites are sent out this while if you add in people who listen a few Subscriptions in the existing YouTube slick, organised way of going through a week, Music Key will be available on the times a month, the total swells to 440m sense – channels that users have signed up discography-type experience, and also desktop and through the YouTube Android monthly active users. to follow – get their own “shelf” in the new the more organic crowdsourced legacy of app, with iOS to follow. The free tier will be This is why YouTube Music Key is such YouTube music homepage, and there are YouTube,” said Boyd. available first, with the paid features following a crucial moment for the , also contextual playlists for activities and He also showed off the Album Watch a few days later. Each user can use up to 10 for better or worse depending on your moods: “the obligatory Card for Beyonce’s devices to access it, but only one at a time. viewpoint. Can that huge base of music hitting-the-gym It’s definitely a Dangerously in Love One curious aspect: caching songs fans be the springboard for a successful mixes” as YouTube’s mobile proposition, album – yes, it seems offline requires caching their videos too: subscription service? partner technology her more recent LP there’s a choice of HD or 360p quality, but Or will the full-albums-for-free aspect manager Eddie Boyd the subscription” remains iTunes-only for anyone wanting to store a lot of music suck money away from rival subscription put it during the demo. for – to play on their device, it’s likely to be a bigger services, as Midia suggested in its report This being YouTube tracks. “Very clearly space-hogger than audio-only services. with a horse-frightening claim that Music and Google, search is also a key part of this is the official version of this album on YouTube’s view is that its users will want Key might be responsible for $2.6bn in lost Music Key. When people search for an artist YouTube,” said Boyd. the videos as well as the audio, given the subscription revenue elsewhere. or album, they’ll see another new feature: The obvious contrast is the unofficial history of the service – and that anyone Key to both questions is whether an “Artist Watch Card” or “Album Watch fan-uploaded versions of full albums that wanting pure audio can switch to their YouTube Music Key is any good. We’ll start Card” that shows the officially-licensed Spotify has been keen to point to during its (bundled) All Access with the free features, which are based music from that artist, or the full album dispute with Taylor Swift. subscription. The rollout process for YouTube around a new music homepage on YouTube, respectively. If this content starts to appear in the Music Key is starting this week, although with an emphasis on discovery. Boyd chose Beyonce for his example “organic search” sections of artist watch some details are still being finalised. First to

report That means favourite videos, trending search, with the card showing mixes, her cards on YouTube Music Key, there’ll be a be invited will be what Southward described playlists, mixes – a lean-back infinite- top 15 tracks, and then individual thumbnails big stink, but (unsurprisingly) there was no as “our keenest music fans” – heavy music play feature that launched a while ago for her albums, licensed to the new service evidence of this in the demonstration. viewers on YouTube. the 4

ISSUE 354 But as Southward pointed out 12.11.14 COVER FEATURE several times during the demo, Music Key is a beta, so features can be added They’ll get free access to the beta, over time. It probably won’t suck people but will have to enter their credit card away from Spotify – especially not those details when signing up, ready for the tightly meshed in with playlists, friends and £7.99-a-month subscription to kick in six recommendations based on their months later. At first, they won’t have play history. invitations to share with friends, but we But Music Key looks much more about suspect that will follow. doubling down the music experience for “We are going out to seven markets, and YouTube users, even if the jury is firmly out we are sending all the invites out. It will be a an example out of the air at random – albums (Red and 1989) aren’t on Music on its chances of upselling younger fans (i.e. closed environment until we expand it,” said decides that they want their albums to only Key for now, her older albums are, plus YouTube’s keenest music users) from free to Southward. “They will all be subscribers for be available to paying subscribers. the videos for singles like Shake It Off and even £7.99 a month. free for six months, and we’ll see what the “An artist can choose to be on YouTube, . Southward also defended the As expected, though, it’s the wider feedback is.” and you then get revenue from the free inclusion of a free tier.” implications that are most interesting here. There’s been a lot of speculation about service or through subscription,” said Google “We are a very successful ad-supported The impact on Vevo, for example, which how YouTube Music Key and Google Play communications manager Emily Clarke, when business to date, and we have paid out if not quite a second-class citizen within Music All Access will compete or complement the question came up during the demo. So no over a billion dollars to the music industry. Music Key, certainly isn’t slap-bang at the one another. The public message is that premium/free windowing? “Currently, no.” Our partners have been growing in the ad- top of the new artist watch cards. it’s very much the latter: anyone paying for “Artists have the choice – everything off supported business 60% year-over-year. So Watch too that contrast with Spotify. All Access will now also have a Music Key or everything on,” said Boyd, during smaller we think this is an additional revenue stream Although the two services seem aligned in subscription, and vice versa. group demos later in the event. But it for artists and our partners,” she said. their determination not to window music “It’s a two-for-one,” said Southward. “You appears they won’t now The message between free and paid tiers, their reasoning get two subscriptions for the price of one. be booted off YouTube Artists have the is well-rehearsed, is quite different. And you’ll see some new features in Google altogether: an artist like choice – everything judging by her Spotify sees a robust free service as key Play, including your watch history on Swift will still be able to off or everything on” later answer to a to driving subscriptions: hence CEO Daniel YouTube, as well as the ability to play official have her single videos similar question. “An Ek’s announcement this week that 80% of music videos in your Play app.” on a Vevo channel, even important thing to its subscribers started as free users. For So, to the current hot potato in music if her full albums aren’t on Music Key. remember is we’re ad-supported and we’ve YouTube, we came away with the impression licensing: the question of free versus Southward took the Taylor Swift question paid out a billion to the industry, based on that Music Key’s ad-supported tier is much premium streaming, with YouTube Music head on. “We have deals with all the an ad-supported business. We want fans more than a means to an end. Key adopting the same model as Spotify: a majors, and hundreds of indies. We are very to have a choice, so we’re giving fans the Hardly a startling philosophy from free tier and a paid tier, but both sharing the confident in our partner base. We respect choice to listen without ads, and adding a Google but an approach that right now, in same music. artists choices: we think a lot of artists have revenue stream for artists.” the climate of artist unrest over streaming Southward was clear on this point. had success on YouTube,” she said. As a service, YouTube Music Key royalties and control over distribution, may “It is one YouTube. The videos are for “She [Swift] has more than nine million looks pretty good, for a beta product. meet some resistance. everyone, and it’s the features that make subscribers. And also Nielsen 360 data has Social appears to be much lower in the A lot of people will be watching to the difference,” she said. In other words, shown that YouTube is right up there in mix than rivals like Spotify or Rdio; its see how hard YouTube pushes the the incentive to pay is to get the offline and terms of how fans discover music, then go recommendations are at the algorithmic subscription option towards the end of background features, not to get access to on to purchase it. YouTube is one of the first end of the scale at a point where rivals are Music Key’s beta. Southward was right:

report albums that aren’t on the free service. places people go to listen to a song before focusing more on human curation; and there YouTube IS “the biggest music service on There’s still a bit of cloud around what buying.” isn’t the same depth of features as those the planet”. Now we get to see what it does happens if an artist – Taylor Swift, to pluck ”Interestingly, while Swift’s last two established rivals. with that power. :) the 5

ISSUE 354 12.11.14 BEYOND MUSIC Social strategy

Facebook focuses on the of advertising income – with 85% of that future at Ireland’s Web Summit coming from the company’s burgeoning mobile advertising business. The company’s president of global e write a lot in music:)ally revenue – now there’s a title to conjure with about Facebook and ’s – Adam Bain told Web Summit that “there’s capabilities for music no other billion-dollar ad business that’s marketing, but sometimes it’s growing at close to 100%. And we feel like Wnice to zoom out and get the bigger picture we’re just getting started”. on how these services are growing and He stressed that there is no tension making money. between Twitter’s moneymaking efforts Talks from senior executives at last week’s and its experience for users, despite several Web Summit in Dublin, provided us with our reports suggesting that Twitter may at latest opportunity to do exactly that. some point follow Facebook’s lead in Facebook’s head of corporate algorithmically curating people’s timelines. development and partnerships Dan Rose “It would be a great storyline if that talked about the way the social network tension was there but in truth it’s not there sees the future, grouped into three periods: in the business,” said Bain, who added that the next three years, the next five years ads must cut through on Twitter through and the next 10 years. quality, rather than artificial boosting. “Over the next three years, our focus is “There’s an economic advantage on really on continuing to serve our existing Twitter for advertisers to be good, instead community - 1.3bn people - and the Facebook’s Dan Rose on-stage at Web Summit focused apps for messaging, photography of just loud like we’ve trained them in the businesses that are being built on top of and news. past however many years in display.” that,” he said. Rose said that mergers and acquisitions “The way people expect to engage But it’s clear how the now-public Twitter “Over five years we’re looking at really fit into this strategy, from those ‘new with applications on mobile is through is doubling down on revenues. “All we do is growing our new communities to a billion communities’ through to Facebook’s these very focused experiences. We didn’t monetise emotions,” said Bain. “Those four plus people. There you have a combination $2bn acquisition of virtual reality startup internalise that for a while, and it was emotions: what’s hot, what’s new, what’s of organic products that we built like Oculus VR. part of the challenge and struggle as we going on in the world and what’s happening Messenger and search, as well as products Rose talked about video on Facebook transitioned the company,” he said. “Once in my world.” :) we acquired like Instagram and WhatsApp.” too. “It’s fairly well understood now: we we did, we moved quickly to offer And 10 years? “We’re really focused on have over a billion views a day on our that.” We have over a billion views connecting the world through internet. native video platform, and it’s growing very And Twitter? The company’s a day on our native video

report org, understanding the world through our quickly,” he said. $361.3m of revenues in the third investments in AI, and investing in the He also addressed Facebook’s strategy quarter of this year was up 114% platform, and it’s growing platforms of the future.” of unbundling its main app into individual, year-on-year, including $320m very quickly” the 6

ISSUE 354 12.11.14 TOOLS Pinboard » Deals Tweets

VIDZONE #TaylorSwift Beats Music has partnered with @fluxresearch the US-based I love the fact Southwest Airlines that every for a deal that will Samsung and music videos service VidZone are “Spotify’s Daniel allow its passengers expanding their European partnership, after the latter El responds to to use Beats’ streaming service for free while reached 100,000 downloads on Samsung devices in Taylor Swift” article I’ve flying, on their own smartphones and tablets. the UK, France, Germany, Italy and Spain. seen is illustrated with a pic of Swift.

VEVO MICHELLE PHAN @tsingham I YouTube beauty star enjoy reading Michelle Phan’s Shift Music Bob ‘tech is Group partnered with all powerful... artist Late Night Alumni actually the Vevo inked a deal with Mobile to sponsor to feature tracks from artist is king!’ Lefsetz three Halloween gigs which will be broadcast their upcoming album in attack Taylor Swift for via Vevo: OneRepublic in Frankfurt, in her videos, with prominent her apparent lack of Amsterdam and Ella Eyre, Gorgon City, credits at the end. consistency. and Rixton from Manchester. @amandapalmer SOUNDCLOUD COCA-COLA/RED People want me to ride in and SoundCloud announced its first Coca-Cola and AIDS lop off Taylor licensing deal with a major label, charity RED teamed up for Swift’s head WMG, including publishing a campaign called “Share with my crowdsourcing the Sound of an AIDS Free arm Warner/Chappell. It covers sword and I won’t do it both SoundCloud’s recently- Generation”, which will sell announced ‘On SoundCloud’ new songs from Queen, Aloe Blacc, Wyclef Jean ad program and an upcoming Follow Music Ally report featuring Avicii, and OneRepublic on iTunes. subscription service. on Twitter... twitter.com/musically the 7 ISSUE 354 » Stats 12.11.14 TOOLS Pinboard SPOTIFY STREAMS PER WEEK REGIONAL BREAKDOWN NEW SERVICE MTV TRAX OF ‘SHAKE IT OFF” OF ‘SHAKE IT OFF’ STREAMS Asia 4% Australia & 14 New Zealand 11.9 3% 11.3 11.6 11.4 12 10.1 10 Latin America 7% 8 Source:

Million 6 Spotify and 3.5 Source: Spotify and Music Ally Music Ally 4

2 Week Ending 0 18 23 28 03 08 13 18 23 28 US 34% Europe 52% Sep Sep Sep Oct Oct Oct Oct Oct Oct

UK CONSUMERS WHO AMOUNT OF WATCH MUSIC VIDEOS NORDIC USERS 11.8 IN LAST ON YOUTUBE What is it? 12 MONTHS British startup MusicQubed is exploring the potential for mid-priced subscription services, most prominently Watch once or 13% with its O2 Tracks app that costs £1 a week. Its latest twice a month 7 partner is another big brand, but this time from the Source: Polaris world of media rather than telecoms: MTV. The MTV 10% A few times Nordic Alliance Trax app has a similar model though: fans “get today’s Source: a month hottest music tracks downloaded free-of-charge Midia 3.1 overnight so they can wake up to new tracks every 14% A few times day and listen to them anytime and anywhere, even a week underground or in the air”. 0.7 Users who 7% Every day don’t watch report It’s free for three months, but we’ll be interested to see music videos YouTube Spotify iTunes WiMP if it keeps the same weekly subscription charge: MTV (music listening) might have more capability to include ads, for example. the 8

ISSUE 354 12.11.14 MARKET PROFILE Mexico

revenues surpass physical ones in the first half of the year: in 1H-2013 the split had MEXICO been 52%/48%, only to see this balanced towards the end of the year with significant physical sales around Christmas. STATS The three most important factors about f 2014’s half year results are: that digital Population 120.2m growth made up for the physical decline (total revenues grew 0.1% year-on-year);

d that this performance might lead to 2014 GDP per capita US$15,600 being be the first full year in which the h market is predominantly digital; and that streaming is quickly becoming a key driver Internet users 52m behind these transformations. Although c and Rdio have been available in Broadband households 10.7m Mexico since 2012, we understand that pure on-demand music streaming was quickly j The second largest market in Latin America, Mexico is often the taken over by Spotify following its rollout in Mobile subscriptions 97.6m the country in Q2-2013. first in which big international music services tread the waters i In talks with music:)ally, Gustavo Diament (Latin America Managing Director, in the region. First iTunes and now Spotify show encouraging Smartphone users 33.3m Spotify) highlighted that “Mexico has been developments towards stabilising music sales. Sources: CIA World Factbook, eMarketer, IFPI, OCDE one of Spotify’s most successful launches in the world, in terms of both active users ccording to the IFPI, recorded is due in part to the fact that Apple only Amprofon placed particular emphasis on and user base growth… it is one of our top music sales in Mexico fell 7.1% launched its store in the country in mid- the growing relevance of access models in five in overall advertising revenues, which is in 2013, totalling $131.4 million in 2009. The company drove an encouraging the market. According to the organisation, a very important KPI for us”. trade value. increase in digital music consumption since in the first half of 2014 streaming revenues Discussing the key factors behind the ADespite digital sales growing 23.9% to then, and the market only recently started grew 130% to MXN 175 million (USD 12.9 quick uptake of Spotify in Mexico, Diament $63.2 million, they did not make up for the showing signs of diversification towards million). The segment’s uptake was such explained that “there are several reasons... 24.6% decline in physical formats to $68.2 streaming. that it brought in 41% of digital revenues, it’s a leading country in Latin America in million. The market thus ended 2013 with a Advertising income was the fastest quickly closing the gap with downloads, terms of digital penetration and tech- 52% physical / 48% digital split. growing area last year, with an upsurge of which accounted for 44%. savviness; there is a strong influence from Unlike some of the more developed 43.5% to USD 13.9 million which, in turn, On the whole, digital sales grew 13.9% the US, where Spotify has been growing a markets, last year Mexico was still seeing represented 22% of digital revenues. IFPI year-on-year to MXN 428 million (USD 31.6 lot; and we fill this sweet spot of music and healthy growth in downloads sales, with an published subscriptions sales in Mexico for million) in the first six months of 2014, while technology, which are two areas Mexicans annual increase of 20% to USD 39.2 million the first time last year, reporting that the physical income totalled MXN 296.8 million are passionate about.”

report – 62% of all digital revenues. format’s revenues totalled USD 5.1 million (USD 21.9 million) – a 59%/41% split in favour Spotify Premium costs MXN 99 (USD The segment is dominated virtually (8% of all digital income). of the former. 7.31) per month in Mexico. The company exclusively by iTunes; its ongoing strength More recently, local trade body This is not the first time that digital has a bundling partnership in place with the 9

ISSUE 354 12.11.14 MARKET PROFILE Mexico continued...

TOTAL TOTAL TOTAL TOTAL TOTAL 119.8 128.9 138.1 141.4 131.4 3.2 5.1 3.6 13.968 68.2 36 98.5 90.4 9.7 Physical 4.018 99.5 Mobile 102.0 Digital 8.7 3.5 Subscriptions 3.5 32.6 39.2 Ad-supported 63.2 4.8 22.2 Downloads 5.0 16.8 5.2 203 29.4 39.6 Other digital 17.8 4.8 3.0 5.6 4.8 5.1 1.9 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Mexico recorded music sales Mexico: recorded music digital sales (US$ millions, trade value, historical exchange rates) Source: IFPI (US$ millions, trade value, historical exchange rates) Source: IFPI mobile operatorMovistar (Telefónica), “Spotify still has a lot of room left. We’re days Spotify’s contributions to the music whose market share trails behind the local only at the beginning of the journey, industry are the object of much global Mobile incumbent telco Telcel (América Móvil). Other digital especially when you consider that even debate, the company’s encouraging entry 34.2m 29.9m “We’re very happy with our partnership 8% 7% paid-for music downloads are still growing into Mexico certainly brings a breath of with Movistar… it has helped to drive our here. This is a country with 40% of its fresh air, complementing iTunes’ earlier premium subscriptions”, indicated Diament. population in the middle class, who invest efforts to develop an online music market. Further detailing the service’s heavily in entertainment. You can also Much like in the rest of Latin America, performance in the country, he added that Source: see this in the fact that is doing YouTube is also exceptionally popular in Amprofon, 2014 “although we’re doing very well both in our well… One of [Spotify’s] key challenges is Mexico and the leading digital platform for free and premium tiers, Mexico’s conversion awareness. We’re increasingly well known casual music consumption and discovery. rates are below Spotify’s global average. in Mexico, but there is still a lot of work According to ComScore, in June 2014 This was somewhat expected, given ahead and we need to be creative in our (i.e. YouTube) had 20.55 million Streaming Downloads that disposable income in the country is 175.1m 188.0m marketing investments”. unique viewers in Mexico, ahead of Vevo’s lower than those in developing markets”. 41% 44% It is worth highlighting that the Mexican 15.56 million. According to OECD, the average household market still suffers from rampant piracy: The latter only launched in the country net-adjusted disposable income per capita although counterfeit CDs and are no in April 2014 and quickly grew to become in Mexico stands at USD 12,850 a year, longer as widespread as they used to be, the most popular YouTube channel, with an nearly half the OECD average of USD Mexico: 1H-2014 recorded this is clearly not due to a massive move average of 1,245 minutes per viewer in June music digital sales

report 23,938. towards legality, but to the fact that piracy 2014 – far ahead of UMG (the second most With regards to Spotify’s outlook for (MXN millions in trade value) has evolved towards unlicensed online popular channel with 286 minutes) and growth in Mexico, Diament stressed that filesharing. In this context, even if these WMG (267 minutes). :) the 10 Music Ally is a music business information and strategy company. We focus on the change taking place in the Music Ally is an ISSUE 354 industry and provide information and insight into every aspect of the business, consumer research analysing 12.11.14 example of perceptive the changing behaviour and trends in the industry, consultancy services to companies ranging from blue journalism at its chip retailers and telecoms companies to start-ups; and training around methods to digitally market your best, with unrivalled artists and maximise the effectiveness of digital campaigns. We also work with a number of high profile music Andrew Fisher, events around the world, from Bogota to Berlin and Brighton, bringing the industry together to have a good CEO, coverage of the commonsense debate and get some consensus on how to move forward. Entertainment digital music sector”

ANTHONY CHURCHMAN CLAIRE MAS Contact: music:)ally Business development Training & development Studio 11, Holborn Studios, 49-50 Eagle Wharf Rd, [email protected] [email protected] London N1 7ED Tel: +44 (0)20 7250 3637 EAMONN FORDE KARIM FANOUS b www.MusicAlly.com e [email protected] Reports editor Head of research [email protected] [email protected] Registered company number: 04525243 VAT number: 858212321 LEO TOYAMA PAUL BRINDLEY

Country profiles & data CEO & founder © Music Ally Ltd. For the purposes of personal, private use the subscriber may print this publication or move it to a storage medium; however, this publication is intended for subscribers only and as such may [email protected] [email protected] not be redistributed without permission. Subscribers agree to terms and conditions set up on the Music Ally website, except where a separate contract takes precedence. Music Ally has taken all reasonable STUART DREDGE STEVE MAYALL endeavours to ensure the validity of all items reported within this document. We do not assume, and hereby disclaim, any liability for loss or damage caused by errors or omissions. In particular the content is Director & founder Editor at large not intended to be relied upon in making (or refraining from making) investments or other decisions. We [email protected] [email protected] cannot be held responsible for the contents of any linked sites.

Our clients include: report the