ISSUE 351 | 01 OCTOBER 2014

Contents thereport 05 Beyond : Ello 07 Pinboard: Stats, deals, startups and more 09 Country profile: Spain Peak app Why it’s time for a digital clearout 2

ISSUE 351 01.10.14 COVER FEATURE

Amid a sprawling number of apps entering the market, standing out and getting repeat usage are huge concerns for any new entrants”

lumly and wearily we approach “peak app”. Apple announced at Why it’s time the iPhone 6 launch last month for a digital that it now has 1.3m apps on its GApp Store – as if that means anything any clearout more. The counter keeps spinning. We are Peak app numbed by . We read daily about new apps raising When does choice stop being a benefit and instead become a massive inconvenience? It appears millions in funding and then it all goes we have reached this point with mobile apps in general and music apps specifically. There are, quiet. Meanwhile even the biggest music and there is no nice way to put this, far too many of them and the vast bulk are just clutter. apps are, years later, struggling to make It is time for a clean out because the more pointless (generally gimmicky) apps that attract the numbers add up – like posting

report a pre-tax loss of £5.3m for the second funding and quickly go nowhere, the less likely investors will be to touch something in the half of 2013. Just as there are arguably far future that is genuinely interesting and useful. We are at peak app and something has to give. too many download stores and streaming the 3

ISSUE 351 Ostensibly this is great news for music, 01.10.14 COVER FEATURE but the report very unhelpfully does not break down the different types of music music services, there is a plethora of music apps. What we can presume here is apps fuzzing up the arteries of iOS and that this is tied to the rise of paid music Android (and BlackBerry and Microsoft) subscription services and the mobile- stores and it would be better for everyone centric approach of services like Pandora. if they were all flushed out. These are apps that only make sense Much has been written about the “attention economy” and the “tyranny of choice” as regards the numeric arms race in streaming and downloading. 20m songs, 25m songs, 30m songs, more. Numbers that, on paper, are impressive but in reality are just so much digital clutter. The apps world is not quite as bad in terms of volume but the use terms are such that getting a music app to stick – to actually be of practical use to someone so that they’ll use it again and again – is much harder. about short – but repeat – usage, such which suggest how quotidian certain apps The engagement dynamics are different as a journey planner app or Shazam: the have become or are on course to become. so standing out has more odds stacked information they have to provide can be Encouragingly, this is also growing. A year against it. served up in seconds and then the app ago, users opened apps on average 9.4 Two new reports into app usage and is closed until the time it is needed. times a month and now they open them their commercial power suggest a mix Shazam has looked to wrap broader 11.5 times which means, cumulatively, users of both blessing and curse for the music functionality around its app to get users are spending more time in apps. business as it looks to migrate its business to spend more time when opened – read While music apps often trail behind onto a series of boxes on the home screen the biography, see the lyrics, buy the song, games, , news, social networks of a smartphone. watch the video and so on. But it is really and more in terms of total installs, the about speed of use and swiftness as its one exhilarating fact from the Localytics App usage is up, with music main selling point: hear the song, tag it, study is that music as a category had the apps leading the surge find out who it is – all in under 15 seconds. largest increase (79%) of time spent in-app It’s not comparing like with like to line – rising to a total of 64 minutes a month. Recent Localytics research into how apps a Shazam up against Candy Crush, so That was reasonably ahead of the gains are used has found that the overall time obsessing on dwell time gives a skewed for and (59%) and social that a user spends within an app has picture of what is happening and how networking (49%) and significantly ahead increased by 21% in the past year. Apps, successful (or not) the app is. of entertainment (22%), sports (16%), games then, are proving more “sticky” if dwell time A more viable metric is open rates (15%) and news (14%). is taken as the defining metric of success. Except that doesn’t quite tell the full story. It’s not comparing like with like to line a Shazam Some apps only make sense when up against Candy Crush, so obsessing on dwell time

report users luxuriate in them for a long time – be they a game or a subscription music app gives a skewed picture of what is happening and how like , or . Others are successful (or not) the app is” the 4

In-app earners: Pandora is at number two behind ISSUE 351 COVER FEATURE heavy compensation packages are being 01.10.14 Line worldwide, despite only being active in the doled out suggests that those running app US and Australia stores are going to tighten the T&Cs for app when a user is in the app for lengthy buy content within the app, often when the submissions so that they are not held liable periods of time and as more people pay parents are unaware until large receipts for what users do with third-party apps. for subscriptions it is only natural that show up on their bank statements. It is unlikely that too many nine-year- the aggregate across the sector rises At the start of September, Google fell foul old children are going to sign up for a year accordingly. of this and had to pay out $19m in the US to a music subscription service by accident, in refunds to settle federal allegations that but it is going to help usher in a new Time in-app is up and, for parents had been “improperly billed” for bills climate of control over app registration and music, so is spending… racked up by their children when using apps. linking accounts to credit . The cases date back to 2011 showing that this Amid a sprawling number of apps A concurrent study by App Annie dissected has been a snowballing issue. entering the market, standing out and the biggest in-app earners globally by … but in-app spending is “As more Americans embrace mobile getting repeat usage are huge concerns company on the iOS platform in August technology, it’s vital to remind companies for any new entrants. New obstacles in- and found that two music services – mobile’s ticking timebomb that time-tested consumer protections still app are not going to make things easier Pandora and Spotify – have crashed the In-app purchasing is the long game for apply, including that consumers should and investors – when they (finally) tire of top 10. lots of apps. Charging upfront for the app not be charged for purchases they did not throwing money at hyped, but ultimately Most impressive was the fact that is seen as a huge barrier to adoption so, like authorize,” Edith Ramirez, chairwoman of pointless, apps like Yo and Selfie – could Pandora was at #2, behind Line, and this is Spotify, they pursue the freemium route. the Federal Trade Commission, told the LA start to regard anything with an in-app despite the fact that it is only live in the US Offer it for free but charge for upgrades, extra Times. This covered in-app purchases that commerce strategy as a risk that is not and Australia. content like stickers, or run ads. Strategically ranged from as little as $0.99 each to a worth taking because there is so little Spotify had to content itself with being this is a quicker way to hit scale. staggering $200 each. wriggle room and there are too many other at #7 while Apple – by rolling Beats Music This, however, is set to be a part of the app “We’ve already made product changes apps across all category types clamouring into its 34 eligible apps – also got into the ecosystem that is going to be policed more to ensure people have the best Google for a user’s attention. Why sink money into top 10 at #9. tightly and it could have huge repercussions Play experience possible,” said Google in something that will sink without trace? Interestingly, when the iOS and Android for those music services hanging their hopes a statement. It had become so ubiquitous This year could see some more platforms are combined, Pandora stays at #2 on monetisation this way. that Google even had a cute name for it – music subscription services either in terms of global revenue and Spotify stays There has been growing concern among “friendly fraud” which puts one in mind of swallowed up by others or dissolve into at #7, but Apple drops out of the top 10. parents that apps aimed at their children the military’s euphemistic “friendly fire”. anonymity and irrelevance. When Apple announced it was going are offered free but encourage them to is also facing similar investigations Their acquisition or death will make to take a 30% cut of all in-app and court actions for purchases via the headlines amid questions about the subscription sales there was outcry Kindle Fire or its own retail apps. sustainability of the sector. Hopefully also from the likes of Spotify and Rdio who While most of these contested in- this year a whole brace of unnecessary suggested that this would completely app purchases are going to relate to music apps end up as digital landfill. It’s wipe out their margins. There was apps (mainly games) squarely aimed what the sector needs because less, truly, mumbled talk of some of them pulling at young users, the fact that such is more. None shall mourn their passing. :) their apps from the Apple and forecasts that this would kill their In-app purchasing had become so ubiquitous that businesses. A few years down the line and that Google even had a cute name for it – ‘friendly

report doesn’t appear to be the case and fraud’ which puts one in mind of the military’s some – but crucially not all – seem to euphemistic ‘friendly fire’” be flourishing. the 5

ISSUE 351 01.10.14 BEYOND MUSIC Ello – is it me you’re clicking for?

Dreams of ad-free round from FreshTracks social networks Capital earlier this year. “When you take f you’re not paying for the product, you venture capital, it is not ARE the product. A favourite cliché for a matter of if you’re anyone railing online against the growth going to sell your users, of Facebook, Twitter, free apps and just you already have,” wrote Iabout any other digital thing that comes influential designer without a price tag. Aral Balkan in a widely Yes, the big social networks make circulated blog post. their money from advertising: a business “It’s called an exit model based on people sharing as much plan. And no investor will information as possible publicly, which can give you venture capital then be used to target ads towards them. without one.” What the if-you’re-not-paying critics He continued, “Let often miss, though, is that their message me put it bluntly: if a isn’t news, even if the majority of Facebook company has taken and Twitter’s users are only dimly aware venture capital, you have of the ins and outs of their advertising already been sold. It’s not businesses. a matter of if, it’s simply a The social bargain – a free service in matter of when.” return for being advertised to – is implicitly The problem Ello faces understood. It’s only when social networks – and the reason it’s only overstep the mark that it becomes a of passing interest to the scandal, at which point they quickly retreat You’ll likely have seen some of the Ello, which has promised not to censor – is that its most unique and promise to be more careful in future. buzz (and backlash) around Ello, which is their posts. feature is its decision to avoid the only Even so, the idea of an advertising-free currently invite-only – a tried and tested They’re joined by lots of technology business model that’s ever worked for social network periodically reappears, tactic for stoking up excitement online journalists – who join anything new and social networks at scale. enthusiastically hyped up by anti-ad – resembling Facebook with most of buzzy, to secure a good profile name in And while its plans to make money activists, before failing to reach even a Facebook’s features taken out, including case it takes off, and to gather material by charging users for extra features has fraction of Facebook or Twitter’s scale. the ads. for the inevitable “I knew it was doomed” some prior success in the mobile social The latest in a line that includes Some of its early adopters are using pieces if it doesn’t. networking space – Line being one example Diaspora and App.net is Ello, an ad-free it on principle: for example, drag-queen And they would normally be joined by – Ello doesn’t even have a mobile app yet. alternative to Facebook whose main performers who’ve bridled at not being able if-you’re-the-product campaigners too, Ad-free activism that’s already

report claim to mould-breaking is the pace at to use their stage names as their names on except Ello is already under attack from being shunned by the ad-free activists? which it managed to alienate the if-you’re- their personal Facebook profiles. There is those quarters for the crime of having Ello faces a struggle to reach relevance, to paying massive. also a sizeable community of porn stars on taken venture capital funding: a $435k seed say the least. :) the THE MUSIC ALLY DIGITAL MUSIC AWARDS 2014 The shortlists in all the categories for the first SPONSORED BY Music Ally Digital Music Awards have been announced....

Best Artist Digital Best use of social media Innovation In Marketing Campaign Sponsored by Mediacom Live Music The awards take place on Sponsored by Mixradio 16th October at the ■ Atlantic Records UK – James Blunt & ■ Crowdsurge Camden Centre in . ■ Atlantic Records UK – Ed Sheeran Rocket Music Management ■ Live Nation UK (Music) – ■ ■ Sweden – Live Nation Music – Download Festival Wireless Festival 2014 Mobile App To book tables or individual ■ Virgin EMI Records – The Vamps Linnea Henriksson ■ Universal Music – GigBuddy seats, see: ■ Virgin EMI – Chase & Status http://musically.com/event/ music-ally-digital-music- Best Music & Innovation In awards-2014/ Best Music Brand Partnership Publishing Startup (B2C) Sponsored by MusicQubed Discounts are available for Sponsored by Gracenote ■ CueSongs Music Ally subscribers. ■ Capitol Records UK – / ■ Kobalt Music Group ■ ShufflerFM – Pause Google/Channel 4/Mediacom ■ LyricFind ■ Soundrop ■ Universal Music – ■ This Is My Jam Gary Barlow/Compare The Market ■ Universal Music Sweden – Rebecca & Fiona/Adidas Innovation In Digital Marketing Best Music Best Music App Startup (B2B) ■ Mediacom/Decca Records – Sponsored by 7digital Sponsored by Sheridans ■ Parlophone/We Make Awesome Sh – ■ Applauze – Band Of The Day ■ AudioSalad Tinie Tempah Rap Demonstration ■ Beatguide ■ Inflyte ■ UMGI Global Digital Marketing/ ■ WhoSampled ■ Senzari Modest! – 5 Seconds Of Summer 7

ISSUE 351 01.10.14 TOOLS Pinboard » Deals Tweets

eMUSIC MIRRIAD #ThomYorke has partnered @ethank Today’s Thom with MirriAd, Yorke release and Five years after licensing content from the majors, the advertising resultant press shows download service eMusic is reverting back to an how little tech press has technology firm, to allow the digital insertion of indie-only offering. Independent labels using major- learned about music in the last ten ads into its music videos. The inserted ads have years. A non story. owned distributors will, however, also be removed the potential to vary according to region. from its catalogue. @soundboy glad Thom Yorke continues to challenge status quo but wish he’d helped to STEAM SONY/ATV push Bandcamp further into the mainstream instead

@lucyeblair If Thom Yorke releases an on Ello, can both things just fuck Sony/ATV, PRS for Music (in the UK) and GEMA off and stop clogging up Gaming platform Steam has fully launched its (in Germany) have joined together to create a my timeline please? music player that allows gamers to play their music one-stop European licensing shop for Sony/ATV @chrissalmon My iTunes collection during games as well as buy bespoke and EMI’s pan-European digital rights (covering just skipped from Thom for individual games. Anglo-American repertoire). Yorke’s new album to Hunting High & Low. For a brief, happy second, I thought he’d covered A-ha. SONY MUSIC 7DIGITAL @emwhitenoise Thom Sony Music is among several 7digital has linked with Yorke Releases Pornhub companies/brands to initially the Spanish Broadcasting Album Only Available Via Bitcoin sign up to advertise in System in the US to power Instagram pictures in the a new music service under UK. The sponsorship of the La Musica brand (that images went live in the streams 14 of SBS’s stations online and to apps). US in 2013 where month-long campaigns can Follow Music Ally report cost upwards of $1m. on Twitter... twitter.com/musically the 8

ISSUE 351 01.10.14 TOOLS Stats Pinboard » US ADULTS: SHAZAM: FINANCIAL RESULTS NEW SERVICE DICE DIGITAL MEDIA HABITS (GBP millions) Source: Shazam Average time spent per day with 31.02 Facebook by Facebook users Revenue Net loss 21.81 38 39 35 16.89 32 15.60 Facebook 10.59 time spent

14 44.8% % of social 39.7% 38.1% 38.1% network 28.5% time spent

-0.64 -0.62 -3.30 -1.98 2010 2011 2012 2013 2014 -5.76 FY 2010 FY 2011 FY2012 FY2013 1H/FY2014

US: RECORDED MUSIC SALES DIGITAL ACTIVITIES What is it? Time spent vs Ad spending share We’ve written about mysterious London ticketing 3,254 3,102 startup Dice before, but this month it stopped being 68 47 17.9% mysterious. Fresh out of stealth mode, Dice is an Social network iPhone and Android app that recommends upcoming 13.6% gigs in London and then sells fans tickets without 1,040 898 Other digital 15.9% booking fees. Digital video Physical 11.7% The startup – a JV between creative agency ustwo 673 860 11.2% and music industry exec Phil Hutcheon – has an Subscriptions & Digital radio streaming editorial team drawing up gig recommendations. 4.0% Digital time Downloads 7.1% spent share But it is clearly setting itself up for more features 1,473 Pandora in the future, from streaming in music from artists 1,297 1.4% Digital ad that users haven’t heard yet to more commerce Source: RIAA, 6.0% spending capabilities through technologies like the NFC-based September 2014 Facebook share 9.7%

report . Dice is starting small and localised, but we sense there’s a lot more to come. 1H-2013 1H-2014 Source: eMarketer, September 2014 the 9

ISSUE 351 01.10.14 MARKET PROFILE Spain

Following MORE THAN a we factor in the population numbers to decade of steep decline, the calculate annual digital revenues per capita, SPAIN Spanish consumers are still at the bottom challenging Spanish market of the table, showing 10% of the value of UK finally saw a return to ones. STATS However, going back to Spotify, we find growth this year. Streaming f that the cumulative number of the weekly consumption appears to Population 47.4m top 50 tracks divided by each country’s population puts Spain on par with the UK, be growing rapidly, but with d ahead of Germany and well ahead of Italy subscription conversion GDP per capita US $30,100 (see fig.4). It is worth bearing in mind that rates seemingly low, h France is on par with the latter as the Deezer/ Orange bundle seems to be dominating in its Internet users 35.7m doubts remain regarding home country. long-term prospects. c Since we’re only using streaming numbers Broadband households 9.5m from Spotify’s top 50 chart (rather than the total number of plays every week), it j ccording to local trade body the latter will still dominate our sales as there is possible that the figures are not entirely Promusicae, recorded music sales will be a significant uptake in CD purchases Mobile subscriptions 49.8m reflective of the wider market. Nevertheless, in Spain fell for the 12th consecutive around Christmas,” said José María Barbat, i as an indicator this strongly suggests that year in 2013, totalling €119.8m. This president of Sony Music Entertainment Iberia, the streaming service is seeing a considerable Smartphone users 29.3m Arepresents an annual setback of 15.1% and a in talks with music :) ally. “However, in 2015 we uptake in Spain. For a country that in the last staggering decline of 80.9% since the all-time might see a 50/50 split.” Sources: CIA World Factbook, IFPI decade has shown much reluctance to pay high of €626m in 2001. While this year’s performance so far brings for music, however, the bigger question is It was particularly worrying to see that a breath of fresh air to the Spanish market, the Download sales fell 9% to €6.3m, making up how much of this usage is coming from paid in 2013 both physical and digital revenues reality is still rather harsh. Local sources concur 24.4% of the digital market (see fig.3). subscriptions. suffered setbacks. Totalling €71.7m, the former that the growth is attributable to a stronger Looking in more detail into the evolution of In talks with music :) ally, Javier Gayoso saw a decline of 22.7%, while digital sales fell than usual release which, with a few streaming consumption in Spain is particularly (director, Spotify Spain) stated that the 0.4% to €48.1m. The market was thus split significant releases (notably , interesting. If we take the number of plays company has indeed seen a significant 60% physical and 40% digital (see fig.1). David Bisbal and Malú), was able to drive sales from Spotify’s weekly top 50 chart as an growth in the country. Although he would The first half of this year, however, finally back to growth, especially given how low indicator, we find that the country is punching not reveal what the conversion rates are, he brought a much-needed sigh of relief to the the market had fallen in the first place – thus well above its weight: in the last week of the did stress that the service is succeeding in Spanish industry: Promusicae announced suggesting that Spain is not seeing the light at first half of 2014, the number of plays in the moving consumers away from piracy. Other that, in the first six months of 2014, revenues the end of the tunnel quite yet. chart totalled 16.4m in Spain, not far behind local sources claim that Spain is, by far, the increased by 6.2% compared with the same On the digital side, the first half of this the UK (22.7m) and Germany (21.5m). developed country with the biggest ratio of period in 2013, reaching €58.1m. Physical sales year saw the market continuing to move Ravaged by piracy and with a significantly free over premium Spotify users. While this grew 6.5% to €32.1m, while digital revenues fast towards streaming services. According smaller population than its counterparts, comes as a bit of a disappointment, the fact

report saw a 5.9% increase to €26.1m (see fig.2). to Promusicae, advertising and subscription Spain typically sees much lower digital remains that moving to a licensed service is “Although in a few recent months digital revenues grew 14% year-on-year to €18.8m, revenue figures than them, instead being a step in the right direction for a market with revenues surpassed physical ones, this year accounting for 72.8% of all digital income. more in line with the likes of Italy. Even when massive levels of filesharing. the 10

ISSUE 351 01.10.14 MARKET PROFILE Spain continued...

Fig. 3 TOTAL Fig. 1 TOTAL TOTAL 25.0 25.0 211.0 54.7 58.1 Advertising & subscriptions TOTAL TOTAL Downloads Mobile 32.2 166.5 TOTAL 26.0 148.6 141.1 24.5 TOTAL TOTAL TOTAL 38.7 119.8 24.5 26.0 Digital Digital 46.4 48.3 16.6 178.7 48.1 Physical 135.3Physical 18.9 32.1 351.3 127.8 30.2 102.2 92.8 71.7 7.0 6.3 Fig. 2 2009 2010 2011 2012 2013 2009 2010 2011 2012

Spain recorded music sales Spain: half-year recorded music sales Spain: half-year recorded music digital (€ millions, trade value) Source: Promusicae (€ millions, trade value) Source: Promusicae sales (€m, trade value) Source: Promusicae

Gayoso, who comes from a background in driven the revolutionary premium conversion radio advertising sales, explained that much we expected”, claimed Barbat. music :) ally Spotify: cumulative top 50 Fig. 4 of Spotify’s team in Spain is focused on ad understands that Spotify and Movistar are streams per capita sales. Although at the moment the country’s currently working on a more ambitious plan UK economy is far from ideal for advertising for a bigger subsidy. Spain budgets, Gayoso stressed that the service With regards to streaming services, Mark already enjoys a very positive reputation Kitcatt (CEO of local indie Everlasting Records Germany amongst brands, something which is helping and founder member of indie association UFI), France music :) ally the company to open doors. Local sources told that the industry “will have to Italy warn, however, that advertising alone will not try other tiers beyond €10/month”. He added, be unsustainable in the long run. “Something around family subscriptions could On the premium side, Spotify secured be interesting, as family is very important Spotify data sourced by a deal with incumbent mobile operator in Spain.” Carles Baena (MD of local indie, El Music Ally Movistar (Telefónica), which grants the Segell) expressed some degree of concern latter’s subscribers a 40% discount on Spotify with regards to transparency in streaming as year within local collecting society SGAE, state of the economy, this year’s performance Premium for a period of 24 months, after a whole. “We do put all our stuff on iTunes, involving board members, TV broadcasters so far is certainly welcomed in the Spanish which time the full price is charged. The Spotify, YouTube etc. because that’s where the and the ousting of president Antón Reixa, who recorded music sector. However, the longer promotion is available to both pre-paid and future is,” he said, “but I’d like to know more had driven the investigations. The last year term prospects for the sustainability of post-paid subscribers. about how it all trickles down the value chain.” has not been great for the live industry either, streaming are still an unknown, even if we

report “Although the partnership did fuel Transparency is certainly a big concern following an increase in ticket sales’ VAT from might finally be seeing signs of Spanish significant growth in paid subscriptions, it in the Spanish music industry. Most notably 8% to 21%. consumers finding licensed options enticing has been a bit disappointing [as] it hasn’t a new corruption scandal came to light this Amidst such troubles and the damaged enough to steer them away from piracy. :) the 11 Music Ally is a music business information and strategy company. We focus on the change taking place in the Music Ally is an ISSUE 351 industry and provide information and insight into every aspect of the business, consumer research analysing 01.10.14 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, Shazam coverage of the commonsense debate and get some consensus on how to move forward. Entertainment digital music sector”

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