Sunday, January 13, 2013

Streaming gets star status at Eurosonic

by Emmanuel Legrand

It took just a few years for streaming services to become fully part of our streams of consciousness. One thing for sure: Streaming is probably the number one focus on the industry, if judged by the number of times the word occurred in discussions at Eurosonic/Noordeslag.

The trade show/conference/festival in Groningen (Netherlands) usually kicks off the year with its mix of panels on serious and not so serious issues and its impeccable line-up of concerts, and sets the agenda for the industry, especially for the live sector. Several sessions were focused on the impact of streaming on the biz and it is fair to say that the rise of the likes of Spotify and Deezer, alongside Simfy, Rdio and many others has given hope to many and much food for thought.

Jeff Price (Photo: Mike Breeuwer)
Obviously it is going to take a few more years before streaming revenues give the music industry some comfort, but there is optimism in this field – and a few question marks. Former Tunecore founder/CEO Jeff Price is on the side of the optimists. For him, streaming will happen when it will be fully part of an experience that will make the users feel it is free even if it isn't. His case in point is to say that streaming will get traction when services will be bundled into cars, for example. “I am waiting to see what will happen when the cost of music is bundled with the cost of hardware,” said Price in his keynote presentation. 

Another source of optimism for Price is the imminent launch by Apple of their answer to Pandora. “They have half a billion with iTunes accounts,” he said, explaining that this should give Apple a lot of leverage. He strongly believes that streaming services will provide the opportunity to scale revenues to the level of their audience. “It is there. It will happen. More money will flow into the system,” he claimed.

Another converted to the positive force of streaming is former PRS for Music economist Will Page who now works for Spotify. He took Spotify's home country, Sweden, as an example of what can happen when streaming gets mass acceptance. Music revenues have been revitalised since Spotify has started operating, and it also keeps piracy levels down. “Spotify helped stabilise Swedish market,” said Page, who added that Spotify now accounts for the vast majority of digital revenues in Sweden, ahead of Apple.

Page then turned his attention to the Netherlands, which he said has become the second big country after Sweden to reach critical mass with streaming and predicted “some light at end of tunnel in Holland” thanks to the rise of streaming usage. For a start music sales have seen a slight upsurge, with an estimated 677% growth of ad-supported and subscription revenues during the first half of 2012, while digital downloads sales continued to grow by 40%. But what is more important, according to Page, is that measurements suggest that piracy levels in the Netherlands have been steadily dropping (Forrester put the number of people using pirate sites in Holland at 5m in 2008, while a recent report by MusicMetric puts the figure at 2.25m). Page sees “streaming as an alternative to piracy”. “It gets sexy when it gets to critical mass,” he concluded.

However, not everyone is convinced that streaming has such healing power. Analyst Mark Mulligan was far more cautious in his presentation. “Streaming is everywhere but let's be realistic: It is a technology to get content into devices. It is not a business model: It is a delivery means,” he stated. The overall digital music picture is still dominated by falling sales of CDs and download sales that are “sluggish”. And, he added, “subscriptions are finally getting some traction, but is niche.” More so to the point: The conversion rate from free with ads to premium, with subscriptions, if extremely low. [A representative from Deezer on another panel suggested that out of 26 million adopters, Deezer has about 10% who paid for a subscription.]

In an other presentation, Buma-Stemra's Andy Zondervan crunched a few figures. He said that the accepted idea is that subs should be in the region of $10 or €10, but since only a few consumers are actually ready to pay that sum, he suggested that it would be more beneficial to focus on the bulk of consumers who were not going to spend more than a few euros for music (around €3). There is certainly there matter for debate and certainly more in-depth research.

Like Price, Mulligan sees streaming taking off when bundled with devices, cars or with telcos subscriptions, where the cost will be invisible to the consumers. For him the upside is that car and devices manufacturers, and cable or internet service providers will use streaming to offer their clients a better experience. “If you buy a car for $12,000 and you pay 3$ for customized music subscriptions, it is a meaningless cost,” he said. “You have to make music feel like free or close to free even when it isn't.”

[Typed while listening to Electric Guest's 'Mondo']

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