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Spotify rules 7/3/14 Bob Lefsetz
Topic Started: Jul 10 2014, 08:41 AM (201 Views)
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1. You will delete your MP3s.

Just like you tossed your 8-tracks and cassettes, you'll get rid of your MP3s, all your iTunes purchases, kaput, evaporate, just like that. It will happen when you get a new computer, which isn't as frequent as before, but the truth is we're moving to flash storage and it's more expensive and you get less and you haven't got room for your music files, never mind the inclination to listen to them.

Just like you wanted the biggest iPod but are satisfied with the smallest iPhone, you won't find it necessary to pay extra for more flash storage even when the price comes down, whether it be in computers or mobile handsets. Because everything will be stored in the cloud or delivered to you when requested.

Hoarding MP3s is like hoarding hieroglyphics, who wants an ancient format no one can read? Especially when it's just bits and bytes!

Eighteen years, that's how long a format lasts.

LPs... 1964, the advent of the Beatles, to 1982, the advent of the CD.

The CD... 1982 to 2000, when usurped by the MP3.

MP3s? By 2018 they're HISTORY!

2. Plays will be the metric.

Just like radio shifted to spins, how much someone listens to your music will be the only thing that's important, furthermore, listens get you paid.

This will be a revolution, a good one, the SoundScan era is history, sales charts make no sense. Companies ramp up the publicity for an initial sales week that media publicizes, all to do it again the next week for new records. This reduces the chances of something sticking. Whereas when plays becomes the metric, we'll instantly see what has stuck. Just because it was released last week or six or nine months ago, it won't matter, because we'll see people are actually playing it. And that which is heavily-hyped but left unplayed...beware.

3. Media will promote spins.

Yahoo already lists the top ten Spotify tracks every week. In the future, a media outlet will still talk about number one, but not how many albums or digital singles were sold, but how many plays it got. It'll be like YouTube, on Spotify there's a counter too, you can see how you stack up. Suddenly data is not hidden, it's there for all to see. And the truth will be that the blockbuster era will continue. We'll see huge winners and a sea of also-rans. We'll be on the outlook for that which is making huge gains. It will all be based on data, as opposed to today's smoke and mirrors.

4. Payouts will be high.

It's all about scale. Once we wean everyone from MP3s, once everybody pays for music, whether it be monthly or baked into the subscription, a huge pot of money will be generated, 69% of which will go to rights holders. So, if you've got an ancient, poor-paying label deal, the company will get most of it. If you're striking a new major label deal...think about what you're giving up, recorded music revenue, in exchange for the company's ability to spend and muscle and make you a star. You can stay independent and keep all the money, but your chance of rising above is diminished, especially in this world of overwhelming input.

5. It'll be mobile.

Spotify develops for mobile first. Not only will you have a smartphone, chances are it will be large, because it will be your primary screen, where you shop and dial-up your music, you want to be able to see and make sense. Think of your handset as the new iPad, just a little bit smaller.

6. Discovery will be in the Spotify app.

It's all about the real estate, you don't want to jump around. You'll roam around Spotify the same way you roamed around the record store, but inventory will be much greater and access will be instant. If your company is a recommendation engine not aligned with a streaming service, good luck!

7. Pandora survives.

Or is bought and merged. But if it survives, its impact will be marginalized over time, because we live in an on demand world, the future is on demand, not wait and see. Pandora is too valuable to be purchased by Spotify. And it's hobbled not only by royalty payments, but the fact it's not worldwide. In other words, you might love Pandora the way you loved your BlackBerry, as in temporarily.

8. iHeart Radio stalls.

It's not on demand. As for listening to your terrestrial station on the Internet... Pandora eclipses that, there are fewer commercials. Clear Channel's digital play is not revolutionary enough, it was billed as a Pandora killer when Pandora was not the correct target.

9. Passive listening.

That's what radio is. Spotify's got a component. There's a market for that. But not run by algorithms, but people. Which is why SiriusXM is so successful, all those people paying to get rid of commercials on their music stations (as well as Howard Stern.) In other words, Clear Channel is in a bind. Promoting a legacy system without legs. If you don't think terrestrial radio will be diminished, you're still listening to AM.

10. You will share Spotify playlists.

We live in a sharing economy. You'll send songs. This is a good thing, this is how we break bands. And inboxes won't be cluttered-up with MP3s, waiting for them to download, eating up space, getting lost in spam folders, however expect to be spammed by wannabes, just like they have done forever in the Internet era.

11. Sound quality will improve.

It's all about bandwidth. And LTE is faster than many people's home connection. And mobile providers are already pondering an even faster generation. The faster the bandwidth, the fatter the pipe, the higher the quality. Remember, there was no YouTube before broadband.

12. Data charges are irrelevant.

Not only did T-Mobile just obviate them for music services, Spotify synchs all playlists so no signal is needed, the "streams" live on your handset, just like files. So even if you've got no cell signal, you've got your music.

13. It's not about Spotify.

It's about streaming. Google's new service could be the winner, but let's hope not, because it pays less. Or maybe a reinvigorated Apple Beats. One thing is for sure, one service will dominate, it's where we'll all go, because we want to share, we don't want to be left out. So you might like Rdio or Deezer, but if you send a link and someone can't play it, that's not gonna work.

14. Exit strategy.

Just like Apple bought Beats, Facebook or Google or Amazon or even Microsoft might by Spotify. Don't forget, Google bought Motorola and Microsoft bought Nokia. If you can't compete, you buy.

15. Bottom line.

Don't get depressed, it's all about the music. Make a good tune and these services are your bitch. They allow you to reach the whole world instantly. And if you haven't, maybe you weren't meant to. Maybe you're not that talented, maybe you make niche music. But as people see what succeeds, it will spark their creativity. They'll see the high standard, they'll see what's left field that breaks through. The only problem we have today is everyone's got a voice, and those who don't win complain, whereas we didn't used to hear from them. Ignore them. Focus on the winners. Spread the word about them. And know that if your identity is based on liking something no one else does, chances are you're going to live a very lonely life.


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The best thing that ever happened to Spotify was Apple Music. Competition lifts all boats. Which is why malls have two anchor tenants, two department stores.

But that was back before malls cratered and turned into festive dining areas that feature shopping as a sport, if the mall hasn't closed completely.

We live in the streaming era. Who's going to win?

The uninformed and uninitiated would bet on Apple and Google. But it appears the former has hit a ceiling and the latter is moribund. Spotify is adding twice as many subscribers than Apple per month. Spotify is adding 1.7 million, Apple, 875,000. Spotify has 40 million paid subscribers and Apple 17. So the two-thirds rule still applies, or close to it.

That's right, online, one outlet ends up with two-thirds of the market. There are always people who won't shop at the big kahuna. Google has about two-thirds of search and Spotify's got nearly two-thirds of streaming music subscriptions. As for competitors...Napster and Deezer, they're sideshow also-rans with acolytes who will eventually migrate to the big two just like Beta users went to VHS.

The final chapter has not been written. Amazon has a play here. We heard that Apple had everybody's credit card number, that can't compete with Amazon's 63 million Prime subscribers. There's an offering here that might work, but maybe not. Maybe Spotify was just too early and kept on improving.

Yes, Spotify had first mover advantage. There were streaming services before, but none with a free tier. Not only did the free tier cause conversion, it begat buzz, people started talking about Spotify.

But then, when Apple illustrated to everybody that streaming was here to stay...

Spotify innovated.

This is what is hurting Apple in general. This is the story of the iPhone 7, which never should have come out. Remember when the iPhone migrated to Verizon mid-cycle? Apple extended the cycle, kept selling the 4... Because you don't want to screw your customers, you couldn't eclipse the purchase of Verizon users six months later. Sure, the bottom line would have taken a hit, but if we got the iPhone 8, with an OLED screen and other innovations in January or March, all would be forgiven. Never forget, Apple was late to CD burners, music software and music players. But then it won with its Rip/Mix/Burn campaign and the iPod. Better to get it right than to alienate your fan base.

And Apple Music was a disaster in functionality. When every other service was better, even the now defunct Rdio, which was purchased by Pandora. In today's marketplace you don't get a second bite at the apple, you don't get a second chance to make a first impression.

Discover Weekly put the stake in the heart of Apple Music. Music discovery was supposed to be Jimmy Iovine's domain. He testified he was gonna fix it, using real people, but then the algorithm came along and beat him and...

Then Spotify came up with Release Radar, a way to discover brand new music. Apple not only did not have a similar product, whatever products it is coming up with are locked behind a paywall, so those who checked the service out once are now completely unaware, and don't care.

So, competition heated up adoption, but there was a war between Yahoo, HotBot, AltaVista and Google once upon a time. And Buy.com was competing with Amazon. Turns out one player pulls out from the pack, and competing after the fact is impossible. Bing is a disaster, a great percentage of its market share was purchased, but it's still got a de minimis percentage of search and the losses are legendary.

Apple took its eye off the ball. Stayed with files for far too long. It's a chapter written right out of Clayton Christensen's "Innovator's Dilemma." He not busy being born is busy dying. If you're doubling-down on your edifice instead of knocking it down with the wrecking ball, your business is time-stamped.

Which is why Apple so badly needs a new product in a sphere within which it can dominate. MSN could never topple AOL and Apple will never beat Spotify, never.

So, what have we learned?

Never bet on yesterday's giants.

Functionality is everything.

Innovation is key.

And products grow when there's a light shined upon them. All this anti-streaming nonsense is just keeping you broke. Never forget the cell phone business, it burgeoned when prices fell through the floor and everybody played. When everybody's talking about streaming music...

Spotify will be even bigger.


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Pandora Premium


We go where our friends are.

Spotify pushed the envelope, created the new paradigm, Apple broadcast that streaming music was safe and everybody else...

Can forget about it.

You'd think the press would say no-go. Say something critical about Pandora. But reporters' powers of analysis are nonexistent, they just repeat the press release. And even the vaunted "New York Times"... Their number one reviewer, Michiko Kakutani (remember her from "Sex And The City"?) just gave a positive review to a book about the return to analog and the paper published a story about writers' favorite bookstores... Where's all the testimony about digital readers, those who use Kindles and iPads and even mobile phones to read books? Nonexistent because the industrial media complex is run by old farts inured to the past. They love physical books, they hate the fast-paced digital world where you own but do not rent, they haven't been on trend in fifteen years. Quick, did you learn about Snapchat in the newspaper? Other than business stories after the fact, after the viral phenomenon took place, crickets.

Utterly frightening.

This is where we are folks. Our government has been hijacked by inexperienced wankers promising solutions as they jet us back to the past and all we've got is old school media which missed the election completely trying to keep them honest. It's a new day, we are the line between them and us, you and me. When someone rants and raves about saving newspapers, know that they're the same people who are not on Snapchat, the same people who don't know that we need news, but we just don't need it from the usual suspects.

So Pandora makes headway with a lame streaming radio service, that operates almost totally in the United States, and the press keeps paying attention to it, even as its stock sinks. Whereas Spotify and even Apple have gone worldwide. The digerati know that we live in a global village, but Americans believe they live in the only country in the world. Pandora is a zit on the ass of streaming music, certainly by a worldwide perspective. But there is story after story after story...

The CD is toast. The file is disappearing. But all we get are stories about the renaissance of vinyl. Do you own a rotary telephone? Do you even have a landline? Then what makes you think a non-portable format has any future, especially one with so many quirks and flaws. As for sound... Call me up when these kids investing in LPs get speakers worth listening to, never mind powerful amplifiers. You start with the end of the chain and work back, your system is only as good as your speakers. Does vinyl sound better than most streams? Sure! Assuming you've got the playback system to hear it, and most don't.

So streaming has won because of utility, it's easiest.

And it's made serious inroads because of Spotify's free tier. Where you try it before you buy it. And then Apple got into the marketplace and people believed streaming music was legitimate. Getting in now is like launching one of those me-too iPods, it's too late. And don't talk to me about features, Beta was better than VHS and it lost.

Furthermore, Spotify has gone nuclear on the tech/feature side. It's got customized playlists and programs to promote records and saying you can do better is like believing that customers will buy your car because it's got better a/c vents.

It's over folks.

The real story is Apple is building a base on brand. And that brand is faltering. Cupertino is no longer invincible. But those still afraid of streaming music, they sign up for Apple Music.

But all the young 'uns...

They're on Spotify.

Could a competitor win?

Doubtful, but it would first and foremost have to start with a free tier and then find a way to go viral and build up its customer base and no one's willing to lose that much money on free and buzz is nearly impossible to generate on a me-too product.

At least give Tim Westergren credit, he's shooting low. Trying for 11 million subscribers by 2020. That's like asking to be kicked out of the Premier League. That's like asking to never make the Spotify Top 50! The internet is a winner take all world, and the only way to compete is on price, which is what is happening in cloud storage, where Amazon got the early mover advantage, but it keeps lowering prices, and Amazon started off at a low price to begin with! Because Bezos is smart, you ramp up immediately, you don't skim only the early adopters. That's the Rhapsody model. Rhapsody was there first, but it's been overrun by Spotify and its free tier.

If you're still using Pandora you're the most casual music fan of all. And history tells us casual users don't pay, we want the active ones. The Genome never worked and people listen passively and if you like Pandora I'm not looking to you for music recommendations, you're CLUELESS!

But will some people sign up for Pandora's premium service because they already like and use the radio service? Sure, why not, I'll go for that, but there aren't many of them. As for new features, give me a break, users thought Rdio was the best and it still failed.

There's one Amazon. One Google. One Facebook. One Snapchat. One Instagram. And you truly believe there are going to be multiple streaming music services? Then you must work for the media!

History, and it's no longer brief, tells us one entity ends up with 70% of the market online.

History also tells us that if you're not innovating, you're dying. MySpace was replaced by the much more user-friendly Facebook.

But Spotify is innovating.

And we know how to share music on Spotify. Does anybody even know how to share music on Apple?

And because YouTube is the default video service, we point to it for music because everybody can go there, and to Spotify for the same reason.

However, having Pandora and iHeart in the on demand streaming market will increase the overall pool, it will get newbies to dip their toes. But they're gonna go where everybody else does, Spotify or Apple.

You can't break the rules of the internet.

And the internet was built on buzz. Sustain it and you win.

As for those bloviating about the bad economics of streaming music... Spotify and Apple would be making money today if they stopped expanding, stopped innovating. Amazon kept investing and losing...and now they own online shopping.

Oh, that's right, Wal-Mart was supposed to give them a run for their money.

Disruption comes from outside. And innovation is constant. And the customer is king.

You can't screw 'em and if you get it right they'll tell everybody.

So, you can ignore Pandora on demand streaming completely. The people who are paying it mind are those who kept saying BlackBerry would survive, because people used it and it had a physical keyboard and it was so safe.

Hogwash.

The revolution happened. Streaming music won.

Ignore the musicians complaining.

Ignore the industry and the press trying to drum up competitors.

The next big move is consolidation. Spotify goes public and then...

Who buys it?

Ladies and gentlemen, start your engines.


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Spotify Radio : Oct. 6, 2017 Bob Lefsetz


It's far better than Pandora, and most people don't even know it exists!

And the point of this article is machines are better than humans, for all of Apple's human curation I far prefer Spotify's algorithms, as for Pandora, the tuneouts are excruciating, why in hell do they think I like x if I like y? Furthermore, Pandora is limited in scope, not every track is included, so you can't build a station on an obscure act, never mind an obscure song.

That's right, you can build a station on Spotify with a song. And what is played...

Will warm your heart.

New music discovery is complicated, especially if you're already old. The truth is you'd rather hear what's familiar than what's unknown, unless it's an instant get, which it rarely is, but I did hear a pretty good David Crosby cut from his last album on Spotify radio, as a matter of fact, it's playing right now, it's called "Sell Me A Diamond," I'm not sure it bears twenty repeats, but it sounds like Crosby, and it's not dated, it's new, at least it's new to me!

But it's the old cuts that are revelatory. I just heard Jimmy Buffett's "Son Of A Son Of A Sailor," which is not his best cut, that's "A Pirate Looks At Forty," but it followed up his breakthrough "Changes In Latitudes, Changes In Attitudes," with "Margaritaville," but my Tallahassee lassie turned me on to Jimmy and "Son Of A Son Of A Sailor" was the first album I bought and I immediately became enraptured with the title cut, the opening cut on side one, and there's this one part that closes me:

"Haul the sheet in as we ride on the wind that our
Forefathers harnessed before us
Hear the bells ring as the tight rigging sings
It's a son of a gun of a chorus"

And on the subsequent live album, 1978's "You Had To Be There," which also opens with this same song, Jimmy references his broken leg and it's these strayings from the norm that stay in your head.

And I've got a bit of sailing under my belt, nothing like Jimmy's, I've never even been overnight, but what I love about being out on the ocean is you're out of cell range. Last night I went to see Gillian Welch and Dave Rawlings and while they were playing their acoustic music it reminded me of the seventies, when this was the only place you could get this experience, live in concert, when the whole world wasn't networked, when you never really miss anything, since it's on YouTube, when you're never really lonely since you can connect with your friends instantly on your mobile device, and I don't want to give up the future but something is always lost in advancement, in this case that solitary existence away from the fray, when it was just you and the experience, undocumented, you bask in it and I miss it.

And last night on Spotify radio I heard Traffic's "Rainmaker," which brought me back to when I bought the album, when Traffic was cruising the hit parade.

And I heard my favorite Lyle Lovett song "Bears," and this is how you do it:

Fire up the Spotify app on your mobile.

Click the "Radio" button on the bottom, it's the second from the right.

And when you do this you'll find "Your Daily Mix" and previous stations and "Recommended Stations," but skip all those. Click on that + icon in the upper right-hand corner of the screen/app, and in the search box that comes up type in a band or a song and when the results come up click on the + button to the right of one and voila, you've built a station, which then starts to play, and what's marvelous, if you're a Premium customer you can skip as much as you want, even go back, and there's a list of what's going to be played next but I try not to look at that so I can be surprised.


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April. 4, 2018


Spotify Goes Public
Wed, Apr 4, 2018 9:17 pm
Bob Lefsetz (bob@lefsetz.com)

Distribution is king, never forget it.

All those cable channels disrupted by Netflix and the internet? The systems distributing them are doing just fine, better to own the pipe than that which flows through it. As for Netflix...

It owns both content and distribution.

Which is why Disney is trying to imitate it.

As for HBO, it's caught in the "Innovator's Dilemma," so busy trying to protect its old model that it can't jump into the new. As you will remember, Clayton Christensen said to build your competitor across the street, and when the time is right, you JUMP! NOW IS THE TIME!

And now Spotify is worth more than all three major labels COMBINED!

Think about that, Spotify is worth more than Sony, Universal and Warner put together. Talk about leverage! And that's what Spotify plans to employ, it's right there in its investment materials, they want to drop the cost of wares.

Will the labels say no?

Well, when Spotify owns the marketplace, it gains power. Never forget that, in internet world one entity controls 60+% of the vertical. Can you say Google in search, Amazon in retail, Facebook in social networking? All the competitors are also-rans. The music business thought it was building a competitive distribution marketplace, but with all outlets just a click away, people gravitate to the one with the best user interface where their friends are, as long as you continue to innovate, you win, until someone comes along and completely disrupts you. Could that disruption be voice control? Interesting. But right now, we are in the heyday of on demand streaming.

Which the music business infrastructure fought for eons, some of the musicians are still fighting it, even though streaming has caused recorded music revenues to spike by double digits, because they just can't understand it, and refuse to accept that music is now akin to the rest of the world, the rich get richer and the poor...stay that way. Although with Spotify data you can build a cottage industry, you just won't get rich on recordings, but you can tour and sell merch but you won't be ubiquitous.

The labels screwed up. Primarily because they are public companies without vision, everybody's on the short term payroll. Did you see that Sony dropped a ton of Spotify stock yesterday? Maybe they were acting as a market mover, but that's a contracted exec for you... Cash out on my watch, so I can get my bonus! All those label incubators, they've delivered bupkes. As for 360 deals, now you can build yourself online and negotiate them away, and the labels never added any value, it was all a land grab, while the labels were protecting their margins, like the newspapers, they faded the same way.

So...

Can Spotify eradicate the majors, or at least their power?

That's what the company so publicly states, that it wants to cut out the middleman, i.e. the major label, to increase its margins.

Well, Spotify will never become a label, never buy a label, you don't compete with your suppliers, especially when legacy assets are worth so much. Amazon tried to do this by starting a publishing house, they were frozen out. Furthermore, it's bad business. Without said catalogs the labels would be in the toilet, catalog, already paid for with low royalty rates, props up the majors.

But beginners are pissed at said loyalty rates. When they can make a direct deal and earn a multiple.

BUT HOW DO YOU GET STARTED??

Spotify went public to return value to investors. Can you make it without investors?

Some can, most can't.

You don't need a label, just someone with deep pockets. But odds of success are so low, deep pockets are hard to interest. And, deep pockets want a ton of upside, that's right, Daniel Ek may control Spotify with Martin Lorentzon, but they don't own the majority share, that's the way business works.

So majors give cash for low royalty rates because they can survive on catalog and hits, and so far no one's come up with a better business model. Most managers refuse to spend and...until someone does, we're stuck with the same damn system.

Marc Geiger said WME was gonna lend to artists, but we haven't heard him talk about that in eons.

And in today's cacophonous world, if you don't have the investment to raise your profile, forget it.

But Chance succeeded on his lonesome. Buoyed by the hip-hop culture online. That's right, cultural capital can be as valuable as cash.

So, Spotify has a cost issue, it prevents scale, they say they're going to attack this via leverage with the major labels and going direct with the indies, they've delineated their strategy, disregard it at your peril.

But there will be some movement along the way..

And sure, Spotify stock could crash, like ArtistDirect, but Spotify's an ongoing concern with income, unlike ArtistDirect, it won't go to zero.

So, we're in a new era, the shine is off the major labels. Hell, if you want cash, you're better off going to a concert promoter, who's got it, will spend it and will take very little in return.

Proving, once again, the lack of importance of recordings in the ecosystem. Hell, if you're a great performer you don't even need a ton of streams. But if you've got them, you've got people who want to see you in a world based on experiences, i.e. live.

So Spotify now has more power than the people it licenses from. They did this by building a better mousetrap and being respectful, taking the fox into the henhouse.

They're gonna start eating the chicks soon, just you wait.


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