This interview is a combination of answers via email and transcripts from a lunch meeting with Scott Bagby in Sydney in November 2012. The combination provides some very candid insight into both Scott’s personal views as well as the direction of Rdio in the future. Happy reading folks!
Jakomi Mathews (JM): So Rdio were the first streaming music service to launch in Australia since then we have had numerous launches with a total of 9 streaming services in Australia. What is the key differentiator that Rdio brings to the table?
Scot Bagby (SB): Rdio’s unique social design emulates the way music has always been shared—from person to person. Music fans build and share they’re digital music collections from a catalogue of millions of songs and can check out the listening activity, collections and playlists of other users – from friends and influencers such as critics, artists and record labels to people with similar musical taste.
We also have the DNA and relationships to grow our business into a global business.
The interesting thing for all of this is the need for focus. On the passive music experience – Spotify and Apple are getting into radio and that is all a passive experience, you don’t get to pick your music. There seems to be a big push to passive and is that where the consumer is at? No! I wouldn’t say Rdio competes’ against traditional broadcast Radio we kind of compete against the CD – it is on demand and so do Spotify and those other guys.
The fact there is such a big focus on the passive experience is rather interesting.
Rdio users are curating playlists – it is human-powered and back to like the offline experience, your following your friends and your friends know what is going on. This is what is creating the whole discovery process. So that is the editorial. You almost create your own editorial. Creating a who do you follow
So if you’re into Punk rock and I’m into Jazz our two Rdio’s are completely different and they will never cross.
If you take your entire social graph I’m talking your real life social graph you have a much deeper group of friends and those friends will look to you for different reasons. If you have a question on what hotel do I stay in or what red wine do I buy, what restaurant? What music do I listen to? What computer do I buy? Your not asking the same people the same thing?
Like our mutual friend Chris I would ask him about his music suggestions and his computer suggestions, but there is no way I would ask him about red wine recommendations because he is such a cheap bastard.
So I want to tailor it to my music tastes and just because we don’t have the same music tastes does not mean we are not friends, but we just don’t like the same music. And we naturally do that in life. So in effect we are the only ones who can allow you to do that online…
JM: So that is your key differentiator?
SB: It is not about technology (it does take hardcore backend technology to make it happen), but it is more about the basics, it is just about listening to music it is not about cloud and streaming. All those words I don’t care about – I just want to listen to music and I want to discover music.
I think a lot of people are moving away from the discovery aspect and getting more into this passive listening. Music discovery is KEY to the enjoyment of music.
JM: So what you’re saying is that this push to buy single tracks has cut discovery from the equation?
SB: Definitely! Most artists create albums for a reason. There is more than just writing a hit.
I’ve only been in the streaming industry for the last two years and it is very interesting to watch it grow up. How many songs does the service have, what is the hit rate your listening to? Really technical details. No one really cares about it as it is just music. There are not 18 million good songs out there. So whether you have one million songs, 10 million songs or 18 million is completely irrelevant.
Rdio are trying to get away from that , of course we are part of this world, but we are more about listening to some good tunes. We are half the cost of CD in Australia per month. And you find a new music discovery and then you want to go and get a vinyl collection around it…
I do not see it as Streaming vs. Vinyl vs. broadcasting, it is all a co-existing ecosystem, but removing that love of music is not the way forward.
JM: The one thing I find very lacking with iTunes is the lack of any real discovery mechanism. What are your thoughts on that?
SB: And funnily enough they do not seem to be looking to improve it. Instead of going into discovery they are going to passive listening and then hopping that maybe you will listen passively long enough that you might discover a new song. The main issue now is the education; people don’t know that these tools are available.
I think the more people find out about this and look around, and there are not too many of them. Look most of them are talking about bit rates and really who cares? Who cares if the bit rate is 194? And ACS or who cares if it is 18 million songs. Does it have what you like, does it sound good? Can I hear the songs I like? I think we’ve kind of lost touch. Rdio has not lost touch with that but I think the industry has.
If it sounds good that’s what it is. I was in Germany once and we were going through this astro brewery and asked the barperson what is the best beer? And he replied the beer you like is the best beer.
JM: Rdio recently launched a new way for artist to make money apart from streaming music by offering a $10 bounty to all artists who get their fans to sign up to the service. Can you please outline how this new opportunity works?
SB: We developed the Rdio Artist Program because we believe that artists deserve to be paid for their hard work and we want to help them earn more money. This initiative provides an additional revenue stream directly to the artists.
How it works is simple: artists receive a one-time reward of $10 for every subscriber that they bring in through social sharing. If an artist has 1.9M likes on Facebook, they can earn $19M by bringing in all those fans to Rdio.
We have also created artist pages that are much more compelling to visitors, which include information such as biography, discography, related artists and even the artist’s own listening behavior on Rdio.
Artists also have access to a statistics dashboard so they can view in real-time, which posts lead to the most engagement with their fans. It’s a turnkey solution available to any artist, big and small.
The Artist Program has artists at its heart. It is all about making sure artists get paid fairly for their work and benefit from building a fan base based on social discovery.
JM: The founders of Skype recently launched a new streaming video service called Vdio and it has been reported that Rdio and Vdio are now working closely together – can you outline the collaboration/partnership and the benefits it will bring artists?
SB: All I can say at this point is that Rdio and Vdio share select resources due to common ownership. We’re currently in private testing with Vdio and will have more news to come soon.
JM: Obviously, the largest streaming service Spotify has copped a lot of flack from artist, and indie labels due to low artist payouts and a lack of transparency on those payouts – no doubt this flack has rubbed off onto all streaming services – how does Rdio counter that charge?
SB: The artists are key to the music that makes Rdio a great streaming service, and we place a lot of importance on making sure they feel supported by the model and can continue making music – that’s why we launched the Artist Program, which complements the existing deals already in place with labels and distributors and offers artists an additional, direct revenue stream.
JM: Whilst Mumford and Sons sold 600,000 copies of their album in the first week of release in the US whilst allowing streaming it was just announced today that Taylor Swift sold over 1.2 million copies of her album yet her label withheld all tracks from being released on any streaming service this is the first time since Eminem in 2002 that any artist has sold over 1.2 million albums in the first week of release. How do you believe this ‘windowing’ release strategy will affect streaming services generally?
SB: Most artists have embraced streaming, but streaming services are still fairly new to the market. Some artists may choose to continue windowing their releases while we work on getting to scale and proving the model. It remains to be seen how windowing strategies will change once we reach the tipping point in the market, but streaming is just getting started and we wouldn’t be doing this if we didn’t believe in the market’s vast potential.
JM: With the launch of Microsoft’s Xbox service, which incorporates streaming al-la-carte and personalised radio – what impact do you think it will have on the streaming music marketplace?
SB: We don’t comment on what other companies are doing, but we do recognize the demand for radio features. We recently improved our artist radio station experience through a partnership with The Echo Nest and are working on more station innovations in the coming months.
JM: With Sony leaving PRO’s and now demanding services license directly from – what will be the effects on new music services when it comes to relicensing catalogue? Do you think it is good or bad for the digital music sector?
SB: The industry has traditionally made things more difficult for themselves, and this is just another step in that direction. In Europe when I started at Rdio there was four major publishers, and then the local society. So just think of the publishing side, I had to sign five deals per country, plus then all the labels, aggregators and all the local stuff, as you need the local flavours to make it work. So you are talking a dozen or so contracts per territory just to get the service of the ground.
So now what is happening is BMG has left Sony ATV on the publishing side started their own publishing, so now there is five majors. And so basically they are just making it harder.
It is also difficult for the rights holders to find their feet in this new world. But their not making it any easier for themselves. And then they attempt to set up a capture all so they do not set future precedents for them to sell. That they shouldn’t be looking towards innovating.
JM: What about positive steps. Have you seen any positive steps taken by the industry that are forward-looking in a forward direction that was advancing their cause?
SB: There is nothing in particular that I can say to that, with the exception of pure attitude. The attitude is much better. There is always some frustrating thing, but in general the individuals within the labels and publishers that I’m dealing with, generally want these services to succeed. Generally they all want to provide something easier for the consumer to enjoy and trust. The societies themselves and the bureaucracy involved kind of over talk themselves. But if you talk to any individual in a label or society there is a genuine desire to make this work and make it easier for the consumer and the service.
They really do want to make this work. It is the execution that gets all screwed up and that has to do with big corporations and the bloatedness of organizations. That is more the problem.
Generally these changes are tough for everyone. But I think we will get there in the near future. It is going to be tough for some of the players and our service, but overall I’m genuinely excited in the direction it is going and I see positive things.
JM: On a final note obviously a small market such as Australia cannot sustain 9 streaming services with a population of only 22 million – so no doubt their will be a shakedown in the 18 months where do you see Rdio placed in this shakedown and who will be the three services that dominate? Where do you see Rdio in two years time?
SB: As this is still a very nascent yet promising market, we will undoubtedly see more streaming services enter, exit and consolidate over the next few months and years. As far as Rdio goes, we are in it for the long haul – we’re looking to make a lasting impact on how music is accessed, discovered, and shared.
JM: What one thing that is not yet in the marketplace would you like to see in terms of music, media and content?
SB: I could tell you but that’s something we’re actively working on, so I’ll just say you should stay tuned for more news from Rdio. I think the interesting model in America is going to be the Beats and MOG and how that plays out. If they can use the marketing prowess, which they have a lot of; they can do some interesting things.
JM: What are Rdio’s expansion plans in Australian in NZ in the next year? & Globally?
SB: We are coming up fast on the one-year anniversary of our arrival in Australia and New Zealand (we launched in January 2012) and we’re extremely satisfied with our traction to date. In the past year, we’ve become a dominant player in the regional streaming music market, built relationships with some terrific local artists such as Ladyhawke, Muscles, and What So Not, and partnered with one of Australia’s largest radio networks, dmg Radio. Australia is a key market for us and we have some big plans in the works for continuing to grow our awareness and presence there.
Globally, we are now active in 14 countries, which are pretty significant, considering we first launched Rdio just over two years ago. We will be expanding to 20+ countries in Europe, Asia and Latin America throughout 2013.
So there you have it from Scott Bagby, SVP Strategic and International Partnerships at Rdio.