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The Free Streaming Bandwagon

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A lot can happen in a week. Last week YouTube and Hulu where in competition seeking out UK broadcasters content offering them in some cases 70% of ad revenues for broadcasters’ content to be hosted on each of their respective platforms. Then yesterday Microsoft announces it intends to launch another streaming service later this month. Pandora founder Tim Westergren is pushing its users to lobby congress to ensure traditional radio pay comparable performance royalties to web radio. And finally, PRS for music announces that Steve Porter it’s CEO is stepping down. What a week.

What is the significance of all of the aforementioned you may ask? Well firstly if YouTube and Hulu can offer broadcaster 70% of their advertising revenue to secure hosting and delivery rights then what was the problem with the previous streaming rates of 0.022 per stream in the UK? Perhaps the pressure exerted by YouTube on the music industry was unfounded and exaggerated. For a base level PRS must feel ripped off now that they know the types of deals Hulu and YouTube have been offering UK broadcasters?

Drilling down further, surely it is now obvious that the case for lower streaming rates lobbied by all the streaming services may have been over egged? If as a business you can afford to give away 70% of advertising revenue received to content partners then obviously there has to be margin to also include fair and equitable streaming rates? Or has the recent lowering of these streaming rates now led to these large streaming services incorporating the larger margins they have been granted by PRS into their own profit at the expense of rights holders and artists? Food for thought anyway.

Yesterday Microsoft drops the bombshell that they intend to launch their own streaming service to rival that of Spotify within the next month. Albeit Microsoft has not yet determined the workings of what its business model could be. Advertising supported and subscription without ads is the obvious presumption. Microsoft did state to the Telegraph that they were also looking a t a download to own element to the service as well. TMV will hold our judgement till the stated service is launched but going on previous music focused service launches, Microsoft has a pretty poor track record. Let’s hope they get it right this time round.

TMV is interested to know if so many competing ad-funded streaming services in a supposed recession are good for both industry and consumer alike? If as we are constantly told each day we are in a recession, then how can we have brands with viable budgets to support all of these ad-funded models? Well according to a director a M-Group last month; quite simple there is not enough brand dollars to support all of these services. Which by-the-way TMV would dispute.

So, more players are viewing the streaming market as more viable in terms of margins and must also believe there are enough brands willing to purchase advertising to support their services. Otherwise, why would they launch?

Yet TMV gets the impression that PRS and GEMA heeded too much of the Google YouTube bullying on streaming rates. If YouTube can offer broadcaster 70% of advertising revenue, then surely there had to be margin to pay better streaming rates, then of 0.00085 per stream? As previously stated, the fact an artist now has to get 100 streams instead of the previous 40 to make the same £1 is quite simply a step backwards in supporting artists and music creation generally.

Furthermore, if publishers generally are the ones investing in true grassroots A&R and investing in artist’s way before the risk-adverse recorded music market does. TMV asks; what margin are they going to have left to invest in this important area? Amy Winehouse and many others had publishers investing in them way before any labels were sniffing around. That is FACT.

On the flip side, Pandora Founder Tim Westergren has always been pushing the line that European streaming rates were unviable. He has always had a valid point especially in terms of the United States where the issue of parity between online radio and terrestrial radio is immense.

The fact new business models like streaming radio and recommendation services are paying more than the massive corporate radio monoliths like clear channel is appalling and does need to be rectified. TMV fully support Tim Westergren’s campaign to get all of Pandora’s users in supporting a lobbying move to get Nancy Pelosi the US house majority leader to support a new performance right act to ensure AM and FM radio broadcasters pay comparable performance royalties to online and streaming radio services.

Despite all of this it is TMVs view that obviously Google has immense scale that it can still profit after giving away 70% of its advertising income to broadcaster’s. Subsequently, as TMV have stated on previous occasions scale is a two-way street and instead of cutting out artists and music creators lets be inclusive of them in all considerations because without them we quite simply do not have a business. So, scale also has to meet the needs of music creators and music services, there does need to be a middle way.

TMV view that way as ad-funded music streaming services selling their propositions better to brands and advertisers. Association with giving away music for free has immense and highly measurable benefits to brands in terms of customer acquisition and building brand loyalty over and above other forms of digital advertising. Let’s make scale work both ways and prevent it becoming a one-way street as it currently is.

On one final note was Steve Porter pushed by PRS for music? And did it have something to do with the recent lowering of streaming rates? Did the knowledge that YouTube was offering broadcasters 70% of advertising revenue announced last week also contribute. TMV will let you make your own mind up.

 

 

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