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Hi there,

Unless you've been under a rock this last 24hrs you will doubtless have seen the news of Spotify's latest test, in which the company will let labels push their way into personalised listening sessions as a promotional tool in return for reduced royalty rates.

I feel like Spotify - like so many things these days - is now just a hugely polarising topic. So it is no shock to see that the pro-Spotify people out there are welcoming this development, whilst the naysayers are using it as a stick to beat the company with.

Something I enjoyed about Music Ally's commentary on this (below) was the point that with many screaming "Payola!" about this new offering, it is likely to pop up on the radar of regulatory bodies and those perhaps already questioning whether the platform is a good thing for artists or not. Likewise, Apple, currently at loggerheads with Spotify, Epic and others about its App Store policies, might also use this somehow.

One point I have not seen mentioned so much is how Joe Public would respond to this. Knowing that their algorithm can be tweaked for a price might not come over well. Given this is only a test for now, it is tough to tell, though I'll be curious to see.

Elsewhere, the largest tech companies have been revealing their financials. Amazon's in particular is notable, with the company's revenues unsurprisingly surging due to lockdowns and Covid leaving many turning to the company's best-in-class delivery service for their shopping needs. Nonetheless, when reading these developments, one cannot help but think about Twitch and the fact that at present, there is no decent solution in place to pay rights holders. A sign of the times if ever there was one.


Have a great evening,

D.

STORIES FROM THE MUSIC INDUSTRY:
Spotify is letting record labels influence personalized recommendations… so long as they pay for it in royalties
In a blog post explaining the new feature, Spotify clarifies: “To ensure the tool is accessible to artists at any stage of their careers, it won’t require any upfront budget. “Instead, labels or rights holders agree to be paid a promotional recording royalty rate for streams in personalized listening sessions where we provided this service.” In other words, when artists/labels opt in to use ‘Discovery Mode’ to identify a track that they’d like to be prioritized in personalized listening sessions (in Radio and Autoplay), they agree to get paid a lower recording royalty rate for streams within those personalized listening sessions. It’s here things are bound to get controversial.
Artists respond to Spotify’s Discovery Mode announcement
Spotify will have been expecting the negative response from artists, and it clearly didn’t put the company off launching the test – which, as we pointed out yesterday, could be shut down relatively quickly if Spotify feels the heat is too great, or if its strategic objectives change. It will need to keep tabs on the ‘payola’ criticism though. Particularly in the US, that’s a very loaded word historically, and could ping some radars in policymaking / regulatory land. We wouldn’t be surprised to see Apple seize on it too: with Spotify attacking that company alleging anticompetitive behaviour as a platform owner, having the ‘p’ word floating about isn’t an ideal situation for the streaming service.
How can the music industry diversify its income streams?
“In your music industry sector – what is the most effective tool, idea, or approach to take in the next 12 months in order to best diversify your income streams?” Our Experts didn’t disappoint, giving advice, sharing examples and explaining their rationale. Importantly, their message is not to panic – but to acknowledge that right now is the time for decisive action. Here are their answers, grouped into lessons.
Linkfire’s latest attribution data deal is with YouTube Music
Music marketing platform Linkfire has announced its latest data deal, with YouTube Music. “In addition to seeing how many of your link visitors click through to YouTube and YouTube Music, you’ll be able to see how those clicks translate into streams on the platforms,” promised the company. It makes YouTube the latest service to sign on for Linkfire’s ‘attribution’ data drive, alongside Apple Music, Deezer, Pandora, Anghami and Boomplay among others. Which, as sharp readers will have already spotted, leaves Spotify and Amazon Music as two of the remaining unchecked boxes on Linkfire’s to-do list.
How J Balvin Made His Trippy, Eye-Popping Halloween Concert in Fortnite
Since the event with Scott, in which a 3D version of the rapper was integrated into the game, the musical appearances on Fortnite (by BTS, Diplo and others) have been taped in real life and displayed within the game, as if through a window between worlds, drawing some fan complaints that the viewing experience was simply not as engaging. Time and production resources are part of the reason, as Epic has tried to put on shows more frequently. “What we’re looking to do is create something that is a little more scalable and repeatable,” Nanzer said.
Spotify subs grew by 6m in Q3, but Daniel Ek’s company has posted a net loss of over $500m so far this year
Spotify published its financial results for Q3 2020 today (October 29), revealing that its global Premium Subscriber base grew to 144 million in the quarter (ended September 30). That was up by 6m (+5%) subscribers on the 138m SPOT counted at the end of the prior quarter (Q2 2020), and up by 31m (+27%) year-on-year. That Premium subscriber growth translated into Premium revenue of €1.790 billion for Spotify in Q3, which was slightly up (+2%) on the €1.758bn generated in the prior quarter (Q2 2020) and up 15% year-on-year.
Spotify is testing price rises and paying labels billions – but, in alarming news for investors, it appears to have a subscriber problem in emerging markets
Across Europe (+3.8m), North America (+1.8m) and Latin America (+1.2m), Spotify actually added 6.8m subscribers in Q3. The net loss of 800,000 subscribers in ‘Rest Of World’ actually dragged down Spotify’s net global gain to 6m. Why’s all of this important? Because as streaming growth inevitably starts to plateau in Spotify’s most mature markets, the company’s investors will want to see an acceleration of subscriptions in countries like India, Indonesia, Vietnam etc. With Spotify’s Q3 failure in this mission ringing in their ears, it surely won’t be long before the firm’s institutional investors start demanding bigger and better results in these crucial emerging markets.
How Splice, which paid out $11m in royalties to musicians in the first 9 months of 2020, wants to help a ‘million more people to make music’
As MBW can reveal today, the company paid out $11 million in royalties to musicians in the first nine months of 2020, bringing its total pay-out figure to $36m to date. In addition to these recent payouts, Splice is making an incremental $200,000 in payments to musicians directly impacted by COVID shutdowns, $70,000 of which it states has already been paid to touring musicians via a partnership with Jammcard and another $130,000 to musicians for Splice Sounds library content.
TikTok and Sony Music ink licensing deal for major’s ‘roster of global superstars and exciting emerging artists’
TikTok has struck a deal with Sony Music Entertainment to “make songs from SME’s roster of global superstars and exciting emerging artists widely available across the TikTok app”. The news marks the first time that TikTok has announced a licensing agreement with one of the three major recorded music companies.
Spotify Q3 2020: What price growth?
Spotify continues to set the pace for the global streaming market and has demonstrated that streaming has proven resilient to lockdown. (Spotify finished the quarter with 144 million subscribers, just above MIDiA’s 143 million forecast – we maintain our end of year forecast for 154 million.) Further evidence of Spotify’s lockdown resilience is that global consumption hours surpassed pre-COVID levels and that churn levels fell. However, Spotify’s premium revenue growth continues to trail subscriber increases, which raises the question: what price is growth coming at for rightsholders and creators?
STORIES FROM THE BROADER WORLD OF TECH:
Amazon third-quarter earnings soar as pandemic sales triple profits
Amazon reported blowout third-quarter results on Thursday as a pandemic sales boost helped the company triple its profits amid a 37% increase in earnings. The company’s revenues of $96.15bn were better than analysts expected and its net income increased to $6.3bn in the third quarter, compared with net income of $2.1bn in third quarter 2019. Its cloud-services unit, Amazon Web Services, reported net sales of $11.6bn for the quarter, up 29% year over year.
Twitter revenue rises 14%, but user growth fails to impress
Twitter reported Thursday net income of $29 million in the third quarter, or 4 cents per diluted share, a decline from the same time period last year, when the company brought in a net income of $47 million at 5 cents per diluted share. Adjusted earnings were 19 cents a share. The company’s revenue came in at $936 million, up 14% from the same period last year and 37% from the second quarter. Analysts had expected revenue of $777 million.
YouTube just generated $5bn from ads in a single quarter – and YouTube Music has over 30m subscribers
The other big statistic revealed by Alphabet of interest to the music industry yesterday was the advertising turnover of YouTube. According to Alphabet’s Q3 2020 fiscal filings, YouTube generated $5.04bn from ads in the three months to end of September this year. That was up by over $1.2bn on the $3.80bn YouTube generated from ads in the same quarter of 2019. Breaching the $5bn quarterly ad revenue threshold is made all the more remarkable for the fact that the pandemic appeared to stifle YouTube’s ad revenues in Q2 2020, which at $3.81bn were only slightly up on the $3.60bn the platform generated in Q2 2019.
Why Disney's pivot to streaming is a wake-up call
The 97-year-old media conglomerate is now more like Netflix than ever before. What this means is that Disney will be reducing its focus from (and potentially the investments routed to) theme parks, cruises, cinema releases, and cable TV. As CEO Bob Chapek said: "Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our company to more effectively support our growth strategy and increase shareholder value."
How Borat 2 reveals the playbook for the streaming movie blockbuster
The film wasn’t even announced until late September, meaning that it had exactly four weeks to generate word of mouth. In Hollywood marketing terms, a four-week movie campaign is unheard of, ludicrous—or, as Borat would say, “Very nice—not!” Yet Amazon pulled it off by leaning on Baron Cohen’s relentless energy and creative salesmanship. There were Borat stunts galore both online and IRL, which helped create a burning sense of immediacy and helped the film explode into the cultural consciousness, as opposed to being slowly fed to audiences by an IV-drip marketing campaign over the course of lumbering months.
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