Tensions were high during a recent Mobile World Congress “MMIX” panel regarding free music streaming. The panel consisted of Ministry of Sound CEO Lohan Presencer, Deezer VP Gerrit Schumann and Rdio head of business development Chris Burton. The whole affair was moderated by Paul Brindley of Music Ally.
The panel opened with Schumann and Burton acknowledging the rise of their music streaming services being used on mobile devices and how their platforms must be adapted in order to accommodate this change. It wasn’t until Presencer brought up his opinion on ad-based streaming services that things began to heat up.
Ministry of sound is a multi-faceted entertainment business that began as a nightclub and grew into “one of the biggest independent record companies in the world,” according to Presencer. However, regarding his business and streaming he said, “The reality is streaming is a very insignificant part of revenue for my business as a whole. It represents less than 5% of our total revenue from digital music, and less than 1% of the income for the group as a whole.”
He goes on to state that he does not believe a “freemium” or free ad-based service is a way to deter music pirating. He believes that by doing this, “you take casual consumers of music and you turn them from purchasers into noshers, into browsers, into snackers. They don’t have to engage in the subscription model. The reality of some of the bigger streaming services is that 75% of their user base are free, which has a horrific impact on the music industry and its ability to invest in talent going forward.”
Burton responded by saying that Rdio existed for four years as a premium-only streaming service before launching its free tier in 2014. He states that during this time period, it was “really really difficult to get users to come in, with all the alternatives they have for accessing music – some of that illegal, some of it legal – we found it very difficult to bring people in to a 30-day trial or in some cases less, and to get them to actually pay for content.”
Schumann added his support by saying, “The music streaming market is going to exceed 15% of the overall recorded music market this year, at least. We’ve seen growth rates of over 50% and the music markets globally are growing again. And I don’t think it’s coming from CD sales, and I don’t think it’s coming from downloads.”
Presencer did not share the same enthusiasm. “These figures can be massaged in the way you want to massage them. Universal Music Group, the largest group, saw its revenues fall by 7% in its announcement last week,” he said.
Schumann claims that the 7% only applies to new releases. He said that “every year we have shifts in market share in every market from label to label. This is the first time in over 10 years that the music market is actually growing again. We have reason to be very optimistic and very positive that streaming has a positive impact on music consumption overall. Secondly, we’re comparing…”
That was when Presencer interrupted and the two went back and forth for a time before Schumann said, “If I look at YouTube, if I look at all the music that’s available out there for free today, with or without music streaming – music streaming has been available for a long time, whether it’s piracy or legal… a lot of people are not willing to pay for music, but they’re engaged with it, and that’s the first point. We see a lot of people coming to us who don’t buy CDs any more. They haven’t for about 20 years. But now, they go in the freemium funnel, or they get a free trial. It’s easy, it’s on mobile, and they start paying for music again. It’s that simple.”
Eventually, Presencer said that “the bottom line is if not enough money is coming into the pockets of record companies such that they can invest in talent, there will be a reduced amount of music delivered to the market, and that will eventually see further decline in the market.”
Burton did make a point that could potentially drive consumers to use a pay service: smartphones are currently the driving force behind the growth of streaming services. One in two adults has a smartphone now and “we know that’s going to increase to about 80% of adults in the next five years.” In terms of hour usage per day, mobile devices are almost at the level of Facebook for consumers.
Regardless of all this debating, all parties stuck to their guns by the time the panel ended. With all the constant changes in technology the future of music is murky. Only time will tell how the industry will adapt and if free streaming will play any part.