20 Compelling Moments for Digital Music in 2014
From Taylor Swift to Thom Yorke; YouTube to SoundCloud; iTunes, Google, Grooveshark, Pandora, Facebook, Twitter and that U2 album giveaway… 2014 wasn’t always a smooth ride for the digital music market, but it was certainly a fascinating year. Here are 20 of the highlights.
Taylor Swift shakes off Spotify
Taylor Swift is an artist enjoying a creative and commercial peak—2014's most significant musician by all manner of metrics. And that’s why her very-public row with Spotify was such a big deal. The clash was clear: Swift didn’t want her albums available on free, on-demand streaming services, and Spotify doesn’t let anyone block their music from its free users. By taking down her catalogue, Swift brought this issue out into the open—it had been bubbling behind the scenes for a while—and her to-the-point explanation sparked the most passionate defense yet by Spotify CEO Daniel Ek of his company’s modus operandi. It was a debate that needed having, and it took Swift’s pulldown to blow it out into the open. But the nuances of this debate are vital: it was less about ‘artists versus streaming’ than it was about ‘free, ad-supported streaming versus paid subscription streaming.’ It’s a debate we’ll see more of in 2015. But Swift’s intervention was also a reminder that unlike previous music format transitions (vinyl to CD, or CD to downloads for example) the sales to streaming shift will see artists and songwriters taking a much more vocal role.
Apple buys Beats Music
Actually, the biggest digital music trend (if not a moment) of 2014 was the decline of download purchases, with even iTunes sales down 13%-14% worldwide according to the Wall Street Journal. Strangely, the long-predicted tipping point between sales and streams seemed to come as something of a shock to wide swathes of the industry. But it certainly provided an understandable context for Apple’s $3bn acquisition of Beats Electronics. Headphones, yes, but also streaming music: Beats Music, which alongside Rdio was the most carefully thought-out competitor to Spotify. Apple’s decision to splash out on Beats was its recognition of the shifting sands in the digital music market. But now what? Reports that Apple is pushing labels to agree to monthly subscriptions of less than $10, as well as touting its ability to push whatever Beats Music becomes to iOS devices, hints at the company’s desire to remain the pre-eminent digital music brand. Prediction: iTunes will retain its position.
YouTube launches Music Key
Even before YouTube Music Key launched in November, YouTube was the world’s biggest streaming music service, with (according to industry consultancy Midia Research) 210m “frequent” music users. But Music Key is YouTube’s long-awaited move into music subscriptions, with plans to eventually charge $9.99 a month for on-demand access to a comprehensive catalogue of music. Well, almost comprehensive. Music Key was YouTube embracing its massive music audience, and—in the eyes of optimistic rightsholders at least—recognising its duty to deliver more revenues back to the people writing and recording that music. Still, Music Key had a troubled gestation period, to say the least: YouTube was roundly condemned by indie labels for the terms of its licensing contract in the summer, before eventually reaching a settlement. Now the service is live, the important question is whether YouTube can persuade its users to pay for music.
SoundCloud’s first deal with a major
SoundCloud is the world’s second-biggest streaming music service (behind YouTube, see above) with 175m people listening to at least one track from it a month, either on its site, in its apps or embedded on the web. That growth has come without licensing deals: instead, artists, DJs and labels have uploaded their tracks knowing they wouldn’t get paid per stream, but reasoning that the promotion and subsequent analytics was fair reward. But as SoundCloud got more popular and (just as crucially) raised more money from VC firms, major labels and publishers were increasingly restless. After some public sabre-rattling from rightsholders, SoundCloud signed its first major-label deal in November, with Warner Music Group. WMG got a small stake in the company, and the ability to share in revenues from ads as well as SoundCloud’s upcoming subscription service, which will launch in 2015. But this sets up a tortuous question: how will SoundCloud make enough money to fulfil its royalty commitments—and don’t forget publishers and collecting societies here—while preserving what makes it unique and valuable to creators?
U2’s iTunes giveaway
Giving away a copy of the new U2 album to every single iTunes customer was supposed to be a triumphant finale to Apple’s September press event to unveil new iPhones and its first smartwatch. But in the post-event media narrative, it quickly became an embarrassment for both parties. People who’d turned on “automatic downloads” on their iOS devices found that Songs of Innocence had been, yes, automatically downloaded. Cue predicable online outrage from people who didn’t like U2 and/or Apple. The criticism hurt enough for Apple to take the unusual step of launching a dedicated website to help people delete the album from their libraries. Meanwhile, the round of interviews after the release became essentially a lap of apology, not honour, for frontman Bono. And yet when the dust settled, was the embarrassment truly harmful? U2 got paid (a lot) and got their new album heard by 81m people, setting them up for their next global stadium tour. Apple carried on selling expensive devices by the bucketload, while learning a useful lesson about how strongly a lot of people want to curate their own music collections. Embarrassing, yes. Disaster? No.
Thom Yorke’s BitTorrent release
Radiohead and Atoms for Peace musician Thom Yorke provided 2013's most memorable anti-Spotify quote with his “last desperate fart of a dying corpse” jab, but in 2014 he did something equally worthy of sparking debate. His latest solo album, Tomorrow’s Modern Boxes, was distributed as a BitTorrent “bundle”—free to download, but charging fans $6 to unlock the whole album. He was the first artist to use BitTorrent’s pay-gate feature, suggesting at the time that it might be “an effective way of handing some control of internet commerce back to people who are creating the work… bypassing the self elected gate-keepers.” To date, the bundle has been downloaded 4.4m times, although it’s unknown how many of those people stumped up for the album—even if only 5% did, that‘d be 220,000 sales, over $1.32m of revenues, and nearly $1.2m for Yorke after BitTorrent’s 10% cut. It invited questions too: was forcing fans to download BitTorrent’s software really better than alternative ways of getting music direct to fans?
Android reaches 1bn active users
Not so long ago, “mobile music” was a thing—a separate category in analyst predictions for the future size of the music industry, separated out from “online” music like that found on iTunes and other download stores. In 2014, that seems quaint: mobile is now the big driver for pretty much every digital music business. And a milestone announced by Google in June at its I/O developer conference is the key to understanding it: the company said there were now more than one billion active users of Android devices globally, up from 530 million a year before. The growth of Android—as well as Apple’s iOS—is why most streaming services now sign up most of their new users on smartphones, not computers. It’s why mobile is 84% of Pandora’s listening hours and 78.5% of its revenues. And beyond music, smartphones are driving the businesses of Twitter and Facebook too.
Spotify’s financials show the costs of streaming music
How much money artists and songwriters make from streaming music is an important debate. But so is how much money streaming music services make from streaming music. Or, more relevantly, how much money they lose. Simple answer: lots. Spotify’s financial results for 2013 were published in November, offering a snapshot of the costs involved in an on-demand streaming business. The company’s revenues rose 73.6% year-on-year to €746.9m ($922.2m) but its operating losses also rose 16.4% to €93.1m ($114.8m). Paying out 70% of its income as royalties, with servers, salaries and other costs of aggressive global expansion on top, remains a recipe for red numbers, not black. Like anything involving Spotify, this leaves space for interpretation according to prejudice. Spotify’s supporters see it as proof that the company is putting its money where its mouth is, investing to build a healthier music industry. Its critics see it as evidence of an unsustainable business model kept afloat by venture capital until it can reach an IPO.
Grooveshark’s final days?
Controversial streaming service Grooveshark has been making labels and publishers angry for years now—even those who it actually had licensing deals with. But in 2014, the company seemed to be reaching game over, as the long-anticipated copyright infringement case against Grooveshark resulted in summary judgement for the labels who’d sued it. The company dutifully told journalists it was considering an appeal, but many doubted it would have the resources for the fight, or the goodwill required to reach financially-unruinous deals with rightsholders. To its opponents, Grooveshark’s defeat cleared one more barrier out of the way for licensed streaming music services—one less free, on-demand alternative to put people off a Spotify or Beats subscription. But before we put that to the test, be aware that Grooveshark hopes to have one last hail-mary pass left in its game: its reinvention as a $0.99-a-month personal radio app to take on Pandora, using blanket licensing to be legal from day one.
Facebook buys WhatsApp as messaging explodes
Messaging app WhatsApp had 200m active users in April 2013, and doubled them to 430m by January 2014. A month later, Facebook announced it was buying the company for a startling $19bn. And since then, WhatsApp has carried on growing sharply: 500m active users by April, then 600m by August. And it’s just one of the companies picking up huge audiences of mobile messagers: 500m for Facebook Messenger, 468m for WeChat, and sharp growth too for the likes of Snapchat, Viber, Line, Kik, Tango and KakaoTalk. Over the last two years, messaging has been the big growth category in the mobile apps world, but as Facebook closed its deal for the biggest of them all, something else was becoming clear: messaging apps might be the next big media platforms. Several are already offering games, but as 2014 drew to a close, Tango was working with Spotify, Snapchat was reportedly in talks to work with Spotify and Vevo, and Line was preparing to launch a fully-fledged streaming music service.
Spotify buys The Echo Nest
As Spotify has grown, it has needed its money to invest in expansion, product development and licensing deals, meaning big-budget acquisitions haven’t been a priority. Its decision in March to buy music technology firm The Echo Nest for what was later revealed to be $68.8m stood out as a big, strategic bet then. What Spotify bought was some of the sharpest minds (and cleverest algorithms) in the digital music business, recognising that its future is not simply making music available in a massive jukebox, but in deeply understanding the relationships between that music, and also understanding its listeners. Whether matching users to playlists and playlist curators, or simply providing the option for lean-back, “zero-button” radio to more casual listeners, The Echo Nest’s technology will be at the heart of Spotify’s battle to compete with richer rivals Apple and Google in 2015 and beyond.
Bandcamp and Patreon step into the limelight
Before 2014, if you talked to people in the music industry about direct-to-fans or crowdfunding, they’d probably say one of two things: “Amanda Palmer” or “Kickstarter” (or, indeed, both). But in 2014, there was plenty of other stuff happening around this space, which provided welcome light against the shade of the streaming royalties debate. Look at Bandcamp for example: in February, musician Zoe Keating revealed that she made $25.6k in 2013 from selling music on her Bandcamp store, compared to $38.2k on iTunes. By June, Bandcamp was distributing $3.1m of payouts to musicians every month, then in November it launched a feature for artists to run their own subscription services. Consider crowdfunding service Patreon, founded by musician Jack Conte in 2013, and which was paying out $1m a month to creators of all kinds by November 2014. In November Conte wrote a widely-read Medium piece opening the books on the touring profits (or lack thereof) for his group Pomplamoose. Or look at PledgeMusic, which has managed to make crowdfunding less about dollar amounts, and more about the relationship between artists and their fans. Small beans? Yes, in the wider scheme of music revenues. But increasingly meaningful for individual artists.
Google finally downgrades pirate sites
Music industry rightsholders have been yammering away for ages at Google to deliver on its 2012 promise to demote piracy sites in its search rankings. Many had given up by October, when Google made the promise again—and then went ahead and actually did it. “We’ve now refined the signal in ways we expect to visibly affect the rankings of some of the most notorious sites,” explained the company. A few days later, filesharing site Isohunt was admitting that its search traffic had “dropped in half.” A brave new frontier in the historically-troublesome relationship between Google and the music industry? Realpolitik to get the then-upcoming YouTube Music Key service finally up and running? Maddening proof of Google’s willingness to mess with the music industry’s collective head? Take your choice. The more important thing about the move, strangely, was that it wasn’t that important—in 2014, most rightsholders are less preoccupied with piracy and more preoccupied with figuring out how legal music services should evolve. Witness the lack of office-congas (metaphorical or otherwise) when The Pirate Bay was finally shut down in December.
Disney buys Maker Studios
The emerging world of multi-channel networks (MCNs) on YouTube has been fascinating for some time to smarter music industry execs, as companies like Maker Studios and Fullscreen built businesses that were part talent agencies and part TV production studios, assembling rosters of YouTubers with rocketing audiences. Maker Studios duly got its exit when Disney agreed to pay up to $950m for it in March, at a time when it had more than 55,000 channels and 5.5bn monthly views. “Everybody is running after the millennials, and the millennials are running after us,” Maker boss Ynon Kreiz told the MIPCOM TV industry conference in October. The music industry looked on with interest, less because MCNs have proved they can make big money from YouTube—most are unprofitable—but because they are refining the art and science of building audiences on Google’s property, which is at once the biggest streaming music service in the world, and a very-real alternative to traditional TV for teens and tweens.
PonoMusic puts high-res audio back on the map
Neil Young hasn’t given up music-making just yet, but he ended 2014 as a bona-fide tech startup CEO too, with PonoMusic. The company raised $6.2m on crowdfunding site Kickstarter to drum up pre-orders for its high-definition music player and downloads store, before getting to work on actually launching them. “You have helped to set the stage for a revolution in music listening,” Young told backers. But if so, it’s a revolution with other potential leaders, many of whom are looking beyond downloads. Streaming service Deezer launched in the US with Deezer Elite, touting lossless audio quality and a partnership with hi-fi firm Sonos. Scandinavian rival WiMP came up with a new brand called Tidal to launch a similar service in the U.S. and U.K., having signed up 580,000 paying users in its home markets. Don’t bet against Apple making better audio quality a key plank in its 2015 relaunch of Beats Music, either. But speculate away on how big the market really is for audiophile-quality digital music: these are early days.
Viner Shawn Mendes storms iTunes chart
In July, teenage musician Shawn Mendes released his debut EP. 37 minutes later, it had topped the iTunes Albums chart in the U.S. Mendes was just the most high-profile example of a musician whose break came not from being spotted playing in a club, or even on YouTube, but in Twitter’s six-second video-sharing app Vine. And Mendes was spotted by several million fans on Vine before he was signed to a label deal by Island Records in June. In August, Vine announced that more than 100m people watch Vine clips every month, with more than one billion “loops” (individual plays) of videos a day. There are more stars being born there every month.
Twitter #Music evolves
In 2014, we learned that even one of the biggest social networks could run into trouble when trying to get into music discovery. Well, less “trouble” and more a lack of interest: when Twitter #music was closed in March, it came as little surprise. But a second tweet that day—“We continue to experiment with new ways to bring you great content based on the music activity we see every day on Twitter”—showed how the closure restored focus to some even more ambitious music activities. Twitter spent the rest of 2014 experimenting, from its real-time chart with Billboard to in-tweet purchasing of music to a new audio card for listening to SoundCloud tracks. Meanwhile, artists and labels were experimenting on Twitter too: Coldplay’s #lyricshunt in May, Michael Jackson’s video premiere in August and Kodaline’s personalised Vines promo this month. Twitter #music may be a dim memory, but since its closure, Twitter as a music platform has become more interesting than ever.
WMG gets deeper into the playlists game
It’s relatively rare for a major label to buy a music technology startup, so Warner Music Group’s purchase of streaming curation firm Playlists.net in October was notable. WMG now owns a collection of more than 150,000 Spotify playlists, and a site that was attracting 1.1m visitors a month in early 2014. But the deal reflected a wider trend: the growing importance of playlists in music marketing, as labels started working with the idea of seeding new tracks on playlists with hundreds of thousands of subscribers, alongside their existing radio, advertising and PR efforts. All three major labels now have in-house playlist brands: WMG has PlaylistMe as well as Playlists.net, while Sony has Filtr and Universal has Digster.
Pandora reaches out to artists
Pandora remains one of the most popular digital music services, with 76.5m active listeners—the vast majority in the U.S.—at the end of September. Yet the company also has one of the most toxic reputations among some artists, songwriters and publishers. That’s why the big story in 2014 for Pandora wasn’t its successful efforts to fend off the threat posed by Apple’s iTunes Radio, but rather the start of a new round of attempts to win back sceptics within the creative community. October’s unveiling of Pandora AMP (“artist marketing platform”) was the key moment, as the company opened up its analytics to artists. But recruiting a VP of industry relations and a head of artist marketing were also part of its efforts. 2015 will show how the sceptics react, albeit amid a likely-acrimonious lobbying process to set Pandora’s royalty formula for the next few years.
Shazam reaches 100m active users
Founded in 2002, Shazam’s growth is one of the longer-term success stories of the digital music industry. Historically a music-identification app, by the time Shazam reached the milestone of 100m active users in August, it had a burgeoning business in TV and advertising too. Even so, the company remains an important player for the music industry, with its tagging charts trusted by media tastemakers as a guide to upcoming tracks. Now, it stands at the tipping point between sales and streams: from an app whose success was measured by the number of iTunes downloads its users bought, Shazam is now evolving into a music consumption app with news, videos and streams from Spotify and Rdio (so far). Those 100m users give Shazam a strong base to work from with these new features.
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