Spotify’s IPO was both a success and an uncertain forecast for the future of music

acastro_180213_1777_0005.0Spotify’s initial public offering today was both a success and a tepid forecast for the future of music streaming. The company’s shares closed today at $149.60, up 12 percent from the initial reference price of $132, but down from a high of $165.90 when shares debuted on the New York Stock Exchange this morning. That gives the Swedish company a market valuation of around $26.6 billion. According to Reuters, Spotify shares slid from the opening high due to lackluster confidence in Spotify’s business model, which itself is a symbol of the future economics of the music industry.

Spotify’s unique IPO approach, called a direct listing and one typical of smaller companies in industries like biotech, involves selling shares direct to the public without an intermediary. “Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years,” explained Spotify co-founder and CEO Daniel Ek in a blog post yesterday. “So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.” Spotify is the biggest company to ever go public via direct listing, and the first on the NYSE.

While Ek says Spotify isn’t raising capital with its IPO, the company is certainly in need of some cash. Although Spotify earns $5 billion a year in revenue, it pays out more than three-fourths of that in royalties to labels, producers, songwriters, and artists. The Big Three — Universal Music Group, Sony Music Entertainment, and Warner Music Group — control a vast majority of that ecosystem, leaving just a small amount of revenue and zero profit for Spotify to recoup from its 70 million paying subscribers. Though Spotify counts nearly 90 million free listeners, it only makes around 10 percent of its total annual revenue from advertising to those free users.

That puts a lot of pressure on Spotify to ensure investors that it can continue to grow, even as Apple Music closes the subscriber gap. Apple’s streaming product is no less economically viable, but the iPhone maker does not at all rely on it to make money, with the company’s vast and robust hardware ecosystem generating a large majority of its record revenues and profits. Though Spotify is cutting its losses thanks to renegotiated deals with record labels, it still loses close to $1.5 billion a year. Spotify has yet to ever make a profit.

If Spotify cannot find additional revenue streams or find ways to turn a vast number of free subscribers into paid ones, the streaming service may not have a bright future except as a kneecapped extension of the existing music industry, the majors of which own about 16 percent of the company as it stands today. But the music industry needs streaming services like Spotify just as much as much as the streaming services rely on labels. That symbiotic, but at times antagonist, relationship forms the pillar of the current music industry. Whatever happens to music creation and distribution in the future, Spotify will surely play a major part, whether or not it manages to transform into a profitable platform

How to Legally Use Music in Social Media Campaigns (and Why You Should)

music-choices-resizedMusic in advertising has evolved from the jingles of old to the modern sounds of today, as shown by the addition of popular songs by the likes of Beyonce, Icona Pop or Taylor Swift. Studies have consistently demonstrated that the addition of music can take a ho-hum ad spot from dull to unforgettable, such is the power of music.

The role of music in advertising is rarely studied on its own, and statistics as to the prevalence of an ad’s accompanying melodies are few and far between. A 1989 study by Musical Quarterly revealed that approximately three-quarters of ads include music in some way, a ratio that appears relatively stable over the years.

The use of music in advertising is unquestionable – but, do differences in video ad performance exist between the use of royalty-free music and rights managed music? Does one element lead to (or take away) the stickiness that every brand is looking for when they run an ad?

In this post, we’ll discuss all things musical – from the meaning of copyrights to the use of royalty free pieces. Final consideration will be given to the discussion of the differences, if any, between the available types of music licenses. Does one perform better than the other? Let’s see: Read the full article here. 

Infographic: 72% of Spotify Listeners Are Millennials. Here’s How They Use the Service

Music streaming services are more popular than ever, and, naturally, no group is leading the charge more than millennials. One of the most popular of those services is Spotify, which provided Adweek with exclusive data to get a better look at this demo. “As the largest global streaming service, we have a deep understanding of millennials from our data on streaming habits,” said Spotify business marketing global director Jeff Rossi. “For marketers looking to reach this highly sought-after group, we understand that millennials are listening more frequently and streaming in more places than nonmillennials, including most often on mobile and desktop as they move from home to school to work. We also see that millennials’ streaming habits are not as impacted by traditional peak consumption periods like prime time or drive time. They are connected all day from the moment they wake up.” pitch-perfect-data-02.png

Google launches YouTube Music, a new app for discovering music videos

YT-music-640x529YouTube’s standalone music streaming app has arrived.

Google launched YouTube Music Thursday, the music complement to its new video subscription service YouTube Red. The app is available now for iOS and Android.

YouTube Music is all about discovery. If you search for an artist, track or album, the app will surface everything from official music videos to popular covers and remixes to concert videos.

And, like any good music app, you can create playlists, listen to personalized “stations,” and get recommendations in the app’s home tab. YouTube Music is free but paying for a $9.99/month YouTube Red subscription buys you quite a few extra features, like offline listening, the ability to switch between video and audio-only streams and the option to listen to tracks and videos in the background while in other apps. It also gets rid of the ads free users will hear when using the app.

Google is likely hoping YouTube Music will help drive people toward its new YouTube Red subscription service, which launched last month. A YouTube Red subscription also comes with on-demand access to Google Play Music — that’s Google’s other music streaming service — and those who already subscribe to Play Music will be able to use YouTube Music’s premium features.

It’s unclear whether a new service built around music videos, which most people are already used to getting for free, will help YouTube Red gain traction but the app should be a welcome addition to YouTube’s many music-loving users. To help promote the new service, the company is giving new users access to the premium features for free for the first 14 days.