Here is another in my series on SXSW events. I am pleased to be attending SXSW for the first time. I am grateful for Adobe Acrobat for enabling me to participate. I am attending some of the Adobe sponsored sessions. As I do with other events I will be posting my notes from most of the sessions I attend. This is the session on The Future of Music Consumption led by Ken Parks. Chief Content Officer, Spotify. Here is the session description.
“Modern consumers want to discover music quickly and easily. They want instant gratification, and they don’t want to pay for things they feel they should be getting for free. Year to year digital music sales are increasing exponentially; consumers are choosing to seek, store and share online. Spotify is leading the field in subscription-based music services by providing fast, inexpensive, and easy access to one of the largest catalogues of online music. With over 15 million available songs available (a figure that is growing by the day), Spotify provides subscribers with more legal choices and at the same time is able to make sure the people who create the music prosper.”
Here is a subject dear to my heart and soul. I always have music on. I primarily use iTunes now. We were welcomed as early risers at 11AM. Ken Parks began with a Spotify overview. They have launched in Germany which is third biggest music market in world, second is Japan after the US. They have over 10 million active users. The bulk of their users are from people that were not buying music. So the money flowing back into artists is on top of what they were getting. It has been claimed that Spotify may pass iTunes. I need to check into it.
How do they know these are new users? A huge number of new members were privates. Sweden is where Spotfy began and it was was a hot bed of pirates. Now they find Spotify as better than piracy. The users are 18 – 24 graphic. These people are not buying much. So there is little cannibalism effect on other means. This is benefiting artists as they get some money from this. They are rising rapidly in US.
What is it about Spotify? Others do streaming. Ken said we all stand on the shoulders of others such as Pandora. Spotify resonated well because it is all the music in world and you can access it in seconds. It is also very social and connected with Facebook. It is also free. The Facebook Open Graph link was huge to get people into the funnel. There is a paid version of $10 a month for premium features. Facebook attracted the free users, some of whom became paid members. There is a better conversion rate from free to paid users for Facebook, three times as likely. They build playlists at a faster rate that ups their personal investment.
This business began as a way to get people off of piracy. They are trying to help artists to vindicate the value of their work. They beleive culture suffers if artists are not rewarded. They are not cannibalizing iTunes, but piracy. It was mentioned that at SXSW Interactive the beer is free and at SXSW the beer is not free because of the different economic base. They want to partner with artist to help then get their due.
The digital record companies like Spotify more than individual artists. Spotify pays the people who have the rights which is the record companies. They do not have control over how the record company passes the money on down to the artists. They pay 65 – 70% of their revenue back to rights holders. It is up to them to pass it on.
David, an artist, now came to the stage to join the conversation. He said that they saw the writing on the wall with Napster. But is was wrong to go after the kids who download illegally. The ISP could have added a small fee like the premium like the sports channels and this could has been passed on. This is similar to how Spotify is working now to pass money on.
MTV used to be launch pad or artists. Now there is YouTube. Artists looked to it as a way to get their music out. You can get millions of users. Artists are okay with this as way to get seen because of the visual aspect. You need to get exposure, like in the old days of radio play. Being able to drive the car before you buy it is a good thing. People like to listen to music before you buy it. I know that I do.
David said it not just a matter of money. We do need it to eat but it is much more than the money. You want to expose it to as many people as possible. This is way I show my painting through Twitter and blogs. It is more the principle that they do not want their work stolen. I would feel the same way.
How do you overcome this/ David said make great records. David feels overall that the quality has gone down recently. This is too much pressure to produce as much as possible so the focus has been more on quantity over quality. There is pressure from the record companies for volume to up their value, possibly for investors or takeovers.
Are we in a post album era. David hopes that albums survive. Producing sound bytes is not as strong as creating a complete story. But iTunes allows you to buy one song at a time cuts into this. Privacy is especially single song oriented. What happen to the Wall or Sargent Pepper?
It was asked about Spotify economic model with a streaming version vs the download version. With the download you pay once and you own it. With a streaming model you pay more in the end if you like the music.
It was asked how David is using Spotify to reach his audience. He has links to Spotify play lists that he creates. He gets contacts from Spotify users. Also he can promote new bands with his own play lists.
Audience questions: What about buying an album when you only like one song? David said this is a problem of trying to produce too much too fast so quality suffers. That is also not the only issue. I often go after a single song because I really like it and/or I already have some of the other songs from other albums. I use this option to fill out a collection. So the number of albums that are collections raises this issue also. This may be driven by the issue that David mentioned of the need to drive more album releases.
The idea is to allow everyone can profit at scale. Spotify starts out as a free service but you pay if you like and the money is passed on to the artists through the record companies. Artists still like YouTube even through they get no money but ii is a promotional channel. I also pick the YouTube over the audio when available, even if it is the same song. I did this when trying to see which bands to watch at SXSW. However, I like a video that is a regular concert video and not an attempt to be arty with too many visuals since the concert experience is what I will be seeing on stage live.