Spotify Music Streaming Service Tops 100 Million Subs; Ups Fiscal Loss

SpotifyTechnology S.A. April 29 announced its branded music subscription streaming service reached 100 million paid subscribers in the first quarter, ended March 31.

That beat the previous-year period with 75.5 million paid subs. It also nearly doubled Apple Music with 50 million subs.

Average monthly users grew 26% to 217 million (which includes free ad-supported music users), slightly lower than the company’s 215-220 million guidance range.

“Outperformance was driven by a better promotion plan in the U.S. and Canada,” founder/CEO Daniel Ek and CFO Barry McCarthy said in a statement, alluding to a 23% price reduction ($12.99 to $9.99 monthly) for the “Spotify Premium + Hulu” promotion in the U.S.

McCarthy was Netflix’s CFO from 1999 to 2010.

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Spotify launched India in late February expanding its global market footprint to 79 countries. More than 1 million users signed up for Spotify in the first week in India. The company now has more than 2 million users in India.

Regardless, the streaming service reported an operating loss of €47 million ($52.4 million) on revenue of €1.5 billion ($1.67 billion), which was up 33% from revenue of  €1.1 billion ($1.22 billion) last year.

 The service, along with Pandora, Google and Amazon Prime Music, remains embroiled in a royalty dispute with songwriters.

Last month, the Register of the Copyright Office approved upping songwriters’ royalties from music streaming services from 10.5% to 15.1%  through 2022.

It was biggest rate increase granted in CRB history, according to the National Music Publishers’ Association.

Spotify & Co. are appealing the hike, claiming it “harms music licensees and copyright owners,” among other issues. Apple Music is not appealing the ruling.

Report: 83% of U.S. Teens Own an iPhone

With Apple prepping to launch its rebooted Apple TV+ streaming platform, new data from Piper Jaffray found that 83% of teen survey respondents in the United States own an iPhone.

The survey of 8,000 teens skewed 54% male with an average age of 16.3 years. Notably, 86% of respondents said they would choose an iPhone for their next mobile phone – up from 75% in a spring 2016 survey.

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The data suggests teens would continue use the iPhone as adults, with usage expanding to Apple Music, AirPods, Apple TV+ and Apple Watch.

Indeed, Piper found that 27% of teens own a smartwatch, with another 22% planning to buy one in the next six months. That’s up from 20% in the same survey a year ago.

Apple Responds to Spotify Complaint

Apple March 15 responded to Spotify’s decision to file a complaint against Apple Music with the European Commission citing unfair business practices, including taxes and restrictions on tech and user-enhancements, among other issues.

Spotify ended its most-recent fiscal period with 87 million paid subscribers, compared with about 50 million for Apple Music. Both services operate through the App Store, which is owned and operated by Apple — and at the center of Spotify’s gripe.

Specifically, Swedish-based Spotify takes issue with the 30% tax it and other digital services must pay utilizing Apple’s payment system. If the service opts out of the payment platform, Spotify alleges Apple restricts how it can communicate with its subscribers outside the app.

“In some cases, we aren’t even allowed to send emails to our customers who use Apple,” Spotify founder/CEO Daniel Elk wrote in a March 13 post.

In a 1,124-word response on its website, Apple said Spotify wants to enjoy the benefits of the App Store without paying for them.

“Spotify has every right to determine their own business model, but we feel an obligation to respond when Spotify wraps its financial motivations in misleading rhetoric about who we are, what we’ve built and what we do to support independent developers, musicians, songwriters and creators of all stripes,” Apple wrote.

The tech giant said the App Store has created “many millions of jobs,” generating more than $120 billion for developers while creating new industries such as subscription music streaming via through businesses like Spotify started and grown entirely in the App Store ecosystem.

“After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store — including the substantial revenue that they draw from the App Store’s customers — without making any contributions to that marketplace,” Apple wrote.

The iPhone/iPad/Apple Watch creator said the 30% tax imposed on app payments drops to 15% after one year.

Apple said the majority of Spotify customers use their free, ad-supported product, which makes no financial contribution to the App Store. A significant portion of Spotify’s users come through partnerships with mobile carriers, which Apple claimed generates no App Store contribution but requires Spotify to pay a similar distribution fee to retailers and carriers.

“Even now, only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model. Spotify is asking for that number to be zero,” Apple wrote.

“Spotify wouldn’t be the business they are today without the App Store ecosystem, but now they’re leveraging their scale to avoid contributing to maintaining that ecosystem for the next generation of app entrepreneurs. We think that’s wrong.”

 

 

Spotify Files Complaint Against Apple Music with European Commission

Spotify, the world’s largest music streaming service, has filed a complaint against Apple with the European Commission alleging the tech giant unfairly restricts competition against the Apple Music service.

Spotify ended its most-recent fiscal period with 87 million paid subscribers compared to about 50 million for Apple Music.

In a March 13 blog post, Daniel Elk, founder and CEO of Spotify, said Apple has changed the rules and stifled innovation how it operates the proprietary App Store. Elk argues that as Apple is both the owner of the iOS platform and the App Store — a competitor to services like Spotify, which gives the company an unfair advantage.

Specifically, Spotify takes issue with the 30% tax it and other digital services must pay utilizing Apple’s payment system. If the service opts out of the payment platform, Spotify alleges Apple restricts how it can communicate with its subscribers outside the app, in addition to limiting tech and user-enhancements.

“In some cases, we aren’t even allowed to send emails to our customers who use Apple,” Elk wrote.

The executive said apps should be able to compete fairly on their merits and not based on who owns the App Store. He said consumers should have a choice of payment systems and not be forced to use systems with discriminatory tariffs.

Elk said the App Store should not be allowed to control the communications between services and users, including allegedly placing unfair restrictions on marketing and promotions that benefit consumers.

“After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition,” he wrote.

 

 

 

Music Streaming Services Appealing Royalty Increase for Artists

Subscription streaming music services such as Spotify, Pandora, Amazon and Google are planning to appeal proposed royalty rate increases for artists finalized last month by the Copyright Royalty Board.

It marks the first time music distributors have appealed compensation rates to artists. Apple Music, the world’s largest streaming service with nearly 50 million subscribers, is not contesting the royalty hike.

The three-member CRB ruled last year — in a 2-1 vote — to increase artists’ share of streaming and record label revenue from 10.1% to 15.1% through 2022.

The streaming services and artists groups spent millions lobbying their sides of the debate. Spotify & Co. contend the decision to increase artists’ compensation involved “serious” procedural and “substantive” concerns.

“If left to stand, the CRB’s decision harms both music licensees and copyright owners,” the services said in a joint statement. “Accordingly, we are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision.”

David Israelite, CEO of National Music Publishers Association, criticized the streaming services for undermining the artists that drive consumer adoption.

“When the Music Modernization Act became law [in 2018], there was hope it signaled a new day of improved relations between digital music services and songwriters,” said Israelite. “That hope was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one-third.”

 

 

 

 

 

Spotify Inks Direct Access Deal with Samsung Mobile Devices

Spotify March 8 announced a deal with Samsung offering mobile device users direct access to the second-largest music streaming service in the world (after Apple Music). Starting today, the Spotify app will be pre-installed on millions of new Samsung mobile devices globally.

New Spotify consumers in the U.S. with select Samsung Galaxy mobile devices, including the just-launched Galaxy S10, can qualify for six months of free Spotify Premium, redeemable through the app.

The partnership expands last year’s agreement affording Spotify with Samsung’s virtual assistant software, Bixby. Spotify also enhances the Bixby Home screen by providing Spotify content and recommendations tailored for each listener.

“This partnership makes it easy for Samsung mobile users to access their favorite music and podcasts on Spotify, wherever they are and however they choose to listen,” Sten Garmark, VP of consumer products, Spotify, said in a statement.

The embedded Spotify app aims to make Samsung mobile devices more appealing to consumers.

“Our goal is to deliver the best possible mobile experience … and Spotify is the ideal music partner to help us make that vision a reality,” said Patricio Paucar, VP of marketing, Samsung Electronics America. “Whether they’re listening to the latest hit albums or checking out their favorite playlist, we’re giving eligible Galaxy S10 users access to an amazing six month Spotify Premium offer.”

 

 

CTA: Consumer Spending on Video/Music Streaming Services to Increase 25% to $26 Billion in 2019

Domestic consumer spending on video and music streaming services is projected to increase 25% to $26 billion in 2019, according to new data from the Consumer Technology Association.

On-demand music services (e.g., Spotify, Pandora or Apple Music) will bring in an expected $7.7 billion in revenue, up 22% as providers race to gain subscribers.

Spearheaded by artificial intelligence (AI) technology being incorporated in myriad consumer electronics devices, consumer spending on smartphones, smart home devices, smart speakers and subscription streaming entertainment will drive the domestic consumer technology industry to a record-breaking $398 billion in retail revenue in 2019 – up 3.9% from 2018, according to the CTA.

“Our latest research shows innovations in AI and faster connectivity are among the key drivers for the industry’s record growth,” CEO Gary Shapiro said in a statement.

Voice-controlled smart speakers, including Amazon Echo and Google Home are projected to sell 36.6 million units (up 5% year-over-year) and earn $3.2 billion in revenue (up 7%). Although adoption is slowing due to rapid voice integration in other devices such as TVs, smart home devices and other audio products, smart speakers remain a category to watch as consumers embrace the benefits of AI in their home.

“The future is bright for many tech products consumers already know and love, as stalwart revenue drivers including smartphones, laptops and televisions continue to innovate,” said Steve Koenig, VP of market research, CTA.

The top three industry revenue drivers continue to be smartphones, laptops and televisions.

After the introduction of pricier, flagship models from major manufacturers, smartphone revenue is expected to reach $80 billion, a 2% increase in 2019. Unit shipments are expected to grow 1% to 170.7 million.

This year marks the launch of the first 5G smartphones on the market. CTA expects 2019 U.S. sales will reach 2.1 million units and cross $1 billion in revenue. By 2022, 76% of all smartphones sold will be 5G-enabled.

In 2019, the U.S. laptop market will sell 51 million units, up 3% over last year, and earn $28.4 billion in revenue (unchanged from 2018). Convertible models and cloud-based laptops remain high-growth areas within computing, as consumers continue to upgrade to the latest operating systems.

Overall, unit sales of total digital displays in 2019 will remain above 42 million units (down 1%) and register $22.6 billion in revenue (up 2%). More than three-quarters of TV shipments will be sets with 40-inch screens or larger.

Future upgrades will be driven by 4K Ultra High-Definition (4K UHD) sets, which now make up more than half of all TV unit sales. 4K UHD will sell 22 million units (14 percent increase) and $16.4 billion in revenue (up 8%). Raising the bar on resolution, inaugural shipments of 8K UHD TVs will reach $545 million in revenue. And budding OLED shipments will reach 1.4 million sets with double digit growth through 2022.

“2019 will mark the introduction of 5G-enabled devices and smartphones and next-gen screen technology such as 8K UHD televisions to the market,” said Koenig. “And constantly-evolving content from streaming services that enhances the experience across ‘the three screens’ – TVs, smartphones, laptops – will help push consumer spending in tech to new levels.”

 

Apple Ups Q4 ‘Services’ Revenue 27%

Apple services revenue, which includes sales of digital movies and TV shows on iTunes and Apple TV, remains an emerging giant.

The tech company Nov. 1 reported fourth-quarter (ended Sept. 29) services revenue of more than $10 billion, up 27% from services revenue of $7.9 billion during the previous-year period.

The segment, which also includes AppleCare, Apple Pay, licensing and other services, benefited from a one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information.

Overall, Apple generated net income of $14.1 billion on revenue of $62.9 billion, compared to income of $10.7 billion and revenue of $52.5 billion last year.

The company sold more than 46.8 million iPhones, 9.7 million iPads and 5.3 million Macs in the quarter.

“We set September quarter revenue records for iPhone and wearables and all-time quarterly records for services and Mac,” CFO Luca Maestri said in a statement.

 

Trump Signs ‘Music Modernization Act’, Easing Legal Requirements for Streaming Services

Lost in the haze of President Trump’s Oct. 11 bizarre news conference with rapper Kanye West, was the president signing into law the Music Modernization Act, passed unanimously by Congress in September.

Officially known as the “Orrin G. Hatch – Bob Goodlatte Music Modernization Act of 2018,” the legislation simplifies the “mechanical license” required for “musical composition” (music and lyrics) and sound recordings from record labels played on subscription music streaming services such as Spotify, Apple Music, Pandora and Amazon Prime Music, among others.

Before passage of the law, streaming music services were required to complete license forms for each song placed on their platforms – upwards of 10,000 titles per day.

Now, a new licensing agency will be established within the U.S. Copyright Office offering music services a blanket mechanical license to stream content. The agency will keep track of music streams and in turn pay royalties to rights holders.

The bill also allows for royalties to artists and songwriters for songs written prior to 1972. It also, for the first time, will afford compensation for a song’s producer played on satellite radio and online music service.

“There’s a lot more that needs to be done here,” said Kid Rock, who attended the bill’s signing. “We need to go after the record labels next, and things like free goods. But this is a great start to protect songwriters, producers, engineers — the unsung heroes behind many of these songs that go out there. People like [me], who are maybe more at the top of the food chain, it really doesn’t affect as much. But I know many people it does affect.”

Amazon Music Expands Service in Canada

Amazon Sept. 26 announced the launch of Amazon Music Unlimited in Canada, featuring voice-activated controls by Alexa.

Amazon launched Prime Music in 2016, with Canadian service bowed in 2017. Amazon Music Unlimited affords users access to millions of more songs and artists on the Amazon Music app for iOS and Android, and on all Echo devices.

Amazon Music Unlimited is available to all customers, offering even more music and ways to ask for it through Alexa. Users have the ability to ask for music on any Alexa-enabled device, including through the Amazon Music app for iOS and Android, by mood, era, genre and title.

Users can also request a playlist based on activity, set music alarms to wake up to, build and add a song to a new playlist just by asking, or return to a song they were listening to earlier in the day. With hands-free listening in the Amazon Music app, users can simply ask Alexa to play music, anywhere they go.

Available in more than 40 countries, Amazon Music offers ad-free access to the newest music from artists such as Ariana Grande, Drake, Arkells, Shawn Mendes and Carrie Underwood, among others, with unlimited playback and skips.

In addition to a range of locally curated playlists and stations featuring international chart-topping artists, from “Brand New Music” to “All Hits,” Amazon Music Unlimited offers numerous playlists and stations featuring Canadian artists from all genres including Cœur de pirate, Celine Dion, The Weeknd, Blue Rodeo and Jessie Reyez. Subscribers can also find the best in top genres, from Tory Lanez on “Fresh Hip-Hop” to The Reklaws on “Fresh Country,” as well as explore a range of globally available playlists, including “Pop Culture,” which spotlights the latest pop music releases.

Amazon is offering new Prime subscribers a free 90-day trial for a variety of plan options, including the standard Prime member price of CDN$7.99/month or CDN$79/year, the individual plan for non-Prime members at CDN$9.99/month; the family plan, which allows up to six members of a household to share a subscription for CDN$14.99/month for Prime and non-Prime members, or CDN$149/year for Prime members; the single device plan, offering full access to Amazon Music Unlimited at CDN$3.99/month on one Echo device, including the recently announced Echo Dot, Echo Plus, Echo Show and more.

“We’ve seen such a positive customer response from the launch of Prime Music for Canada last year, and with today’s launch we’re excited to bring more customers even more choice and ways of discovering music with Alexa,” Sean McMullan, head of international expansion for Amazon Music, said in a statement.