Streaming Music Has a Problem-It's a Huge Success: Pandora, Spotify and Others Need Money-And Where They Want to Get It from Is Ruffling a Few Feathers

By Griffith, Erin | ADWEEK, January 9, 2012 | Go to article overview

Streaming Music Has a Problem-It's a Huge Success: Pandora, Spotify and Others Need Money-And Where They Want to Get It from Is Ruffling a Few Feathers


Griffith, Erin, ADWEEK


In late September, Spotify CEO Daniel Ek was the first guest Mark Zuckerberg introduced on stage during his keynote speech at the f8 developer conference, which introduced the network's new media consumption features. That night, Sean Parker--Napster founder, early Facebook executive and Spotify investor--threw a lavish warehouse party for conference attendees, serving roast pig and lobster during performances by Snoop Dogg, The Killers, Jane's Addiction and Kaskade. The next day posts declaring which users were listening to what bands on Spotify trickled into Facebook's feeds.

The integration helped earn Spotify an additional four million U.S. users over the next six weeks, notable because the Stockholm-based company had launched its free music streaming service in the U.S. only a month prior. Until then, it felt as though music fans had largely conceded to paying for music on iTunes. But Spotify's hotly anticipated--and most importantly, free--arrival electrified the digital music ecosystem.

It was likely no coincidence that the month Spotify landed, digital DJ site Turntable.fm launched, also free of charge--and with no clear business model--and, soon after, MOG and Rdio, which also participated in the Facebook integration, launched free versions of their subscription-based services. Around that time, Myxer, known for its mobile ringtones, apps and wallpapers, announced Myxer Social Radio, a free music streaming service. Clear Channel unveiled an amped-up version of iHeartRadio, its previously quiet three-year-old digital service, also free. Even Pandora, the reigning Internet radio champ fresh off its IPO, got into the act, increasing its limit on free streaming from 40 hours per month to 320. It was a free-streaming free-for-all.

But nothing online is ever really free.

The online music industry is in a unique, Catch-22 situation: The more successful it is, the more money flies out the door. Digital music companies pay dearly for the rights to stream music. Pandora, for example, turned a profit for the first time this past November--10 years since its launch--thanks to onerous licensing agreements requiring it to pay a fee each time a song is streamed. The company's peers, including the smaller players, also pay a hefty rate each time a song is played. The services will never outgrow their costs, an unfortunate arrangement commentators have dubbed a "suicide pact."

And subscription revenue, a much smaller business, is not enough. The streaming services need advertising dollars, and they have monies previously allotted to broadcast budgets in their crosshairs. It is, in general, a well-trod story: New medium goes after old ad dollars. But in this case, the stakes are unusually high. Online radio's very survival depends on stealing ad dollars from its traditional counterpart, and it needs to do it fast.

"When [streaming services] look at the pool of radio dollars, which is immense, and ask if there's a logic to joining that category, it's impossible not to be seduced by the opportunity," says Mark Ramsey, president of Mark Ramsey Media consultancy.

EMarketer has estimated online radio would secure $800 million in ad dollars in the U.S. by the end of 2011, compared with traditional radio's behemoth $15.7 billion. (The Radio Advertising Bureau's official 2010 number, which includes off-air ads, is $17.3 billion.) It's a small but growing sum that increases by 20 percent each year, and eMarketer expects it to hit $1.6 billion by 2015. (All numbers exclude Pandora and Spotify.)

Nine of the top 10 auto brands including Ford, Chevrolet and Toyota were running online radio ads as of September 2011, according to IAB's Digital Audio Advertising Overview. The same goes for nine of the top 10 retail marketers like Target, Macy's and Walmart; nine of the top 10 restaurant marketers like Wendy's, Taco Bell and McDonald's; eight of the top 10 financial services marketers including American Express, Bank of America and Chase; and seven of the top 10 telecom marketers, including AT&T (which was the top spender on traditional radio advertising, according to the RAB). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Streaming Music Has a Problem-It's a Huge Success: Pandora, Spotify and Others Need Money-And Where They Want to Get It from Is Ruffling a Few Feathers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.