“Ethics change with technology.”
Larry Niven, N-Space
According to the latest Q3 financials this year posted by Spotify, operating profit reached $60 million on $1.92 billion of revenue. Subscribers and monthly active users additionally grew to 113 million and 248 million, respectively. Questions remain whether the company will be able to sustain these numbers for the upcoming fourth quarter.
There are reports by Reuters that TikTok’s parent company, China-based ByteDance is under a national security investigation by the US government. Sources provided information saying that the federal government’s Committee on Foreign Investment in the United States (CFIUS) is in talks with TikTok surrounding plans to divest Musical.ly’s assets from its business, undoing a previous merge. The news follows a recent letter sent out to Secretary of the Treasury Steven Mnuchin by US Senator Marco Rubio regarding concerns that ByteDance censors content the Chinese government doesn’t approve of.
UK song rights collecting society PRS For Music is set to launch a new data and analytics dashboard for songwriters and publishers, “build[ing] a comprehensive picture of when and how royalties are being generated.” Additionally, statistics will be provided for all the song right revenue streams that involve the collecting society. The portal also allows comparisons between songs, territories, and time periods.
Now, the details...
Compiled by Heidi Seo
Exploration Weekly - November 8, 2019
Spotify Posts Operating Profit of $60 Million in Third Quarter
According to Spotify’s third quarter 2019, operating profit reached $60 million on $1.92 billion of revenue, Investors were impressed by financial gains, subscribers growing to 113 million and monthly active users reaching 248 million. Spotify’s share price also jumped 19% on October 28, adding $4 billion of market capitalization. Its shares still trade 16% below the price at which it debuted on the New York Stock Exchange in April 2018. Now over a decade after its 2008 launch, the music streaming service is still in growth mode, the phase when a streaming company spends more on expansion than it receives from a subscriber. For example, licensing contracts with labels tend to have minimum guarantees. A label receiving a fixed percent of revenue can let average revenue per user fall only so far. Looking ahead to fourth-quarter earnings, will Spotify be able to follow-up from an operating profit in one quarter?
TikTok Parent ByteDance Under Investigation by US Government
Reports suggest that the US government has opened a national security investigation into TikTok’s parent company, China-based ByteDance, and its 2017 $800 million acquisition of competitor app Musical.ly. Two anonymous sources familiar with the matter told Reuters the federal government’s Committee on Foreign Investment in the United States (CFIUS) is currently in mitigation with TikTok, and the two are discussing what TikTok can do to divest Musical.ly’s assets from its business and undo the merge. A recent letter by US Senator Marco Rubio (R-Fla) to Secretary of the Treasury Steven Mnuchin requested that CFIUS investigate ByteDance and Musical.ly, citing concerns that ByteDance censors content the Chinese government doesn’t approve of. Another letter written by Senators Cotton and Schumer were along the same lines, to which TikTok responded by saying, “We are not influenced by any foreign government, including the Chinese government...TikTok does not operate in China, nor do we have any intention of doing so in the future...TikTok does not remove content based on sensitivities related to China. We have never been asked by the Chinese government to remove any content and we would not do so if asked. Period.”
PRS Launches New Data and Analytics Portal for Songwriters and Publishers
A new data and analytics dashboard was launched this week by UK song rights collecting society PRS For Music in order to help songwriters and music publishers better understand how their songs are performing across the world. The announcement also added it would “build a comprehensive picture of when and how royalties are being generated.” The new portal provides statistics for all the song right revenue streams that involve the collecting society, and will allow comparisons between songs, territories, and time periods. PRS stated that the new service will be “invaluable” for songwriters and their teams, providing data that can “support career choices, touring decisions and open new markets to songwriter, composer and publisher members.”
CISAC Report Finds Global Publishing Revenue Grew to $10.6 Billion in 2018
Global collections top $10.6 billion as digital revenue jumps nearly 30%, according to a report from collections group CISAC, the International Confederation of Societies of Authors and Composers. This hit a new record of royalty payments for creators of music, film, TV, literature, and the visual arts last year, most likely due to a surge in revenue from online platforms. Breaking down the figure, 1% of global royalties collected came from authors’ societies around the world, and 29% came from digital sources such as Spotify and Netflix, totaling $1.81 billion. The report also included that over the past five years, creators’ digital income has nearly tripled and now accounts for 17% of all collections, compared to just 7.5% in 2014. In the US, there has been a 300% increase in digital revenues in the past five years. Music royalties account for the bulk of overall revenue, some $9.4 billion worldwide. This is thanks to laws that protect and remunerate musical artists and composers, such as the European Union’s Copyright Directive, a broad piece of legislation enacted by the European Union in June. CISAC currently has 239 member societies, which represent more than four million creators in 123 countries.
Peloton to Launch More “Artist Series” Exercise Classes
Exercise company Peloton published its latest quarterly financials this week, and it includes an upcoming feature that will be released soon called “Artist Series”. This means classes based on specific artists’ music for its exercise bike-owning subscribers. The announcement stated, “We recently produced a Jennifer Lopez dual-instructor ride with Robin Arzon and Jess King, as well as a Lizzo ride, and both placed in the top 10 live classes of all time on our platform. Recent classes based on music by Paul McCartney, Red Hot Chili Peppers, The Chainsmokers and Shakira similarly drove strong engagement from our members.” The results also revealed that Peloton’s “content costs for past use” - payments as part of music licensing deals that release the company from potential copyright claims by those rights holders for past use of music - were $0.9 million in Q3 2019, compared to $2.9 million in Q3 2018. There was no update in the letter to shareholders on lawsuits from US music publishers. The financials, additionally, showed the company’s revenues more-than doubled year-on-year to $228 million in Q3 2019, although its net loss narrowed from $54.5 million to $49.7 million over that period. Peloton increased its “connected fitness subscribers” from just under 277,000 at the end of September 2018 to nearly 563,000 a year later.
Pandora’s User Base Lost 1.8 Million Listeners in Three Months But Ad Revenue Reached New Record
About a little over three years ago, Pandora had more active users worldwide than Spotify towards the end of Q2 2015 (79.4 million vs. 75 million). Today, according to updated Q3 statistics publicly unveiled by both companies this week, Spotify has nearly four times as many as its one-time rival (248 million vs. 63.1 million). The decrease in Pandora users could have been due to the firm shutting down operations in Australia and New Zealand in July 2017, making it a US-only service. On the other hand, Spotify was able to expand into the likes of India, Vietnam, and the Middle East. Though Pandora no longer holds the top spot in US-based subscribers, other news reveal that ad revenue at Pandora reached a record $315 million in the three months to end of September, up 8% year-on-year. Juxtapose that with Spotify which, despite its nearly-four-times-bigger global audience, generated just $190 million (€170 million) from advertising in the same period (up 20% YoY). Pandora parent SiriusXM said, “Strength in traditional audio advertising, boosted by video programmatic and engagement-based video, as well as the expansion of off-platform efforts and fees generated on the AdsWizz platform drove revenue growth.”
Spinal Tap Creators and Universal Music Group Settle Copyright Dispute
Harry Shearer, Christopher Guest, Michael McKean, and Rob Reiner, the creators of the film “This is Spinal Tap,” have resolved their dispute with Universal Music Group regarding the film’s soundtrack recordings. The agreement now states that Spinal Tap’s recordings will continue to be distributed through UMG, and “eventually the rights will be given to the creators.” The $125 million lawsuit, originally filed in October 2016 by Shearer’s Century of Progress Productions, alleged that UMG and Studiocanal underpaid music royalties in the film and sought to reclaim their copyrights to the film, its songs, and characters. Vivendi argued that three of the co-creators’ companies, did not have the legal right to sue. A district court judge Gee agreed, noting that the contracts with the creators’ companies obligated them to “perform services - not receive rights or other benefits.” The three then sued individually, seeking a judgment in the actors’ right to reclaim their copyright to the film and elements of its intellectual property.
Napster Q3 Revenues Fell by 21.6% Year-on-Year to $27.3 Million
RealNetworks’ music-streaming subsidiary Napster released its latest quarterly financial results, unveiling revenues for Q3 2019 at $27.3 million, which represents a 21.6% drop year-on-year from its $34.8 million revenues in Q3 2018. RealNetworks reports its figures by splitting out Napster’s revenues into two sales channels: business to business, and direct to consumer. Napster’s B2B revenues (from streaming services it runs for other brands) were $13.1 million in Q3 this year, while its D2C revenues from its own service were $14.2 million. In the company’s earnings call, CFO Cary Baker cited “declining subscribers, partially offset by higher platform partner revenue,” so it is not far-fetched to suggest B2B may be about to overtake D2C for Napster.
Report: TuneIn Loses Copyright Lawsuit Filed by Sony and Warner in the UK
According to a report by Bloomberg, a judgment passed on November 1 by Judge Colin Birss in London said that streaming radio service TuneIn breached copyright, thereby losing a copyright infringement lawsuit filed in 2017 by Warner Music Group and Sony Music Entertainment. The company was sued by the two majors for lacking a license to play music in the country. TuneIn was launched in 2002 as a free digital radio service that offers its listeners music, sports, news, podcast, and audiobook content. Its Pro app’s record feature was reportedly functioning as “download on demand service,” according to Birss. Reports suggest that the Pro app had 150,000 users in the UK in January 2019, but that the record feature was removed in the country in early 2017. The majors later submitted evidence which they claimed showed a sample of 800 unlicensed TuneIn music streams in the UK.
Random Ramblings
- The effects of shortening attention spans on the music industry.
- Selena Gomez earns her first Billboard Hot 100 chart-topper with "Lose You to Love Me".
- How romantic relationships alter our relationship to music.
- How streaming killed underground micro-labels.
- Westlife drops a new video for their heartfelt ballad, "My Blood".
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