Exploration Weekly - Spotify’s First Physical Product / Facebook Enters Smart Speaker Market / YouTube’s Lyor Cohen Emphasizes Community

Aaron Davis -


“If I can't dance to it, it's not my revolution.”

Emma Goldman

Physical music sales, like CDs in particular, are decreasing by almost 6% year-over-year according to a recent study by Kantar Worldpanel. To fill its space, smart speakers are gradually drawing consumers into an ultimate lean-back music experience within the comfort of their homes. As Spotify and Apple Music compete for subscribers to their paid streaming services, a new frontier of smart speaker/voice assistant products might disrupt and dismantle streaming’s hold on the music market.

Facebook recently announced the newest launch and debut of its two smart speakers codenamed Aloha and Fiona that will include facial and vocal recognition. The social media company has also recently signed a deal to license the music catalogue of ICE Services, which represent European music societies STIM and PRS. Spotify is also anticipating a “physical product” launch and debut that could easily represent its own version of smart speaker technology. How both companies will make noise this year alongside its competitors can only be, as we imagine, difficult, as currently, no established service has yet been determined to rule smart speaker sales, and adding new members could cause risk of increased competition due to saturation.

Now, the details...

Exploration Weekly - February 23, 2018

Spotify Releasing “First Physical Products”

According to Music Ally, a recent job posting for an “Operations Manager - Hardware Product” role inside Spotify’s website indicates that the company is “on its way to creating its first physical products and setting up an organisation for manufacturing, supply chain, sales & marketing.” The ad is described to “define and manage” key elements like distribution, logistics, and customer service for the product(s), which suggests Spotify is currently in the manufacturing process of the hardware. It isn’t clear what the company’s first product will look like, but sources claim it will be “akin to Pebble Watch, Amazon Echo, and Snap Spectacles”, according to job adverts posted over the past year. Spotify currently only relies on partnerships with third parties to stream its catalog on home devices, except for Amazon Music (Echo) and Google Play (Google Home), which allow users to easily synch up their Spotify accounts for playback via vocal prompt. Apple music lets users play anything they want from their iPhone, iPad, or computer, including playing from the Spotify app, but it doesn’t support native playback via Spotify.

Facebook Smart Speakers Set to Launch in July

Facebook is set to launch two smart speakers codenamed Aloha and Fiona this summer, arriving with 15-inch touchscreen displays, video chat and social features, and facial recognition technology. The company originally was set to launch earlier last year, but the date was pushed to July 2018 to improve audio quality. Aloha, also called Portal, will be the pricier of the two products. It will include voice and facial recognition to identify users. The tech company has partnered with Sony and Universal Music to add music functionality to their devices, but it is still unclear whether the speakers will support popular audio streaming services like Spotify, Google Play Music, and Pandora. Few are skeptical about Facebook’s privacy settings when handling sensitive user data as well as its potential ability to saturate the smart speaker ecosystem at a time when companies are still attempting to establish themselves in the market.

YouTube’s Lyor Cohen Recognizes Value of Community for Music Industry

YouTube’s global head of music Lyor Cohen sat down with Dua Lipa in a Q&A at the YouTube studios in London this week. The two discussed the importance of YouTube for labels and artists as a tool to strengthen the music community. The topic spilled over into Music Ally’s conversation with Cohen after the event around the topic of YouTube’s “value gap” battles. “It’s too easy of a soundbite - ‘value gap’, “Cohen stated, “I believe that YouTube contributes in such a significant way to the artist community. And to segments of the community that doesn’t have access to traditional media but who wants to build their audience.” The music exec explained that advertising and subscription at YouTube will help the tech company provide significant value to the music industry, while contributing to building a rich and defined community. “From me, I would like to see the music industry...come work alongside us and help build products and tools to make a healthier ecosystem for the artists and the labels. I think that by having YouTube and Google be successful in the process of converting their funnel, that would just be awesome – net awesome – for everybody.”

ASCAP Sues Small Bar for Copyright Infringement

Nonprofit performance rights organization ASCAP recently filed a lawsuit against Dam Bar owner Elda L. Brandt and her daughter, former co-owner, Jennifer L. Landon on Tuesday in federal District Court in Tacoma under the federal Copyright Act of 1976. The 2,500-square-foot venue was purchased by Brandt in 2014, and sits at the corner of U.S. Highway 101 and state Highway 112. It is one of the 11 bars and restaurants nationwide being sued for alleged copyright infringement by ASCAP. Brandt said last week that she will not talk to ASCAP representatives about acquiring a license agreement, which would cost her $912 a year, because they had intimidated her. She was worried whether artists were actually benefiting from license fees and questioned ASCAP on their claims stating she was playing their songs. International law firm Perkins Coie LLP of Seattle filed the lawsuit on behalf of ASCAP and is seeking damages of between $750 and $30,000 for the unlicensed, unpermitted performance of each of four songs, or $3,000 to $120,000 in total damages, along with court costs and attorney’s fees. Jackson Wagener, ASCAP’s vice president of business and legal affairs, confirmed on April 19, 2017 that The Dam Bar had played the songs during a Karaoke Night, which brought upon their summons to the case.

Goodlatte’s Sweeping Copyright Reform Bill May Launch Next Month

US Rep. Bob Goodlatte, chairman of the House Judiciary Committee, announced the copyright reform bill, covering the Music Modernization Act, the CLASSICS Act, and the AMP Act, will be introduced in March. According to The Tennessean, Goodlatte has been overseeing the hearings and debate around music copyright reform for roughly five years, and will not be seeking re-election this year, making it the last and only time for a broad scale decision to be made after decades. He will also be joined by Congressman Doug Collins (R-GA), US Rep Hakeem Jeffries (D-NY), and Senator Lamar Alexander (R-TN) to pass the bill. There are two bills that are being questioned whether they will be added to Goodlatte’s agenda. The first bill, called the Register of Copyrights Selection and Accountability Act, gives Congress the power to choose the Register of Copyrights appointment, which is currently filled by the Librarian of Congress. The second is the CASE Act, which would create a copyright small claims court for disputes under $15,000. These bills have not yet received universal backing from the broader coalition of groups in the music industry.

Facebook Signs International Music Licensing Deal with ICE Services

Facebook recently signed a deal this week with licensing group and copyright database ICE Services representing around 31 million works on behalf of organizations PRS in the UK, STIM in Sweden, and GEMA in Germany. Facebook wants to provide music licensing and royalty collection for works and artists represented by ICE Services, when their music is used on Facebook, Instagram, Oculus, and Messenger. WhatsApp will not be included in royalty collection for these works. ICE describes this as a significant deal due to it being the first time settling a multi-territorial license with Facebook, covering a total of 160 territories and 290,000 rights holders. The social media platform has been making a large effort to work with the music industry, including signing deals with record labels in order to make sure that the music used in videos and other items posted to its sites is legitimate and compensating the correct rights holders. “Facebook’s journey with music is just beginning and we look forward to working with ICE and songwriters to build a community together around music,” says Facebook’s Head of International Music Publishing Business Development Anjali Southward in a statement.

Olympics Allow Figure Skaters to Use Music with Lyrics in Routine

The International Skating Union at the 2018 Winter Games in Pyeongchang, South Korea, is now allowing ice skaters, for the first time, to use music with lyrics in their routine to attract a younger audience. When songs are played on television, producers pay for a synchronization license from music publishers. The more popular or in-demand a song is, the more it will cost when negotiating a fee. However, according to music lawyer, Steve Winogradsky, the license is not required since the Olympics are considered a “live event.” They are, instead, covered by a performance license to broadcast the desired music in a public, commercial setting. Performance licenses make up one of the music industry’s biggest and most reliable kinds of income, with performance rights organizations like ASCAP and BMI each collecting $1 billion a year in licensing fees.

Warner Music Sues Smart TV Company, Future Today

US-based Future Today, a video technology and distribution company, is now facing legal battle with Warner Music for alleged reproduction, distribution and public performance of copyrighted musical compositions without a proper license. Future Today allows content creators to distribute and monetize their content on the web, mobile devices, and connected TV platforms such as independent YouTube channels and media companies that syndicate content to television networks. The increase of content consumption from the internet onto smart TVs via an assortment of wifi-enabled plug-in devices has become a “top piracy gripe” for the movie and TV industries. Smart TVs come preloaded with apps that can connect to illegal sources of content. The music industry is now increasing efforts amidst the growth of smart TV usage to look into issues like finding where smart TV users obtain their music in particular.

Pandora Launches Premium Audio Marketplace for Programmatic Ad Buying

Pandora is building a premium marketplace allowing advertisers to purchase its audio inventory programmatically across mobile and desktop platforms. The first pilot program will be launching in collaboration with Volkswagen, soon expanding its suite of programmatic solutions and audio capabilities out to other advertisers in the coming months. The streaming service plans to enable automated and streamlined access to its premium inventory through direct sale, private marketplace, and self-serve solutions, including a specialized private marketplace for broadcast radio buyers. “With the rise of voice-activated devices,” says Pandora’s Chief Revenue Officer John Trimble, “the demand for quality audio inventory is rapidly accelerating. This offering positions us for growth by meeting the needs of our current buying partners and unlocking market opportunities in the near future.” Pandora has reported a 7% year-over-year growth and 25% increase in subscribers in Q4 2017, according to Billboard.

Investments in Boutique Festivals May Drive Growth in Music Industry

Are major streaming services like Spotify and Pandora reducing in value and becoming less attractive to investors? Is the music industry soon being driven by smaller, less headliner-driven, boutique festivals? According to Forbes and Billboard contributing writer, Cherie Hu, investments made in streaming services were actually “emergency funds” to aid in their huge losses and low profitability. During an interview with a partner from investment firm Edition Capital, boutique festivals could soon be a new way to attract investors and redefine success in entertainment. Some of its portfolio companies, like Snowboxx, an annual music festival that takes place in the Swiss Alps, tend to result in higher profits, because they are built on more solid financial foundations. Investments in boutique festivals can be niche-driven and thrive off scarcity, geography, and exclusivity, defying “the common Silicon Valley ideal of the completely open, democratized distribution of information.” Cherie Hu recognizes this as a potential growth factor for the music industry, rather than the streaming companies bringing in net-negative profits. Such a thought can dramatically change the way we perceive the music industry...

Event: What’s in Your Wallet...Show Me The Money

Join us on Tuesday March 13th at the Sportsmen’s Lodge Events Center in Los Angeles (12833 Ventura Blvd, Studio City, CA 91604) over cocktails and dinner to discuss better financial freedom in the music industry from various income streams generated by: performance rights in sound recordings and musical compositions, revenues from streaming, and monies from merchandising deals. Learn how to manage the holistic financial picture with moderators Reggie Calloway and our very own COO and co-founder, Rene Merideth! Check-in begins at 6:15 PM. The discussion will include various panelists like SoundExchange Chief External Affairs Officer, Richard Conlon, and BMI Executive Director of Distribution & Administration Services, Michael Crepezzi.

Physical Music Sales Plunge Despite Impulse Buying Chances

Research firm Kantar Worldpanel revealed physical music sales in the UK continue to go downhill at 5.8% year-on-year despite impulse buying periods such as the Christmas holidays. The home video domain is showing the steepest decline with 21% year-on-year decrease with the entire physical home entertainment down at 8.8% year-on-year in the quarter until January 14th. Kantar’s Olivia Moore affirmed that physical entertainment gifts remained to be the popular choice with 45% of spend in the market coming from a game, video, or CD during Christmas season. She went further to confirm impulse buying is a great opportunity though pre-planned purchases have increased by 7%. “To encourage shoppers to make more impulse purchases,” Moore responded, “supermarkets and high-street retailers alike need to become savvier with their in-store layouts and guide customers from aisle to aisle.” On the other side, Amazon saw its market share increase by 3.3% in the most recent quarter, leading in physical disc sales.

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