2017 Digital Music Scoreboard

I was recently asked to participate in RAIN News’ 2017 predictions for the audio industry. Not one to follow directions, I filed wishful thinking ‘predictions’ that assumed the industry would get its act together when considering streaming and make fans and listeners the main focus instead of treating them like a piggy bank that keeps on giving.

So why no real predictions? For the most part I find them pretty boring. Mostly because you have a pretty wide knowledge-to-blab gap. Those who truly know what’s going on are not in a position to say, and those who are willing to blab certainly don’t know enough to make insightful predictions.

Like this one from RAIN’s 2016 predictions, for example:

“…Pandora’s on-demand service will arrive in November to good reviews and international expansion. As a result P stock will soar to about $30 one year from now. And by mid-2017 P will be close to Apple and Spotify for on-demand subscribers.”

Ouch! Fact is most predictions are wrong and even if correct, all you really get is bragging rights. I certainly wouldn’t create an investment strategy based on industry prognostications.

But as 2017 starts, I do think it’s worth pausing to reflect on where the industry is and how it’s trending. After all, without a scorecard, how are we supposed to know who’s leading? So I offer you my 2017 Digital Music Scoreboard.

1. Spotify

Daniel Ek’s company capped another tremendous year that earns the number one slot here. The biggest number is the huge increase in paid users. The company announced it passed 40 million users in September, up from around 25 million at this time last year. Oddly, every time there is big launch from a competitor, Spotify seems to increase the number of subs, which leads me to believe that the company is hitting a Kleenex-level of dominance. Have we gotten to the point that the company is the only brand name consumers associate with the music category? Perhaps.

However. The company has a bomb under the table problem. Because of its most recent funding rounds, Spotify must go public by September or start coughing up big chunks of the company to investors. And to go out, Spotify must disclose huge gobs of financial information that hasn’t been seen, which could well impact its ability to go public. Deezer’s failed attempt to go public in France this year is a prime example.

While it might be a bit scary for the company, the employees, and investors, I can’t be more excited to dig into the company’s financials. Access to Spotify’s financials will allow us to answer many core questions about the viability of streaming music. At this point we have a small window into these questions through Pandora and a sliver of Napster’s business metrics. A full reveal of these metrics will allow us to see if Spotify is the future of the business music, or as a former colleague once put it, ‘destined to become General Motors or Lehman Brothers.’

2. Amazon

The Seattle commerce giant doesn’t really care about music, not like Apple and Spotify, at least. You don’t see Amazon spending massive amounts of money on launching radio stations, or spending millions on user acquisition. However, Amazon has a full stack of music products and also has been able to launch several different price points (from free to $9.99) for on-demand streaming, depending if a consumer owns an Echo device or is a Prime subscriber. Amazon is never going to be as sexy as Spotify, but it understands the role music plays for the company and utilizes it effectively.

And finally: has there ever been a better device for consumption of all kinds than the Echo. Not only has it done well as a music device, but it has been the trojan horse for turbocharging buying from Amazon. Slice Intelligence reports that Prime customers spend seven percent more at Amazon once an Echo device enters a household.  If you were taking bets five years ago on  who would win voice in the house, Amazon would be maybe your fourth pick. Soon it will even work with Sonos, which will make a bunch of music nuts who have invested heavily in the speakers (like me) very happy.

3. Apple

For all of its strengths, the company hasn’t had the best past few years. It nearly missed streaming altogether and when it did enter the field, it certainly didn’t blow the doors off the competition. The company launched Apple Music in more territories than anyone else. Better yet, nobody has more credit cards on file than Apple, which would make it seem like a slam dunk that it would quickly sign up tens of millions of subs. In September, the last time the company reported, Apple said it had 17 million subs–nothing to sneeze at, certainly–but well under the company’s lofty goals.

Additionally, there have been reports that Apple Music’s churn is nearly twice that of Spotify, which is very debilitating for a company that doesn’t have Spotify’s built-in funnel of free users to squeeze into a paid tier.

But there’s good news. Apple launched a new design that seemed to be well received, and there was a spate of hiring of pros who can help with churn and retention. It seems impossible that Apple won’t get the wheels greased and start to perform better this year. As MP3 sales continue to crater, it might just in time.

4. Sirius XM

I never understood Sirius, all the way back when the two companies were first launching. Did it make sense to start an untested offering when you had buy a $20 million FCC license, launch 20 satellites and pay for an expensive radio in new every car coming out of worldwide auto plant before you sign up a single customer?

Somehow the companies found a way to join forces, executed a nifty jujitsu move on its massive debt and all those car radios actually became its long-term user funnel. Of course Sirius is still a transitional technology and is only slightly better than terrestrial offerings in a world where today you can play anything anywhere. How will the company ever compete? A marriage with Pandora really would make a lot of sense.

6. Google/YouTube

Well that didn’t work. YouTube Red, its paid tier, reportedly only signed up 1.5 million subs as of late summer. While only in a handful of countries, it still makes you wonder if its billion free streamers use the service specifically because of the price point. In the words of Homer J. Simpson, “Free! I can afford that!” Meanwhile, the company is facing massive pressure from the industry about its ‘value gap’ for giving away free music by the boatful (again, to the people who weren’t going to pay to start with). The company’s real workhorse is Google Music All Access, which continues to perform solidly, but without fanfare. One wonders if it might put all its paid eggs into that basket.

6. Pandora

Too little, too late? Tim Westegren came back and focused the team as CEO. The company closed tricky negotiations with labels and publishers that will allow the company to expand internationally and enter on demand. Pandora probably needed to pivot well before even tardy Apple; and now is the third or fourth option in the field.

There are a few positive signs. Since launching its full suite of subscription products, Pandora has stuck to the top of the charts in the iTunes store for both downloads and grossing. And there’s plenty of room to grow as the service is still only in a few markets compared to Spotify and Apple.

But it might be too late. The company is under significant pressure to figure out its future from institutional and big foot investors. Rumors of a merger with Sirius XM near the end of the year propped up its sagging stock, which is still only a third of its price two years ago.

7. Tidal

If it pleases the fine women and men of the jury, I offer Tidal as example numero uno of why exclusives are very challenging for a music service. Tidal’s strategy is to offer boatloads of cash to artists for exclusive and watch the fans flock to the service! And just look this past year, Rihanna, Kanye, Beyonce, Prince! That’s some serious firepower! So how did Tidal do with its 32 exclusive releases this year? Good. But not great. Apple Music has nearly four times as many subs as Tidal’s last reported 4.2 million, Spotify 10 times as many.

By focusing strictly on the releases, Tidal has gotten a lot of people who just had to hear a new record, but maybe didn’t really want to subscribe to a music service. Couple sluggish growth with reports that the company is late on paying bills and it starts to look bleak.

The company does have strong relationships with artists that it could use to craft a unique offering. However, this will not be a short play, nor a cheap one. Tidal will need a huge war chest to continue to grease the wheels of exclusives. And as I wrote in the fall, there could be an inherent weakness when marketing solely through exclusives because of high churn. So it might not be a viable strategy, even if the company successfully gets people to try Tidal. Then there are the costs. On-demand streaming is a very expensive business before you start writing six figure checks for a two-week exclusive window. Is there any way that this strategy makes fiscal sense? It’s very doubtful.

8. Napster/Deezer

These two companies share the same model and operational challenges of being a quasi-white label music service for cell phone services. Napster took it even further by powering iHeart Radio’s on-demand service. Can either company can survive in this environment? Deezer quickly withdrew that failed IPO in France after it became apparent that the market wasn’t going to cooperate and Napster rebranded after deep staff cuts. A merger between these two companies and getting the headcount to a sensible size that the thin margins justify could be a path forward.

9.  Soundcloud

The ink wasn’t even dry on the deals with labels when the company figured out that it was in trouble. It makes sense, too. Sure Soundcloud has scale, but it has less ability to monetize that audience than even YouTube. Now that the life buoy from USS Spotify has been retracted (apparently over those pesky major label deals), it probably is just a matter of time before Soundcloud sinks.

 

 

Executive Turntable: Can Classic Label Talent Transition to Digital Formats?

Warner Music Group Grammy Celebration Hosted By InStyle
Lyor Cohen knows all about how to rub elbows with artists like Elvis Costello and Diana Krall, but how will that rub off on YouTube?

Old-school record executives seem to be joining new-school digital music companies in increased intensity.  In the past few years WMG’s Stephen Bryan (Soundcloud), Interscope’s Jimmy Iovine (Apple), UMG’s Amanda Marks (Apple), super-manager Troy Carter (Spotify) have all been wooed to some of the most prestigious companies.  Last week, the big kahuna Lyor Cohen, former CEO of WMG and founder of Def Jam, joined YouTube as head of music for the company. And  it isn’t some honorary title, where he deals with artist and industry relations. He’s running the whole thing!

What’s going on here? Obviously these companies all know they need to beef up their ranks with people who know the ins and outs of the music business. After all, a good relationship with your content supplier is extremely important. But it’s only one factor in building a successful music company. There are other essential skills that being a good label executive doesn’t necessarily provide the appropriate experience.

First let’s get something straight. All these label execs are eminently talented. You don’t get to the top of  label orgs without a herculean work ethic, serious business chops, and massive brain power. But getting to that level doesn’t  necessarily mean you can run other complex companies. After all, CBS Records’ Svengali Walter Yetnikoff might have built the company into a powerhouse, but it doesn’t mean he was qualified to do Russ Solomon’s job at Tower Records.

Record companies do many things; but at its core is scouting, locating, and developing talented artists. It’s a tough job we discount too often. You have to have a great understanding of art and a finely tuned ear to what people will respond to. But digital music companies have different needs: product development, technical acumen, and a keen understanding of what users will find compelling enough to open their pocketbooks. You also must know how to lead tech teams and understand how people use and adopt new products.

While there obviously is some overlap between these two diverse core skills, there’s a lot that doesn’t fit. We’ve seen this manifest when companies try to move into the other’s turf. Labels time and time again have failed at direct to consumer offerings. The efforts have gotten considerably more ham fisted as technology has played a larger role in the  industry. From its inability to secure files on CD and all the way up to the ridiculous Now! subscription service that rolled out just last week, nearly every label’s tech initiative  or direct-to-consumer offering has underperformed or been an outright disaster (Pressplay, anyone?). Likewise, digital music services struggle with artist relations, leading  to wary feelings between artists and digital services, or straight-up hostility.

DNA Mismatch

Both labels and digital services struggle to meld because they’re so different. At their essence, labels are about artists. Everything is built around finding and developing great artists. Talent is also the core talent of most senior execs at labels. Sure, there are probably great dealmakers, technologists, and marketing whizzes working at UMG, but ultimately, it all serves the artist. Meanwhile the digital services are all about the customer. And yes, artists are vital for services, but if push comes to shove, product development, not artist development, wins.

So when labels end up going directly to consumers, they’re on unfamiliar turf. Likewise, when Tim Westergren says something that sounds awfully stilted to the artist community, it’s because he’s not capable of fully serving both sides. Ultimately, he must side with his listener. You can bring in label talent to the music services to help co-mingle the two sides. But it won’t change the DNA of the company.

Free Advice

Look, I’m not telling you that digital music services are the model of how to build the modern company. Spotify isn’t Jack Welch’s GE or even Reed Hastings elite-level Netflix.  There’s a tendency to rely too much on technical solutions and not enough focus on customer problems, which leads to a functional–but not a very warm–product.

So if I were to give advice to say, a new executive at, say, the world’s largest free music listening service, I’d suggest following a few axioms about how to build his or her new team.

  1. Empower Product Leaders
    Too often we end up hiring product development professionals but don’t empower them to make decisions. Product is the core of what these companies do and to fully take advantage of this, you need great product talent in leadership positions. When you don’t own the content, you have to win on product, full stop. And yeah, I’m a product guy, so I’m biased. But I’ve seen what happens when you don’t prioritize the right talent in the right roles, and it’s not pretty.
  2. Practice Design Thinking
    Although tech products are much better today than even five years ago, we have a long way to go in building out thoughtfully designed products. You can tell a massive difference in Spotify versus a company where design is front and center like Airbnb. If you start with design solutions, rather than technology ones, it will resonate a lot more with your users. Cool tech is just that. Cool. Solve problems first and foremost, my friends.
  3. Different Analytics For Different Goals
    Labels have invested in analytics teams in varying levels. Most of these  efforts– including UMG’s exceptional data analytics team and Lyor’s start-up The 300– used data to identify artists that will perform best, which is just an evolution of what labels always have done. Spotify and YouTube have both invested heavily in solutions to solve ‘what to play next.’ While YouTube’s recommendation products are good, they don’t have the sheen of Spotify’s Release Radar, Daily Mix, and Discover Weekly, perhaps the best of all the technology centric recommendations. The lesson here: using data science and machine learning to create superior user experiences is the foundation of any successful digital music product.
  4. Market Like A Retailer
    If there’s been one element missing from most services, it’s figuring out how to sell them to mass audiences. At its core, the pitch seems to be “Hey, you like music. Well we’ve got lots of music. Come get some!” Okay then! The services need to get better. While it’s clear that music services are different than retail, the attention to detail and stronger relevance to the customer’s life would help the services define a) what they are and b) who they are for. Without that kind of definition, mass consumers will continue to pass.

None of this stuff is surprising. Let’s just file it under ‘doing the basics really well.’ But the labels, and the people who built their careers with them, still seem like they are steeped in another era. Digital is different, and building an elite team that can navigate this competitive market requires a different skill set. A phenomenal product team is today’s A&R. Invest wisely.

Billboard: Lyor Cohen’s Move to YouTube: Good Or Bad For The Music Industry

Hypebot: Music Industry Uncharacteristically Silent about Lyor Cohen to YouTube

Bobby Owsinski: YouTube Misses The Point With Lyor Cohen Hire

Consumerless Recovery: Music Revenues Are Up But Is More Pain Coming?

News this week, for once, was positive for the music business. The RIAA released its report for the first half of this year and there was an eight percent growth in revenues over the same time 2015, thanks to subscription streaming. At long last, after years and years of losses, we’re finally on the other side of the decline and now we’re going to see a huge run up of revenues as the industry continues to grow like gangbusters. At least that’s what you’d think from the headlines. I agree: it’s a good result. But there are also troubling signs in the numbers.

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Source: Recording Industry Association of America

You see, while revenues are up, the number of people who buy music has steadily fallen for the past decade. According to MusicWatch, a music industry research firm, the number of people buying rebounded a bit in 2015 to 85 million, it’s still significantly down from the buying population 10 years previous.

Not all consumers are created equally. Over the years the average consumer spent around $50 a year on music. Sounds pretty good, right? Well, the average consumer only about about 1.5 CDs a year. So how is that possible. Well, there was small number of consumers who bought 10 or 20 times what most consumers did. I used to see this all the time in line at my local record store. I’d be wondering if I should be buying the 10 CDs in my hand on my meager first job salary (the answer was no). Meanwhile, the woman in front of me was buying the Debbie Gibson CD for her daughter. It most likely was the only CD she’d buy all year.

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Sources: MusicWatch and U.S. Census Bureau                     Music Buyers in Millions

This has all changed in the subscription era.  We’ve flattened that curve between the casual buyer, who only bought Adele’s 25 last year, and that obsessive-compulsive music nut who happily subscribes to Spotify. Sure, the nut is still spending much more than casual fan. But at $10 a month, it’s capped at $120. And yes, the music nut might also purchase vinyl, buy up posters at Flatstock, and attend music festivals, but they don’t have to pay more for all that music. Many super fans I interviewed to while working at a streaming service thought they were getting away with something by only paying $10 a month.

The theory of the streaming era is that we’ll produce so many more subscribers, that we’ll make up the difference in revenue. But thinking that casual fan will pay twice as much as the average consumer spends is fairly flawed logic.

Especially when one considers how people are listening today.

 

Based on MusicWatch’s recent audiocensus report, more than 70% of all listening today is on services that are free, like Pandora, YouTube, Spotify’s free service and iHeartRadio. Because when faced with the choice of $10 a month for something they use rarely or free, casual fans choose free. Duh. Hence the massive decrease in the percentage of buyers.

Much like how the U.S. economy recovered in the years after the housing market collapse, but only with many fewer jobs, the music industry is recovering. But with many fewer customers. And the pain is just coming. Compact discs may only be a shadow of its former self, but there were still 38 million CDs shipped in the first half of this year. Question: when was the last year you bought a device that can even play a CD? While vinyl and even downloads have a purpose and will maintain some attractiveness, my contention is that CDs will go to zero. This, my friends, is a problem.

So what can be done?

Perhaps address the product itself. Streaming services main use case is access to all the music. While it’s great for the fan that knows what she or he wants to play, it causes more problem than it solves for the casual fan. After all, how many times do you sit at your computer and not know what to play next. Even with 30 million songs only a seconds from a search.

Considering after all these years peddling subscriptions to consumers, we now have a total of  18 million subscribers in the U.S., I’m sure it’s safe to say that the $10 all you can eat music subscription isn’t the product for anything but the super fan. Will there be more growth? Yeah, sure, no doubt. Can it grow to 50 million? Doubtful.

So what about lowering the price, which has been bandied about as a cure all? Beyond the fact that rights holders won’t budge on price, it probably is the wrong product for those who like to listen occasionally. “Casual fans have different needs than super fans and may be fine with a more basic experience,” Russ Crupnick, managing partner of MusicWatch, told me via email. “So converting them to paid requires a different set of strategies and tactics. Lowering price alone won’t automatically convert them into super fans.”

Last week Pandora announced improvements to its free service as well as Pandora Plus, a product that merges a few on demand features, like more skips and the ability to save tracks to the phone for offline use, to its core experience. Can the new product as well as Amazon’s planned subscription service, which apparently will share Pandora Plus’s $5 price, help? Perhaps.

But those are just two ideas. In the world of product development, it takes many attempts to find the perfect product market fit that people are willing to pay for. Licensing two and saying ‘okay, we’re done,’ is not going to cut it. It took 15 years, a handful of flopped companies and at least a couple hundred million in funding before AYCE streaming services finally produced a billion dollars in revenue. My guess is that it will take years to attract the casual fan. Fact is, we’re going to need wave after wave of ideas to grow customers again.

Variety: Music Streaming Wars: Consolidation Looms as Lower Prices Kick In

Music Industry Blog: Have Spotify and Apple Music Just Won The Streaming Wars?

 

 

Churn Baby Churn: Why TIDAL’s Losses Only Tell Part Of The Story

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TIDAL, the Jay-Z led streaming service may have a problem retaining user it has signed up. 

The Wall Street Journal recently published some pretty terrible numbers on the train wreck that is called TIDAL. Naturally, the entire industry started piling on Jay-Z’s music startup, determined to show what a cluster the company finds itself in. But to us music vets, it’s pretty much the same old, same old. Losing lots of money isn’t the problem—it’s actually required these days if you’re running a digital music company; due to the enormous costs of content, and the fight for paying subscribers. It should be pointed out that Spotify’s losses are much greater than TIDAL’s reported numbers.

The bigger problem that TIDAL faces is revenue growth. According to the filings the WSJ reported on, TIDAL lost $28 million on revenues of $43 million in 2015. And while that’s a lot of money to lose, Spotify lost nearly $194 million, and Rhapsody lost $35 in 2015. But the scale of both of those companies is impressive. Spotify nearly doubled its revenue last year, recording of $2 billion. Even Rhapsody logged around $200 million last year.

So what gives? Why is TIDAL’s revenue just a drop in the bucket compared to its competition? I think it has to do with its reliance of exclusives to sign up subscribers. A caveat here: this is speculation based on one report from Sweden, which might not even show the accurate financial picture of the company. A source told the Journal that the filing didn’t include all U.S. revenue, for example. Additionally, it doesn’t account for 2016, when TIDAL rolled out wave after wave of impressive exclusives, from Rihanna to Kanye to Beyoncé. So it doesn’t really account for its power moves.

However, if you just divide the revenues of each company and into each self-reported subscriber count, TIDAL lags well behind in revenue per subscriber. Rhapsody banks $57 per sub per year and Spotify is an impressive $87. TIDAL didn’t announce year end subs, but in March it said it had 3 million, so let’s just say they had 2.5 million at year’s end, for a total of $17 per subscriber. Don’t like that number? Fine. Let’s just go on the TIDAL subscriber number reported on October 1, 2015 of a million subscribers. Based on that, TIDAL is still generating half the revenue per sub of Spotify and a 25 percent less than Rhapsody, a company with a significant base of lower-revenue bundled subscribers.

I know what you’re thinking. How can this be? TIDAL doesn’t have a free offering. It also claims that a huge number of its subs are on the $20 plan for better audio quality, much higher than all streaming services. Shouldn’t TIDAL be generating tons of cash per user? Well, yes. Except for one nagging little problem: churn.

Churn, the amount of subscribers that quit your service every month, is the canary in the coal mine for a subscription business. Low churn means people are happy. High churn is a disaster, as you need to replace all those subscribers just to tread water–let alone to grow. Churn is the one metric subscription companies obsess over. Netflix has famously spent a great deal of effort lowering its churn and is considered the gold standard for an entertainment company.

In the next stage of subscription services, churn will be one of the most important factors in determining health of businesses. There were reports this summer that Apple Music’s churn was significantly higher than Spotify’s, and the company has recently been recruiting talent to deal with its problem. So it’s just not TIDAL that has to worry about it. However, the company is much more suspect to massive churn that its competitors.

My theory is that TIDAL does indeed harvest a lot of credit cards from people who just have to have access to The Life of Pablo or Lemonade. But the minute the exclusive is over, those subscribers leave. In droves.

I would suggest that TIDAL has done a great job at signing people up. And a terrible job at converting them to the service long term. Mostly because TIDAL isn’t marketing the service outside of the only place where you can get exclusives for a short period of time.

One of the measures of performance for companies I track is App Annie data on downloads for iOS in the U.S. It doesn’t tell the whole story, but it does suggest popularity of an app. More downloads: more new customers. One would expect small changes from time to time, but steady, consistent demand. Kind of like Spotify’s iOS downlaods:

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In comparison to the TIDAL’s downloads over the past year:

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That’s one bumpy ride.

You’ll also note that the scale between Spotify and TIDAL is significantly different. Spotify never dropped out of the top 30 apps, whereas TIDAL has bumped between 1 and 1,250 since churning out the exclusives.

TIDAL in June announced it has 4.2 million subscribers after signing up 1.2 million fans during Lemonade alone. But let’s not pay attention to how many subscribers TIDAL adds. It’s all about how many it retains.

One last caveat: maybe I’m wrong. Maybe TIDAL is signing up tons of people and they’re sticking around. But if that is the case, the company should have lots of cash on hand to pay its bills in the form of operating income. The fact that seems to be short of cash and it isn’t able to turn its exclusives into a consistent funnel of customers leads me to believe that something isn’t working with exclusives.

WSJ: Jay Z’s Music Streaming Service Tidal Posts Huge Loss in 2015

Recode: Spotify is adding more subscribers and is losing its chief revenue officer

Billboard: Rhapsody Nears 3.5 Million Global Subscribers

 

                                                                                                   

 

Jon’s Top 10 Product Mistakes

product_truths
Who said anything about commandments? I’m talking about mistakes!

Mistakes. Yeah, I’ve made a few. Anyone who spends any time managing product teams has as well. It’s part and parcel of doing the job. And I’m not talking about the vaunted Failure Culture that we all aspire to create, where we embrace our failed product attempts as heroic learning opportunities. I’m talking more about the operational ones that can stall productivity, sag morale and halt a team cold in its tracks.

We’ve all been there. Here’s a few of the issues that I’ve seen over the years and a few solutions.
1. A lack of trust leads to broken features, releases and team commitment. A team that doesn’t work correctly isn’t going to function correctly. Period. 

2. When I say a lack of trust, I mean Product Managers not trusting Developers to build the product the right way and developers not trusting PMs to define the right product. And if that relationship is broken, it most likely will emanate throughout the whole company.

3. If you don’t have trust between PMs and Devs, you can forget about shipping great products. Or even good ones.

4. The concept of the Minimum Viable Product works. But teams forget to define what Viable means. It’s a great idea to create the smallest amount of features and software to test a theory. But far too often under developed ideas get shipped and you cannot discern if it was the idea or the execution. If you spend a lot more time in early stages figuring out what viable means for your users, you will alleviate this issue.
5. A good product process is an insurance policy against wasting time and resources. It does not mean you will ship a product that succeeds. That’s something else entirely. You’ll need to go a lot deeper to get to great ideation.
6. No matter how much you say it, people just want to build a product for themselves. Fighting this is the most important job a PM can do.
7. If you hear team members say ‘That’s not the way I use the product’ it means that your PM is failing on number six. 
8. If you hear ‘That’s not the way I use the product’ from your PM, you’ve got a very serious problem. If a PM has had experience running a product that she or he has no interest in it–or even openly dislikes–it can help mitigate this issue.
9. You don’t get credit for ideas. Only products and features that you shipped. You don’t get glory for stuff that you shipped. Only products that perform. Product isn’t a thinking and doing job. It’s a performing job.
10. If the team isn’t performing, consider changing your PM. While not always fair, it’s the PM’s job to get that performance out of team. Think of a PM like a manager of a professional baseball team. When a club struggles it replaces the manager because you can’t replace the other 25 members of the team. Same thing with the PM. It might not even be the case that a PM is doing a bad job. It could be you just need another voice that resonates with your team.

Don’t Look Back: The Return of Napster Highlights a Company Running Out of Options

Oh Rhapsody! Or should I say, oh Napster! The pioneering Seattle-based streaming music company yesterday finally announced a long-planned rebranding of its service to Napster. While it certainly got some attention, it wasn’t exactly the kind of attention one craves.

Basic RGB

[Disclosure: I argued about which brand to support while serving as VP of Product for Rhapsody International until 2013]

Rhapsody acquired the Napster brand when it bought the assets of the company from Best Buy in 2011. Instead of rebranding the service Rhapsody in Germany and the UK, the company has operated two brands since—Rhapsody in the States and Napster internationally.

So it would make sense that the company would need to unite under a single name. We can all agree that Rhapsody hasn’t been a powerful brand. It’s better known as your Dad’s first streaming service, back from the days when you had to listen to on the computer or on a weirdo MP3 player (Philips Go Gear or SanDisk Sansa, anyone?) but definitely, absolutely NOT the iPod. When we did surveys on the brand back in the day, the overwhelming consensus from music fans was, ‘meh.’

While the company Rhapsody International has had some success growing recently, it’s all about Napster. All of the company’s expansion in past few years in Europe and Latin America has been under the Napster brand. Meanwhile, Rhapsody has failed to find traction.

As I have written about before, Rhapsody’s strategy is to focus on cell carriers to market and sign up users, as it does with e-Plus in Germany, Telefonica in Latin America, and Metro PCS in the United States.

Rhapsody has a loyal core of high margin subscribers who have been with the service for years. But those numbers dwindle each year as new products come into the marketplace that are aimed directly at the music fan. I’m sure the execs in Seattle had a number in mind when the company could roll out a new brand without risking a mass loss of revenue. So, now they have nothing to lose.

Napster is a powerful brand, bringing back a strong sense of nostalgia for many music fans. So I can understand the temptation to want to utilize that asset. However in the United States, Napster’s negatives are huge. Most consumers still associate Napster with stealing music. And it’s just not potential consumers. Sources tell me that at least one major label is not very happy with the return of the brand.

Look, the world has changed. Does it make sense to continue to look back to an era when people (again, your dad, if you’re a young Millennial) stole mass amounts of music, or should the company look ahead and come up with a new name that is associated with something else than the early days of digital music? I mean, if the problem is that Rhapsody is an old tired brand, why do you go back further in the past and pick a name that has more baggage than Samsonite? And no, ‘just because we had this brand laying around’ is not a good answer.

My personal favorite would have been the original proposed name for Rhapsody, Aladdin. Equally difficult to spell, but somehow apt. You just rub the magic lamp and watch money disappear.

 

 

Unboxing Pandora

Why The New Royalty Rate Matters Little For The Digital Radio Giant

Yesterday, the Copyright Royalty Board–the three-judge panel that sets the rates that non-interactive radio services pay –set the new rate for the coming year 21 percent higher than the previous year. Services like Pandora were seeking a lower rate. SoundExchange, which represents rights holders, requested a higher rate. The CRB playing a wise Solomon, split it almost right down the middle, settling at .0017 per song played.

And then the industry yawned.

As a refresher, in the United States, music companies can offer playback by taking advantage of a compulsory license set forth in the Digital Millennial Copyright Act. All you need to do is follow the rules for non-interactive digital streaming and pay SoundExchange for all the plays within 45 days. This rate does not affect directly licensed services, like Spotify, Apple Music, or Deezer.

Disclosure: I work at 8tracks, which offers non-interactive radio in the US and Canada. These opinions are mine and don’t represent the company. See 8tracks CEO David Porter’s opinions on the subject here.

Moving On
The CRB rate seems like it’s already an antique of past days. Call it the iPhone 1 era. Remember way back in 2005 when you’d fire up Pandora, pick an artist and sit back and listen to an awesome radio station?

The world has moved on from those olden days. Thanks to YouTube, Spotify and Soundcloud, a whole new generation of listeners have grown up being able to play whatever she or he wants at any time. Also, listeners can skip as much as they want and save tracks to their phones with a premium account; all functionality that requires agreements with labels .

In terms of growth, relying the compulsory license has hemmed in Pandora. Spotify has been able to grow leaps and bounds by launching in country after country. Meanwhile poor Pandora is only available in the United States, New Zealand, and Australia as only a few countries offer compulsory licenses. Its growth has slowed dramatically compared to Spotify.

Directing the Action
Pandora understands that if it wants to offer some flavor of on-demand features and do it around the world, it’ll have to sign direct deals with labels. The company has already signed similar deals with all the major publishing groups to pay songwriters.

So the days of Pandora relying on the CRB rate are numbered. Of course the rate is still important as it sets the floor from which all parties will negotiate, but it really doesn’t truly matter as much as it once had.

The CRB seems like it would like to get out of the business of setting the rate. The rates in the following four years will be based on the increase of yearly inflation, which might be the template in the future.

A Pound of Flesh
While Pandora said it was pleased with the rate, it’s not all smooth sailing for the company. Up next will be sitting down with major labels to hammer out agreements for sound recordings. After years of deep discontent with Pandora, I would bet that labels will be licking their chops to dictate onerous terms. And if the company wants to offer the ability to download tracks to a phone or up the skip limits, its gonna cost an arm and a leg.

But still, there is a path forward. Pandora recently purchased some of the assets of the much admired yet failing Rdio streaming service in preparation for an on-demand world. After months of uncertainty, Pandora’s stock perked up, rising about 13 percent the day after the announcement.

Beginnings and Endings
The CRB also simplified the rates down to a single one from three. iHeart Media, the terrestrial giant also saw its fortunes improve. Its rates dropped 22 percent when the CRB eliminated the blended rate that companies who offered more than just non-interactive radio used. On the opposite side, the elimination of the small webcaster rate means that tiny services are facing the end of days, as the new rate means their costs have now gone through the roof.

Digital musics’s chorus doesn’t really change much. Let the beatings continue until the morale improves.