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

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

Screen Shot 2015-04-01 at 10.07.52 AM
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:

screen-shot-2016-09-15-at-4-06-02-pm

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

screen-shot-2016-09-15-at-4-10-17-pm

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

 

                                                                                                   

 

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.

 

The Bundle Deal: The Miracle of Spotify’s Paid Subscription Numbers

We all knew it was coming.

Of course Spotify was going to answer back the big ballyhoo of Apple Music’s underwhelming unveiling. It came today as Spotify announced 1) that it now had 20 million premium users 2) that it was paying more than ever for content ($300 million in the first three months of 2015!) and once again, tried to clear up the misconception of free music. As we all know, Spotify has been in the woodshed for months on end because of its free music scheme to sign up paid users. What brilliant strategy did our Swedish friends cook up this time? Well, when you are facing tough problems, do what everyone turns to: animation!

After watching this extremely informational and entertaining clip, I felt so much better.

Since Spotify has been announcing numbers, it’s mentioned the same conversion rate. Twenty five percent of their entire base is paid. This hasn’t changed in any announcement, year after year. The remarkable consistency of Spotify’s conversion, regardless of the different markets it launches with different consumers and behaviors and competitive pressures, truly boggles the mind. It actually twist credulity.

After word of this came out this morning, a friend who’s a longtime digital music veteran texted:

“36 percent of the users are paid? C’mon! Now that’s insane conversion. Has to be cooked with some underwater bundle deals. I am disgusted.”

It got me thinking about what a paid customer is, and how do we judge one.

The prevailing winds in the industry bends towards thinking that a paid user is good, and all free users suck. Well, maybe not all paid users are the same. You have customer who use mobile and pays $10 a month. You have customer who only has web access and pay $5 a month. And then you have my disgusted friend’s bundled users.

The Bundled Wars

It’s an open secret that there has been a battle between services to bundle on-demand services with cell phone companies. Spotify, Beats, Deezer and Rhapsody have been trading body blows to sign these deals. They are considered the crown jewels of the services because:

  • It provides a huge base of users that you don’t need to worry about billing, since the fee is bundled into the monthly cell phone bill.
  • The cell company will do the heavy lifting of marketing.
  • Cell companies just bake the service in for everyone in a tier. So if someone signs up for the All You Can Play plan, you get paid, regardless if someone uses your service or not!

But these customers also have drawbacks. The service only sees a fraction of the revenue per user than it does for the retail customer. As I have written about before, these deals are complicated because you have more than one party involved. On one side, you have the supplier–the content owner, in this case, labels. On the other side you have your distributor–cell companies. In the middle you have ‘lil ole digital music services, who have to convince these two big bad boys to take a discount to make the deal work.

In theory it all works. Customers get music at a discount. Labels get access to revenue they’d never get. Cell companies get premium services that leads to more loyal customers. And the digital services get lots of users, even if they’re only making a buck a month instead of three a month. Except for one, small issue.

Competition.

These deals have become extremely competitive over the past couple years. All the music services are working hard to land carrier deals and take further discounts off already paltry margins. There have been rumors that Spotify has been the most aggressive of all the companies to close, or at least disrupt, deals. So my disgusted friend wonders how many millions that Spotify loses money every month on, just to say it has more paying users. It’s an excellent question.

Drain The Swamp

There’s an old saying in politics that to get rid of mosquitos (or alligators), you’ve got to drain the swamp. The concept is that once you get rid of the cause of your issues, all your annoyances go away. It could be that Spotify is trying to get rid of its competition by taking a loss on bundled customers to get the deals (the swamp in this instance). Additionally, it doesn’t hurt the PR cause to say you have more subs, because, you know, paid subs are GOOD!!!!

As we get smarter about subscription music, we’ll figure out better questions to ask. My contention is that these bundle deals will need to come under increasing scrutiny as services start to mature. Many in the industry believe the bundle is the answer to all of our problems. But the baggage the bundle contains might make it not worth the trouble.

Grow Fast And Burn Cash

By all accounts, the music service Rhapsody has been on a roll. Subscriber numbers continue to grow. The company announced an innovative use of a trial based on plays that makes it appear like free music on Twitter. It recently acqi-hired a team of developers who built a social sharing application named Reveal.

Disclosure: I dirtied Rhapsody’s white boards when I worked there from 2004 until 2013. 

More revealing, however, is the cost of growth. Real Networks is compelled to disclose Rhapsody’s financials in its 10-K reports, and the most recent results are brutal. Rhapsody lost $8.9 million in the first quarter of 2015. The Seattle-based company lost $1.6 million in the same quarter in 2014. Rhapsody had to borrow $10 million in cash from Real Networks and its other owner–the private equity firm Columbus Nova.

Do You Know ARPU?

So how can the company grow subscribers, but losses continue to escalate? It’s pretty simple. The company’s average revenue per user (ARPU) is slipping. Badly.

Most, if not all, of Rhapsody’s growth has come from their cellular carrier partnerships, like T-Mobile in the United States, Telefonica in Latin America and Vodaphone and SFR in Europe. These deals are awesome for distribution. But the deals provides just a fraction of the revenue a retail customer in the US provides the company. So instead of making, say, $5 bucks a month for each retail customer who signs up directly, Rhapsody might make $0.50 on per each user month of Brazil’s Vivo Musica, if not even less.

As I posted earlier, Rhapsody’s cellphone carrier strategy is a sound one, if the company can do two things: make up the loss of ARPU by dramatically increasing the volume of partner subscribers and bolster its brand to sign up a number of high ARPU customers the company has traditionally attracted in the US.

Rhapsody, just like everyone in digital music, is probably feeling the pressure of Spotify’s successful year. The company continues to sign up tons of high-value premium customers as it expands around the world. There’s some evidence that Spotify is taking the oxygen out of the market. Spotify’s premium users grew the equivalent of Rhapsody’s entire subscriber base in two months at the end of last year. The company grossed over a billion dollars in revenue last year.

And Rhapsody’s losses are a drop in the bucket compared to Spotify. The Swedish-based digital music juggernaut lost $184 million in 2014, according to recent reports. Based on how the company continues to harvest the private markets for more and more cash, Daniel Ek’s company makes Rhapsody’s losses look good in comparison. Rhapsody appears to be more like a rock-ribbed conservative banker compared to Spotify’s sailor-on-shore-leave approach to spending. We are clearly still in a Grow Fast or Die Slow stage of development, and Rhapsody has playing the best hand it has available.

The digital music market has long valued growth at any costs over rational business planning. That may be changing as Universal Music Group is starting to question the value of free music. There’s been many reports that Apple is pushing UMG to have Spotify limit or end its unending stream of free music as a way to sign up paying customers.

UMG CEO Lucian Grainge may see Apple as the best of both worlds: a 100 percent paid service that has access to hundreds of millions of credit cards. If Apple is the White Knight that will save the music business from itself, or just another Trojan Horse is an open question.

7 Points I Wish Team Tidal Made

Tidal talked about its new music service, but didn't give many details. I added a few myself.
Tidal talked about its new music service, but didn’t give many details about plans or product. I added a few myself.

For those not living under a rock, Jay-Z presented Tidal, the industry’s first artist-owned music service on Monday at a press conference that has been widely mocked for being heavy on lip service and platitudes and extremely wanting in details. Jay spent a reported $56 million to buy Tidal from its Norwegian corporate parent Aspiro AB and there’s been a lot of speculation about what Tidal could be up to.

It’s premature to call it a failure (though the tech press didn’t have any qualms doing so) as we don’t know what Tidal is going to do. But without details, I was really wishing for more from 16 of the biggest names in the music business Monday. The fact is that an artist-run streaming service should have a different outlook at how a music service should function, from its relationship to listeners to how artists are compensated. Here’s a few suggestions for what Jay and team could have said.

  1. “First and foremost, Tidal is going to complete the fan experience. Too often we’re asking our fans to do too much work and it hasn’t gotten easier in streaming. It’s gotten harder! I believe first and foremost that if we’re asking fans to pay for music, then we better be delivering a lot more value than just access to music. To that end, Tidal is going to focus on shortening that distance from the music fan and us, the artists.”
  2. “Sharing music is a great way for our fans to show their love for our music. We’re going to make it extremely easy for fans to share music and enable playback of tracks in a limited way, regardless if someone is a Rdio, Pandora, iTunes or Spotify listener. Our project is called EasyShare and it requires all the services to cooperate so that it’s easier for our fans to share their love of music. It also supports all the services, since, let’s face it, people are using a little bit of everything these days.”
  3. “Okay, we’re superstars. But it’s not easy for artists these days in all genres and levels of their career. We believe in fairness for all artists. We’re going to make sure that the way artists get paid in our streaming service works for everyone, from the superstar to the struggling artist. Right now it seems like payments for streaming seem like a ‘winner take all’ proposition. So we’ve asked leading economists to look at the pro-rata share of determining compensation to investigate if it really is the best way to pay artists.”
  4. We’ve informed the major labels that we want to renegotiate our contracts with them. Our number one priority is to make sure that more money from our service goes into the pockets of artists. So we’re going to add what we’re calling a ‘Transparency Clause’ into the contract that will require labels to quantify how much money they’ve received from us, and what percentage goes to artists. We believe this number will help artists understand the moneyflow and make sure that the billions streaming services are paying labels don’t turn into fractions of pennies for artists.”
  5. We also won’t sign non-disclosure clauses with any label and we will post the details of all of our deals so that the artist community knows exactly how much money is going into the coffers of labels for their content.”
  6. “We believe in artists. And that’s just not performers, but also songwriters. So we’re going to help solve the problem of getting songwriters paid. Right now, music services like Tidal can only pay 70 percent of royalties because we just can’t identify who should get paid. We’ve earmarked $5 million that we’ll give to SoundExchange to develop a Global Rights Database. The database will endeavor to identify the publishing rights for every song in the world with the end goal of getting every single rightsholder paid for every play. We have calls later today with Daniel Ek, Doug Morris, Jeff Bezos, Tim Cook and Lucian Grainge urging them to contribute to this extremely important endeavor.”
  7. “We’re going to support artists by investing in causes that are important to them. Therefore, we’re going to contribute the money that Tidal paid us for exclusives to MusicCares, which helps artists who are in need of economic support often for medical problems. We’re asking our subscribers to join us in supporting this vital non-profit service.”

2014: Music Services Lost Subscribers…And That’s A Good Thing

Last year was a banner year for music subscription in the US. The RIAA reported big time growth, primarily driven by Spotify’s gains in paying subscribers.

But at the same time, the market stalled a bit in terms of actual subscribers. The RIAA in its midyear report had paid subscribers at 7.8 million, but by the time we got to the end of the year, it was only 7.7, a loss of 100k subs. So what gives?

Well, we had another year of consolidation. Two big players came off the market. The biggest driver of losses is Muve Music, which at its peak, reportedly had two million subscribers. Granted those subs weren’t generating much in revenue for the industry, but it was a big number. AT&T acquired Muve’s parent Cricket Wireless and then treated it like a redheaded stepchild.

Conventional wisdom is that Muve delivered a big number of subs, but it was primarily a sleeper service, where most of the users were inactive. There was a ton of media flaunting how great Muve was for the industry, which in retrospect, now seems absurd. AT&T shuttled off Muve’s subscribers to Deezer in January. However, these kinds of deals generally mean retaining 50 percent of subscribers at best. I’ve seen acquisitions deliver less than 30 percent of subscribers to the new service.

After a big marketing blitz, Beats turned off their acquisition channels once Apple purchased the company, which adversely affected its numbers.

Just totaling up subscribers isn’t the best way to judge success of subscriber. The key number to get the total picture is revenue plus subs. In the first half of this year, streaming subs increased to $371.4 million, and increased even more in the second half to total $799 million for the year.

Perhaps the old adage about lies, damn lies and statistics applies here. It’s easy to fall into the trap of writing provocative headlines based on precursory numbers. But it requires digging a level deeper to understand what the numbers actually mean. Spotify had a great year in 2014. In some respects the company, along with the massive increase of internet radio revenue, kept the industry afloat through another transition.

There’s no need to bemoan the loss of garbage subscribers. We need to focus on revenue and subscribers to get a true sense of what streaming subscribers is delivering to the industry—and where the real growth will come from.

More Reading

RIAA: 2014 Industry Shipment and Revenue Report

CNETCricket’s Deezer Music Partnership Rises From The Ashes of Muve Music

Fierce WirelessCricket’s Muve Music’s Fate Is Up In Air Following AT&T Deal

Billboard: Muve Music Surpasses 2 Million Subscriber In US