Deck for an investor webinar presented to Coleman Research Group clientele regarding the streaming music industry on June 30, 2015

1. Streaming Music in 2015:
A rapidly growing, maturing and
consolidating marketplace
Dr. Aram Sinnreich
Associate Professor
American University
June 30, 2015
Aram Sinnreich 2015

2. Introduction
Aram Sinnreich, Ph.D.
Currently:
• Associate Professor, American University SOC
• Author of 2 books:
• Mashed Up (2010)
• The Piracy Crusade (2013)
Previously:
• Assistant Professor, Rutgers University SC&I
• Co-Founder, Managing Partner, Radar Research
• Director, OMD Ignition Factory
• Visiting Professor, NYU Media & Culture
• Journalist, Wired, MediaPost, Billboard, NY Times
• Senior Analyst, Jupiter Research
Aram Sinnreich 2015

3. Traditional Music and Copyright
Artists/Labels
“Masters Rights”
Composers &
Publishers
“Publishing Rights”
Retail Radio
• Retailers pay
wholesale to labels
• Labels pay royalties
to artists
• Retailers pay
wholesale to labels
• Labels pay “mechanical”
royalties to publishers
• Publishers pay
composers
• Broadcasters do NOT
pay performance
royalties on masters
• Promotion and “payola”
• Broadcasters pay
royalties to PROs
(e.g. BMI)
• PROs pay publishers and
composers
Aram Sinnreich 2015

4. Traditional Retail: Value Chain
Aram Sinnreich 2015

5. Traditional Retail:
Revenue Distribution
Aram Sinnreich 2015

6. Traditional Radio: Value Chain
Aram Sinnreich 2015

7. Traditional Radio:
Revenue Distribution
Aram Sinnreich 2015

8. New Tech is Blurring the Lines
Programmed
(Radio)
On-Demand
(Retail)
Compulsory ?????????????????? Contractual
Aram Sinnreich 2015

9. Subscriptions Have Been Inevitable
Since The Turn of the Century
Aram Sinnreich 2015

10. But the Industry Can Move Slowly
Aram Sinnreich 2015

11. Analysts are Still Bullish Today
Aram Sinnreich 2015

12. And They Have Good Reason
demand streaming services (such as YouTube, Vevo,
free versions of Spotify, and others).
Figure 4
Altho
down
grow
that
3.2%
accou
(note
Sales
indiv
5%
7%
9%
15%
21%
27%
2009 2010 2011 2012 2013 2014
Proportion of Total US Music
Industry Revenues From Streaming
Source: RIAA
$
$Milli
Aram Sinnreich 2015

13. 2.
Digital Music Revenue Distribution

14. Boilerplate MP3 Economics
Consumers
Retailers
(30%)
Labels
(60%)
Artists
Publishers
(10%)
Composers
$1 per song
$0.60 per song
(Global: $3.6B in 2014)
$0.08
per song
$0.10
per song
$0.05
per song
Aram Sinnreich 2015

15. Webcasting Economics
ConsumersWebcasters
LabelsArtists
Publishers Composers
Ads ($5-10 CPM)
& subscriptions
($3/month)
PROs (e.g. ASCAP)
SoundExchange
US: $773M in 2014*
$348mm $348mm
Roughly 4-5% of revenues
*Per-Stream Rates:
• Webcaster: $0.0023
• Broadcaster: $0.0025
• Subscription: 15% revs
Aram Sinnreich 2015

16. Boilerplate Subscription Economics
Consumers
Retailers
(30%)
Labels
(60%)
Artists
Publishers
(10%)
Composers
10.5% of
revenues
Consumers generate
revenue both through
ads and subscriptions
($5-10/month)
Pro rata or
~$0.007
per stream
(Global: $1.6B to
labels in 2014)
$0.60 per
1,000 streams
EXCEPTIONS:
- Recoupmen
t
- “Breakage”
5% of
revenues
PROs
(e.g. ASCAP)
OR5-7% of
revenues
Aram Sinnreich 2015

17. The Creators’ Cuts
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18. Take This “Artists’ Rights” Advocate
With a Big Grain of Salt
Aram Sinnreich 2015

19. 3.
Major Players in
Streaming Subscriptions

20. Deezer
Launched: 2009
Territory: 182 countries (not US)
Library: 35M tracks
Platforms: PC/mobile/devices
Subscribers: 6M paying / 16M active monthly users
Price: $9.99/month (free limited version)
Features: Lyrics, curated playlists, exclusive content, HD
Partnerships: T-Mobile, Bose, Samsung, Sonos, Pepsi
Recent news: Acquired Stitcher Radio, 2014
Aram Sinnreich 2015

21. Rdio
Launched: 2010
Territory: 85 countries
Library: 32M tracks
Platforms: PC/mobile/devices
Subscribers: N/A
Price: $9.99/month (free limited version; $3.99 lite version)
Features: Curated playlists
Partnerships: AXS Ticketing, LiveNation, Shazam, Bosch
Recent news: Amazon Fire TV integration, 2015
Aram Sinnreich 2015

22. Rhapsody/Napster
Launched: 2001 (spun off 2010)
Territory: 32 countries
Library: 32M tracks
Platforms: PC/mobile/devices
Subscribers: 2.5M
Price: $9.99/month ($4.99 lite version)
Features: Curated playlists, live radio
Partnerships: Telefonica, SFR, Vodafone, T-Mobile
Recent news: Twitter music integration, 2015
Aram Sinnreich 2015

23. Tidal
Launched: 2014
Territory: 40+ countries
Library: 30M tracks, 75k vids
Platforms: PC/mobile/devices
Subscribers: 40k
Price: $9.99 ($19.99 HD)
Features: HD, playlist import, exclusive content, “discovery”
Partnerships: Artists, Softbank, Raumfield
Recent news: High-profile defections incl. 2 CEOs in 4 mo.
Aram Sinnreich 2015

24. Spotify
Launched: 2008
Territory: 58 countries
Library: 30M tracks
Platforms: PC/mobile/devices
Subscribers: 20M paid; 75M active monthly users
Price: $9.99 (free ad-supported tier)
Features: HQ audio, exclusive content, social integration
Partnerships: Starbucks, Uber, Facebook, happn
Recent news: Buying data analytics firms including Echo
Nest & Seed Scientific
Aram Sinnreich 2015

25. Apple Music
Launched: Today (June 30, 2015)
Territory: 100+ countries
Library: “tens of millions” of songs
Platforms: All iOS/OSX devices, PC, Android
Subscribers: TBD
Price: $9.99 ($14.99 for family membership); 3-month trial
Features: Exclusive content, Beats 1 radio, artist connect
Partnerships: Pitchfork, Rolling Stone, TBD
Recent news: Launching today
Aram Sinnreich 2015

26. Spotify: Strategic Position
STRENGTHS
• Streaming market leader
• Market-defining brand
• Battle-tested tech & design
• Platform agnostic
• Fresh cash infusion of $526M,
with an $8.5B valuation
WEAKNESSES
• Undiversified business model
• Consistent red ink (content costs)
• Not much in the way of
proprietary IP or protectable
service features
OPPORTUNITIES
• Expanding into video
 higher ad revenues
• B2B partnerships e.g. Starbucks,
Uber, Sony PS3/PS4
• Automotive integration
opportunities are growing
• Big data!
• On track to be default agnostic
platform for music streaming
THREATS
• Negative PR from Taylor Swift etc.
• Potential market pressure to
eliminate free tier
• Market entry by Apple,
accelerating growth from other
rivals e.g. Rhapsody
• Fickle consumers, rapidly evolving
mobile market
• Mobile bandwidth not priced for
heavy streaming
Aram Sinnreich 2015

27. Apple: Strategic Position
STRENGTHS
• World’s largest music retailer for
over a decade
• 800M iTunes accounts
worldwide
• Deep integration with OS &
hardware
• No profit imperative, plenty of
cash
WEAKNESSES
• Slow, imperfect integration with
Android and Windows
• Late market entry
• History of failed or under-
performing music efforts
• Few B2B partnerships
• Reduced leverage compared to
iTunes market entry
OPPORTUNITIES
• Attractive to indie & label artists
due to Connect platform
• Deeper integration into OS with
iOS9 & OS X 10.11 (El Capitan)
• Explore partnerships w/ retail,
automotive, console devices
• Big data w/ Semetric acquisition
THREATS
• Market power still contingent on
post-Steve Jobs device innovation
• Spotify & others undermining
Apple’s source of leverage
• Core download business may
implode faster than streaming
grows
Aram Sinnreich 2015

28. 4.
Q&A
Let’s talk about royalties, revenues,
Taylor Swift & all the rest…