Sonos is finally jumping on the voice speaker bandwagon, both in terms of Alexa control of existing Sonos hardware via devices consumers already have, and by integrating Alexa and the Google Assistant directly into its speakers. The growth of the voice speaker market has emerged as something of existential threat to Sonos, and it has needed to respond for a while now. The Alexa implementation is really good, allowing users to control Sonos speakers without the awkward syntax required by a lot of third party skills on Alexa. That’s going to be key for making the integration really usable.
On the voice speaker side, Sonos is starting small, with an update to its cheapest speaker at the same price as in the past. I would guess that the same functionality will be coming to the rest of the lineup in the next year or so, but Sonos hasn’t announced this yet. Starting with Alexa integration makes sense, given that it’s the most widely deployed voice assistant in home speakers today, but adding Google Assistant will help broaden the appeal to those familiar with it from their smartphones.
Sonos’s claimed differentiators in this space are quality and ease of use of multi-room audio, agnosticism with regard to assistants, and openness with regard to music services. That leaves Sonos caught in something of a pincer movement between Apple, which will also focus on premium, multi-room experiences, and Google and Amazon, which offer cheaper, more open alternatives. Sonos’s true differentiation is therefore fairly subtle, emphasizing the ease of use of its multi-room functions and likely its price against Apple’s HomePod, at least until it launches voice support across its more expensive speakers. Proving its feature superiority is going to be tough in a retail environment, and Sonos will likely have to lean heavily on its brand and existing customers here.
Microsoft has today announced that it’s killing off its own streaming music service, Groove Music, and will be partnering with Spotify instead as the latter builds an app for Windows 10 and the Xbox One. This isn’t a huge surprise – Microsoft’s various incarnations of music streaming services have never done as well as its base of Windows users should have enabled them to – but it’s an admission of how completely Microsoft has failed when it comes to consumer content services, where it’s basically a non-player. That, in turn, is indicative of Microsoft’s continued challenges as a consumer ecosystem, especially relative to Amazon, Apple, Facebook, and Google, which dominate much of consumer time and content consumption. Microsoft’s consumer presence is largely limited to its de facto standard status as a maker of paid productivity software and increasingly free standalone productivity apps on mobile platforms, alongside its search and gaming platforms. None of that engenders much positive loyalty to Microsoft from consumers, and it generates very little revenue for the company on the consumer side. And yet it continues to try to straddle the consumer and enterprise worlds in a way few have ever managed to do successfully. Giving up in music is a logical and sensible step, but it’s certainly not going to get Microsoft any closer to cracking the consumer market. Meanwhile, it’s yet another channel – albeit likely not a big one – for Spotify to sign up more streaming music subscribers.
via The Verge
Amazon is adding voice control features to its mobile music apps for iOS and Android to give users more ways to control their music even when they’re not using an Echo or other Alexa-enabled device. That’s a logical place to extend Alexa functions given that music playback is a major use for voice speakers, and the symbiosis between the two has already made Amazon Music a much more widely used service over the last couple of years that it would have been otherwise. A recent survey I ran suggested that under 20% of US Prime subscribers use the music feature, but even at 20% that would be millions of users in the US alone, and I would guess many of those are likely Echo users. Adding a voice feature to a third party app still isn’t nearly as convenient as invoking it from an external button or a voice command from the lock screen, but for those committed to Amazon’s ecosystem, this is still a useful value-add. We’re going to see the connection between voice and music become considerably stronger over the next few years, with Apple’s entry into voice speakers through the HomePod as well as Sonos’s announcement next week. A big question is whether voice becomes an important way to drive playback on mobile as well as in the home – voice assistant use on mobile remains fairly low overall and high mostly in specific circumstances like while driving, but that could change as assistants get more sophisticated in understanding commands relating to music, something Apple’s clearly been working on lately.
It’s been increasingly clear in recent months that Spotify has big ambitions for its advertising operation, even going so far as to pitch itself as a threat to Google and Facebook in time. One thing essentially every big ad platform has in common, though, is self-serve tools to enable the long tail of small and medium-sized businesses to buy ads, and that’s an area Spotify hasn’t emphasized enormously just yet. One big challenge is that audio ads are rather tougher to create for small businesses than display ads, and that’s one of the things Spotify is now looking to solve with what it calls the Spotify Ad Studio. The tool will allow advertisers to upload a script and choose music and other options while text-to-speech technology creates the voiceover. That sounds like it could be terrible if it’s anything like other robotic sounding TTS software, but the key is that it dramatically expands the range of advertisers that could run audio ads on Spotify, which now has a large and rapidly growing audience in the US. Given how poorly ad-based streaming music is monetized today, anything which boosts the demand side of the ad market should help raise prices and therefore improve the overall economics, though it’s never likely to rival paid streaming in terms of revenue per user.
The Recording Industry Association of America (RIAA) today issued its report for the industry’s performance in the first half of this year, and it showed a by now familiar trend: stronger growth driven by rapid growth in streaming. That growth far more than offset the decline in both physical and download sales, with physical sales now just 16% of total revenues compared to 31% back in the first half of 2013. More importantly, downloads have dropped from 44% of industry revenue to just 18%, barely ahead of physical sales, while streaming is now 58% of total revenue. As always, though, it’s worth noting that it’s really subscription streaming that’s driving numbers up, with 61% year on year growth in that category and 74% of total streaming revenues, with just 12% coming from ad-based streaming despite the much larger user numbers. The RIAA says there were an average of 30 million paid subscribers in the US in the first six months of the year, up from 20 million in the same period last year. In its report (linked below) there’s the usual griping about that ad-based revenue stream, a stream the industry continues to go along with but moan about at the same time because it knows it can’t really live without it, even though paid streaming is far more lucrative. In the paid streaming department, the US continues to be quite some distance ahead of most of the rest of the world. A recent survey I ran showed that Spotify and Apple Music alone had captured 23% of online adults as customers between them.
via RIAA (PDF)
Pandora has been testing a new ad model for some time and is now launching it broadly. The model offers users an opportunity to trade watching a video ad for extra skips and playbacks, both of which are normally limited under its ad-based option. That’s a familiar model from the mobile gaming market, where games often offer users additional lives or other in-game features in return for watching video ads, although anecdotal evidence from my own family suggests that those ads aren’t really being “watched” in any meaningful way – they basically insert a 30-second delay in game play during which the player does something else. Pandora says a high percentage – 42% – of its active user base has signed up for this program, which is called Video Plus, so that’s a good start, but the key metrics here aren’t the number of signups or even the number of times people agree to trade an ad view for in-app functionality, but brand recall and other more traditional ad metrics which would demonstrate that users are actually watching and taking in the content of video ads. There’s no mention of any of that in the Adweek article linked below, and whether this new model ultimately succeeds or fails will depend entirely on whether brands actually see a decent return on the investment.
Spotify Wants to Rival Facebook and Google in Advertising (Aug 17, 2017)
Despite SoundCloud’s repeated protestations that it’s not on the verge of going under, the scuttlebutt has been that it is indeed just a few months from running out of cash, and two recent new investors have been reported as potential saviors: Singapore’s Temasek Holdings and the Raine Group. SoundCloud is now reportedly communicating with existing investors and asking them to back the rescue effort by these two new backers as a last-ditch attempt to avoid having to wind down the business. Some of the numbers involved are a bit crazy – the new investment is $169.5 million at a $150 million pre-money enterprise valuation and some existing shareholders will see their liquidity preference slashed by 40%. But all this would apparently put the company on a much sounder financial footing and allow it to consider searching for a way out of its current predicament. I’m still bearish that there’s any way to really turn SoundCloud around given its history and what’s happened in the industry since it experienced its meteoric rise, and imagine the most likely long-term outcome is still an acquisition for intellectual property and possibly customer data. Update: Recode is reporting that the CEO will be replaced and kicked upstairs to the board chair role in favor of former Vimeo CEO Kerry Trainor if the deal goes through, which now seems very likely based on other reporting later in the day.
Pandora’s Premium Subscription Growth Slows in Q2 (Jul 31, 2017)
Spotify Has 60 Million Paid Subscribers (Jul 31, 2017)
The Financial Times reports that Spotify has hit the 60 million paid subscriber milestone, a fact that has now been confirmed by the company’s press site, where it also says it has 140 million active users in total, suggesting 80 million free users. It had previously reported 50 million paid users in early March of this year, suggesting it took just under 5 months to add a million subscribers, while Apple Music added around half that over the same period. It’s been fascinating to watch Spotify’s growth accelerate in the aftermath of Apple’s launch of its competing service, as streaming takes off as the dominant form of music consumption and paid subscriptions generate the vast majority of streaming revenue. That’s indicative of Spotify’s success in both establishing itself as the de facto standard in the market and creating social features that help win new subscribers, and also at signing partnerships with wireless carriers and others who help promote discounted subscriptions. As Spotify’s financial results for last year show, its average revenue per paid subscriber has been dropping rapidly, something I suspect has continued this year. But it’s the paid business that’s profitable on a segment basis, while free streaming loses money, which is why I suggested in a piece for Variety last week that it ditch the free tier. I’m only partially serious about that – the free tier remains by far Spotify’s best marketing tool, but it also remains a point of contention with the music labels, among which Warner is the remaining holdout in signing a new long-term deal.
via Financial Times