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Thanks Alexa: “Friends With Benefits”

Based on the 15th edition of MusicWatch’s Annual Music Survey we were able to estimate that more than 14 million US consumers reported using an Echo device, including Tap and Dot. That’s users, not necessarily buyers. Over the past few years the conversation around audio has been about mobility; connected cars, music on smartphones. With voice assisted devices, we’re back to talking about music in the home. Amazon reported that Jingle Bells was the holiday song that you most requested Alexa to play.

The obvious question is whether 2017 will be the “Year of Amazon” when it comes to streaming, especially following the fall launch of Amazon Music Unlimited in the US. Perhaps that’s right, particularly as Prime membership and the Echo installed base continue to grow.  In the Annual Music Study, we observed that 13 percent of Echo users had listened to Amazon Music Unlimited, whether through a paid subscription, a trial or sharing an account. But we noticed something else that was interesting. There appears to be a halo effect on services that are on the Echo platform. As shown in the chart below, usage of iHeartRadio is 64 percent higher among Echo users compared to the total internet population.  TuneIn has a nearly 4:1 lift in usage incidence among Echo users. Spotify has a more than 2:1 increase.

To be fair, some of this difference is because Echo users are likely more tech savvy, early adopters who would be more likely to stream in the first place; and pay for the privilege. A decade ago Pandora appeared on the Apple app store, and went from near oblivion to the largest pure-play music streaming in the country. Will we see a similar effect thanks to Alexa? TuneIn’s brand awareness was a worst in class 18 percent in MusicWatch’s July Monitor study (among free services). Is Alexa the route to improve that? Will Spotify grow share of listening hours over Apple thanks to all those “Alexa, play Discover Weekly” requests? How many more ads can iHeart sell now that we listen to KTU 103.5 in our cars, and our kitchens? My guess is yes to all the questions, but perhaps we should ask Alexa.

*The MusicWatch Annual Music Study is based on 5200 respondents aged 13 and older, and projected to the US internet population. The study was fielded between December 17, 2016 and January 2, 2017. Respondents were asked past 12 month device usage.

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Pandora Wins Music Streaming Wars (for 2016 anyway)

Pandora held on to the music streaming crown in 2016 with a 28 percent share of music listening. This gave Pandora a slim lead over YouTube, who came in with a 27 percent share. The statistics are based on monthly consumer surveys that MusicWatch contracts from third party suppliers and are weighted and projected to the internet using population aged 13 and older.  The Pandora and YouTube numbers combine the free or ad-supported versions and the paid offerings. Spotify followed in third place with a 17 percent share. The three top services combine for 72 percent of streaming music hours. Weekly music listening averaged just over 21 hours for 2016.

Apple Music, including free listening on Beats 1, garnered a 4 percent share, compared with Spotify Premium at 7 percent. With the recent introduction of Unlimited, and a successful holiday season selling Echo devices, Amazon is expected to have a big impact on the 2017 streaming landscape. For 2016, Amazon ended with a 4 percent share, mostly from Prime Music.

For music overall, streaming from dedicated music or music video services (including listening to or watching streamed videos) was the #1 option with a 28 share, followed by AM/FM radio at 24 percent. “Ownership” models including CDs, digital downloads and vinyl came in next at 23 percent combined. The streaming number does not include streams from social media services or artist websites, which would have further advantaged that listening format.

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Note: The following are combined: YouTube/YouTube Red; Google Play Music free and paid; Apple Music and Beats 1

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Note: Vinyl had a 1 percent share; net “Ownership” of CD, DDL and Vinyl sums to 23.0  percent

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Will iHeart’s Audience Pay? You bet, maybe!

 

As iHeartRadio rolls out the beta of its PLUS paid streaming service, it’s fair to ask if anyone will pay for it come the live launch in January. PLUS is targeted at the $4.99 monthly price point and offers features such as saving, song replay, search and unlimited skips. MusicWatch’s soon to be released “Light Makes Right” report will examine consumer reactions, purchase interest, and pricing sensitivity for lighter versions of streaming services such as Pandora Plus and iHeartRadio Plus. Positioned between free and ad supported offerings and full on-demand services at ~$9.99—“light” is the hot new category in streaming at the moment.

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The basis of the “Light Makes Right” report is a research project that surveyed 7800 internet users 13 and older. The core of the study was a concept and pricing test around a “Plus” like product. Here’s what we found:

ONE in FOUR free music streamers listened to iHeartRadio in the past month—or nearly 40M. That’s almost the audience level that Spotify Free obtains, and better than Google Play Music, Vevo or SoundCloud (among streamers listening at least one hour per week). iHeartMedia reports 90M registered users for the app, meaning it is seeing strong monthly conversion among potential users.

OVER 40 PERCENT of iHeartRadio listeners expressed interest* in paying for a plus-like service. That’s pretty good, and higher than the benchmark for the average streamer. Remember though, that consumers typically overstate their willingness to pay for services. This is an indicator of interest, and does not suggest that 40% of the 90M registered users will actually subscribe. Some of that interested group now pay for Apple Music or Spotify Premium, and there are hurdles to switching. Some will share their account log-ins with friends or family members. Caveats aside, the response is encouraging.

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It’s NOT just payers. Three out of four iHeartRadio listeners don’t pay for a music subscription.  Among those virgins, one-third of iHeartRadio listeners expressed interest in the “Plus” concept. These users have to be sold on the value of a paid subscription; free trials are proven to help. On the positive side they haven’t built a bank of favorites, playlists or stations, which would make switching painful.

*interest is based on respondents who said definitely/probably would pay (top two box)

iHeart can quickly get to FOUR MILLION PLUS subscriptions. How? The math is simple. There are 40M monthly users. Purchase interest might be half of the reported 40%. There are typically two users per account.

40M MONTHLY LISTENERS X 20% PURCHASE INTEREST /2 USERS PER ACCOUNT = 4M SUBSCRIBERS

 Four million (4M) may not sound like a lot but considering the entire US paid on-demand universe is around 20M, that’s a solid chunk of growth in the paid sector (# does not include Amazon Prime Music or Pandora One). And the number rises as iHeart taps into more registered users who aren’t listening on a regular basis.

 REPLAY enhances the music discovery process. What are the features that motivate iHeart listeners who don’t currently pay for a streaming service? Replay was at the top, with 51% citing it as one of the “musts” in order to get them to pay. iHeart Plus offers listeners the ability to replay, then return to the station. We know the more that listeners replay the more they get engaged with the artist, song, and the service.

As the number of paid streaming services grows, iHeart appears to have hit on a formula that will appeal to its current listeners—most importantly the ones who aren’t used to paying for a music subscription.

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Orderly Transition: As Paid Music Streaming Escalates No Paying Downloader Can Be Left Behind

As rapidly as the music business is moving to paid streaming subscriptions from paid downloads there’s an argument to be made that it needs to move even faster. At the MusicBiz conference in May of this year we offered up a somewhat dire forecast for US digital download revenues, suggesting that more than half the buyers would evaporate by 2020. That’s a bundle of lost revenue, as the RIAA estimated 2015 sales of $2.3 B. Revisiting that forecast we’re starting to think it could be worse.

About a week ago Billboard reported the lowest tally of download sales for a #1 song in ten years. “Closer” by The Chainsmokers sold 84,000 downloads in the week ending October 27. The article pointed out this was the fourth occasion this year that a #1 sold fewer than 100,000 downloads in a week and highlighted Nielsen Music’s trend of a 25 percent decline in digital song sales. However, the sales data tells only part of a troubling story.

Even as Americans bought fewer CDs we continued to listen to them. CD revenues fell 52 percent between 2011 and 2015 (RIAA), yet the percent of people who listened remained reasonably steady at a few points above 50 percent. As recently as Q3 2016 MusicWatch’s audiocensussm monthly tracking survey shows that 52% of the internet population listened to a CD in the past three months. This shouldn’t be surprising. We listen to a lot of music in our cars, most cars still have CD players, and for many it has been, and remains, more convenient to pop in a disc than connect to a digital option. The trend in how we listen suggests that many Americans never fell entirely out of love with CDs even as they moved on to streaming. The trend for digital downloads suggests that is not what’s happening with song files.

There is a simple explanation. Downloads share the same device profile as streaming; the laptop and the smartphone. This makes them streaming and downloads more interchangeable Nearly nine out of ten digital download listeners are also streaming music, at least one hour per week.

Music purchases and listening habits are regularly monitored by MusicWatch’s audiocensussm tracking. 1. As of the close of Q3 2016 audicensussm indicates that there are now nine million fewer download listeners in the US than at the beginning of the year (end Q1). As shown below, the number of people listening to downloads has gone from 86 million in an average month to 77 million. Now, 77 million is still a lot, and maybe some had a hangover after listening to all those Adele downloads, but we don’t think so.

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Among the remaining 77 million listeners, the time spent per week is slipping but only slightly—down about three percent to 7.9 hours per week. But remember—nine million went from something to nothing, meaning the average is actually down to 7.0 hours. That’s actually a 14 percent decline in time spent listening.

Scarier still is the behavior of heavier download buyers. Among the 41percent who bought more than three songs per month, time spent listening to downloads is off 14 percent—and their time spent music streaming is up by a whopping 18 percent.

That’s a lot of numbers. Translated it means that, if the trend holds, downloads are losing listeners at a rapid pace at the same time engagement (time spent listening) among core download customers is shifting to streaming. Nielsen’s 25 percent decline could just be a preview of things to come.

What’s next? The number of streamers who pay for a music subscription in 2016 will be double the 2015 count. That’s terrific but even more aggressive and creative actions must be taken to grow the franchise for paid subscriptions.  Only about 1 in 3 paid downloaders also pay for a subscription.  Apple and Amazon sold the overwhelming majority of downloads, and they have the ultimate relationship with most of these buyers—an account backed by a credit card. If those download buyers haven’t yet taken a free trial to Apple Music or Amazon Music Unlimited, then offer them one—repeatedly and vigorously. Streaming is the future however there are still over 30 million download buyers in the US. Today on the iTunes store there are pre-orders for the new Bruno Mars album, a feature for the deluxe version of Lady Gaga’s “Joanne” and a discounted version ($.69) of Kelsea Ballerini’s “Peter Pan,” fresh off its CMA performance. As the download stores become less of a weekly destination, we can’t ignore those who have any inclination to buy a track or album. These specials should be promoted as energetically as Spotify hypes new playlists. No paying downloader should be left behind.

1Research note: In addition to the cited RIAA figures, certain historic data is sourced from MusicWatch’s Music Acquisition Monitor. MusicWatch’s audiocensus is a monthly consumer survey conducted online and projected to the internet population 13 and older. Certain figures are based on respondents who listen for at least one hour per week.

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For Music Streamers, Playlists Becoming The New Radio

New consumer survey finds that nine out of 10 Spotify and Apple Music users have listened to or created a music-streaming-service playlist, and half of their premium subscribers listen to playlists every time they use the service

A new study released by MusicWatch, a company providing consumer research for the music industry. profiled the usage patterns, playlist preferences, discovery habits and creation habits of music streamers. The study, which is based on 500 online interviews with users of Spotify or Apple Music who participate in listening to or creating playlists. The study found that 90 percent of music streamers have listened to or created a playlist. Paid or “premium” subscribers were the most active, with eight in 10 listening to their service every day and half listening to a playlist every time that they use the service to stream music. Among those who listened to service’s playlist, nine out of ten had also created a personal  playlist in the past three months.

“Playlisting has become the fabric of the music streaming experience,” said Russ Crupnick, managing partner of MusicWatch. “The ability to listen to and create playlists has become as important a feature as the catalog of music itself.”

Genre-based playlists were the most popular among MusicWatch survey respondents, with 68 percent having listened to this format. Top-40 and other chart-based playlists (e.g., “Top 50,” “Best of The Year”) tied with mood-based playlists for second place, each close to 50 percent. More than a quarter (24 percent) listened to a genre-based playlist each time they used a music-streaming service. Genre and familiarity with songs and artists were ranked highest in importance, when deciding which playlist to listen to.

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Comparing paid Apple Music subs and Spotify Premium, consumer usage of the services is similar. Two-thirds of users of each service listen to their current-hits offerings – “Today’s Hits” on Spotify and “Today’s Top Hits” on Apple Music — and 44 percent listen to either “Discovery Weekly” on Spotify or “Discovery Mix” on Apple Music. Apple users were somewhat more active than Spotify Premium users, with 29 percent claiming to listen to “Today’s Hits” each time they used the service (compared to 22 percent for Spotify Premium’s “Today’s Top Hits) and 21 percent listening to “Discovery Mix” (compared to 15 percent for Spotify’s “Discovery Weekly”).

While the use of streaming services and playlists is very popular, nearly 80 percent of music streamers also listen to music on AM/FM radio.  “Ease and convenience” and “discovery”, both hallmarks of traditional broadcast radio, were cited by many as reasons to use playlists when they stream music.

“We set out to understand what’s really important to listeners, and it’s the essence of the song and the artist that wins, in the end,” Crupnick said. “There’s debate about human versus machine curation, about celebrity personalization, and about music sharing on social platforms, but ultimately listeners are really most concerned about whether a playlist provides song that they like and offers a touch of music discovery, too.”

About MusicWatch, Inc.

MusicWatch provides in-depth music consumer research and analyst services for the entertainment industry. With more than ten years of trended data and new research released quarterly, MusicWatch helps clients understand the latest market trends, consumer purchasing and listening habits, including music streaming services, broadcast and satellite radio, and music devices. For more information, visit www.musicwatchinc.com.  “Premium” subscribers were defined as Spotify Premium users or those paying for or sharing a paid Apple Music subscription.

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A Mid-Year Look At Vinyl

The headlines from BuzzAngle’s mid-year music report focused on the growth of on-demand streaming and the carnage surrounding the paid digital download market. Eventually we will turn to everyone’s favorite music topic: Vinyl. BuzzAngle reported a 17% increase in vinyl sales for the first half of 2016, and while not quite the torrid pace of the past few years, vinyl continues to post impressive gains. From time to time MusicWatch has posted statistics on the consumer purchasing of vinyl, and we thought this would be a good time for an update. The data is sourced from MusicWatch’s audiocensusSM tracking service covering January-April 2016 and based on an online sample of 4,800 US respondents aged 13+.

Historically we have reported on the “vinyl” buyer. But looking back that’s a bit of a misnomer as there is a dual market;  sales of new product, as reported by BuzzAngle, and for used.  We currently project there are actually more customers for used vinyl than for new.

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In any given month most vinyl buyers choose either new or used, but the more time goes by the more that will equalize, and certainly hardcore vinyl shoppers are more likely to buy both new and used in a given window of time.

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The question we get asked most often is “who are they”? Are vinyl buyers boomers craving nostalgia and the so-called pure sound of records? Or are they young hipster “uber” fans for whom vinyl is a self-branding way to connect with favorite artists? The answer is yes, sort of.

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One-third of new vinyl buyers are aged 13-24, and by the way, 66 percent of new buyers are male. The profile for used vinyl is similar, except that there are a few more in the 55 and over bucket. By contrast boomers really show their presence for listening to vinyl—the 55+ segment accounts for 26 percent of vinyl listeners.

Their favorite genre? Whether buyer or listener, the #1 favorite genre was 80/90s Hits followed by Classic Rock, Alternative and Pop.

Amazon led the shopper traffic in Q1; 30 percent of vinyl shoppers reported buying a unit from the online retailer.

Although vinyl is not growing as rapidly as on-demand streaming the format continues to grow, thanks to continued interest from younger consumers who keep it hip. But good for us boomers who think the only way to enjoy “Eat A Peach” is on the old Thorens with that Stanton cartridge dancing the grooves.

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Bad Company, You Can’t Deny

(With apologies to Paul Rodgers)

57M in US Still Acquiring Unlicensed Music

The BBC reported on February 17 that Kanye West’s “Life of Pablo” has already been pirated 500,000 times.  According to the article on The Next Web quoting those statistics, piracy is at historic lows. Respectfully, that is a popular belief, though wholly incorrect. The rationale goes like this:  Education and judicial action have reformed the majority of consumers.  The shift to digital downloads made ripping and burning CDs obsolete. The emergence of legal streaming and smartphones means that “pirates” now listen to Spotify and Pandora. With only a few remaining hardcore miscreants, the high seas have mostly been cleansed of pirates—and we can declare Mission Accomplished.

This is an entirely incorrect proclamation. Acquisition of unlicensed music from unsanctioned sources has not gone away. How bad is it? In 2004 we estimated there were 41M folks in the US illegally downloading music from P2P networks at a time when many weren’t even regular users of the internet. Last year that number dwindled to 22M, with the number of files being downloaded also in decline.  However, now there are more forms of unlicensed acquisition available than in 2004; streamripping, downloading from storage lockers, mobile apps, and hard drive swaps.

In all forms, we estimate 57M Americans are engaging in these forms of music acquisition. We call it “badquisition:” acquiring music from bad or unlicensed sources.  Another startling statistic: 35% of music buyers (CD or download) also reported getting at least one song from an unsanctioned source. This is not exclusively a problem among people unwilling to pay for music.

We call the participants who get music from these sources “badquirers”. The question is, in a world of iTunes, Spotify, Pandora, Apple Music, Tidal or Deezer, why would anyone need to participate in “badquisition” of music?  We set to find out, and here’s what we learned from a recent study:

  1. Ownership Matters. The migration to access was supposed to eliminate the need (and desire) for owning music. Consumers disagree. Research shows “badquirers” want to own the music. They also want it available on their smartphones.  Some express concerns about data usage but ownership is a higher priority.  This is not surprising as our other studies point to continued perceived value in possessing a song or album.
  1. Ubiquity Fosters Selectivity. As expected, many “badquirers” report getting files because they are free, or at least cheaper. But it is more complicated than that— there are tracks they like and want to own, but not enough to pay for. Streamripping, mobile download apps and P2P provide an avenue for obtaining those files and permit listeners to be more selective in what they buy.
  1. Technology is a Lubricant. “Badquirers” often turn to video services when they want to listen to a song. One-third of those who do so are also streamripping music. They often do an internet search for the song or artist which, coincidentally, is the leading way they learn about unsanctioned sources for music. Speaking of streamripping, we estimated a 50% increase in the number of streamrippers in the US between the end of 2013 and early 2015. There are nearly as many streamrippers in the US as folks who illegally download music files from P2P networks.
  1. There is Ambiguity. 73% of “badquirers” agreed with this statement; “I assume any music app that I can download from an official app store is licensed by artists and rights holders.” 58% said it was easy to determine whether a site that has free music is licensed by artists and rights holders—42% disagreed.
  1. Communication Breakdown? “Badquirers” are getting music that they believe is officially released, but is not available on streaming services or they can’t find it on CDs or downloads. And yes, they also look for remixes and bootlegs unlikely to be found on licensed services.  Are consumers well informed on what is available on streaming services? Does more need to be done with pre-release alerts? Or is there indeed a gap in catalogs?
  1. They are Heavier Music Buyers. People using unlicensed options for music acquisition are otherwise good customers, spending $33 per capita on CDs and paid digital downloads. The US average is $19 per capita. Half of them bought a CD or download last year, which is a higher percentage than the population as a whole.  They are also more likely to stream, including using paid services such as Spotify Premium. However, the $33 per capita is less than the $45 expenditure of the average music buyer.

The study did not measure the economic impact of these activities. It is fair to speculate that revenues are being siphoned from artists. These people are more likely to buy music and they value ownership of music—yet they can be more selective as a result of mobile apps, streamripping and P2P. Not every rip or download would translate to a sale but certainly some would.

Much success has been made thwarting P2P usage. Unfortunately other sources for unlicensed music now boast millions of users. For those who participate it raises a number of questions: Why pay for premium on-demand streaming when I can get on-demand elsewhere?  How impermeable are pay-walls, exclusives and windows when consumers can readily circumvent them?  It’s not exclusively a music problem—if they’re doing it for music they’re likely doing it for TV shows, movies and games as well.  It’s time to reset our thinking about music piracy.

The MusicWatch “Badquisition” study was conducted among 1000 US respondents aged 13-50 who were screened for use of one of seven unlicensed forms of music acquisition including P2P file sharing, streamripping, mobile apps and other forms of file transfer. The data was weighted to quotas from MusicWatch’s Annual Music Study (AMS) which monitors music acquisition and listening activities. This was an online survey completed December 2015. Expenditures and population estimates were derived from AMS and based on internet using population aged 13 and older.

 

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