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Beyond Alcohol and Angel Investors: Building Business Models in an Age of Mobile Music Streaming (Conference Learnings)

Posted by Maggie Huang at Jan 20, 2015 05:00 PM |
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This blog post is the first of a series of blogs to document, synthesize, and analyze learnings from attending various music industry trade conferences. This first post introduces the research question, and highlights learnings about the various business models which can be accessible via the mobile, and broadly how the music industry is attempting to respond to monetization challenges.
Introduction
 
The Pervasive Technologies: Access to Knowledge in the Marketplace project is conducting research on access to the mobile phone hardware, software, and content in the context of the intellectual property regimes in India and China. This chapter focuses on access to music content via the mobile phone in India with a particular focus on copyright law.
 
Following preliminary research, it was identified that the copyright organizing institutions in India lacked legitimacy amongst stakeholders within the music industry. For the purposes of this research, these institutions include the Copyright Act, the Copyright Board, and the copyright societies. Collectively, these institutions have received constitutionality petitions, corruption allegations, and critiques of overall ineffectiveness in regulating and balancing music copyright for the maximal benefit to society. This is of particular importance in light of new modes of digital music distribution technologies (such as mobile phones, and music streaming platforms) which have resulted in a tremendous increase in music consumption but simultaneous decrease in revenue. This is in part due to new business models for music streaming services, and the increasing complexity of music copyright and licensing management in the digital content industries.
 
1) How have evolving music distribution technologies accessible via the mobile phone impacted business models and licensing practices amongst stakeholders in the digital music industry?
 
2) What are the specific copyright challenges for each stakeholder in the digital music distribution chain? How can the copyright institutions provide for a more effective regulation and regulation of music in India?
 
The research methodology1 includes a series of expert interviews whose participants were identified by attending the following key music industry trade conferences in India, and remotely attending in the relevant conferences abroad:
 
1) 6th MixRadio Music Connects Conference in Mumbai ("MRMC")2
 
2) The Exchange UK Conference ("Exchange")
 
3) Indiearth Independent Music, Film, and Media Xchange Conference ("Indiearth XChange")
 
4) Future of Music Coalition Policy Summit (remote attendance) ("FMC")3
 
 
5) San Francisco Music Tech Summit (remote attendance) ("SFMT")4
 
This first post will highlight learnings from the above conferences5, primarily to respond to the question: What business models for digital music distribution exist in the market today? How is music production financed today? The question of how each industry stakeholder is responding to monetization challenges will also be explored. The main findings documented are mainly sourced from the MRMC and IndiEarth Xchange conferences due to their focus on India and its unique, context-specific challenges.
 

 

"India should stop chasing and build business models. We are already ahead... being a mobile-first market... now must lead by learning from our rich cousins - the film and television industry. " - Sridhar Subramaniam, CEO, Sony Music India6

 

Business models and monetization seemed to be the key buzz words at the 6th annual MixRadio Music Conference held in Mumbai, with industry veteran Sridhar Subramaniam, CEO Of Sony Music India giving the opening keynote speech 'How the Industry Stands Today?'. Despite Vijay Lazarus, Secretary of the Indian Music Industry preceding the keynote with a welcome speech warning of piracy as the biggest barrier to monetization. Subramaniam seemed much more optimistic, declaring 2016 as the 'year of music' despite a 10% decline in the former year due to decreased subscription in c first  aller ring-back tunes 7.  This was in part due to his belief that India was ahead of the game -- being a mobile-market amidst a global trend of mobile music convergence through streaming-based music consumption. Given India's increasing preference for music access in this form, Subramaniam suggested India "stop chasing and build business models" via learning from the music industry's two rich cousins -- the television and film industry.
 
Subramaniam outlined a strategic plan for growing the 200 million dollar music industry up to a billion in 5 years. He explained how the music industry is positioned where the TV industry was 5 years ago - giving content away for free via ad-supported revenues. This is due to the popular "freemium" business model for music streaming, which allows users to listen to music for "free" (data-consuming, supported by advertisements), with an option to upgrade to a paid tier.
 
Given recently overlapping ecosystems - standalone music services, device-embedded music services, and operator-supported music services - the question was whether there was enough advertising based revenue to sustain this cluttered industry. In three years, Subramaniam predicted moving from predominantly pirate-consumed music, to ad-supported to a consumer-paid revenue model.
 
This transition would be done via learning from the film industry through a technique called windowing. This is when the same content is released through multiple windows - for film, this is done first in a theatre, then via home video, then television, then broadcast TV. For the music industry, monetization could occur via exclusives, recommendations, personalization, quality, or regional restrictions; holding some kind of premium content behind a paid wall. This strategy according to Subramaniam's estimates could reach the billion dollar mark in 3 years with the goal of transitioning the 200 million pirated market, to 75 million ad supported, to 25 million subscribers.

 

" For the first time we have access [to music] from not just one, two, but three ecosystems - standalone music services, device embedded music services, and operator-supported music services." - Sridhar Subramaniam
Following the forward thinking strategy for future business models, the rest of MRMC's panels brought the conversation back to current services and ecosystems of standalone, device-embedded, and operator-supported music services. This increasingly crowded space, along with new international entrants makes the mapping of upcoming services extremely difficult. Nevertheless, the diversity of these services were attempted to be represented at MRMC, with "standalones" like streaming services Gaana, Hungama Australian-based Guvera, and RDIO (which acquired former Indian service Dhingana), along with download stores like Indian-based independent platforms OKListen, Songdew, and Insync. "Device-embedded" services were represented by Samsung with its MilkMusic service, and formerly Microsoft/Nokia owned MixRadio (which has been recently acquired by LINE messaging app8). Lastly, "operator supported" platforms was represented by Bharti Airtel who introduced their new Wynk app, only fully accessible for Airtel telecom subscribers. Multinational content aggregator Believe Digital also was present, providing insight on how the back-end aggregation of content works. A question from the audience inquiring about how to get ones' music onto the various platforms revealed content aggregators' main value -- providing smaller labels and independent artists the ability to ensure their content is distributed widely across multiple platforms. 
 
Although the MRMC panel Streaming: Gathering Momentum hosted a variety of different streaming services, it seemed that there is increasingly less differentiation. Services like user-tracking playlist curation and recommendation, social media-inspired tagging, mood-based suggestions, friend-based recommendations, temporary offline downloads, and more were all being adopted in various forms. Business models of initial free-to-use/access with premium pricing for ad removal and full-on downloads were also becoming a standard across platforms. Some services prioritized specific stakeholders, like Guvera who described their advertiser/brand focused approach through brand play-list curation to target to certain music users.

The Global Music and Mobile panel at the San Francisco Music Tech Summit ("SFMT") highlighted challenges for music applications, with Kathleen McMahon, Vice-President at SoundHound noting the challenge of merely staying relevant in the app store, in part due to the decreasing differentiation with other services. In the streaming ecosystem, a variety of music consumption options are increasingly available through a singular platform (i.e. Hungama enabling on line streaming, download of songs, and purchase of ring-tunes). Given the principle product - the music itself - is the same, the differentiator is marked in part by the user interface, and perhaps more significantly, by price differentiation. 
 
Panelists also spoke of interesting licensing challenges, one being the complexity of differing rates between web-streaming verses mobile streaming, wifi-data transfer, verses 3G access. This copyright challenge was also exemplified when a panelist lamented on the challenges of licensing in various geographic territories, asking "Should I be able to listen to my Spotify subscription wherever I go? Is this not possible purely because of rights and not technology? Do borders even make sense anymore?" These specific challenges will be discussed in an upcoming post highlighting copyright and licensing challenges, but it is worth mentioning here as a barrier to potential technological innovation and ultimately success and survival of these platforms. 
" [MCNs are] the new age record label...except far more equitable and less exploitative." - Samir Bhanghra, Managing Director and Co-Founder, Qyuki 9

 

Despite the increasing competition and services, one particular streaming platform which need not be concerned is the audio-video streaming service YouTube, which has a reach of 1 billion consumers, averaging to a viewership of 450billion mins per month 10. Framed as the new broadcast company for user-uploaded content, this viewership directly translates into advertising revenue for the platform, with brands sponsoring specific content creators ("YouTubers") themselves. An interesting new stakeholder which is in part facilitating this phenomena are multi-channel networks ("MCNs"), who was represented in the MRMC Indian MCNs panel by MCNs Qyuki, Digital Quotient, Ping Network and YouTubers All India Bakchod. The MCNs described their business model as a relationship-service, which acts as an aggregator and optimizer of various YouTube channels. With back-end analytics and advertising strategies, MCNs aim to optimize monetization opportunities by focusing on maximizing CPM (clicks per impression) and identifying brand sponsors. Despite the seemingly disruptive service, Tammay Bhat of All India Bakchod was skeptical about the need for such service, asking "How will an MCN actually help me get more money and sustain? As a creator, brands are coming directly. They are so accessible and it's not that difficult. Perhaps it could help smaller creators but..."
 
Smaller creators and independent artists was definitely one of the target clientele for Qyuki. Samir Bhangra, co-founder of MCN Qyuki's held workshop They Say You Can Monetize Content Digitally - Really? at the IndiEarth Xchange ("the Xchange") independent music film, and media trade conference. He appealed to the independent artists by illustrating the potential reach of the one billion YouTube viewers, and explained some useful back-end analytics which can allow for more strategic and effective monetization. According to Bhangra, the CPM in India is about 1Rs per view, with the possibility of doubling or tripling this if viewed in the United States. Qyuki in particular sought to optimize monetization through ad-funded support (via CPM and brand sponsorship), payment via the MCN themselves for content creation, and 'forward integration' through increasing demand for live and digital gigs through increasing regular viewers. Bhangra even went as far as hailing Qyuki and MCNs as the "new age record label" which would allow content creators full creative control. 

 

"Well, I support piracy so..." - Sohail Arora, Founder, KRUNK11

 

For independent artists, social media tools like YouTube, Facebook, and other direct-to-fan digital services are of even greater importance considering the relative lack of accessibility to mass-media marketing power. In the XChange workshop Driving Your Career with Social Media, Sohail Arora, founder of booking agency and general artist management company KRUNK focused on search-engine optimization strategies for various social media platforms This included tips such as tagging influencers via social media, strategic timings of content posting, unique release and distribution of music, diversity in content posts, suggestions for increased fan engagement, and more. 

The rise of new technologies seem to have brought an increased role and importance to not just social media tools, but also artists managers as well to utilize these services effectively as one of their duties. This new role and its various responsibilities was highlighted by the The Exchange Music Trade Conference ("the Exchange") in the panel The Role of Artist Management Agencies. Considering the diversity of distribution options available, and the difficulty of controlling content usage once released, I asked artist manager Arora for his thoughts on some musicians' strategies of giving away free music downloads. He responded by stressing that freely giving away music was an essential marketing tool for his artists. The ability to download and share would in turn translate to an increased number of fans, quantifiable, measurable social media support (via "likes" and "follows"), and subsequently increased ticket sales, attendance for live shows, and brand sponsorship. This perspective resulted in an interesting conversation/debate with the audience, one member of whom was Marti Bharath, producer/composer of electronic act Sapta who believed that giving away music for free led to piracy, and a devaluation of music. In response, Arora unashamedly stated that he supported piracy, which temporarily halted that conversation during the time-crunched presentation.
" Independent Music is... anything that is not Bollywood" - Nikhil Udupa - MTV Indies. "If you liked it, good. If you didn't, not my problem" - Verhnon Ibrahim, Consultant12

 

Despite the numerous social media tools and online opportunities available for self-promotion, the reach of mass media and its role as a marketing tool was not forgotten amongst the independent music scene. 
In the Making Space for Culture panel, an interesting conversation arose on what it meant to be an "independent" artist. It seems that it boiled down to those who were mostly unconnected to the larger institutional support of the music industry like major labels and traditional media -- radio, newspapers, magazines, and television. On the one hand, there was a sense of ambivalence as to whether or not their work would ever appeal to the tastes of the masses. One panelist had asked - would popularization of a certain artist or music remove the label of being "independent"? Nikhil Udupa of MTV Music defined independent music in India as anything that was not Bollywood, due to its dominance in the Indian music market and overall appeal to the masses. Music industry veteran Verhnon Ibrahim conveyed the notion of an independent artist by expressing the somewhat indifference to likeability when reflecting on his days while in a heavy metal band: "If you liked it, good. If you didn't, not my problem". He seemed to imply that appeal to the masses was essentially irrelevant, and almost more revered due to a sense of being able to maintain artistic integrity and authenticity.
 
The title of the panel itself - Making Space for Culture  - was interesting, seemingly alluding to the opinion that mass-consumed, popular music was perhaps not as "cultured" . The main grievance and topic of conversation was that independent music, film, and media did not receive adequate airtime space on traditional media - television, radio, and even print. This premise was probably the only agreement during the panel, as conversation soon evolved to heated debates on whether media created trends or merely picked up on them; and whether there was lack of quality independent content for full-time curation of independent channels, a sentiment expressed by Nikhil Udupa from MTV Indies. This panel's conversation also touched upon a sense of entitlement which independent artists held, in which audience member Guru Somayji of Bangalore-venue CounterCulture expressed his agreement. This echoed the comment from an audience member earlier in the day who stated "musicians do not deserve to be paid... venue spaces do not deserve to make money. There is no entitlement. You only make money when people are breaking down the door to listen to you."
 
Amidst a crowd of independent musicians and artists hoping to devote their lives to creating their art in a financially feasible way, there was an understandably ill response from the audience. The main criticism was the lack of broadcasters' efforts in finding quality content, and allowing independents a chance to perform in large venues and mass media channels. Verhnon Ibrahim, consultant and industry expert on the Making Space for Culture Panel attempted to explain that radio, television, and other traditional forms of media and communication was a mass-market game, whose purpose was to ultimately to sell ads. He cited radio's high cost of royalty payments to explain the need to curate for the majority so advertisers will get the most reach. Ibrahim stressed the need to demonstrate quantifiable forms of "deserving" - number of Facebook likes, YouTube views etc. to demonstrate virality and fan following, so the media would have to pick up on ones' popularity.

 

"It's public knowledge that vast sums of money in royalties have not been collected... [due to a] situation of buying out rights, but even labels and rights holders say hundreds of thousands of pounds are not making their way back." - Terry Mardi, Managing Director, Asian Music Publishing13

 

Although several independent musicians raised grievances about the lack of avenues to perform in, and the reoccurring problem of being paid on time, there seemed to be a hesitancy when discussing business strategies and the challenges of copyright due to technological innovation. In the independent space, this was anecdotally demonstrated by one panelists' response when asked about the impact of technology on the distribution strategies for their art, and on financial returns for their livelihood. He responded: "Those are two separate things... one is about making money and making a living. The other is about making an art form. These are two separate things." Within the larger industry conference MRMC, there seemed to be a lack of representation by musicians and content creators. Yet, one particularly vocal audience member, and later panel member of the UK Exchange was Terry Mardi, Managing Director of Asian Music Publishing. Numerous times throughout both conferences, he raised the controversial issue of missing royalty payments in India, and the absence of royalty collection and distribution by unregistered copyright societies IPRS and PPL. In MRMC, this issue was ever so briefly touched upon in a panel when Bollywood playback singer Natalie Di Luccio who's worked closely with A.R. Rahman mentioned that she had never received a contract outlining her rights and her royalty dues. Although there was very little curated conversation about this issue, coffee breaks demonstrated a clear gravitation towards those vocal and concerned about the issue, while many stakeholders, particularly the few musicians in the room seemed to find this a significant gap in voices not heard and expressed in MRMC. At IndiEarth, Vivek Ragpolan, representative of the Music Composers Association of India briefly commented as an audience member about the need to take collective action regarding composers and overall musicians' rights, stressing the importance of independent artists also being included within the new provisions of the Copyright Amendment Act. Though this issue of royalty licensing will be reviewed in a future post, this brief mention demonstrates the challenge of monetization and livelihood at multiple levels -- significantly for content creators, but also for the music platforms themselves. 
"It seems like the pricing model is wrong... it's the only way to explain the drop in revenue" - Tarun Malik, Apps & Content Strategy, Samsung 14

 

Across different platforms, panels, conferences, and countries, one particular question seemingly common to all was that of price points band business model viability. Tarun Malik, Apps & Content Strategy of Samsung in Biggies Give Their View commented on the growth of the industry. Despite an increase in overall consumption, he noted - "It seems like the pricing model is wrong...it is the only way to explain the drop in revenue". Atul Charumani, formerly Head of Content with OnMobile and currently Managing Director of Turnkey Music stated that "in no other industry where the content is produced at such a high cost, is the product given away for free." In the Global Mobile and Music Panel at the San Francisco Music Tech Summit, the moderator asked a panel of music distribution service providers - "What is the value of music? Does music have intrinsic value at this point? Or is it just how it is presented?" In response, Dean Bolte, Managing Director of Omniphone expressed that the value of music was different for every person, and that some people were willing to pay more for access than others. The priority is to ensure that those who value music more have the opportunity to express through payment, since anything was better than zero. Beyond competition between music service apps, Bolte noted that the competition for funds also occurred across app categories, noting a generation of youth conditioned to acquire music for free through Napster, yet pay for additional levels in games. He closed the panel with the insight that "the product needs to be better than the sword".
 
The targeting of youth and young adults was also conveyed by the somewhat surprising pervasiveness of brands, who had a larger than anticipated presence for a music industry conference. The UK Exchange demonstrated the potential of partnerships in its Brands & Music - When They Combine Forces panel. MRMC panel The Brand Sponsor also invited the Taj hotel (who seem like an unlikely sponsor) an opportunity to express its interest in supporting the discovery of new talent. Aditya Swami from MTV & MTV Indies said that brands can communicate through music, and create conversations with their consumers. Subramaniam, CEO of Sony Music mentioned the importance of funding through brands and advertising in the MRMC keynote How the Industry Stands Today, while IndiEarth's Taking it Live panel opened the day with a conversation about live venues seeking sponsorship from alcohol, clothing and other 'lifestyle' companies. Even the MCNs in the MRMC Indian MCNs panel discussed one of its main services as the securing of brand sponsorship.

 

"Independent music in India would not exist if it weren't for alcohol sponsorships" - Tej Brar, Artist Manager, Only Much Louder 15

 

Music platform MixRadio, the title sponsor of MRMC was an understandably suitable partner, since it closely correlated to the main music product. Yet, particularly in India, it soon became apparent that alcohol brands have a very significant role in financing the music industry. This was highlighted when liquor-brand Bacardi received an award during MRMC for 'excellent brand association'. It was later learned in an interview that liquor and cigarette brands are not legally able to advertise in India, hence the popularity of alcohol sponsorships for live music festivals, venues, and club nights. Tej Brar, EDM Artist Manager for Only Much Louder believed that independent music would not exist in India if it weren't for alcohol brands. This is an interesting phenomenon considering just a decade ago, the idea of synchronizing ones' music with a corporate brand would be akin to "selling out". However, in today's increasingly digital world, especially in India where non-film musicians don't have much of a presence, brand sponsorship is one of the main 'monetization strategies' for music production. The last important significant financier to mention are investors, showcased in the MRMC panel Of All Things Finance. These "angel investors" play an instrumental role in backing many of the technology start-ups and other streaming services while experimenting with various business models. Yet whether these investment decisions are one that would reap sustainable returns is still a question to be answered.

Conclusion
 
It seems in this mobile first market, India has the opportunity to lead the way in developing business models that grow the industry through multi-tiered windowing of music streaming. Strategically, in an ecosystem still rampant with piracy, moving consumers towards legal access to music can facilitate new sources of revenue. This opportunity has also given rise to new intermediaries like YouTube and multi-channel networks. time will tell whether their contribution will legitimately grow the industry or simply take away more pieces of what seems to be a shrinking profit pie. Independent artists are able to use new direct-to-fan distribution platforms such as YouTube, amongst others to share their works. Yet, it is clear that the sustenance of a livelihood off of digital sales and distribution is extremely difficult. It is interesting to note that the bulk of financing for music seems to be trending towards live shows and brand sponsorship. However, despite increase in digital music consumption, the distribution of the revenue needs to be further studied and understood. Given the ease of replication, this will require a further in-depth understanding of licensing and copyright management in India today.

1 See the research methodology here: http://cis-india.org/a2k/blogs/copyright-management-in-age-of-mobile-music last accessed Jan 22, 2015

2 All of the panels from this conference can be found online here: http://musicconnects.indiantelevision.com/y2k14/videos.php last accessed Jan 20th 2015

3 See here for the IndiEarth website: http://www.xchange14.indiearth.com/ last accessed Jan 20 th 2015

4 Watch and/or listen to the Future of Music Coalition panels here:https://futureofmusic.org/events/future-music-summit-2014 last acccesed Jan 19 th 2014

5 All data in this solely from public conference panels; including quotes, etc. Does not include any individual interview data.

6 As quoted from the MixRadio Music Connects Keynote panel:

7 Though it was not mentioned in the speech, it is useful to understand the initail demand for CRBTs was not necessarily genuine, for the fall in revenue was due to the crackdown by the Telecom Regulatory Authority of India to prevent false billing by telecom and value-added-service providers.

9 As heard in the MixMusic Radio Connects panel Indian MCNs on Nov 5th 2014

10 According to Samir Bhangra in MixRadio Music Connects' Indian MCNs panel on Nov 5th 2014

11 As heard at the IndiEarth Xchange conference in the Driving Your Career with Social Media panel on Dec 5th 2014

12 Stated at IndiEarth Xchange Conference in the Making Space for Culture panel on Dec 4th 2014

13 As heard at UK The Exchange Submerge conference on Nov 7th 2014

14 As stated on the MixRadio Music Connects panel Crystal Ball Gazing: Bigges Give Their View on Nov 5th 2014

15 In a conversation at the IndiEarth Music Xchange Conference on Dec 5th, 2014