Glenn Peoples’ articulate byline appears at billboard.com where he contributes to the trade publication as Sr. Editorial Analyst. His column Business Matters appears regularly and he is a leading authority on the digital music entertainment space with emphasis on the new Access model.
Peoples first began making waves when he founded coolfer.com in 2003. The influential blog examined the digital issues of the day and his work started being reviewed and addressed in a number of well-read media outlets. In 2006 the journalist enrolled in the MBA program at Vanderbilt’s Owen Graduate School and earned a degree in 2008. Peoples is also a Leadership Music alumni, class of 2011.
We gathered in the NEKST conference room to discuss “Streaming 2014.” Where are we and what should we expect? Is the new format cannibalizing downloads? Will streaming income ever be able to really support an industry? What does Internet radio mean for terrestrial radio?
Peoples speaks in a quiet voice, but his words ring loudly…
NEKST: If the CD is old and on social security, at what stage is the Access model?
Glenn Peoples: With respect to a timeline, half of the country listens to Internet radio on a regular basis (monthly), so that’s mainstream behavior, but there is still room for growth. Think of the ways people listen to broadcast radio in the home and car and how Internet radio could encroach on that time. There’s a lot of hours to be had there. The streaming model is set to grow for the foreseeable decade. No one seems to even have a clue about whatever might come next. I don’t know if the change from purchasing downloads to streaming will be any more painful than the CD to download shift, but it involves vastly different licensing terms, business models and consumer behavior. Labels and publishers are starting to monetize Internet radio listening in a different way, but it’s going to take time for the industry to wrap its head around it.
NEKST: Internet radio is mainstream, but what about on-demand or subscription streaming?
Glenn Peoples: Subscription services like Spotify, Beats, Rhapsody and Rdio are still in the early days. Some, like Spotify and Rdio, also have free, ad-supported tiers. Deezer is supposed to launch in the US later this year and it has a free tier. There aren’t many companies in this space because it is expensive and difficult. Five years from now we’ll see what has risen to the top.
NEKST: Is the Access value proposition a winner for everyone?
Glenn Peoples: The consumer can listen to music legally for free in a number of ways and/or pay for greater access, but not all consumers agree that streaming is a good option. Perhaps it’s a generational thing. There might be a segment of the population that will only give up the convenience and certainty of downloads after a long fight. You don’t need an internet connection to play downloads, you own the files in perpetuity and can upload them to the cloud or a hard drive. I’m not sure that a subscription service can be all things to all people.
NEKST: Will Access cannibalize other formats?
Glenn Peoples: The sentiment around the record business is that last year’s decline in CD and digital sales was evidence of cannibalization from streaming. It makes sense that people will buy less if they stream more, especially if they are paying. Why do both?
NEKST: Perhaps streaming revenue made up for the loss in digital income last year, but it’s definitely not balancing out the overall loss of industry revenue against all formats which is down more than 50% over the past decade.
Glenn Peoples: I understand the attraction to comparing everything to 2000 which was the peak revenue year. But why not compare it to 1982 before the CD took off? We may never get back to the year 2000 when adjusted for inflation. It was a freakish event with heavy mass merchant activity to discount and sell CDs and the rise of the boy band. In sales most of your revenue comes up front. The first three months is the bulk of your revenue and downloads are good because you get paid quickly. You might get the same revenue from streaming, but you have to wait three or four years to recoup your investment. A label’s best interest will be to stream and sell music in whatever fashion works—pre-releases or autographed editions, etc. Hard core superfans will continue to want these things and they will be profitable.
NEKST: How does this longer time frame affect labels with and without deep catalogs?
Glenn Peoples: I’ve compared streaming with sales data. Sales is skewed toward the most popular songs, but streaming activity is dispersed over a wider set of songs. This could be a real concern for indies who don’t have catalog that would benefit from streaming services.
NEKST: Radio touts its personalities. Is that something Internet radio might adopt?
Glenn Peoples: Radio puts a happy face on it, but they must realize they are more vulnerable than they let on. A lot of people don’t care about the personalities. I doubt Pandora or Beats, for example, will go that route because SiriusXM already mixes music and personalities. iHeart radio offers personalized radio, plus streams from Clear Channel and partner company stations. Everyone will have to pick their focus and stick with it.
NEKST: Does it make sense to differentiate between licenses for webcasting and on-demand? Does the consumer care?
Glenn Peoples: I understand why the labels have separated these uses in licensing terms. Internet radio or webcasting, like Pandora, is supposed to be more like terrestrial radio which per listener generates very low revenue. When consumers get the ability choose songs, create catalogs and treat a licensed record collection as their own, on-demand like Spotify, they must pay more. It makes sense and eventually consumers will figure it out.
NEKST: Any thoughts on how the in-dash screen might change listening habits?
Glenn Peoples: I’ve seen cars with in-dash screens and apps that sync to your smart phone via bluetooth. This functionality will accelerate the shift of listening hours from broadcast radio to either ad supported Internet radio or paid subscription services. That’s ultimately a favorable shift for rights owners. The broadcast radio royalty looks bigger because there is a large audience, but if you break it down per each individual listener, then streaming is more valuable. Unfortunately, the transition will be slow because getting new equipment in your car is not like buying a new smartphone. Everybody is jockeying for position, doing partnerships with auto and stereo equipment manufacturers. SiriusXM is the master of working this automotive market and Pandora has also done well. Radio is great in-car because you push a button and you are done. Unfortunately, you can’t scroll through your on-demand music catalog while driving. So an on demand user experience dedicated to the car will need to be developed.
NEKST: What scale do the numbers have to reach for these businesses to work?
Glenn Peoples: One subscription service executive told me their goal was about 30 million customers. But that is still a long way off. All together including Pandora we are barely at 10 million U.S. subscribers (excluding satellite). Thirty million subscribers would surely kill download and CD purchases although the streaming royalties would become much more meaningful. So big numbers are possible in the long term, but you’ll gain and lose in the process.