Music Industry Predicts a Major ‘Wake-Up Call’ on Streaming

BMG says its artists receive more than 75% of music streaming royalties. Why are other artists getting 0%?

In the past few years, all three major music labels have posted higher financials thanks to one magic word: streaming. Revenue from music streaming has pushed major labels to their highest revenues in years. It’s off the charts!

So why exactly are artists still receiving such tiny royalty payments?

According to Hartwig Masuch, CEO of BMG, the reason may lie behind a “complex” excuse major labels use.

Streaming has provided a strong growth boost after sharp declines due to piracy and declining CD sales. Just two months ago, in Warner Music Group’s Q1 financials, CEO Steve Cooper proudly says:

“Our strong momentum continues with excellent first-quarter results including 11% constant-currency revenue growth on top of 11% growth in the prior-year quarter. While streaming continues to drive industry growth, we are outperforming the market thanks to extraordinary music from our artists coupled with first-class execution from our operators around the world.”

However, the BMG CEO warned that as major labels continue to report higher financials thanks to streaming, artists will soon demand a greater cut of royalty revenues. The simple reason is that the cost base can’t reasonably be justified.

Speaking with the Financial Times, Masuch said,

“I believe there will be some wake-up calls. I am very cynical about the view that the good days have returned. Every renegotiation [with an artist] will cut down massively on the margin.”

Artists have long complained about poor payouts from streaming platforms, including Spotify and YouTube. Citing one example, Chris Difford co-wrote hits like ‘Up the Junction’ and ‘Tempted’ with his band Squeeze. Yet, he has only received £1.50 ($1.87) for every 6,000 streams.

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YouTube TV’s DVR Has a Catch

The cloud DVR that comes with YouTube TV’s new OTT TV service comes with unlimited storage, but is apparently limited when it comes to letting subscribers fast-forward through ads in recorded programs.

YouTube confirmed to The Wall Street Journal that subscribers to the new offering, now available in five markets for $35 per month, will be forced to watch commercials in some popular shows recorded to the cloud DVR – a restriction that is not present in traditional local DVRs or cloud DVR offerings from Comcast or Sling TV, the Dish Network-owned virtual MVPD service.

Due to a “tangle of contracts” YouTube has with media giants such as Disney, 21st Century Fox and NBCUniversal, if a new TV episode is available via VOD (which disables fast-forwarding for ads), customers won’t have access to a cloud DVR-recorded version that would support ad-skipping, the paper said, noting that the ad-skipping restriction doesn’t factor in if a VOD version of a show doesn’t exist.

YouTube TV makes no mention of this limitation in its FAQ about its cloud DVR, which reads:
“You can record as many programs as you want at the same time, without ever running out of storage space. We’ll even keep each recording for 9 months. Stream from your library anywhere in the U.S.”
The WSJ said this restriction appears to be a special case in part because some believe YouTube “hasn’t done enough to battle pirated content appearing on its platform.”

YouTube TV also has not detailed the architecture of its cloud DVR, and whether its special rights arrangements with some programmers means it can let multiple subscribers access the same copy for certain programs, or if its system makes individual copies of all program recording requests.

YouTube has been asked for further comment and clarification on this point.
Though it’s extremely inefficient from a storage standpoint, network and cloud-based DVR services from Comcast, Altice (in the former Cablevision System properties) and others make individual copies of all recorded programs to ensure that they stay within the bounds of copyright rules.

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YouTube Gains On Netflix In OTT

Nowadays when people talk about over-the-top Internet-based TV, most are probably still referring to Netflix, the video-on-demand service so ubiquitous it gave rise to its own leisure activity/euphemism, “Netflix & chill.” And while Netflix still rules the roost, its main social media competitor is catching up fast, according to new data from comScore, which shows OTT viewers watching YouTube (as well as other OTT services) more often.

Overall households with access to OTT tend to be heavy users of the service, comScore found: among the 49 million U.S. homes that used at least one OTT service in December 2016, average consumption was 2.2 hours of OTT video per day, with OTT viewing sessions on an average 19 days out of the month.

Turning to specific providers, Netflix reached 75% of homes using OTT in December 2016, and was viewed on 12 days per month on average. Meanwhile YouTube reached 53% of OTT households, which viewed it on eight days per month. Further down the totem pole, Amazon Video reached 33% of OTT households and was viewed six days on average.

Interestingly, some smaller competitors rack up even more robust engagement stats. Thus, while Hulu is used by “just” 17% of OTT households, it exceeds Amazon and YouTube with an average of nine days of viewing per month. And Sling TV, with single-digit penetration of OTT households, generates 11 viewing days and 47 hours of viewing per month, ahead of Netflix with 28 hours.

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The Times of London sees success in digital editions approach

The Times is enjoying a mobile windfall.

Users of the British newspaper’s paid-for mobile app are up 30 percent since this time last year, and people are viewing three times as many pages per visit as they were a year ago. The average number of pageviews on the app is up 300 percent since last March, and tablet traffic hasn’t been cannibalized in the process, according to the publisher.

Those rises all stem from a decision The Times took a year ago to push away from the trap of commoditized online news and focus on publishing three updates to the digital editions a day: at 9 a.m., 12 p.m. and 5 p.m. It wasn’t just the publishing schedule that was core to the change; it was also the refocused design. Everything was designed to look good on mobile and give a simplified user experience.

“At the time, some people thought we were crazy,” said The Times’ head of digital Alan Hunter. “But it’s working. Our guiding principles when we started were to be reader-first and mobile-first. I had those things written on a massive whiteboard in the boardroom. We wanted to do what was good for them, not what media commentators thought we should. And it’s working.”

Although Hunter wouldn’t reveal specific numbers, he said that the 30 percent lift was from a “reasonably high” base number, while over the last year tablet growth has been smaller than smartphone.

The articles themselves on the smartphone app are no different from the website, where a few hundred pieces are published a day. Comment and analysis are the formats that do well, along with exclusive scoops. But the focus on the design and its simplicity was core to driving engagement.

It’s been a year of radical change for The Times. The website, which has also seen a 20 percent uptick in its audience in the last year, introduced registered access last summer and is viewed as a funnel for the subscription products. The most engaged readers and subscribers are on the smartphone and tablet apps. “People read on the site, but that’s where they will be introduced to our journalism,” added Hunter.

There are plans to grow that too. Registered users can read two articles; to read a third users must subscribe. Last month, the count was around 550,000 sign-ups and climbing steadily. Ultimately, the goal is to use the registered access as a shop window to then convert people into paying subscribers and app users.

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Meet ‘M”: Facebook Messenger Digital Assistant

Facebook on Thursday launched its digital assistant named “M” for US users of its Messenger application, ramping up the social network’s efforts in artificial intelligence.

For users of the messaging platform, M will pop up and suggest “helpful actions” in the chat window.

The move is seen as the first step in a broader launch of the digital assistant to compete against services from Google, Amazon, Microsoft, Apple and Samsung, which is launching its new assistant with its newest smartphone.

M uses artificial intelligence and “suggests relevant actions to help manage conversations or help get things done,” Facebook product managers Laurent Landowski and Kemal El Moujahid said in a blog post.

“We are bringing the power of M’s AI technology to support and enhance the Messenger experience and make it more useful, personal and seamless.”

With M, Facebook Messenger users can simplify tasks such as sending money to friends, sharing location or obtaining a ride-share.

Facebook, which has its own artificial intelligence research lab, announced M in 2015 as an experiment, and the expansion to Messenger is another step in the social network’s broader AI goals.

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YouTube Sets Limits on Which Partner Channels Can Show Ads

Doing all it can to stop an advertiser exodus and convince brands that they’re safe on its platform, YouTube announced changes to which channels in the YouTube Partner Program can show and profit from ads. Under rules announced yesterday, partner channels need to accumulate 10,000 lifetime views to quality for ads, YouTube says

“This new threshold gives us enough information to determine the validity of a channel. It also allows us to confirm if a channel is following our community guidelines and advertiser policies,” wrote Ariel Bardin, vice president of product management for YouTube, in a blog post.

Because automation isn’t enough to weed out harmful channels, YouTube will implement a review process in a few weeks where a human will verify that channels with qualifying views are consistent with the company’s ad policies. YouTube has learned that it can’t trust flagging problem channels to its community.

YouTube’s troubles began in February when The Times of London reported that ads for major brands were appearing on videos from hate sites. That led to over 250 advertisers—including Walmart, Starbucks, Pepsi, General Motors, Johnson & Johnson, Dish, Verizon, and AT&T—boycotting the site.

So far, reaction from the industry has been optimistic.

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YouTube TV debuts in 5 US markets

YouTube TV is especially interesting for marketers because it’s backed by Google. While Google has the power to potentially turn YouTube TV into a strong competitor given its budget, bent toward innovation and massive technology infrastructure, the company could also demand higher advertising rates as the service picks up traction.

Alphabet, Google’s parent company, has put a sharper focus on YouTube as consumers demand more video content and turn more frequently to their mobile devices to view it. On a recent Alphabet earnings call, analysts suggested that YouTube could act as a sort of heir apparent to Google’s search advertising business, which has been its key revenue driver for years.

However, Google is also currently navigating tough waters with YouTube, as major U.S. brand marketers including Verizon, AT&T and PepsiCo freeze their spend on the platform over issues with ads appearing next to offensive content, including terrorism- and hate speech-related videos. While YouTube TV is a different beast altogether, strictly streaming TV-like offerings advertisers would deem “safe,” it launches in the midst of a particularly bad PR moment, which might hurt its early legs.

Overall, digital media continues to make inroads into the territory typically owned by linear TV with skinny bundles and over-the-top (OTT) services like YouTube’s. The quickly expanding swath of digital TV-like alternatives seek to accommodate a growing trend toward cord-cutting, but it’s also possible the space is getting overcrowded before it ever truly takes off. Certainly, the sheer number of current offerings is likely to be confusing for consumers.

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As Video Evolves, Media Companies Scramble to Adapt

TEN, Condé Nast Entertainment and Time Inc. rethink format and distribution strategies.

Pardon the pun, but video is a medium that keeps on moving. It’s not only the channel with the highest audience growth for magazine media brands (up 44% in unique viewers YoY, per the February 2017 Magazine Media 360º Brand Audience Report) but its formats remain in flux. In the last year, we’ve seen the impulsive Facebook fall in (and sometimes out) of love with distributed video clips, live streaming and now long-form media with ad inserts 20-seconds into play. Meanwhile, Instagram, Twitter and Snapchat have gone all in on their own streaming formats. On connected TV sets, OTT has been the growth catalyst for lean-back viewing as prime-time viewing shrinks. But how are well-established magazine branded video programs maintaining business and editorial strategies as many of the major distribution points morph at will? To find out we checked in with TEN: The Enthusiast Network, Condé Nast Entertainment and Time Inc.’s People Entertainment Weekly Network (PEN) to learn how they’re adjusting and maintaining focus on growth in the face of relentless change.

While most players followed Facebook’s ambition for live video early in the year; TEN, PEN and CNE look at their video strategy holistically. “The real question is whether we can justify the investment and satisfy user experience while making it a business,” says Scott Bailey, president, automotive division at TEN. Across its auto properties, TEN launches north of 45 live programs (more than 1,000 minutes) each month. While it was fueled initially by Facebook’s seed funding, Bailey is exploring revenue models for the format. “It’s changed how we go to market,” he says. In addition to long-standing auto event coverage and new car unveils, the live push has inspired content innovation, like renovating a Chevy live on air over the duration of a week.

While TEN often spiffs up the raw live content in postproduction to create new franchises, Bailey notes a certain economy to it all, in that users don’t expect the same fit and finish from live feeds. “When there’s a two-person production team with an Osmo camera you can produce live video.” And yet these broadcasts can now be amortized across Facebook, YouTube and TEN’s O&Os site, as well as its paid Motor Trend On Demand network. Facebook has moved from testing to deploying ad inserts.

Conversely, PEN’s overall strategy remains focused on its cross-platform video-on-demand site, mobile, as well as OTT apps, which just celebrated one million downloads. The full content for its programming resides solely within PEN, but lighter clips and teasers get widely distributed across the social video ecosystem. Red carpet events and TV episode recaps have been effective real-time streams. And while the emphasis has been less about live feeds, now even OTT platform partners Apple and Roku are “very interested in live programming,” says Susanne Mei, general manager, PEN. Yet, the PEN apps have proven video doesn’t have to be live to feel live. The basic design of the app drops people into a linear playback experience from which they can opt into on-demand choices. “We have seen a lot of linear usage,” Mei says. People often want to lean back and “not be confronted with not knowing what to watch.”

Playing the Quality Card

More polished, longer and linear experiences may eventually trump the live streaming fetish of early 2016. “The jury is out on whether these lower production value live streams are really resonating with audiences,” says CNE General Manager Joy Marcus. The format can be very compelling when live events are well suited for social activation—like commenting on fashion on the red carpet. CNE created a live studio on budget, she says, and the company learned a lot from being one of Facebook’s top paid partners on live. But Marcus wants to keep CNE’s focus on whether these opportunities really add up to a good user experience rather than just feeding the live beast. “I think this incarnation of live as low-res, turning on the camera and talking, might not be its final incarnation,” she says.

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99% of Young Adults Multitask While Viewing

Americans are streaming a lot of TV, but how much of it are they really seeing? According to the 11th edition of the Deloitte Digital Democracy Survey, 73 percent of American consumers binge watch TV shows. Young adults are the strongest bingers, averaging six episodes and five hours per viewing session. They’re not simply glued to the screen during that couch time: 99 percent of millennials and generation Z viewers are multitasking by texting, browsing, using social networks, reading emails, and shopping online. How they can follow the twists of complex streaming series is a mystery.

In the latest high water mark for streaming services, Deloitte finds that 49 percent of U.S. consumers subscribe to a paid OTT service, while 74 percent subscribe to pay TV. For younger adults, nearly 60 percent subscribe to a paid streaming service. However, viewers spend 40 percent of their time streaming from free services and 35 percent of their time streaming from paid services.

The hardware used for streaming video varies by age: Millennial and generation Z viewers spend roughly half their viewing time watching on something other than a TV. Generation X spends 60 percent of their viewing time with a TV and baby boomers spend over 80 percent.

The reason pay TV subscription rates are as high as they are is largely due to bundled offerings. Deloitte finds 66 percent of pay TV subscribers keep their service because it’s bundled with internet and they’d pay more without it.

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Roku Moves From Audience Measurement To Demographic Guarantees

Two years after Roku starting working with Nielsen on audience measurement it’s become the first OTT platform to offer demographic guarantees based on Nielsen Digital Ad Ratings. “It’s a huge mile marker for our industry,” Jim Lombard, Head of Advertising Sales, says in this interview today with Beet.TV during a break at the 2017 Transformation conference of the 4A’s.

The advancement of Roku’s video ad platform capabilities helps advertisers reach audiences on its 300-plus channels that are drifting away from linear television while using detailed demographic metrics comparable to linear TV. “It allows for advertisers to transact the same way as they would with measurements in the linear space in the OTT space,” says Lombard.

Two years ago, Roku announced that it was working with Nielsen on audience measurement deals. The next logical step was audience guarantees, particularly since they are becoming more popular with linear TV buys.

“Essentially, what we’ve done is Roku registration data is matched with a third-party vendor,” Lombard explains. “The metadata is passed through in the ad call, and then Nielsen uses their measurement tool to be able to verify age and demo against that ad call.”

One of the ways Roku has differentiated itself is that its technology enables its channel partners to do targeting, measurement and interactivity. The company also has its own sales team that sells and monetizes inventory across more than 300 channels.

It’s also the only platform that has both comScore and Nielsen, according to Lombard.

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