Newsletter: 2014 Q4

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2014 Q4: $100B Music Market

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BEATS MUSIC! Yes, you've probably already heard that Apple purchased Jimmy Iovine and Dr Dre's Beats Electronics and Beats Music for a shocking $3.2 billion. Everyone's asking the perfunctory question, "What does this mean for my music?" SMG has got you covered as we are already working with distribution execs to provide a seamless ingestion process!

SOUND EXCHANGE! During the past decade, digital radio has grown into a substantial revenue source for artists and record labels. Data released by the RIAA reveals the rapid growth and significance of Sound Exchange distributions. Specifically, Sound Exchange payments represented 8.4 percent of the total U.S. music industry revenues in 2013. That number is up from 6.7 percent in 2012, and was only 1.1 percent as recently as 2008. Our SMG team works with SX on a daily basis, ensuring that your music is thoroughly formatted and protected from infringement & double claiming in over 35 countries around the world!

PANDORA! In the increasingly bitter dispute over royalties for online music between Pandora, ASCAP and music content owners, the current ruling was split down the middle. Pandora had wanted a lower rate and ASCAP wanted the rate to gradually increase over time. So, at this point in time, neither side got what it wanted. We'll keep you abreast of these ongoing digital broadcast rulings. More to come!

YOUTUBE! YouTube has expanded its reaches and is now monetizing music in Lithuania, Latvia and Estonia!

SPOTIFY! Spotify is now launching in Brazil (the eighth largest market in the world and the biggest South American market). which has thus far been dominated by streaming platforms Rdio and Deezer. Brazil will be Spotify's 57th market. Another bit of news is that Spotify has recently purchased music data platform The Echo Nest, which will help refine the streaming service's discovery and recommendation tools. This will generate more streaming revenues for our label partners!

RDIO! Rdio has also gone on a shopping spree and acquired the Indian music streaming service Dhingana.

MUVE MUSIC! Farewell, nice to know you, and adieu to Muve Music, which was axed following Cricket Wireless' re-launch under AT&T.

SAMSUNG! In more signs that streaming is the future, Samsung has just launched an ad-free radio streaming service by the name of Milk Music. Powered by Slacker Radio, Milk Music is currently only available in the U.S. and on Samsung Galaxy devices.

NOKIA! Nokia is bringing MixRadio and its catalogue of 30 million tracks to China, where more than 80% of internet users access the net through a mobile device. We're on it!

LAST FM! is closing down its radio streaming service, moving towards a replacement player that will source its music from YouTube, VEVO and Spotify. We'll keep you posted.

ANGHAMI! With 1.5 million users, the first and largest streaming service in the Middle East now hosts your music. Anghami includes an ad-supported free tier, a premium/offline subscription format and reduced offer allowing users to interchange 20 songs/month.

ROK! 7Digital-powered new mobile streaming service, ROK Mobile, launched this past Independence Day in the U.S., and you can rest assured our deal covers it. The service offers an unlimited data, voice, messaging and music bundle.

GUVERA! This Australian-based streaming service is launching a worldwide partnership with Lenovo, where it will be the featured service on the company's handsets and tablets.

SOUNDSCAN! Nielsen SoundScan says on-demand streaming services jumped an incredible 42% in the first half of 2014 compared to a year ago, soaring to 70.3 million streams.

APPLE! iTunes Radio will initially be available only in the United States. Countries in Western Europe are expected to follow. There is certainly potential for a much wider release. After all, iTunes Music Store is available in 119 countries.

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The $100 Billion Global Music Market

Streaming subscriptions are now the fastest-growing revenue source for the music industry. Streaming subscriptions jumped 51 percent in 2013 to $1.1 billion (out of a $15 billion total spent on music). Meanwhile, digital downloads slipped 2.1 percent. Also, per-user spending is higher with streaming services than for music downloads. A good customer spends $25 to $35 a year on music download purchases, but a subscriber spends $9 or more a month - or more than $100 a year. In addition, musicians earn a fraction of a cent for every stream, and although that is not a lot of money, it potentially works out to be much higher revenue than downloads over the course of time.

From YouTube, to Pandora, to Spotify, streaming music is piloting our listening habits in fascinating new ways. CDs and mp3s won't simply disappear (they're still vital parts of digital music's ecology), but faced with streaming, they feel destined to become the digital equivalents of once-dominant analog predecessors like vinyl records and cassettes.

Taking this into consideration, the mobile marketplace will play a very important role in how we all will earn money with our music in the very near future. Ericsson AB, the world's largest telecommunications network developer, reported during 2013 that it estimates more than 5.6 billion smartphones will exist by 2019!

The number of music consumers in the world will also be increasing significantly, primarily through smartphone expansion. Tom Silverman, the founder of Tommy Boy Records, argues that new consumers could easily amplify music into a $100 billion-a-year industry. "We need to stop looking at music as an economy of buyers and downloaders," he explains. "And instead look at it as an economy of subscribers and streamers."

The acronym BRIC consists of four nations (Brazil, Russia, India and China) deemed by financiers as massive states that have entered a new era of economic development during the last 25 years. "Those are territories have never had a significant music business at all," Silverman laments. "Considering their giant populations, they've been pathetic in terms of actual contributions to music revenues." This will change very soon. Those four giant populations equate to nearly 3 billion people, more than 40 percent of the world's total inhabitants. And all are conveniently buying into smartphones. According to the International Data Corporation, China is the world's second largest smartphone consumer and Brazil is 4th, although the latter may pass Japan during 2014. The same report indicated that India's smartphone market had grown by 229 percent from 2012 to 2013. Silverman believes the industry will actually "strike gold in Asia, Africa and South America, possibly up to 100 billion dollars' worth of music per year"!


Be Prepared for Global Growth

To grow the music business in a world of only 300 million music buyers, the industry is finally tapping into the potential of the 7.2 billion people living here on earth. Sugo Music Group's CEO, Stevan Pasero, states,"To do so, music must conveniently and seamlessly find its way into people's lives and lifestyles in a meaningful way: in cars, TV sets and various other places outside of their homes using mobile devices." To this point, Pasero believes that "industries around the world are on a fast track to connect our global music database into every connected device possible." These and other new revenue centers can grow the music business fivefold to tenfold in the next decade! Sugo Music Group's distribution services such as Streaming, Compilations and Publishing are essential when targeting these touch points and building your portfolio's potential.


Staying Ahead of the Curve

In decades past, cassette sales surpassed vinyl sales. Not long ago, compact disc sales supplanted cassettes. Recently, music downloads displaced compact discs. A few years from now, streaming revenues will dethrone downloads. It is inevitable. Consumer trends and lifestyle propensities will always trump, and the majority of music consumers are now migrating to subscription music streaming services.

Today, music content owners, such as performing artists, music libraries, licensors and record labels, are facing the biggest challenge: how to produce music products that will not only survive in this new medium, yet flourish. One important factor to note is that current download stores do not always have the built-in discovery provisions that digital radio streaming services offer. Search ability within most download stores is extremely limited. Yet with streaming services (that boast millions of tracks for users to browse and listen to), the game has somewhat changed. Streaming services are better equipped for "discoverability," and some along the way will include social media benefits as well. Currently, most streaming services make heavy use of algorithms to populate their recommendations or browse sections, limiting pure search ability of your music tracks, yet that will change in the near future. Our team here at Sugo is consistently integrating and modifying new systems and services on a regular basis, ensuring that your music, artwork and metadata is formatted and broadcasted for optimum results.


Counter Claims: Domestic and Foreign

The value of revenues from performance rights is increasing steadily, and shows no sign of declining. In the U.S., these rights are managed by SoundExchange, while overseas the options are more complex. What if your track is getting airplay in the UK or Europe, Australia, Japan or elsewhere? There are over 30 international performance rights organizations that collect on your master's sound performances (digital broadcasts). Sugo Music Group works closely with Sound Exchange and their international affiliates. Everyday we negotiate counter claims with all sorts of companies including major record labels. Some of these claims date back 10 or more years! Counter claiming is an essential part of protecting your catalog of masters. Please contact us if you are not already enrolled in our Performance Royalty Counter Claims program.


Thanks for your time and interest.
We're here to help get you plugged-in to your Complete Distribution Portfolio,
Stevan Pasero


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