Music streaming showdown looms

Stockholm

THIS week's all-star launch of US rapper Jay Z's music streaming service may not have caused Spotify's management to lose sleep - but analysts predict tough days ahead as tech giant Apple prepares to enter the fray.

The glitzy rebrand of the Tidal service which Jay Z bought from another Swedish firm Aspiro for US$56 million was billed as a new departure in streaming: higher-quality audio and owned by artists for artists, not record labels and tech companies.

After a day's silence, the news was welcomed by world leader Spotify, despite the barely veiled criticism of streaming companies like it from US superstars including Madonna and Alicia Keys at the New York launch.

Jonathan Forster, Spotify's vice- president for Europe, told AFP in Stockholm that his company welcomed the artists' initiative. "I like the rallying cry that artists should get involved . . . We're definitely not trying to keep anyone down," he said.

Spotify has come under fire from artists like British band Radiohead and US pop star Taylor Swift - who has shifted her catalogue to Tidal - protesting that Spotify does not pay artists their fair share.

Its founder Daniel Ek has hit back, saying it had paid out US$2 billion to artists and record labels since it launched in Sweden in 2008.

And music industry watchers have been quick to point out that the artists' beef is not with Spotify but with their own record labels.

"When it comes down to artists' payments, all streaming services play by the same rules dictated by the record labels," said Mark Mulligan at London-based music industry research firm Midia.

According to a study by French music industry trade group SNEP and accounting firm Ernst & Young, recording labels pocket 46 per cent of streaming subscription revenues, while artists, publishers and songwriters share 17 per cent, with the rest going to streaming providers and taxes.

With an estimated 60 million users in 58 countries, including 15 million who pay for ad-free music, Spotify dwarfs Tidal, which had just over half a million users in 31 countries when Jay Z bid for it in January. Spotify also costs half the price at US$9.99 compared to US$19.99 for Tidal.

Streaming - which allows users to play unlimited on-demand music online - has quickly shaken up the industry, narrowly edging out CD sales in revenues last year in the United States at US$1.87 billion. But the world No 1 in streaming is a minnow compared to Apple in overall music consumption. The US giant, which plans to launch its own service in the coming months following its US$3.2 billion purchase of Beats Music last year, has about 500 million iTunes users. "The Apple music service is the one I'd be running scared from if I was Spotify. At the very least, 50 per cent of Spotify subscribers also happen to be IOS (Apple) device users," said Midia's Mr Mulligan.

"There are endless things Apple can do . . . because it controls the device and the operating system and everything on it. You could suddenly find this music service on the front screen of your phone."

In a survey published by Midia this week, 62 per cent of music subscribers in the US said they were likely to sign up with the new service.

While Apple also has to deal with record labels - reportedly failing recently to secure lower licensing fees - Spotify arguably faces an even bigger challenge from YouTube, which offers free music videos on all devices with an Internet connection.

"As a market leader, you're probably more worried about where people are listening to music on the Internet. More people are listening via YouTube, which is owned by Google - the biggest Internet company of all," said Olle Aronsson, at the Swedish tech news site Breakit, adding that streaming is still in its infancy, representing under 15 per cent of US and UK music sales revenue.

But Spotify, under fire from record label bosses and artists to cut back on its own ad-supported free music - which it uses to attract paying clients - sees free music as the future.

"We've always thought that 'free' has been a huge part of music wherever you look - historically, you had (free music on) the radio and you went out and bought vinyl or cassettes," said Mr Forster, adding that illegal downloading has made charging for music difficult. AFP