Exclusivity is King

Andy Dunphy, Account Exec at FRUKT London, unpacks the shift in power towards streaming services and their resultant strategies.

Music consumption is a daily aspect of people’s life, whether it is commuting to work, exercising in the gym or chilling out in the flat, music is a constant.

The consumption of music has been around since the dawn of time, along with humanity’s evolution over the years. It started in dancehalls, entered the household and eventually became personal. Personal music consumption started with a user having access to a small number of tracks using a relatively immobile device such as a gramophone that only the rich could partake in. With continuous innovation within technology, more tracks became available and the device being used became ever mobile. We can see this in the development from turntables, to home stereos, boom boxes, Walkman and mp3. Now in 2016 users can listen to any track they fancy in the matter of seconds from anywhere in the world, using a combination of a high tech smartphone and a digital streaming application.

Music streaming apps are now the leading vehicle of digital music consumption, and in recent years, have grown to be a multi billion-dollar market. It began with a number of forward thinking first adapters such as Napster, YouTube and Spotify but with growing success more companies have joined in an attempt to milk the cash cow. Applications like Tidal, Apple Music and Google Play Music have emerged with a service - all loosely based around the same idea, but with subtle differences. These subtle differences are the means by which users select a listening platform.

All competitors offer the same key formula; subscribers pay a small monetary fee monthly for access to an endless stream of music. So if you were signed up to Spotify for the last two years why would you go to the trouble of transferring to one of the new music streaming providers?

The newbies realised this issue and understood they needed something to disrupt the streaming service market. If all music is available to license why not make some of it exclusive? So this is exactly what happened - providers such as Apple music teamed up with Dr. Dre for his eagerly awaited ‘Compton’ album for a two-week exclusive period. Tidal also did this by providing exclusive audio and visual exclusive from the likes of Jack White, Jay Z, and most notably Kanye West, with his recent album ‘Life of Pablo’. And some artists jumped ship; Taylor Swift removed her music from Spotify and (somewhat suspiciously) aligned herself in a new happy relationship with Apple Music.

Of course these artists have to be massive to draw in the crowds - but that’s what they’ve managed to do. Tidal saw a huge hike in subscribers following their exclusive rights to Kanye’s release. According to reports their user base more than doubled from 1 to 2.5 million. And for the first time ever, the platform ranked number 1 on the iOS App Store. 

Currently there’s little to no brand loyalty between services and users just want to access any music anytime - they don’t care if Apple, Amazon or Google provides it. So it seems the difference in purchase relies on what you are offering. What extras am I getting for my money? This is where exclusive content becomes key.

So what does this mean for the future? Well, we could see streaming services becoming the key players in the music industry (not that they aren’t already) but becoming huge, powerful forces like PlayStation and Xbox in the gaming industry. The console makers offered the tech and the games developers would create the final product, always making sure it worked with one of the two powerhouses. Often the games creators would pledge allegiance to just one console or the other. In fact Xbox, much like Tidal, have actively sourced exclusivity rights to certain games, such as huge franchises like Halo.

If this trend continues with streaming services it could potentially split the market, with artists having to align with one platform over another. This would see a continuing transfer of power from the record labels to the streamers. If they teamed up with artists to create music in-house they could then copyright that material and take it one step further to owned content, rather than just exclusive. It wouldn't be surprising if Jay Z, with his origins as Roc Nation label founder, was already sourcing artists for this kind of play.

The flaw with this analogy is that streaming services are subscription-based and PS4 is a household item that can’t be bought and sold as quickly and easily as cancelling your Spotify direct debit. Meaning users have the freedom to manoeuvre between platforms as and when they like.

Of course, Spotify could make the subscription process more committal, like a Sky broadband contract. But, with a relatively low barrier to entry in the industry and plenty of rabid competitors waiting around the corner offering super low prices, Spotify can’t risk selling a bad deal to potential newcomers.

The only way for a single provider to carve a dominant path is to gather a large amount of exclusive and owned content that clearly beats the small fish in the market.

Interestingly enough, only a couple of days ago did Kanye announce that he had made revisions to his album on Tidal. This move is pretty much a first of its kind, whereby albums have become a solely digital product open to constant iteration and development. This is comparable to a new game update or expansion pack that you can download off the PS4 network, as and when the game developers feel fit. This product development is far more modern model than the music industry has ever toyed with before.  Quickly being able to meet the consumers needs with the help of customer feedback.

Either way, all we can be sure of is that music consumption is becoming increasingly focused towards streaming, and the money will continue to accumulate in this area. As a result there will no doubt be increasingly aggressive strategies put in place to fight for power and market share. And as the fight continues, the important objective will be to build brand loyalty so that paying subscribers remain just that, once they’ve had their fill of Yeezy.

 

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