DSP investment in podcasts could be bad news for the music industry and why DSPs need SEO
We live in uncertain times...
Over the past 18 months, Spotify has acquired Parcast, Gimlet and Joe Rogan Podcasts in deals worth over $200 million. Michelle Obama has also been handed a podcast. Just as Netflix aims to move against PayTV and news channels, Spotify aims to become the No. 1 destination for audio content and ultimately, to battle radio.
Currently, its share of the podcast market has risen beyond 15% but it is still under 30% and some way off Apple’s commanding lead - over 60% of the podcast market.
In the same vein, Amazon who has been gearing to go beyond Apple as beyond Spotify’s major competitor in the audio business with lower subscription fees. It has also launched an offensive for the podcast market.
Why are podcasts so attractive to streaming platforms?
First off, the audio business will carry incredible power in the future because of ease of consumption - compared to video. Secondly, it’s another stream of income for Spotify as it seeks to be cash flow positive.
Thirdly, podcasts are a non-royalty bearing. As Doug Davis tweeted on May 21, 2020, this means, “The more time spent on non-royalty-bearing content the less subscription revenue Spotify shares with the music business and the more profit it makes.”
This is bad news for the music industry
This relates to the market share model that Spotify currently operates. This model means Spotify pays artists based on their market share over a particular period of time.
The market share model operates on two things;
Total amount generated from subscription over a period of time goes into a figurative pool.
Money is then disseminated to artists based on the total amount of streams [aka market share] they were able to generate during that period.
In essence, acts like Drake and Taylor Swift that usually have loads of streams stand to make the highest revenue regardless of what a small artist uniquely generates from his streams over that period.
For example, if Motolani Alake, a Spotify subscriber spent his entire year listening to Omah Lay, it would not matter. Drake - the most streamed artist for that period - still gets paid most of Motolani’s subscription and Omah Lay gets pennies or even nothing. The reason is simple; Drake has the higher market share.
This is why artists have been clamouring for a user-centric payment system that pays artists based on the percentage of a user’s plays.
The user-centric payment system operates on the following models;
Money will not go into a ‘figurative pool’ unlike in the market share model.
Money will be determined by what a subscriber consumes during the period in review and the percentage everything he consumed against each other.
To determine what goes to who, the DSP will then pay artists based on the % of how much a subscriber plays them in a month - or whatever the time frame is.
Under this model, if Motolani Alake, a Spotify user pays N900 to Spotify in a month, his subscription will go to the artists he listened to during that month. If he only listens to Omah Lay and Drake during that month, his subscription will be split between them based on the amount of time he spent listening to both artists.
Here is why this model favours DSPs
At this time, only Deezer uses a user-centric payment system. Everybody else uses a market share model. Remember, money collected in a market share system goes into a figurative pool and is then disseminated based on market share.
In this instance and like artists, Spotify itself has then become one of the people who are due some form of payment. The reason for this; Spotify paid Joe Rogan $100 million to bring his successful The Joe Rogan Experience to its platform for a number of years. Throughout that period, Spotify will not pay Rogan any royalties.
Money that comes from Rogan’s market share on Spotify can and will be recouped by Spotify because like music, podcasts are simply consumed on Spotify - not on any unique interface.
Guess what, Spotify has other products like The Joe Rogan Experience and those too could rank as high as artist accounts. That means more podcasts could have high market share during Spotify’s period in review and Spotify will also recoup the money due from the market share of those podcasts/shows.
The result of that means that Spotify now has a right to dip hands in the ‘figurative pool’ of funds when funds are meant to be disseminated. This could then even reduce the funds dished out to the biggest artists because podcasts generate loyalty.
So, if Drake was earning 2% of the pool before, his market share could be reduced if Spotify’s podcasts have a huge market share and if subscribers don’t increase. And even if subscribers increase, Drake might not earn what he should have earned from such an increase because five unique new podcasts might have also boosted their market share.
The problem for the music industry
The music industry has only started rebounding from the effects of the dwindle in revenues, which started in the mid-2000s. The 90’s revenue highs of $21 billion was followed up by the plummet to the low $6 billion in 2017.
In March 2020, Verge reported that streaming accounted for 80% of revenue in the music industry in September 2019.
Earlier in the year, Pulse Nigeria reported that, “In the year ending June 2019, the Recording Industry Association of America reported that music industry revenue hit $11.1 billion - up 13% on the previous year. While streaming slowed down, global music industry revenue hit $20.2 billion dollars in 2019 - this is money artists and labels made.”
We face uncertain times ahead.
The solution
Streaming platforms should treat podcast revenue and music revenue as unique and different.
Streaming platforms need better SEO
As a Nigerian, when you search for a random song on Google, you would get links to illegal download sites - not even Mdundo. As much as a core problem confronting the growth of streaming in Nigeria is as regards affordability of data and subscription, some of these streaming platforms are not putting the content in people’s faces.
Sometimes, the nudge a human being needs is the illusion of availability. A lot of Nigerians don’t have the problem of affordability. Yet, they don’t pay to stream music. Streaming platforms need to work on their Search Engine Optimization [SEO]. This will help them come up in search results and rank high - not illegal download sites.
Importantly, they shouldn’t just provide links to the primary source of the song, they should be optimized to a level where that particular searched content comes up in all the playlists and albums that houses it it. This will help push the illegal sites back.
Already, Audiomack and Netflix are doing great on this end. They still don’t rank as high, but they are better than the rest. Now, this might require better UX for their web-based platforms and they need to work on it. YouTube Music has a fantastic web-based UX, by the way.
Earlier today, November 8, 2020, Motolani Alake - who is also one-half of Listen Africa - took to his Twitter account to write this thread;
#ListenAfricaExtra - Here are additional bits of content from the past week;
Watch new Facts Only with Motolani Alake as he reviews Made In Lagos by Olamide;
Excel Joab of Boombuzz speaks with Blaqbonez;
This week, Motolani Alake had a two part conversation with Nigerian legend, Olamide.
Motolani Alake speaks with Nigerian star and new mother, Simi.
Motolani Alake speaks with Oluwasola Obagbemi, the Corporate Communications Manager of Anglophone West Africa at Facebook about Facebook’s entrance into Nigeria in H2 2020.
You can catch up with Motolani Alake’s work this week HERE.
Fu’ad Lawal, Editor-In-Chief at Zikoko starts a newsletter, Vistanium.
Veteran Culture Journalist, Ayomide Tayo launched the first installment of his newsletter, Naija Times.You can also get his podcast, 234 Essential HERE.
Veteran Journalist and Tech professional, Chiagoziem Onyekwena also manages GetDotAfrica, a weekly newsletter on happenings in African Tech.
Davido Adeleke, Head of Communication at Eko Atlantic started Communique, a newsletter.
Veteran Nigerian Journalist and Director of Marketing at OPay, Osagie Alonge is back with a new podcast titled, A Music In Time.
You can catch up with veteran Nigerian Journalist, Jide Taiwo’s newsletter History Made for some mind-blowing stories about Nigerian music.
AFRO&B
Omah Lay - Do Not Disturb
Oxlade - DKT
Rowlene ft Nonso Amadi - Hypnotise
Jasen Blu - Enough
Andy Bumuntu - kk 509 St
Afropop
Deshinoor - Pemi
Bad Boy Timz - Have Fun
Bebi Phillip - Prophetie
Blaq Diamond - Woza My Love
Olamide - Do Better
Rap
Worlasi and Drvmroll featuring Lil Shaker, KoJo Cue, E.L and Feli Funa - Hibernate
AKA - Casino
Teeto Ceemos featuring Show Dem Camp and April Maey - Ride With Me
BurningForestBoy - Baptized In The Moon
Drayko featuring Eeeskay and Zilla Oaks - Zoom
Other
Psycho YP and Azanti - Caro
Bman - Ballistic
Lithe - Pessimist
Kid Fonque & D-Malice (Feat. Ruby White) Life Is Real (Punk Mbedzi Remix)
King Sasha - Biri Biri
You can get our playlist on all five streaming platforms HERE.
Contact us:
Follow us on Twitter: @ListenAfrica_
Follow us on Instagram: @ListenAfrica
Shoot us an email for playlist inclusion or a feature: curatealisten@gmail.com
Until next week, guys…