HITS Daily Double


TWO SIDES OF THE COIN: The music business is entering 2017 buoyed by greater optimism than at any time in the last decade and a half, thanks to a 2.5% year-over-year increase in total album-unit sales. But while streams rose to a staggering 38% of total album units sold, physical sales accounted for a surprising 52% of all album sales, according to BuzzAngle. Physical product still represents 27% of total album units sold, the aggregation of album sales and the album equivalents of streams and track downloads. No one expected the download sector to decline so dramatically or so rapidly; 2016 track sales were down a whopping 25% from the year before. But at the same time, no one expected the physical sector to show such ongoing strength. The indisputable fact is that today’s vibrant marketplace is bifurcated, with the streaming hordes on one side of the equation and those who continue to value ownership holding the fort on the other.

PRIMING THE PUMP: Negotiations have been taking place between Daniel Ek’s Spotify and the majors about a paid-tier-only option, and most believe it will happen. Spotify’s subscriber base has grown to 120m worldwide, 44.5m paid, 12m in the U.S. (compared to 9m for Apple Music). But the ad-supported free tier, with its 75.5m users, can’t be ignored, in part because it counts as much as the paid tier for chart positions—and that gives Spotify increased leverage with artists who want to be #1. Taylor Swift is presumably one of those artists, and the appearance on Spotify of her single with ZAYN a week after it became available on Apple Music strongly suggests that Taylor’s stance on free streaming is softening, and for good reason. She’s extremely hands-on in her career and aware of what makes the marketplace tick, and she undoubtedly realizes that in order to have a dominating #1 album, probably this fall, she has to make it available on both Spotify tiers. The fact that the track broke the single-day record on Spotify’s all-important Top Hits playlist evidences Taylor’s immense popularity. Despite her collaborative relationship with Apple, she’s far too savvy to pass up an opportunity like this one.

UMG and WMG are employing the strategy of sale pricing iTunes singles at $.69 for a limited time to increase airplay, because radio programmers continue to closely watch the iTunes charts (Sony has also done so, but far less frequently). This gambit has some hypothesizing about a possible parallel within Spotify when the service begins to offer the paid-tier only option. Specifically, will it be possible to move a single from the paid tier to the free tier in order supercharge the streaming number, and then move it back to premium again once the goal has been met? Streams measure how often people listen to particular songs at home and at work—a relatively new measuring stick, and an increasingly important one. Concurrently, the iTunes charts have assumed a decreasing value as streaming becomes the primary mode of experiencing music. At some point, one would expect the gatekeepers at radio to get the message and begin to study the biggest Spotify playlists as well as iTunes in their decision-making.

THE NUMBERS GAME: Lyor Cohen is under extreme pressure to keep his label, 300 Entertainment, from going belly- up, and that entails finding a capable replacement for himself. The issue is that Cohen funded the label not with private-equity money but with personal money from his deep-pocketed friends, and the members of Cohen’s billionaire boys’ club—including Google kingpin Eric Schmidt, Israeli-American hedge-fund billionaire Noam Gottesman, Bronfman brother-in-law Alex Zubillaga, Colombian tycoon Andres Santo Domingo and media investment bankers Aryeh Bourkoff and Ori Winitzer of LionTree—don’t want to write off the million or two apiece they invested in the startup. So they were not pleased when he abruptly flew the coop to become YouTube’s Global Head of Music—in essence sticking it to his investors. Thus, Cohen finds himself in a familiar situation—scrambling to rebuild another bridge he’s burned. And this time he won’t be able to fast-talk his way out of it—not with friends like these.

A 12/20 MBW report named Republic EVP Rob Stevenson as the replacement Cohen has targeted. The chatter ramped up two weeks ago, and it’s now believed that Stevenson’s current deal will expire soon. The money he’s being offered to join 300 may be extra-large, but it could be a career-ending move for Stevenson, who gained prominence after signing The Killers and The Bravery while working under Cohen at IDJ. Is Stevenson savvy enough to just use the rumored offer as leverage to get a new deal at the house the Lipman brothers built? If Stevenson does decide to take the top job at 300, will his name be added to the long list of Cohen’s betrayals?

NAMES IN THE RUMOR MILL: Edgar Berger, Michele Anthony, Fred Davis, Marc Cimino, Allison Hagendorf and Johnny Barbis.