thereport ISSUE 352 | 15 OCTOBER 2014

Apple: where next?

Contents06 Beyond music: Talking TV at MIPCOM

07 Pinboard: Stats, deals, startups and more 09 Country profile: Russia

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Apple hAs, ArguAbly, not successfully innovAted in music for over A decAde. ping wAs A disAster, itunes rAdio still limps behind pAndorA And it hAd to buy in A subscription streAming service rAther thAn build its own. only recently did it Attempt to disrupt the Album mArket by giving AwAy u2’s new Album for free but the public bAcklAsh suggests it dAngerously misreAd the mArket. the downloAd business thAt it kickstArted in 2003 And still dominAtes is now running out of roAd with sAles flAttening in some mArkets And fAlling shArply in others. with All of thAt in mind And with things hAving moved on so swiftly in the pAst decAde, we Ask people from different pArts of the industry whAt Apple needs to do to stAy relevAnt And to ensure it remAins the centre of grAvity for the digitAl music business for Another decAde or more.

T he new battleground for streaming services is not catalogue size as they all have pretty much the same enormous catalogues –

give or take the odd exclusive like Metallica. It’s not on pricing either as they have all settled around $9.99/£9.99/€9.99 a month.

The lawyerChris Castle, Christian l Castle attorneys (Texas)It has to figure out what it is going to do with Beats, iTunes Radio and the streaming reality. It has a good brand with artists for pretty much everything it does and it hasn’t had to deal with the Pandora and Spotify hate element. But for the first time, I think, it is about to cross the Rubicon.

Their rates on downloads have only gone up. People, generally, speaking, feel good about iTunes. They don’t feel good about streaming services. Apple has to be concerned that when it starts to look more like a streaming service that it doesn’t draw, to its download business, a lot of the ire that is directed at streaming.

There is a rumour it is going to negotiate downward for its streaming rates. I can’t imagine that it would cut those prices [for subscriptions] and not cut royalties. That is going to be a shocker for everybody. You have to use scientific notation to express what your royalty rate is today and you want to make it even less? I don’t think that is going to fly. It has to be careful with that but it really has an opportunity to combine these two businesses [downloads and streaming] that would be innovation-

suitable to the Apple brand in a way that no one else has done. That is the biggest opportunity it has and it is in a unique position to do so.

Transitioning from downloads to streams is the challenge – but Apple has the pieces to do it. It would be an extraordinary waste if it abandoned iTunes, which it clearly is not inclined to do. I personally don’t believe that [streaming] is ever going to land. It’s like Millerism and the psychological phenomenon of The Great Disappointment. That is what is starting to happen with streaming. There is almost a religion about streaming and how it’s the future – but it’s not paying off for anybody except the people who are promoting the idea. We are beginning to experience The Great Disappointment of streaming in the artist community.

Apple has a chance to avoid all that and find a way to integrate streaming into its download business. There will be some fall off. It has got some pieces that are interesting and that it is

in complete control of as well as having the device base to do it with. Why not try that? It doesn’t have to be an either/or. It can be both.

Beats Music is compatible with Android and Apple should take advantage of that to grow its market ahead of Google. It’s a huge opportunity. It has cornered the download business – which is still a real business. It has cornered a good chunk of the device business and now they have a way to get onto all the other devices that they don’t control through the Beats acquisition. Rather than just stream to Android devices, why wouldn’t Apple try and find a way to sell downloads into that ecosystem as well? It’s not going to be trivial to accomplish, but God knows the company could do it.

The one thing Apple, and everyone else, could do is open up the one piece of data that every artist could use more than any heat map – namely to make it easy for fans to sign up directly to an artist email list. Beside the ‘buy’ button they could have an ‘email sign up’ button if you are a fan. Even if you get just 1% of people signing up, those would be real email addresses

COVER FEATURE Apple: where next?COVER FEATURE

that you could really do stuff with. If they did that one thing, that would be a huge differentiator for them. It’s no skin off Apple’s nose and hardly costs anything. And if the artist doesn’t want to populate it with a link then shame on them. Let them have it for free.

The artists drive business to iTunes. Apple doesn’t sell tracks by working them at radio and its ass isn’t in the studio [making albums] and getting haemorrhoids. The artists are doing that so Apple should do them a favour and let them have the email addresses – if the customers want to hand them over. Let the artists have the email addresses of the business it drives to iTunes. It seems only fair to me.

The markeTer lucy Blair, motive UnknownI have never done pre-releases on iTunes and maybe that is because I am not working on artists who are big enough! Jay Z and Beyoncé are the kind of acts who do that because they have such a huge audience and they don’t need to do all the pre-marketing stuff. Often iTunes wouldn’t be interested in promoting [small acts].

Because I have worked with dance acts

mainly until now, iTunes has never really figured as part of a pre-release strategy. Dance music has tended to do more stuff with SoundCloud and that is slowly switching to Spotify.

For some dance labels, Spotify is coming up really fast for them. Then there are stores like Beatport and Bleep, with Juno and Amazon after that.

iTunes doesn’t really figure. It is more important for dance artists to have tracks on SoundCloud – that’s a huge part of the marketing strategy as it has such a large dance music community. Dance music fans are more likely to want to go to Beatport or stream the track on SoundCloud – or even Spotify – than necessarily download from iTunes.

You don’t hear about many dance acts doing stuff with iTunes. They tend to think about what they can do with their own

channels as they have such an engaged audience there anyway. Because EDM is so big in the US, the time for iTunes to embrace dance is now. It’s also a perfect opportunity for whatever it is its going to do with streaming and Beats. If it is going to keep the curation and editorial, there is a huge opportunity to create more pre-release marketing strategies and

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ISSUE 35215.10.14 COVER FEATURE partnerships with dance labels.

Instant grats are the [hot] thing going on at the minute. Everyone is doing it and every time an album goes out on pre-order there is an instant grat. That seems to be the main part of the iTunes marketing. I am not sure what impact that has on marketing now as everyone is doing them and has been for a while. It is a good thing to get

people listening to music before the album comes out, but I am not sure it is having the same impact now. It’s just becoming standard industry practice.

The TeCh wriTerandrew Orlowski, The registerApple is believed to be putting in place something akin to a hallmark for music, such as ‘guaranteed quality’, in which a new digital format plays a part. If this is accurate, it would tell us a few interesting few things: that Apple believes that music can enhance the quality of Apple’s gear; that it believes that music has value which is not being tapped today; and that Apple can exploit this value gap to enhance the music experience for its customers.

This promises to change the landscape in some interesting ways. It offers the industry a way out of the shaky basket in which it’s put its eggs, and which now appears to have fatal consequences for music investment, production and streaming.

But it also begs a few questions for the industry.

Why aren’t open end-to-end industry standards being developed that encompass the entire chain from production to consumption? Without open standards, Apple will own this. The music industry should ask itself this: why is a consumer electronics

company doing this and not us?I look forward, more in hope than

expectation, that the industry can anticipate change rather than simply react to it.

The disTriBUTOr/ arTisT managerscott Cohen, founder of The Orchard and manager of The raveonettes, The dum dum girls, The deer Tracks, Queen kwong and BleechThe Beats acquisition is really interesting. I don’t think of it as necessarily being about the music subscription service. Apple could have done that itself. As we get into the world of wearable technology, what are headphones if not wearables? We know that wearables can do a lot more both in terms of what the user puts in but also what we get out. There is a huge opportunity around that.

Where Apple has done really well is – and this is where companies like Samsung and Nokia have stumbled – is that when anyone buys anything [on iTunes] they get registered and it is connected to their credit card. Nokia tried it with Comes With Music but it’s a much easier proposition with, hypothetically, “Beats Comes With Music”. You have headphones, shouldn’t you have music? That is a much easier sell than Nokia Comes With Music.

By targeting someone who buys headphones, which are wearable devices, you can capture lots of data – but you can also make that easy assumption that the buyer is a music fan. There is your target

service. On a more sophisticated level, the business model is everything. In a world of so many people accessing so much media in so many different ways, there can’t be a single business model to fit all. There can’t even be two or three. It’s got to be a truly blended world where different people on different devices and with different economic circumstances will consume media different and pay for it differently. It is situational, device-specific and age-specific. There are a lot of intangibles there. So it’s not about the download model or the streaming model. It’s about all of them. It has to have business models that reflect that.

The develOpersyd lawrence, we make awesome shThe biggest recent push [by Apple] has been around things like HealthKit and the integration of widgets such as the Today bar. But if you want your app with HealthKit, it can’t work on devices that don’t support HealthKit. That’s a bit bullshit. It’s a bit of a surprise as well. Will they fit it in the next iOS update? I don’t think so. I don’t think they care.

I think Apple has lost its way a little bit as a company as a whole. They are no longer thinking about some of the stuff they were thinking about.

My biggest hope is that it releases some form of developer platform for Apple TV so that you can make apps for the device that sits in your lounge. The Apple Watch stuff is pretty interesting, but I am not sure what music-based use cases there are for it as yet

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ISSUE 35215.10.14 COVER FEATURE except for just

being able to control your playback on your phone from your watch.

When Apple makes

its big announcements at WWDC, it has sessions there for a more in-depth look [at the OS]. But there is a lot of trial and error from playing around with stuff – working out how to crowbar things into new ways of doing stuff. You always have to keep on top of any new technological advance.

The biggest problem with Android is the UI – how confusing it is and how hard it is to use it. But the new version, Android L, looks a lot more refined. When that comes out it will be interesting to see if people move over to Android.

The approval process on Android is non-existent; you can publish an app and it will be live within a few hours. With Apple, you have no idea what they are going to turn around and say. We did a project with one band where it looked like Apple wasn’t going to approve it because it wasn’t necessarily in its best interests from a business point of view. That one took four weeks to approve. Nowadays, two weeks is the average [for

approval]. Annoyingly, it’s always a case of who you know rather than what you know. We have had an app approved in the past in under 24 hours but mostly it’s two weeks.

We don’t have connections [where we can speak to someone at the App Store directly]. We would love those kinds of connections. Some of the bigger developers do – like US2. You can always tell. As soon as an app is launched, is it featured [on the homepage]? If they are featured on day one then that means Apple has had a fair amount of warning and discussions about it beforehand. We have spoken to Apple about some apps but that has mainly been through the labels as those labels have their iTunes relationships.

The biggest pain than any iOS developer has is the whole certificate and provisioning profiles song and dance. To get a new app onto someone’s phone, you have to find out their UDID [unique device ID] beforehand, add that to the Apple developer system, add

that to a provisioning profile, create a new certificate for your developer environment and send it out. With that whole process you have to sit and hope that it will work. It is a longwinded thing that often causes nightmares. That process itself takes a good amount of time.

There is also the sending out

market instead of the wider world of giving everyone the U2 album.

Something like 80% of music consumption in America happens in the automobile. Looking at those consumption rates, what does that mean for Apple? It is a big opportunity for everyone, but Apple makes devices and Apple knows who people are. This is the Achilles’ heel of other hardware manufacturers. I own lots of Samsung products like a phone, vacuum cleaner and a TV but they don’t know it. Apple knows every device I have and it knows how I use them. It has created an ecosystem around all of that makes me keep coming back. These are the opportunities for Apple going forward with wearable devices, the car and other lifestyle products.

The market looks really good for Apple, but the company has to execute in the future like it executed in the past. In the end, it’s not about downloads versus streams, ownership versus access or advertising versus subscription. I think that sometimes over-simplifies it – or it over-complicates it.

On a simplistic level, people don’t care what the business model is behind a

This is going full circle for Apple. Apple needed music to get its device business going. It really thought it had moved beyond that stage and now it is realising that, ironically, it is having to go back to music to bring back some of its most loyal customers.

[Having Beats on Android] is not because it wants to conquer that OS. It is a way of making sure it establishes a beachhead so it can win back the lost customers and build out into new customers. Apple doesn’t want to be an Android software player; it just wants to be there because it’s a way to fight from within enemy territory.

It has to look at what it can do differently. If it wants to utilise the full capability of its devices, it could create something that is visually rich and interactive as a format. That is something that can be both a music strategy and help create a clear competitive space.

In some ways it is easier to sell Apple’s userbase some sort of next-generation album product than it would be to sell that to the installed userbase of Samsung Galaxy owners. If anyone could make it work, Apple could – because of its capabilities, its ideology and its userbase. The opportunity here is less about an album as such and more about building artist-centric experiences. Some of them might happen to be albums, some of them might happen to be playlists, some of them might happen to

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ISSUE 35215.10.14 COVER FEATURE be archives. This is essentially

a group of content around an artist that includes songs and multimedia. That could easily sit within a streaming service as much as it could sit within a downloadable app. It actually becomes a more manageable user experience if it doesn’t sit within a standalone app because then you just end up

with dozens of artist apps on your phone on top of all the other ones you’ve got.

Apple has got a streaming service, it has lots of feature sets that currently exist as standalone products like iTunes Radio and iCloud that can become features of a streaming service. Wouldn’t the most natural thing for Apple to do is try something ambitious and create the next-generation music platform that has all of these things in it? That would have to be the breadth of the ambition where it can indisputably be held up as a company that has seized back the innovation baton.

Apple would be foolish not to utilise its ability to subsidise music costs. There is no way it is going to convert the majority of its userbase [who buy a few tracks a year] to a full-price subscription. A lot of them will just engage with free. But imagine if Apple could do three tiers. One is free where you have the basic iCloud, iTunes Radio and the download store. The next tier is a subsidised one where, if you buy a certain device at a certain

price, you get a certain amount of iTunes subscription credit in there. Then the top tier is where you buy the top-end device [with a sub rolled in]. A three-pronged approached would make the most sense for Apple – free, subsidised and premium.

Even if you got a $3.99 and a $9.99 product into market, $3.99 is still going to go completely over the top of the heads of the vast majority of its 500m customers. If you are making a bet that the future is streaming then you have to get everybody streaming. You have to do that in a way that doesn’t lose you too much money but which also doesn’t end up looking like a cheap, second-rate radio offering.

Do fully expect, given the relationship Apple has with the majors in particular, there to be a lot of promotional activity. It is already happening on iTunes Radio where a certain amount of the songs that get pushed into streams are ones that the labels want to push.

Apple will be asking the earth [to give] the labels a lot of promotional exposure. :)

of test versions. Apple bought TestFlight recently which makes it a lot easier to get a test build to people, but it still has a bit of a song and a dance to it. They haven’t integrated it into Xcode [Apple’s bespoke code to build apps] as well as you would have hoped they would. I imagine that is a plan of theirs – but they haven’t done that yet. Developers do complain that Xcode is prone to crashing.

Android has as much song and dance about it – just in different ways. With Android you have to support multiple devices that have different feature sets, different capabilities and different screen sizes. Android’s developer environment, Eclipse, is, frankly, worse than Xcode. There are many more variables with an Android app than there are with iOS.

Apple is getting much better at having inter-app support. Before, on iOS each app would be a separate thing and you wouldn’t be able to communicate between the apps.

You wouldn’t be able to do anything outside of your container – which you now can. They have added quite a lot in iOS for that kind of thing, meaning that apps are no longer a closed silo.

The analysT mark mulligan, co-founder of midia ConsultingThere is no doubt that, over the past few years, Apple has lost a lot of its music mojo. Part of the reason for that is that Apple was distracted by much more interesting things – things that show off the capability of its devices like e-books and games. It probably thought it didn’t need to do that much with music any more because music wasn’t the thing that was selling the devices.

A three-pronged approached would

make the most sense for Apple – free, subsidised and premium”

millennials are running after us because we have what they want – great content,” said Ynon Kreiz, Maker CEO, in a keynote interview that was a metaphorical chest-thumping lap of honour after the acquisition, which he said brought the old and new media worlds together.

“They had to do something to remain relevant in that space – the shortform medium – and especially with millennials,” added Kreiz, illustrating that wider theme pressed by the MCNs at MIPCOM: that traditional media companies need their

command of the shortform online media if they’re not to go the way of the dodo.

Is it right, though? As music:)ally sat in on other conference sessions, things became interestingly less clear-cut. Broadcasters accept that young viewers are watching YouTube lots, but they are also asking pointed questions, particularly around business models.

The fascinating thing about YouTube is that some content is very cheap to make. PewDiePie shoots and edits his own videos alone, most of which involve playing games,

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MIPCOM is one of the two TV industry equivalents of Midem held in Cannes every year (the other is MIPTV), based around

similar twin features of a market for buying and selling content as well as a conference for discussing the latest trends in the industry. The MIP markets, however, are now a lot larger than the comparable zone at Midem.

Yes, digital loomed large at MIPCOM, just as it does at music conferences. One of the major trends this year was MCNs and the continued growth of the YouTube ecosystem: mention YouTubers like PewDiePie or Bethany Mota to the average attendee and you’re much less likely to get a baffled blank stare in response now.

The MCNs were certainly bullish. There is Maker Studios in particular, fresh from its $500m acquisition by Disney – a sum that could rise to $950m if certain targets are met. The prevailing theme whenever an MCN spoke was that they are the true TV networks for “millennials” – the young viewers who are turning to YouTube as an alternative to broadcast TV.

“Everybody is running after the millennials, but the

BEYOND MUSIC

Talking TV at MIPCOMthe lAtest hAppenings from the cAnnes industry event

so he’s about as high-margin a media entity as you can get.

Yet the MCNs are trying to prove their calibre by also investing heavily in more expensive, high-quality shows – even if they’re still shortform – where the ROI is still very tough, especially given the early stage (still) of YouTube ad revenues.

This is changing. Brands and agencies are putting more of their budgets into online video rather than TV, slowly. But the claims by MCNs that they present an imminent threat to the status quo can be questioned

– especially when the biggest beasts of the production world continue to make massive-budget series that they’re paid handsomely for by broadcasters.

In fact, digital seems to be opening up opportunities for those big beasts to take their traditional kinds of show online. Netflix, Amazon, Hulu and others are investing huge sums in original productions like House Of Cards and Orange Is The New Black, paying for them upfront.

MCNs and YouTubers do represent an important generational shift in what people think of as “quality” content; but while the big guns of the production world are still awash in cash, they simply don’t feel the threat breathing down their necks. Not yet, anyway. :)

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ISSUE 35215.10.14 TOOLS Pinboard » Deals

Vaytus, a new streaming service aimed at independent content and which claims will pay

artist higher rates than other major streaming services, has raised $32,861 on Kickstarter, passing its $30k funding goal.

Deezer has partnered with Vodafone in South Africa to offer its 32m customers bundled access to the music service for a year.

Musikki, which describes itself as “the IMDb of music” with content aggregated in real time, has raised €330k from Smart Equity in its second funding round.

Shazam has linked with Sun Broadcast Group (which has 8,000 radio stations) in the US to create interactive content for its audiences and advertisers.

VAYTUS

MUSIKKI

SHAZAM SAMSUNG/GOOGLE PLAY

WILL.I.AM

Consumers buying a new Samsung smartphone/tablet in Latin American markets will get six months of bundled access to Google Play while existing Samsung owners will get a three-month trial.

@DavidEmery Today’s highlight so far: acciden-tally getting a PO

through for a radio mix for The Script that Sony seem to think I’ve done

@seaninsound How much is a stream worth? I’m no mathematician

but... an ocean of music = worthless / a song that re-duces pain /induces a tear = priceless

@Popjustice EXCEPT IN THE UK RT @iTunes-Music: Are we in

the clear? @taylorswift13 Get #OutOfTheWoods now when you pre-order 1989. http://tw.itunes.com/6010Uhhu

Follow Music Ally on Twitter...twitter.com/musically

Tweets#MusicAllyDEEZER

Will.i.am is launching his new smartphone with a music service provided by 7digital.

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ISSUE 35215.10.14 TOOLS

What is it?Co-founded by former WMG exec Leanne Sharman and musician Benji Vaughan, Disciple Media is the latest company trying to help artists make money through apps. In this case, artist-branded apps that will help them live-stream video from their smartphones or laptops, as well as offering music, tickets and merchandise. Fans will get limited features for free – or they can sign up to monthly subscriptions for full access to the content. The company may also broker partnerships with brands – something we’ve seen already in the US with Shakira and T-Mobile – and is planning to roll out dozens of apps in 2015. Apps are a tough space for artists: people aren’t yet spending in-app on music to the same extent they are on games like Candy Crush Saga.

Even so, the time feels ripe for someone to take another crack at artist apps, building on lessons from the last five years within music and in other sectors alike.

US: RECORDED MUSIC SALES

UMG 38%

SPOTIFY: UK FINANCIALS

SubscriptionIncome

64.8m

2012 2013

Source: Spotify

Revenue

Net Income/Loss

92.0m

92.6m131.4m

–11.0m2.6m

Source: SoundCloud

2010 2011 2012 2013

SOUNDCLOUD FINANCIALS

RevenueNet loss

1.37

4.32

8.04

11.28

-1.55-3.74

-12.43

-23.11

WMG 19%Indies 14%

Underreview

1%

US MARKET SHARES

SME 28%

Source: Nielsen

974.6848.4

87.8 77.6 91.7

Digital track sales Digital album sales CD sales

113.1

2013 Jan-Sept

2014 Jan-Sept

Unit sales (million)Source: Nielsen

NEW SERVICE DISCIPLE MEDIA

Pinboard » Stats

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According to IFPI, recorded music sales in Russia totalled $57.7m in trade value in 2013, up 6.2% from 2012. Digital revenues grew 14.6%

to $38.7m, while physical formats fell 7.5% to $19m. The market was thus split 66/33 in favour of digital.

music:)ally understands that IFPI’s figures mostly come from major record labels alone, which makes them extremely limited given that the market is dominated by domestic

repertoire. Local sources explain that around 100 local indies account for approximately 80% of the market. This fragmentation is exacerbated by a lack of developed centralised licensing bodies.

The international trade body does not break down digital revenues in Russia; the lack of more accurate figures is down to the fact that the mechanisms for reporting and collating music sales in the country are rather primitive. Based on

conversations with local sources, music:)ally understands that downloads account for approximately 40% of digital revenues, followed by ringback tones (RBTs) with 30%. The remaining revenues come from a mix of sources, including ringtones and streaming.

Apple is virtually the only downloads-based revenue stream in Russia, having quickly carved up a market consisting of the wealthier iPhone-owning citizens with the launch of the iTunes Store at the end of 2012. Although iTunes downloads drove

much of the digital growth in 2013 (which made up for the physical decline, according to IFPI), the retailer’s sales have plateaued since then. RBTs are also said to be flattening or even declining.

With regards to streaming, music:)ally understands that the biggest services in terms of revenues are YouTube/Vevo and Yandex Music. The latter was launched in mid-2012 by local company Yandex, which is the leading search engine in Russia, surpassing even Google.

A licensed service, Yandex Music claims to have over 16m tracks. It has a free ad-funded tier and a premium one priced at RUB 149 ($3.65) per month.

All sources agree, however, that the music platform with the widest adoption in the country remains that of incumbent local social network Vkontakte, whose UGC music service remains unlicensed. A local source told music:)ally that Vkontakte’s music service has approximately 50m unique users. Its popularity is down to various factors, including not only the fact that it is free and neatly integrated with the social network, but also that its UX and catalogue are also very strong.

As a matter of fact, this high-ranking source in the local music industry explained that Vkontakte would be a rather powerful adversary to any international service looking to launch in Russia. The company is said to be in talks to go legit next year, which would be a very interesting

MARKET PROFILE Russia

one of the most chAllenging mArkets in the world, russiA still fAces mAssive levels of pirAcy. Although developments to legitimise music streAming on incumbent sociAl network vkontAkte might present An opportunity for existing And upcoming services, the next steps will hAve to be tAken cAutiously so As to not hurt other sectors of the music industry.

STATS

f Population 142.4md GDP per capita US $18,100h Internet users 32.7mj Mobile subscriptions 163.7mi Smartphone users 36%Sources: CIA World Factbook, IFPI

RUSSIA

Apple is virtually the only downloads-based revenue stream in Russia, having quickly carved up a market consisting of the wealthier iPhone-owning citizens”

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ISSUE 35215.10.14

development for the local industry – both in terms of the revenues it could generate as well as how it could level the playing field for other services.

Local startup Zvooq is an interesting legal alternative, currently offering two mobile apps with differing access to its 15m track catalogue of both major and indie content. Zvooq is the full on-demand streaming option priced at RUB 199 ($4.85) per month; Fonoteka has a model akin to the now defunct Bloom.fm, with monthly fees of RUB 33 ($0.80) or RUB 66 ($1.60) for storing three or seven albums offline at a time, respectively.

Although Deezer has been available in Russia for some time, music:)ally understands that it has not gained significant traction yet. In addition to its ad-funded web-only tier, the company offers its Premium+ plan for $7.99 per month. In talks with music:)ally, Mathieu Molinero (head of new markets, Deezer) said, “We are currently working to review some dimensions of our local strategy. Yandex and Zvooq are well adapted to the Russian market, notably in terms of pricing. Still, this is a very promising market, with a huge population and where digital penetration is growing. Today you have around 30m Russian e-shoppers, but piracy remains challenging for music. I estimate that it will take the next five years for Russia to have 10m people paying for music subscriptions.”

Competing service Spotify is not yet available in the country, despite having been recruiting local talent (including former Googler, Alexander Kubaneishvili) to head Russian operations. It was previously rumoured that Spotify would

MARKET PROFILE Russia continued...

2009 2010 2011 2012 2013

20.5

98.5 66.8

49.3 19.0

21.633.9

19.738.733.8

TOTAL120.1

TOTAL100.7

TOTAL54.3

TOTAL57.7

TOTAL69.0

Digital

Physical

launch in Russia in Q3 this year, but music:)ally understands that this is unlikely to happen until sometime next year. The importance of securing local catalogue in such a fragmented market could make this a more challenging rollout than others

in the company’s history, also demanding a higher degree of localisation and translation efforts.

music:)ally understands that it was only after the launch of iTunes that local record labels started to be more digital-savvy and proactive, helped also by the entry of label services providers such as Believe Digital. On the publishing side, however, much work remains to be done. RAO

is considered to be the largest collecting society in the country. Its digital-readiness, however, is said to be lacking still.

With regards to performance rights, it is well worth considering that, for several years, Russia’s live music sector has

Russia recorded music sales (US$ millions, trade value, historical exchange rates) Source: IFPI

been booming. A report by CCIA/Floor64 indicates that in 2013 live music revenues in the country totalled $1.47bn, surpassing the French market ($1.2bn), as well as the Spanish and Italian ones combined ($1.45bn).

Interestingly, a local source points out that such is the relevance of the live sector for the Russian music industry today that the pressure put on Vkontakte to go legit could have some negative aspects in the wider context. This is due to the fact that the social network’s popularity as a music destination has grown to such a point that is has also become a very powerful engagement platform for live promoters to connect with fan communities. The industry will thus have to tread carefully with regards to the next moves around Vkontakte to ensure that going legit won’t effectively lead to significant damages on the live front. :)

Today you have around 30m Russian e-shoppers, but piracy remains challenging for music. I estimate that it will take the next five years for Russia to have 10m people paying for music subscriptions”Mathieu Molinero, Deezer

Local startup Zvooq

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ISSUE 35215.10.14

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