SoundCloud ‘Not Shutting Down,’ Top Executive Says

Dark Clouds Over SoundCloud

Despite nagging rumors of impending shutdown, a top SoundCloud insider says this is a long-term play.

SoundCloud isn’t at risk of an immediate shutdown and has ‘ample resources’ to continue for ‘years,’ according to a well-placed source within the company.  In a somewhat contentious conversation with Digital Music News on Tuesday, the top-level source pointed to a number of misconceptions over the stability of the company, particularly after the leak of troubled financial filings.

The source is intimately involved with SoundCloud, but preferred to maintain confidentiality.

The financial filings, first published on DMN, exposed annual losses of $56.4 million in 2014, a startling burn rate that could outpace incoming investment rounds.  Indeed, SoundCloud’s recent purchases have been criticized as reckless, particularly the lease of luxurious, high-priced office space in Manhattan (not to mention fancy digs in home base Berlin).

Google Autocomplete: SoundCloud Shutting Down

 

All of that is happening against serious profitability concerns, and stoking rumors of SoundCloud shutting down.  In fact, a search for ‘SoundCloud’ on Google now auto-completes to ‘SoundCloud shutting down,’ a development the source partly blamed on ‘[DMN’s] shoot first, research later’ reporting style.

“The investors want them to spend.”

Some of SoundCloud’s high-priced purchases “could have benefited from extra review,” the source admitted, but are mostly “par for the course when you’re trying to compete on [SoundCloud’s] level.”  High-priced offices help to attract top employees, for example, who frequently weigh options to work in fancy, higher-priced office locations.

Most importantly, the source emphasized that aggressive spending is what investors are  asking for.  “SoundCloud has more active users than Spotify, they have more active users than Apple Music, you can go on down the line and the figures line up,” the source continued.  “This is where [CEO] Alex[ander Ljung]’s abilities come out, he’s the real deal.  So if [investors] weren’t spending money to get to that position, then you’d have a problem.  The investors want them to spend.”

The source also took issue with a recently issued warning by SoundCloud’s internal financial auditor, KMPG, whose Senior Statutory Auditor Karen MacKenzie expressed “significant doubt on SoundCloud’s ability to continue in light of the financial losses recorded.”  That opinion was also echoed by Ljung in the same report, who noted that SoundCloud could not exist without a continued flow of heavy investment dollars.

Fast-forward to 2016, and SoundCloud is busy building out a subscription tier and satisfying its newest licensing partner, Universal Music Group.  Which is exactly the point, according to the executive.  “What [DMN] reported on was from 2014,” the source continued.  “So you have old data, and old opinions that aren’t in line with what’s happening now.  Do they need ongoing investor participation?  Of course.  Are they going to lose that investment?  No, they’re not, this is a company with a huge upside that more investors are recognizing.”

But even in the event of an investor pullout, SoundCloud might have ample time to figure out next steps.  “I’m not going to speculate on an acquisition or anything of that nature, but this isn’t a case where the investors are saying, ‘Oh, markets are down in China, what do we do?’  They’re smarter than that.  They’re seeing Rdio collapse, they’re seeing iHeartRadio collapse, they’re seeing SFX collapse.  It’s an opportunity for the bigger fish to consolidate share.”

The source declined to offer 2015 financial details, noting their confidentiality.

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‘Fifth Beatle’ George Martin Dies at 90

Produced by George Martin

Sir George Henry Martin, the ‘Fifth Beatle’ who produced and guided the core catalog of Beatles’ works, has now died at 90.

Martin, who passed away in the early morning hours of Wednesday, is being celebrated after a six-decade career that produced 30 number one songs in the UK and 23 in the United States, among other chart-smashing accomplishments and innumerable accolades.  In 1996, the producer, arranger, composer, and pop visionary was knighted for his contributions to music, popular society, and charitable causes.

Martin first encountered the young Beatles in early 1962 through a meeting with group manager Brian Epstein, and subsequently signed the group to EMI months later.  The rest, as they say is history, though that history started quickly with two critical hits: ‘Love Me Do’ and ‘Please Please Me,’ the first in a long string of classics that thrived in a singles-focused era.  Eventually, Martin and the Beatles were at the vanguard of a deeper, album-oriented progression, with opuses like ‘Sgt. Pepper’s Lonely Hearts Club Band’ cementing the Beatles as a cultural, commercial, and critical success.

Martin has been indelibly dubbed the ‘Fifth Beatle’ for his deep involvement with the group, and Paul McCartney further cemented that title.  “If anyone earned the title of the fifth Beatle it was George,” McCartney recently stated, though the ‘first Beatle,’ John Lennon, was annoyed by the idea that Martin molded or created the group.  “When people ask me questions about ‘What did George Martin really do for you?,’ I have only one answer, ‘What does he do now?’” Lennon wrote McCartney in a published letter during 1971.  “I noticed you had no answer for that! It’s not a putdown, it’s the truth.”

Lennon later recanted those comments, and Martin himself continually downplayed the inherited title.  Others outside of the Fab Four were undoubtedly pivotal in the development of the group, though without Martin, the Beatles would have been a different group (if they existed in our historical consciousness at all).

And Martin’s hit-making, pop-friendly sensibilities extended to other artists, including Gerry & the Pacemakers, America, Shirley Bassey, The Who, and the now defamed Gary Glitter.  Fittingly, one of Martin’s last collaborations involved Elton John, whose ‘Candle In the Wind’ was released shortly after the producer was knighted.

Martin clearly lived a long, healthy life, though his death marks another important loss from a critical era.  That includes the recent death of David Bowie, with other greats like Lemmy Kilmister and Glenn Frey also passing in recent months.

Top image: cover of ‘Produced by George Martin,’ released 2001.

 

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Spotify Faces $30 Million, ‘Quick-n-Dirty’ Settlement Over Unpaid Royalties

Spotify: Please Pay $30 Million

Spotify is negotiating a fast-track settlement over unpaid publishing royalties that could reach $30 million.  But that may only cover part of the liability.

Please note: The following is a breaking story with quickly shifting details.  Please check back for ongoing updates and developments.

Spotify may wriggle its way out of a perilous publishing royalty lawsuit after all, but it could be costly.  Yesterday, sources to Digital Music News pointed to a $5 million one-time penalty, payable to the National Music Publishers’ Association (NMPA), part of a structured agreement that would also involve the construction of a working copyright matching interface and claims system for songwriters and publishers.

That ‘quick-n-dirty’ agreement remains unsigned, but is being given urgent consideration according to DMN sources.  Indeed, the negotiations were quickly confirmed to DMN by NMPA chief executive David Israelite on Monday via email, though specifics over penalty amounts weren’t discussed.

Israelite subsequently pointed to longer-term discussions between the NMPA, Spotify, and other streaming services, with mechanical licenses the focal point of the talks.

The $5 million figure was soon parroted by Billboard in a copycat piece, with one humongous zinger.  It turns out that $5 million penalty may be on top of earlier negotiated penalties of between $16 million and $25 million, according to Billboard’s unnamed sources, bringing the grand total to nearly $30 million.  “The National Music Publishers’ Association’s (NMPA’s) settlement with Spotify … will include the streaming service paying $5 million in damages on top of the $16-25 million that the service owes music publishers and songwriters,” Billboard’s Ed Christman wrote.

The details of the penalty figures are vague, and the NMPA hasn’t responded to our latest inquiry.  Separate sources have noted that the $16-25 million figure would be an estimate of damages, while the $5 million a non-compliance penalty.  But regardless of the specific amount ironed out, Spotify would receive a massive discount off the estimated $150-200 million in potential damages from an ongoing, class action lawsuit.  Spotify is aggressively fighting those claims, though a recent settlement with Microsoft over the exact same licensing problem suggests a long, arduous fight — and potentially disastrous penalties — ahead.

And there’s another bitter pill for Spotify: even if an NMPA-structured settlement goes through, that wouldn’t eliminate a large number of unpaid, non-NMPA members.   In fact, that group would not only be excluded from the agreement, but potentially edged out of all back payments entirely if unsuccessful in court.  As part of the NMPA arrangement described by sources, all unclaimed mechanicals would be redistributed among NMPA members based on marketshare, even if the royalties actually belong to someone else.

Stay tuned for more information!

Image by Thomas Galvez, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).

 

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Streaming Startup CÜR Pays $8 Million for Major Label Licenses

CÜR Media

According to the Wall Street Journal, CÜR Media has received ”licenses from all three major record companies, giving them a collective $8 million in advance money.”

In addition to the $8 million advances, CÜR has given each record company a ”5% stake in the company.” However, despite receiving such a high volume of investment cash, CÜR Media ”still needs to raise more money to launch the service”, says Tom Brophy, CÜR’s chief executive.

Brophy says low monthly price points were ”the centerpiece of his pitch when he started licensing negotiations with record companies several years ago.”  Accordingly, CÜR will have three tiers, one called “Octo” which will be priced at $1.99 a month that includes ”eight on-demand songs a day,” and will also feature a custom radio similar to that of Pandora’s. The other two tiers will be priced at $4.99 and $9.99 a month.

The low price, along with CÜR’s strong social components, which allow users to share songs with attached photos and short personal videos, are a definite way to attract young consumers, like college students for instance. ”Octo” is targeting the younger demographic who may not have the disposable income to pay for other streaming services, like Spotify, Apple and Tidal.

It will be interesting to see how CÜR plans to get the service off the ground. It may continue to sell stakes in the company to raise the rest of the money it requires.  It is unknown at this stage exactly where this vital money is going to come from.

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Kanye West Vows That He Will Never Make a CD Ever Again

CD

Kanye West says he’s never making another CD. Maybe he should consider other formats as well.

Kanye West is probably one of the most talked about artists today, and has become an absolute pro at placing himself front-and-center of controversial situations.  There was the Taylor Swift scandal, the Tidal exclusive that didn’t even chart, the Twitter war with deadmau5, and so many more juicy meltdowns.

Some perfectly manufactured, others accidental, all totally in a media spotlight that has become so difficult to tame.

Indeed, where West’s artistry has fallen off, his skill at becoming a circus ringleader has sharpened.  Always the center of conversation, whether he’s simply speaking his mind or sharing his thoughts, Kanye usually ends up rattling someone’s cage with a combination of the bold, absurd, and outright obtuse.

Yesterday, was one of those situations.  After a rare day of non-Kanye, West proclaimed that he will never make CDs again, while focusing solely on streaming opportunities going forward.  It started with a tweet that he was ”thinking” about not making CDs, and ended with a definite decision where he states…

”No more CDs from me.”

Screen Shot 2016-03-08 at 15.19.50

Hard to tell if this declaration will stand, but it isn’t out of character for Kanye to limit the availability of his music. His just-released ‘The Life Of Pablo” was a Tidal exclusive, with promises to ”never ever ever” give the work to Apple or Spotify.  Who knows, maybe Kanye will be a Tidal-only artist in the future.

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After Skipping Spotify, The 1975 Scores a Number 1 Album

The 1975

Screengrab of the1975.com

Kanye West skipped Spotify and didn’t even chart.  The 1975, on the other hand, have a number 1 album in several countries.

It’s another vote in favor of windowing, the emerging art of strategically rolling out releases to different platforms to maximize sales and impact.  In the case of Kanye, the ‘strategy’ wasn’t windowing at all, just a Tidal exclusive.  That ego-driven approach featured limited timing and sophistication and lots of bombast, and invited near-certain disaster in the form of BitTorrent piracy and non-existent chart positioning.

For The 1975, the story was entirely different, and merits some industry observation.  After avoiding Spotify entirely and focusing the release on iTunes and a variety of physical formats, the band achieved a number one album in several countries.  According to Billboard and its counting partner Nielsen Music, The 1975’s just-released album, I Like It When You Sleep, for You Are So Beautiful Yet So Unaware of It, sold 98,000 units in the US alone, a chart-topping tally.

Beyond that, the album also topped the charts in Britain, Canada, Australia and New Zealand, which is no small feat.  In fact, The 1975 joins a very hallowed group of bands to top the album charts in both the US and Britain simultaneously, with groups like the Rolling Stones, The Beatles, and Led Zeppelin also achieving the feat.

Also in the mix is a US-based album specifically created for Target, with two extra bonus tracks.  Overall, most of those sales were actual sales, meaning actual purchases of CDs, vinyl LPs, or downloadable album.  The rest, roughly 9 percent of those ‘sales’ were calculated based on complicated Nielsen formulas that attempt to equate streams with albums.

And where were those other streams coming from?  It turns out that while Spotify has been restricted, other streaming platforms received the release.   That suggests a very targeted exclusion, and a potentially bad case study for Spotify.

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