Gloom Lifts on Music as Vevo, Spotify Add Customers
(Corrects Vevo’s ownership structure in first paragraph of story published June 21.)
The music industry may emerge from its post-Napster doldrums as legal music-streaming services such as Vivendi SA- and Sony Corp.-backed Vevo add users and companies step up music sponsorship.
Record companies are “coming through the pain” by halting revenue declines, Rob Wells, president of the global digital business at Universal Music Group, said at the Cannes Lions media conference today.
Music companies are experimenting with new business models to reverse a slump in revenue that followed the rise of Napster and other music-sharing services. Global music sales dropped to $15.9 billion in 2010 from $27.2 billion in 1998, according to the International Federation of the Phonographic Industry. Napster was formed in 1999.
Sponsorship by brands -- for example by offering users free downloads in exchange for watching an ad -- is also gaining pace as an alternate source of revenue.
“I would argue half the revenue of the industry in a few years will come from brands,” Laura Lang, chief executive officer of digital marketing agency Digitas, said in Cannes.
Vevo, whose owners include Vivendi’s Universal Music Group and Sony Corp. (6758)’s music division, provides advertising-supported music videos in the U.S., U.K. and Canada and provides live coverage of performances.
Online Jukebox
London-based Spotify offers some free, ad-supported music over the Internet. It reached agreements with three major record labels and is close to a close with the fourth, Warner Music Group, to start a U.S. version of its online music service, people with knowledge of the talks said this month.
The potential of the music industry to grow again has attracted some unlikely backers. Last month Napster co-founder Sean Parker said he’s looking at investing in traditional music companies, whose back catalogs are “going to become extremely valuable,” as online jukebox services proliferate.
Still, music marketers have to be wary of bombarding listeners with ads.
“We have to find a balance between something that feels too commercial and quality entertainment,” Vevo CEO Rio Caraeff said. “That’s one of the key tension points for us.”
To contact the reporters on this story: Matthew Campbell in Cannes via mcampbell39@bloomberg.net; Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
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