Hosted by our very own Ben Morris, the first episode features tracks from the likes of Part-Time Heroes (Wah Wah 45s), Krystal Klear (Eglo), Maylee Todd (Do Right), and Blue Rhythm Combo (Jazzman Records).

This is another fantastic way for us to showcase some of the amazing music being released all the time by our labels.

You can subscribe to the Kudos Records podcast right now via iTunes or by using the Feedburner link.

There are a few that are worthy of merit, (most notably MusicAlly, CMU and Record of the Day) but there are also many who have taken it upon themselves to play the part of a modern “Tokyo Rose” or “Lord Haw-Haw”. They seem to be determined to sap the morale out of anyone working in music (favourite headline; “It Just Got Worse !”).

Dreaming of a Return to the ‘90s?
2012 sees Kudos enter its 20th year of trading, so we were around during the pre-digital “Booming ‘90s”. However, you might be surprised to learn that 2011 was our Best Year Ever.  In fact, we have just experienced our fifth consecutive year of double digit growth. We are now almost four times the size we were in 2006, and employ more than twice the number of staff.

The thing is, we are not “bucking the trend”, at least not in the independent sector. Many labels I speak to have experienced similar growth.  So, why all the “Bad News” stories?   I put it down to the big corporate behemoths who are struggling to cope with the new environment. They still represent a massive chunk of the market, and unsurprisingly, they cry the loudest.

The problem for the majors is that the marketplace is now far more meritocratic, and they can no longer control access.

In the “Good Old ‘90s”, we were very reliant on the high street music chains stocking and merchandising our releases to have any chance of success. If we had a physical CD release with crossover potential, we had to go, cap in hand, to the various chain’s central buyers. If we were lucky enough to be offered any support, it would be on the condition that we paid for their advertising, and bought racking space. In fact, we would often be frozen out of the high street chains altogether, especially during “Q4” (October to December) during which the majority of prime retail racking was reserved for Major Label releases. One particular chain would not even let us present new releases to them from October to the end of the year.

A Fairer Landscape
Fast forward to 2011, and not only can we ensure that all our releases are stocked at all the important digital stores, we even find our releases featured on the home page, of the Biggest Music Store in the World, Ever! without paying a penny for either advertising or positioning. iTunes and other key digital retailers are happy to get right behind our releases based purely on their own editorial criteria. If we can persuade them that our releases are appealing; that we have created enough public awareness, and that there is a good likelihood that a casual click on a brick might convert to a purchase, they will often take a punt.

It’s certainly NOT all doom and gloom in the physical world either. Every single title in our catalogue is always available at the worlds biggest physical retailer (Amazon), and those independent stores that are left in the high streets have rightly come to the conclusion that their success is based on their ability to provide a true, music discover experience. They have largely left the chart toppers to the supermarkets, and now concentrate on supplying great music to the true connoisseurs. Our releases no longer have to compete with the NOW series at Christmas for independent shelf space.

Better Prospects for New Labels
Another very positive characteristic of the “new” business compared to the “good old 90s” is that new labels seem to have lower “infant mortality”. It has been our experience that the survival rates for brand new labels have improved, largely as a result of the kinder economics of digital. Many new labels in the 90’s would only have had sufficient funding to release one, or two opening 12”s. If these releases didn’t re-coup their initial investment in the tiny sales window available, that was often the end of the road. Nowadays, the sales window is open ended. A release is available to buy and stream indefinitely, allowing labels to recoup their investment over time.

Bad News Stories
So, if we and other independents are doing well, why do I care what a bunch of naysayers have to say? Because, by specifically spreading misleading information, and by giving the impression that the whole industry is in terminal decline they can influence some of the decisions that effect how we do business in the future. This is why I felt it important to make our experience of streaming services public here and here.

I also feel this “talking down the business” starves our industry of the young talent it needs to move forward. Trying to recruit has never been harder.  Many young bright graduates no longer see our industry as appealing.  Some don’t even believe it has a future. Few things depresses me more than attending a trade show like MIDEM and seeing it full of middle aged men propping up the bar.  We need more new blood coming through.

Good Times
So, will the industry ever return to the heady days of the ‘90s, with its corporate jets and “fruit and flowers”?  I, for one, sincerely hope not. The “new” industry provides infinitely more opportunities to enterprising independent artists and labels.

That is the news story that needs to be heard.

Just to be clear, we take a neutral approach to digital services. We don’t specifically favour one business model over another. Our belief is that the wider choice the consumer has of legitimate services at prices the consumer is willing to pay, the more likely we are to ensure artists and composers are fairly paid for the music they make.

I have nothing but the greatest respect for ST Holdings. They have been through much the same as we have. Both of our companies have survived the cull which wiped out most of the other independent distributors. They have a great reputation, distribute some amazing labels, and have been instrumental in bringing Dubstep to a wider audience.

I don’t know for sure, but I would imagine we are companies of a similar size.

If my experience of streaming were the same as theirs, I might also question whether we should encourage our labels to stick with it. However, our experience has been dramatically different..

Streaming Turnover

Our current Spotify quarterly turnover is, BY A VERY LARGE FACTOR more than the £2,500 quoted as ST’s quarterly Spotify revenue  in the linked Digital Music News article. 

Now, I am pretty sure that our overall company turnover is no greater than ST’s, so why this enormous disparity?

I suspect the key here is that we have been supplying Spotify since the service opened.  We (and our labels) have seen turnover grow exponentially over the past three years.

Streaming services are very “long tail”. It takes time for consumers to discover your music, add it to playlists, favourite it, and share it with friends. The longer a label is on a streaming platform, the more established they become, and the more time users will have had to discover their music. Users need to dig deep and it also helps if labels market their playlists. If a label is sceptical about streaming and is concerned about cannibalisation, they are not going to actively promote their music on streaming services, so stream rates remain flat. Catch 22.

Currently, Spotify is our number two digital account in most of the territories where it exists in terms of actual turnover. In Scandinavian countries it is our number one source of income (physical or digital).  This morning, MusicAly published some Swedish stats which make interesting reading.

Cannibalisation
This is a more difficult question to answer as we have no benchmark. When we started with Spotify their turnover was negligible so there was certainly no issue with cannibalisation. What has happened as time has gone by? The argument could be that we are like a lobster, slowly getting boiled to death as the temperature rises.

I really don’t think this is the case.

Our A la Carte turnover has been pretty solid over the last couple of years. We have certainly seen no significant drop. It rises and falls by a few percentage points depending on the quality and exposure of releases during the sales period in question.

If I ask myself, “if we left streaming services now, would we see our a la carte sales rise by 24%” ? My answer would be a very emphatic no.

Income “per consumption”
Looking at “per stream” income for streaming isn’t particularly helpful.  You need to focus on overall turnover.

There are two developments that will eventually make a big difference in per stream income. One is conversions to premium, the other is bundling.

Spotify’s conversion rates in Europe are running at over 10%, but this was before they started limiting their free version, and also before Facebook integration. I would anticipate this rising very considerably over a reasonably short time. Mobile use is also key to encouraging conversion. People want to take their music with them, which they can only do with a premium subscription.  Incidentally, we have already seen very significant improvements in our per stream rates.

The other big factor is bundling. As more items (phones, TVs, cable contracts, cars) get bundled with streaming services included we will start to see “gym membership economics” kick in. This is where consumers get streaming as an add on, but don’t make a lot of use of the service. Their contribution adds to the royalty pool, inflating the “per stream” income.

Of course, (as was the key theme of yesterday’s post) people will only upgrade if the service is top notch, with good depth of catalogue and with new releases fully represented.

Transparency and Equality
Our accounting from the streaming services mentioned is completely transparent. We can see exactly what we earn per stream, per service, per territory. Nothing fudgy or grey. By the nature of these services, there is a lot of data for us to process each month, but it is all very clear. (I wish I could say the same for some of the other services !)

There also seems to be a running theme that indie content is not being equally remunerated. In the case of RDIO, Spotify, Simfy and Deezer, all these deals were, for us at least, negotiated through Merlin. Charles and his team do a tremendous job ensuring we, as independents, are treated equitably, and that our content is valued appropriately. It is worth noting that Spotify were quick to engage with the independent community right from that start, and were fully licensed at launch. This is more than can be said for many services.

Kudos Take Downs
Since we started dealing with streaming services, (initially with Napster and Rhapsody, now joined by Spotify, MOG, RDIO, Deezer, Simfy, WE7 and a bunch of others), we have had a total of 3 labels ask us to remove or stop content supply. This is almost an exact inversion of ST’s experience. This is partly down to the influence a distributor has with their labels.  I also think it is because Kudos labels are beginning to see considerable income from streaming services which they don’t want to lose.

Artist Compensation

As the debate has raged over the past few days, I have seen quite a few statistics that have puzzled me, with artists publishing what they have earned individually for streaming.  When I query further, I discover that the artist in question is on a points deal with his record label,  in which he earns less than 10% of digital income.  This is an argument the artist needs to have with his label, not with streaming services.

Conclusion
Kudos will continue to support all services who we believe have viable business models. We currently consider subscription streaming a viable model, and “Freemium” a valid marketing tactic to sell subscriptions. Our labels are, of course, free to pick and choose which services they supply, but we would encourage them to stay on board. Without a pragmatic approach, the failure of streaming services could become a self fulfilling prophecy, which we believe would not be in our industries, or our labels best interest.

Danny @ Kudos

See also

http://www.kudosdistribution.co.uk/streaming-services-again-2/

http://www.kudosdistribution.co.uk/spotify-and-other-streaming-services/

Context

Estimates vary, but I think it’s pretty safe to say that 95% of music consumption is unlicensed, and earns the performer and composer nothing. I say “at least” because most statistics take little account of non internet sharing. I’m sure there are whole school classes where all the pupils have identical MP3 collections, sourced on torrent sites and propagated on portable drives. The same is probably true in many workplaces. We (the recorded music industry) are scavenging around in 5% of consumption, so any conversation on an industry strategy needs to be seen in this context. This statistic opens up the possibility of significant growth from harvested from the “95%” without, at least initially cannibalising the “5%”.

The allegiance of Technology
I’m sure at some point significant sales will migrate from a la carte to streaming. I would however hazard a guess that once migration starts denting Itune’s turnover, Cupertino will release a very beautiful and incredibly slick streaming service. With their current market share it simply makes no sense for them to change their business model at this stage, but you can bet they are watching with interest.

In this blog post from a year or so go, I made the point that cannibalisation is pretty much an irrelevant point in any case as we have lost the ability to determine which business models will succeed.. Consumers will eventually get the services they want, as long as there is the technology available to deliver it.  Our goal has to be to ensure that the content creators, the artists and songwriters, are the ultimate beneficiaries of that winning supply chain.

Who spends what on music.
Here are some more statistics, this time from the BPI year book. In 2010 only 52.8% of the UK population spent anything on music. Of that 52.8%, the average annual spend was £42.83 per annum. With subscription rates running at £120 per annum we have the potential of immediately growing that annual spend from music buyers three fold, while also monetising much of the 47.2% who currently don’t engage with us at all, This could be achieved through bundling streaming services with ISPs, and Mobile Contracts.

A Service worth Paying for ?
However, consumers will only upgrade to and maintain premium Spotify, Rhapsody, MOG and RDIO subscriptions if the content is top quality, and new releases are fully represented.

• Premium services are simply not attractive as “catalogue only”, No one is going to pay a monthly fee for old music.
• Free tiers have been shown to be necessary to gain market traction, but are not viable as anything other than a gateway to premium services.

It would be interesting to know how those Coldplay fans with streaming subscriptions dealt with this missing content. While some headed to Itunes, I’m quite sure there were many who reached straight for Bit Torrent and Rapidshare.  Some will now be considering whether their monthly subscription actually represents value for money.

Crossroads
We are at an important juncture in the evolution of digital music. We have a variety of services that can successfully compete with free by offering greater convenience and enhanced social functionality. Spotify’s conversion rates testify to this. There is also now tremendous service diversity both in terms of business models (a la carte –v- subscription) and functionality.  I have been fortunate enough lately to have had the opportunity to try out MOG and RDIO, both of which I found really compelling services, genuinely enriching my listening experience.  Exciting Times… potentially.

We, as an industry, can either fully engage with and support these new innovative services which genuinely appeal to consumers, or we can dick about for another decade, artificially crippling services and trying to dictate to our customers how they consume music.  If we take a fragmented, confused and arrogant approach we will still be splashing around in our 5% puddle for decades to come.

This is worth watching.  It’s a bit long, so if you are in a hurry skip forward to about 17mins in.

http://www.youtube.com/watch?feature=player_embedded&v=LbAT9Ap9EVs#!

- Danny at Kudos

Affine, the Vienna-based electronica label, feature the likes of Dorian Concept, Ogris Debris and The Clonious. Their latest album, from Zanshin, is out physically on 14 November and is out digitally right now.

Earnest Endeavours have just dropped their debut release from B. Bravo, the ‘Kiss ‘n’ Tell EP’. The London-based music and art collective are already a big name on the party circuit and will be looking to take things to the next level with the inception of their new label.

New Italian electronic imprint, Lil Pitch, will release their first 12-inch on 21 November featuring a remix from the mighty Pinch. Digital to follow.

Every week, the label management team at Kudos sits down and reviews all our digital releases. We then decide our placement strategy; which tracks we are going to pitch for site placement to which store.

We use a number of criteria to decide which store to pitch a given release to. Some digital stores are very genre specific, others will only feature an artist with a track record and sales history, or a high level of pre-sales. We also look at what additional assets we have, such as an exclusive bonus track, or whether there is an option for a short exclusive sales period.

If you log in to your label portal and navigate to ‘Digital’ and click on ‘Screenshots’ you can select your new release and see exactly what we have pitched for.

If you re-visit this area after your release has been live for a few weeks, you will also see where placement has or hasn’t occurred. Where we have been successful, we also include a link to a screen-grab of the actual site placement.