logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Google Snags Songza, But Will Streaming Ever Be Profitable?

By  +Follow July 3, 2014 3:53PM
Share:
Tickers Mentioned:

Songza, Spotify, Pandora, Sirius, Streaming Services, Streaming Music, Club Songza

Online and mobile music streaming has reduced the clutter of CDs at home, but has increased the clatter around selling songs. On-demand and streaming services such as Spotify, Pandora (P) and Songza rely on advertisers’ sponsorship to fund their services, and while they all offer subscription service, most listeners expect music to be free. Given this trend, and the fact that subscription-based Sirius XM Radio (SIRI) is currently the only profitable music-streaming provider on the market, all free streaming services face little prospect of profitability.

As the largest streaming radio option, Pandora is a good indicator of where streaming profitability is headed, and the road appears to lead to a dead end. It earns yearly revenue of more than $500 million, but its gains in revenue are matched by proportionally high licensing fees and other costs. A bleak analysis conducted by Generator Research in 2013 concluded that the streaming business was "inherently unprofitable" in its current state. According to analysis and projections, "no current music subscription service — including marquee brands like Pandora, Spotify, and Rhapsody — can ever be profitable, even if they execute perfectly.” 

Streaming Services Provide Data, Not Profit

In their current state, all streaming services face the challenge of ever finding profitability. Music listeners are used to getting all the perks with none of the price, and the trending expectation is that music will remain free. While Songza offers Club Songza subscription for $0.99 per week, which removes ads and doubles the skip limit to 12 songs, few users opt in. Most people are used to the influx of advertising on all platforms and are relatively willing to endure a few ads for free personalized playlists. Club Songza is only a year old and user data is unavailable, but if its proportion of paying subscribers is anything like Pandora’s, only 3.6 percent of its users are willing to put down money for those perks. This represents annual subscription revenue of $10.2 million, most of which would likely be redirected to licensing fees for new tracks in efforts to continue boosting listenership.

For More Than $39 Million, What is Songza to Google?

Google (GOOG)  has entered the music streaming arms race, but not for Songza’s direct prospects of profitability. For listeners who want quality playlists created for them, Songza is the most effortless personalized option. Each playlist is hand-selected (the latest buzzword is ‘curated’) by DJs and music experts based on listener data, and fares far better in reviews than competitors such as Pandora. This is largely in part to its wide catalog size, and at 20 million tracks it is in close pursuit of Apple’s (AAPL) iTunes Radio, which is just above 25 million.

Google’s strategy appears to center on acquiring the best platform for personalized listening. Similarly to Netflix’s (NFLX) creation of microgenre categories, Songza combines listeners’ data with handcrafted playlists by music experts. Songza’s tracks add to the YouTube and Google Play catalogs, but its most valuable feature is its user data. Google’s goal is to capture customers in the streaming market, and while Songza alone may show poor prospects of profitability, its ability to attract customers to Google’s entire range of products is its most valuable benefit. For example, if Songza’s popularity takes off, consumers may be more drawn to Google Chromecast knowing it provides access the streaming service.

While Google’s acquisition of Songza may attract more users away from competitor Apple’s iTunes Radio, the musicians providing their tracks to the streaming services still earn fractions of pennies. Artists signed with independent labels have historically gotten the short end of the stick when it comes to royalties, from vinyl sales to mp3 downloads to streaming. Of a reported 1.71 billion hours of listening on Pandora Radio, 44 percent of songs played were from indie artists. However, these artists earn 12% of a penny each time a song is streamed. Free streaming that primarily relies on advertising for its revenue cannot be profitable for either the service provider or the artist. Who really profits is the label middleman — companies such as The American Society of Composers, Authors and Publishers (ASCAP) that collect royalties from Pandora and its competitors pocket large fractions of the payouts, and distribute the remains among musicians and performers. The larger the band, the smaller the fraction that goes to each member.

Spotify is the latest service eyeing an IPO. Given analysts’ concerns of profitability, streaming services are unlikely to turn a profit comparable to that of subscription radio champion Sirius XM unless major overhauls are made to either subscription services or the royalties paid per track streamed.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for goog
Quantpost Technology
21 Oct 14 11:28:32
$GOOG $GOOGL News: "Apple Pay: Today's Answer To iTunes And Another Moat $GOOG …" http://t.co/wVs1vVe89f Board view: https://t.co/jOJ3ihOOHo
Quantpost Cnsmr Good
21 Oct 14 11:28:32
$AAPL News: "Apple Pay: Today's Answer To iTunes And Another Moat $GOOG #GOOGLE…" http://t.co/sw9jcFtSBM Board view: https://t.co/UKnOp0aS6J
Seeking Alpha
21 Oct 14 11:28:31
Apple Pay: Today's Answer To iTunes And Another Moat http://t.co/fGO2TyTvNn $GOOG #GOOGLE $GOOGL $AAPL
alex_2592
21 Oct 14 11:28:19
$SPY $IBB $AAPL $GOOG $BBRY $BABA Fast recover of the markets after great fall of last week. Very dangerous! #NASDAQ #BORSA
Glenn Petersen
21 Oct 14 11:20:51
Mystery startup Magic Leap raises $542 million from Google, others http://t.co/qsRhrtMlmh via @reuters #Startups $GOOG #VirtualReality
kpricestox
21 Oct 14 11:19:56
"keeping it small during this losing streak. $goog 525's at $2.65" >>> Sold half at 4.25 +60%.
Jim Treacy
21 Oct 14 11:18:58
@businessinsider @LisaEadicicco A "no shit, Sherlock" moment. The duopoly $AAPL - #iOS / $GOOG - #android R must owns. Together the market!
Major Finesse Record
21 Oct 14 11:17:31
RT @cmtstockcoach: Key technical level to watch on Google $GOOGL $GOOG http://t.co/KNI38jvsbX
Jim Treacy
21 Oct 14 11:15:10
@businessinsider @larakiara Biggest beneficiaries $GOOG & $FB #trading #investing #investments #SocialMediaMarketing #SocialMedia #investor
11月の5日から10日までは福岡
21 Oct 14 11:14:19
$goog
Al Ramirez
21 Oct 14 11:12:40
All your firebase are belong to us. $goog
BRO-lando
21 Oct 14 11:11:38
Firebase joins $GOOG - A M A Z E B A L L S
Stocks News&Markets
21 Oct 14 11:10:52
Big Trader in the News! http://t.co/F3G081e6MW $ZAZA $FREE $HYH.W $SINO $FB $TWTR $GOOG we nailed $IBIO !!
Stocks News&Markets
21 Oct 14 11:10:50
Check out this big trader in the News! http://t.co/F3G081e6MW $ZAZA $FREE $HYH.W $SINO $FB $TWTR $GOOG
ML7
21 Oct 14 11:08:08
$GTATQ Flagging hold tight do not sell untill bell;) $AAPL $FB $GOOG $CNET $FREE
Tech Alerts
21 Oct 14 11:00:05
How Important Is Facebook Challenging YouTube For In-House Video Post Supremacy? http://t.co/607XA94lD8 $GOOG $GOOGL $FB
BLUESPIDER
21 Oct 14 10:56:00
$GOOG Cloud unit confirms Firebase acquisition
Quang Doan
21 Oct 14 10:54:14
in $$$$$ cash except one equity and fews put. $ES_F $SPY $AAPL $TSLA $GOOG $PCLN
Stock Moo
21 Oct 14 10:53:49
$goog: Google Leads $542 Million Investment in Magic Leap http://t.co/6umQbXniqU
Stock Moo
21 Oct 14 10:53:48
$goog: Google leaps into new virtual reality http://t.co/2veuDZyWC3
The Fly
21 Oct 14 10:52:33
$GOOG Google acquires Firebase, terms not disclosed: Full Story http://t.co/AN3Gag2uCe
Investors Hangout
21 Oct 14 10:51:12
leahanne: $EBAY Ebay Inc (EBAY) 50.10 +0.90 (+1.83%) $GOOG http://t.co/kpcSUjL0Q0
Investors Hangout
21 Oct 14 10:51:12
leahanne: $EBAY Ebay Inc (EBAY) 50.10 +0.90 (+1.83%) $GOOG http://t.co/UPAkvrY5WN
Justin Pulitzer
21 Oct 14 10:37:03
“@kpricestox: @JustinPulitzer any thoughts on $goog and its relative weakness.”<~Sounds like you already know the answer.
kpricestox
21 Oct 14 10:36:44
@JustinPulitzer any thoughts on $goog and its relative weakness.
Cody Willard
21 Oct 14 10:05:50
Longer-term $HIMX has several potential catalysts to drive it higher, but to be clear, $GOOG Google Glass demand... http://t.co/PvZmtzpKWq
Seeking Alpha
21 Oct 14 09:28:19
Why The Technology Sector Is Lagging The Market http://t.co/6vOXCHi8Yf $AAPL #APPLE $GOOG $NFLX $SPY $XLK
John C. Calhoun
21 Oct 14 09:16:07
GET IN THE CAR!! $BABA $aapl $Twtr $Dis $fb $Goog $Spy $Qqq
Emily Wasserman
21 Oct 14 08:59:22
$GOOG, KKR, Kleiner Perkins invest $542M in virtual reality eyeglass startup: http://t.co/vAHrTJbPXQ
First Business News
21 Oct 14 08:54:44
Can $AAPL beat $GOOG at its own game? http://t.co/VBYwbX7Qqs @bmoller @kpronn
Mr. Bytes Blog
21 Oct 14 08:40:36
Daily Funding Report #cloud #EHR #Mobile $GOOG #antenna #wearable #interface #enterprise $MSFT #wireless http://t.co/o70ALxe2d5
Mook Trader
21 Oct 14 08:34:44
$GOOG working to reduce open-source androids $NQ $HIMX
Ski The G
21 Oct 14 08:25:25
@kenr0966 @wuzupwidat both will lead in advertising rev in the next year they go up $goog goes down
Evelyn Rusli
21 Oct 14 08:20:09
$goog investment in Magic Leap values co. at abt just below $2b, accd to sources, huge round at series b-- http://t.co/poVkfdvUlU
Cindy Byerrum, CPA
21 Oct 14 07:39:27
#Buy $DNAX #DNA #Energy #Drinks #New #CEO #Real #Experience > $FNMA $HEMP $PMCM $PHOT $PLPL $CBIS $JPM $GS $MS $TSLA $FB $TWTR $GOOG $MSFT
Gary Nielson
21 Oct 14 07:30:20
The LinkedIn Effect: Why Social Media Is Now Mandatory for Success $LNKD $FB $TWTR $GOOG http://t.co/HnBGPoavR8
Quantpost Technology
21 Oct 14 07:24:44
$FB $TWTR $GOOG $GOOGL News: "Concerns Over Google's Earnings Results Are Way…" http://t.co/di9fpmL8Rj Board view: https://t.co/J4kSpfNqJv
Quantpost Technology
21 Oct 14 07:15:27
$FB $GOOG News: "YouTube Is Becoming Another Digital Network Option Among Many…" http://t.co/UL2QS8DIXp Board view: https://t.co/WGBEu6iRzi
Louie
21 Oct 14 07:15:23
Big money trying to unload $LNKD but lack of volume makes it a hard sell. $AAPL $TSLA $FB $TWTR $BABA $YHOO $EBAY $MSFT $GOOG $Z $P $YELP
Louie
21 Oct 14 07:12:03
$LNKD is the next $NFLX. The $126 gap will be filled. Market penetration 90% done. $AAPL $TSLA $FB $TWTR $BABA $YHOO $EBAY $MSFT $GOOG $Z $P
StockExpert
21 Oct 14 07:04:24
$STEM Big News Going to be able to Help Paralyzed People $RWLK $SPY $DIA $QQQ http://t.co/kytGqXAQuv $TWTR $FB $AAPL $GOOG $INTC $MSFT $WMT
STOCKTWEETS
21 Oct 14 06:43:43
@Weeklyoptions its important to cut short losses and chip in those 30-100% max winners for compounding gains week after week. $goog
Christian Tharp, CMT
21 Oct 14 06:18:17
Key technical level to watch on Google $GOOGL $GOOG http://t.co/KNI38jvsbX
Seeking Alpha
21 Oct 14 05:30:05
Apple Earnings: Dismissing The Bear Case http://t.co/W1eqI2GaBY $GOOG #GOOGLE $INTC $GOOGL $AAPL
David Clinch
21 Oct 14 05:29:06
Good read: / @jmcduling YouTube is Google’s sleeping giant http://t.co/ZJDRrPdXvL $GOOGL $GOOG
Seeking Alpha
21 Oct 14 05:19:15
Apple Q4 2014 Review: Let The Good Times Roll http://t.co/IyG2Ap4AxN $GOOG #GOOGLE $GOOGL $AAPL
Jim Treacy
21 Oct 14 04:51:41
The vast, untapped potential of #YouTube http://t.co/Z3NyMCVggI via @qz One of several reasons $GOOG is undervalued & a major buy! #trading
Allen Wastler
21 Oct 14 04:48:29
Top stock lookups on http://t.co/E6yr9ENnYt ysty: $AAPL, $IBM, $FB, $BAC, $CMG, $SPY, $BABA, $GE, $NFLX, $TWTR, $F, $C, $BBRY, $GOOG, $TSLA
Seeking Alpha
21 Oct 14 04:48:15
Apple Earnings: Dismissing The Bear Case http://t.co/QLpdFKNiO8 $GOOG #GOOGLE $INTC $GOOGL $AAPL
4-traders.com
21 Oct 14 04:05:05
GOOGLE 'C' : changes 'to fight piracy' by highlighting legal sites http://t.co/P0ftXDkdVw $GOOG
				
				
By  +Follow July 3, 2014 3:53PM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.