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.


Signup for our daily newsletter and get our best articles emailed right to you!

Results for goog
IH News Desk
30 Jan 15 19:58:24
$IMSC Short Sales Updated Friday, January 30, 2015 10:11:50 PM $GOOG $ABT $CELG $AA http://t.co/63C61dyFN8
Stockaholics
30 Jan 15 19:53:47
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/LayPQuOeI4 $CBL $GOOG $BLL
®مستشارك المالي®
30 Jan 15 19:48:19
RT @skaladwani1: “@s_s_o0: $GOOGL $GOOG $FB $YHOO #النفط #تداول #اوبشن #options فقط توصية $ICPT من ٩٠ سنت الى ١٢$ اليوم بفضل الله http:…
Ryan M Craver
30 Jan 15 19:42:38
Law of diminishing email returns: Gmail, "85% of emails bundled, 33% were promotional and 60% of users swipe bundles away 2x per day" $GOOG
Psycho Logical
30 Jan 15 19:40:41
@zerofiltertruth @jimcramer I do not believe Twitter execs/founders interested in working for Larry Page & Sergey Brin $TWTR $GOOG $FB
Steve
30 Jan 15 19:36:40
RT @DLaurentNY: $aapl #iphone business is now larger than $goog and $msft combined. WOW
Chayton Falke
30 Jan 15 19:35:06
#Nasdaq100 #recent #market #exit #2: Covered $GOOG short for a 6.10% #gain in 52 days. #GOOG #forex #trading #stocks
CHARLOTTE Options
30 Jan 15 19:34:46
RT @DLaurentNY: $aapl #iphone business is now larger than $goog and $msft combined. WOW
INVEX Banco
30 Jan 15 19:30:18
.@google $GOOG mostró un comportamiento positivo tras publicar mejores resultados a los esperados, con incrementos en ventas y en utilidades
Chad Cameroon
30 Jan 15 19:27:56
See Just How Much Google Knows About You http://t.co/tkrPGuiSjP via @daily_finance $GOOG $GOOGL
StockNewsWires
30 Jan 15 19:26:02
$GOOG $GOOGL $FB $AAPL $BABA: After Wild Earnings, How Do Big Tech Stocks Compare On ...: http://t.co/lRREEhDOjJ
Bradley
30 Jan 15 19:23:06
What will the $DOW do tomorrow? http://t.co/RGFWb0Cbdl $GOOG $AAPL $FB $EBAY #options #stocks #daytrading http://t.co/IEeXGFKced
Eden Chen
30 Jan 15 19:14:23
Google engineer accidentally shares internal memo, insightful view of pros and cons of google + amazon $goog $amzn http://t.co/wN6JfZXxsT
Bradley
30 Jan 15 19:12:05
Free Video Tutorial #psychology of #trading http://t.co/th4YrVqgyg $TLT $TNA $QQQ $SPY $GPRO $GOOG $AAPL http://t.co/Y3CoBPiPC5
RickLejeune
30 Jan 15 19:10:15
iPhone's Sales Are Worth More Than Google's And Microsoft's Combined http://t.co/Vf7wTvgTAe $AAPL $GOOG $GOOGL $MSFT #Apple #Investors
Glenn Ostrosky
30 Jan 15 19:08:39
RT @crazycanuck655: iPhone's Sales Are Worth More Than Google's And Microsoft's Combined http://t.co/FSp6qtASws #AAPL $GOOG $GOOGL $MSFT #A…
RickLejeune
30 Jan 15 19:07:25
iPhone's Sales Are Worth More Than Google's And Microsoft's Combined http://t.co/FSp6qtASws #AAPL $GOOG $GOOGL $MSFT #Apple #Investors
OM_freebies
30 Jan 15 19:07:06
#OptionsTraining Video: #Payoff #Diagrams http://t.co/cfo1SRTSld $GOOG $GOOGL $TSLS $TQQQ $XLV $XNRG $NKE $DIA http://t.co/wHd16kqIhj
Sara
30 Jan 15 19:02:19
Join me on tsū, is sharing social revenues with all of us. http://t.co/xycMWeldhM $LNKD $AAPL $GOOGL $GOOG $FB $YHOO http://t.co/ULxpR1zMEb
Stock Rocket
30 Jan 15 18:59:32
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/sVd7mrwWCj $DPM $FRAK $GOOG
royfberger
30 Jan 15 18:59:05
Logging into Option Millionaires LIVE chat NOW! http://t.co/NnbFy7etbX $GOOG $AAPL $VIX #stocks #daytraders http://t.co/JVvb8TzpDE
IH News Desk
30 Jan 15 18:56:42
$UGAZ News Updated Friday, January 30, 2015 9:11:48 PM $SLB $DXJ $GOOG $UNG http://t.co/8QSfYMCPOm
Rosner Stocks
30 Jan 15 18:56:39
$LUV Investor Opinions Updated Friday, January 30, 2015 8:59:25 PM $EPI $EWZ $GOOG $MCD http://t.co/OyQgitOPFZ
Stock Rocket
30 Jan 15 18:49:49
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/vJR8lXzozx $GPS $NSPR $GOOG
RB Options Scans
30 Jan 15 18:46:34
Nothin like after hours reversals $MTW $GOOG
Stock Hobbit
30 Jan 15 18:46:06
Logging in now to live stock chat http://t.co/v1eaRRes2Y $GOOG $AAPL $FB $EBAY #options #stocks #daytrading http://t.co/hZYfBm4ws9
Tradesight
30 Jan 15 18:40:57
Key #trading #stocks like $AAPL and $GOOG with buy and sell signals for Monday: http://t.co/HvJUWIVtfD
Tom Loffman
30 Jan 15 18:36:29
Biggest gainers today large caps: $AMZN 13.71% $BIIB 10.17% $AU 8.22% $CLR 6.42% $CVE 4.77% $GOOGL 4.74% $GOOG 4.67% $CNQ 4.40% $CXO 4.12%
Jens Krueger
30 Jan 15 18:18:22
RT @supertino: Apple's profit: $18B Google's revenue: $18B But $AAPL is just worth 2x $GOOG ¯\_(ツ)_/¯ @gruber @monkbent @neilcybart @asy…
lesvia garza
30 Jan 15 18:11:04
RT @GusFuentes_: @Poder_Mexico inicia. Sigan la cuenta y descarguen la #APK desde google play https://t.co/iYONa6JpRJ. #News #sports #econo…
Bradley
30 Jan 15 18:05:08
Will it survive? Find out here: http://t.co/RSegwJBryE $UPRO $GRPO $OCAT $IBB $HYG $ILMN $XON $ZIOP $GOOG $AAPL http://t.co/u40D65WKbE
Sara
30 Jan 15 18:02:53
Join me on tsū, is sharing social revenues with all of us. http://t.co/xycMWeldhM $LNKD $AAPL $GOOGL $GOOG $FB $YHOO http://t.co/wdVfOpZ8yo
The Stock Professor
30 Jan 15 17:48:19
Microsoft keeps Super Bowl ad secret; Mophie ends world: http://t.co/jUAttyKDw5 $AAPL $GOOG $PCLN $K
US Banking News
30 Jan 15 17:44:23
Google’s Strong-Buy Rating Reiterated at S&P Equity Research $GOOG http://t.co/ekg8d3BfXo
OM_giveaways
30 Jan 15 17:40:58
Learn stock technical analysis and charting. http://t.co/STnJTqyeL6 $AAPL $GOOG $JRJC $LIVE $INTC $TWTR http://t.co/875vyFTmNS
clayton
30 Jan 15 17:39:47
GOOG 534.52 Google Inc Class C $GOOG added to my watch list. Right now with GOOG I am watching the last price http://t.co/t9JMiKG2Oa
clayton
30 Jan 15 17:39:25
$GOOG GOOG 534.52 Google Inc Class C $GOOG stock added to my watch list. Right now with GOOG I am watching the last http://t.co/IW8lTvyLjE
Stock Market Basics
30 Jan 15 17:30:27
RT @10Xtrading: Stocks Tank on the Last Trading Day of January with Massive Monthly Declines http://t.co/uuq5YMuiDO $BHI $GOOG $SHAK $V
Stock Market Basics
30 Jan 15 17:30:16
RT @10Xtrading: Shocking News From Amazon And Google http://t.co/o4E1IqeEk8 $AMZN $GOOG
Otmane El Rhazi
30 Jan 15 17:26:41
Otmane El Rhazi in http://t.co/ev3N8zp09S , #Stock $GOOG Google Earnings: Strong Mobile Performance Backed By Pr… http://t.co/dotmvaScDm
Justin J. Lee
30 Jan 15 17:22:40
RT @businessinsider: Marissa Mayer made $700 million before turning 40 — here are 5 lessons from her incredible career $YHOO $GOOG http://t…
royfberger
30 Jan 15 17:22:07
Eye of the tiger, baby! $GOOG $PCLN $TWTR $FB $AAPL $EBAY $GM $DUST $BABA http://t.co/iPEJ5TWWIE http://t.co/YWYUkZtU3N
Ryan M Craver
30 Jan 15 17:20:10
Impressed by the number of cards now running in Google Now http://t.co/Bwc2qoisDV $GOOG
Sherilyn Balazs
30 Jan 15 17:10:10
Speculative trading rocks! http://t.co/o6PqlxZaOF $GOOG $PCLN $TWTR $FB $AAPL $EBAY $GM $DUST $BABA http://t.co/Igzs0UqdIH
The Stock Professor
30 Jan 15 17:08:15
Rise of the robots at AOL lead to job cuts: http://t.co/Xkn6GhtS9Z $AAPL $GOOG $PCLN $K
Stock Rocket
30 Jan 15 17:06:04
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/vJR8lXzozx $TRX $AAPL $GOOG
jim50
30 Jan 15 17:06:00
GOOG Gapped up +4.43 $GOOG Last Price 534.52 Day High 539.87 Day Low 515.52 Change +23.86 Volume 5,594,038 Tod http://t.co/YbuVro6Mr5
jim50
30 Jan 15 17:05:37
$GOOG GOOG Stock Gapped up +4.43 $GOOG Last Price 534.52 Day High 539.87 Day Low 515.52 Change +23.86 Volume 5,594,0 http://t.co/eSqix30TC8
Sara
30 Jan 15 17:04:44
Join me on tsū, is sharing social revenues with all of us. http://t.co/xycMWeldhM $LNKD $AAPL $GOOGL $GOOG $FB $YHOO http://t.co/Do7QdufOB2
royfberger
30 Jan 15 16:57:08
True balls. $AAPL $GOOG $INTC $MTW $CAT $X $C $CSCO $T $SE $WU $MU $WBA http://t.co/iSJgoPHA0z http://t.co/yLBDisaDPj
				
				
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.