Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?


Google Snags Songza, But Will Streaming Ever Be Profitable?

By  +Follow July 3, 2014 3:53PM
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 and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for goog
Jeff Frick
23 Nov 14 17:19:09
@googlecloud @dtuckerames @Workiva > Are social interactions the new norm for developers? http://t.co/NYEIX9Gsjf #GCPLive $GOOG #Google
Jeff Frick
23 Nov 14 17:17:43
@googlecloud @addvin > How large of a shift is the containerization paradigm? http://t.co/1hy7gXb9BS #GCPLive $GOOG #Google #docker
Jack Damn
23 Nov 14 17:16:14
The Battle Of The Big Techs http://t.co/l4oIKVYSG5 Charts & analysis by @fingraphs. $GOOG $AAPL $MSFT http://t.co/4LynFJN4BT
Jeff Frick
23 Nov 14 17:13:57
@googlecloud @sogrady @redmonk > Is there a ceiling to this growth w/ cloud? http://t.co/S2BwfXNJPm #GCPLive #theCUBE $GOOG #Google
Jeff Frick
23 Nov 14 17:12:45
@googlecloud @cmcluck > What does Kubernetes do differently? http://t.co/QMRJmSOKcM #GCPLive #theCUBE $GOOG #google
Jeff Frick
23 Nov 14 17:11:13
@googlecloud @SaaSpro @IDC > How do you tell who is winning the (cloud) marketplace? http://t.co/fMH4N770Eu #GCPLive $GOOG #theCUBE
Jeff Frick
23 Nov 14 17:06:04
@googlecloud @gregde > What was Google's approach to Cloud Platform? http://t.co/cMsuBmoN9R #GCPLive $GOOG #theCUBE
Jeff Frick
23 Nov 14 17:04:45
@googlecloud @lchen @fastly > What is the argument for cache? http://t.co/7BORQeHvNf #GCPLive $GOOG #theCUBE
Jeff Frick
23 Nov 14 17:03:31
@googlecloud @ericabrescia > Late To The Cloud Market, Advantageous For Google? http://t.co/WknrhX8KvT #GCPLive $GOOG @bitnami #theCUBE
Jeff Frick
23 Nov 14 17:02:19
@googlecloud @DaveBartoletti @johnrrymer > Was shadow IT the beginning of the downfall for IT? http://t.co/YVFfGKU6N1 #GCPLive #IDC $GOOG
CAL Entertainment
23 Nov 14 16:13:15
RT @FinanceTrends: Atari founder, @NolanBushnell @ Google: "The next 10 years will be a golden age of innovation". http://t.co/aAnSZpNVLh $…
maria m.
23 Nov 14 16:02:47
RT @DBiben: How to get rid of ads on Google: http://t.co/UL5lgGkHrH $GOOG http://t.co/xKE4tTOV4e
®مستشارك المالي®
23 Nov 14 15:57:23
#NYSE #DOW_JONES $AAPL $GOOG $FB $AMZN $PCLN #مستشارك_المالي اليوم الأثنين سيتم طرح فرص في #الأوبشن اثناء التداول كونوا بالموعد
Investors Hangout
23 Nov 14 15:41:15
jim50: GOOG Gapped up +1.45 $GOOG Last Price 537.50 Day http://t.co/qCROSwcwrQ
Investors Hangout
23 Nov 14 15:41:11
jim50: GOOG Gapped up +1.45 $GOOG Last Price 537.50 Day http://t.co/Gt26yTrCYM
23 Nov 14 15:38:41
RT @FinSentS_SP500: $GOOG:US European Parliament may propose Google break-up #GOOGLE INC http://t.co/xpX8SxGqaT #SP500
Colin Sebastian
23 Nov 14 15:37:11
.@b_judah @benparr And some jurisdictions would still like to punish $GOOG for innovation, and to protect inept management at legacy media
23 Nov 14 15:36:33
GOOG Gapped up +1.45 $GOOG Last Price 537.50 Day High 542.14 Day Low 536.56 Change +2.67 Volume 2,218,200 Toda http://t.co/xYrOlCEE5R
Lucky Jimmy
23 Nov 14 15:33:00
GOOG Stock up +0.50% percent Today $GOOG High is at 542.14 and the Low 536.56 with current volume of 2,218,200 http://t.co/Pt3SvcRGRF
23 Nov 14 15:28:19
$GOOG:US European Parliament may propose Google break-up #GOOGLE INC http://t.co/4pbkurHcap #NASDAQ
23 Nov 14 15:18:53
RT @DBiben: How to get rid of ads on Google: http://t.co/UL5lgGkHrH $GOOG http://t.co/xKE4tTOV4e
Joshua Payne
23 Nov 14 15:13:45
RT @StockAviator: If you want to trade like a pro, learn from the pros. http://t.co/30Wzoc9t1Q is here to help. 14-day trial available. $…
23 Nov 14 15:10:50
If you want to trade like a pro, learn from the pros. http://t.co/30Wzoc9t1Q is here to help. 14-day trial available. $HEMP $GOOG $MNKD
FinSentS SP500
23 Nov 14 15:09:58
$GOOG:US European Parliament may propose Google break-up #GOOGLE INC http://t.co/xpX8SxGqaT #SP500
Mark Trader
23 Nov 14 15:08:55
http://t.co/FOdvsRfk32 has 6 pro traders in their chat room. real-time trade alerts, and offer a 14-day trial. $GOOG $BABA $YHOO $TWTR
23 Nov 14 15:08:47
@_HenryChinasky Large stocks that trade with lots of volume and have tons of institutions in them. Premier firms like $GOOG
Nathanael Arnold
23 Nov 14 14:59:04
Why Rockstar’s Settlement With $GOOG Is Good for Smartphone Users http://t.co/3zi6XGb2tE via @wallstCS #patentwar
23 Nov 14 14:53:30
RT @Crash_1929: U.K. PM warns of looming global crash: http://t.co/ZOX6cLtvyV $AAPL $GOOG $MSFT #UK $VIX $SPX #FTSE #SMI #OMX #IBEX #CAC …
23 Nov 14 14:23:48
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $AMZN $MCOX $GOOG
K. Rudolph
23 Nov 14 14:09:46
Advertisers and browsers trying to make ads so annoying, you'll pay for #NoAdsInternet $Goog $YHOO Every site begins with jewelry commercial
23 Nov 14 14:09:46
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $ERBB $BBDA $GOOG
23 Nov 14 13:58:16
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $IBM $GOOG $AAPL
23 Nov 14 13:46:13
RT @GoogleFacts: Google's founders tried to sell to Excite for under $1 Million in 1999, but Excite turned them down. Google is now worth $…
23 Nov 14 13:45:14
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $CBL $GOOG $BLL
23 Nov 14 13:17:11
#Technical #Scans $GOOG $AAPL $BA $BBRY $NFLX $HOT http://t.co/fQ3UdkApKi #Setups #pullback #trading #Doji #Overbought #Oversold #zippers
Somkant Mishra
23 Nov 14 13:13:47
RT @ValaAfshar: It is projected that by 2016, Apple and Google will have combined cash holdings of ~ $300 billion. $AAPL $GOOG
Brett Fulton
23 Nov 14 12:57:54
Buy Google Stock Invest in $GOOG on eToro http://t.co/dj0RjDxg2J #stocks
23 Nov 14 12:06:09
“@CNBC: How to get rid of ads on Google: http://t.co/paHwtEwOFP $GOOG http://t.co/QSNMqzd8ot” / use Firefox #not
Celan Bryant
23 Nov 14 11:50:07
Commented on: "Google Class A Vs. Class C: Buy GOOGL, Steer Clear Of GOOG" http://t.co/7kP7NqlRND $GOOGL $GOOG
Anupam Palit
23 Nov 14 11:50:05
Some European legislators are preparing a draft resolution calling for the breakup of #Google's search from other commercial services. $GOOG
23 Nov 14 11:45:11
$GOOG high open interest range is 500.00 to 555.00 for option expiration 11/22/2014. http://t.co/sNZXcBfEgN
Carlita Clark
23 Nov 14 11:40:08
Buy Google Stock Invest in $GOOG on eToro http://t.co/FxYrUidhcV #stocks
Susan Schulte
23 Nov 14 11:35:22
RT @BrianSozzi: "The mobile phone is really the center of people's lives." @BestBuy CEO Hubert Joly $AAPL $GOOG
23 Nov 14 11:32:01
日本では普及しないかも $goog
23 Nov 14 11:30:17
$GOOG Max Pain = 535.00. Maturity = 11/22/2014. Previous close = 537.50. http://t.co/AX3TPQnURy
Seeking Alpha - All
23 Nov 14 11:22:47
Why Amazon Travel Has Little Chance Of Disrupting OTAs: Lessons From Google http://t.co/fVex8jzekZ $EXPE $GOOG $OWW $PCLN $TRIP $GOOGL
Antonio Costa
23 Nov 14 11:15:05
$GOOG Daily short sale volume over the last month http://t.co/uw2obnVxmX
23 Nov 14 10:48:50
The Android Vs. iOS Saga http://t.co/R7Ej9cQOAU $AAPL $GOOG http://t.co/pBzmBaHjpx
23 Nov 14 10:47:01
GOOG 537.50 Stock Charts $GOOG Google Inc. Cl C (NASDAQ) Any opinions on GOOG? Please reply to this post. Last http://t.co/U3EvZquKgb
23 Nov 14 10:37:06
Wonder how $GOOG will react to this “Google break-up plan emerges from Brussels” - http://t.co/p06ohrUPib http://t.co/kkSrawvq4V
By  +Follow July 3, 2014 3:53PM



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.