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
Stock Relay
30 Oct 14 08:57:47
$GOOG Prev Close Click Here: http://t.co/nzNqYsDYw5 Also See: $AXCG $FLY.V $GPRO $GDXJ ~
wininstocks2014
30 Oct 14 08:56:48
GOOG 548.1587 Stock Charts $GOOG Google Inc. Cl C (NASDAQ) Last Updated: 10/30/2014 10:56:56 GOOG Stock Chart http://t.co/DqX5QqOeHh
Stock Relay
30 Oct 14 08:54:33
$GS E.P.S. Click Here: http://t.co/LwyR7KyKFn Also See: $FFIV $ELRA $IG $GOOG ~
Chasing Stars
30 Oct 14 08:54:30
$GOOG Short Sales Click Here: http://t.co/SHU8Y3nGi1 Also See: $DECK $HALO $C $DECK ~
Consestimate
30 Oct 14 08:48:31
The Last Phone You'll Ever Buy: Google Demos New Lego-Style Smartphone. $GOOG, $MSI. http://t.co/C7D2gwypyj http://t.co/NoJpAii5aU
Consestimate
30 Oct 14 08:43:36
3 Top Stocks That Are Downright Cheap. $IBM, $MSFT, $GOOG. http://t.co/aWLzzJgIuf
Emylers
30 Oct 14 08:43:10
$GOOG Bid Click Here: http://t.co/6wo5ZsRbby Also See: $AMRN $INFY $MHYS $CSX ~
Investors Hangout
30 Oct 14 08:40:10
$GOOG Shares Click Here: http://t.co/2jgF3RoKd4 Also See: $JDST $WAG $DE $QCOM ~
Lauren Holmes
30 Oct 14 08:38:12
$GOOG how low it could go? Get our thesis here http://t.co/IhJaUAjPfb
Bobby Wilbert
30 Oct 14 08:36:19
$GOOG Julian Assange: Google Is Not What It Seems #WikiLeaks http://t.co/Ik0xek8POD
jim50
30 Oct 14 08:35:32
$GOOG Stock Message Board Click Here: http://t.co/qkjomj085D Also See: $RSP $XLV $ING $LNKD ~
Stock Relay
30 Oct 14 08:34:50
$GOOG Prev Close Click Here: http://t.co/Au5jNnSTfB Also See: $RSP $WMIH $XLP $DDD ~
Rosner Stocks
30 Oct 14 08:32:02
$GOOG Bid Size Click Here: http://t.co/x99Zcdj79O Also See: $FITX $YDLE $ABX $AMZN ~
OpenLink Software
30 Oct 14 08:31:25
RT @kidehen: $APPL $FB $GOOG summary stock price view: http://t.co/XzMwquXoaU. #LinkedData #Stocks #SemanticWeb #RDF #Microdata #SchemaOrg
Bidness Etc
30 Oct 14 08:30:55
#GoogleX To Develop #Nanoparticles For Early Disease Detection http://t.co/4HAvXX43MA $GOOG $GOOGL $NVS
Investors Hangout
30 Oct 14 08:29:50
$GOOG E.P.S. Click Here: http://t.co/DF8HAs2BRF Also See: $CSCO $MA $C $SBUX ~
BUZZ Just-In
30 Oct 14 08:28:11
Transaction costs for trading $GOOG with brokers, min: 0.049% max: 0.211% difference: 3x http://t.co/BAquZR7MJ4 #spreadbetting
Investors Hangout
30 Oct 14 08:27:39
DennyT: NEM Insider Disclosure $NEM $MO $GOOG $XLI $AMZN http://t.co/VlA61GMnGu
Trader News Daily
30 Oct 14 08:27:33
http://t.co/BAXuQqaQDC gave me a bonus for my new credit card. Awesome! $aapl $twtr $goog $ibm $baba $lnkd $siri $bac
Investors Hangout
30 Oct 14 08:27:26
DennyT: NEM Insider Disclosure $NEM $MO $GOOG $XLI $AMZN http://t.co/103DK0YgAP
Consestimate
30 Oct 14 08:26:03
New Players in Mobile Payments Are Going After Visa and MasterCard. $V, $AAPL, $GOOG. http://t.co/MHUwL6Zw9G http://t.co/yEFi6wTasE
Stock Relay
30 Oct 14 08:25:20
$GOOG Summary Click Here: http://t.co/kAxc07Y7ED Also See: $HYG $BMRN $MHYS $HGD.TO ~
Consestimate
30 Oct 14 08:24:39
The Wall Street Journal: Google in the crosshairs of EU’s new digital chief. $GOOG. http://t.co/wJVnZW3wR5 http://t.co/aWqIXgChhA
ValueWalk
30 Oct 14 08:24:17
FPA Capital Fund Q3 Letter To Investors http://t.co/P9fLmhSmSP $FB $GOOG $AAPL $ESV $PTEN $BHI $NFX $SM $ROSE $XEC
Stock Relay
30 Oct 14 08:21:59
$GMCR Change Click Here: http://t.co/yQjLRpfMXe Also See: $AMGN $GOOG $GOOGL $BBH ~
Kyle R Sharick
30 Oct 14 08:21:39
RT @lindachung321: #Mobilepayment wars - @Index's Marc Freed-Finnegan tells @TheStreet the one thing #mobile wallets need: http://t.co/N2X1…
Stock_Tracker
30 Oct 14 08:17:39
$GOOG Day High Click Here: http://t.co/s3wfesXnXd Also See: $CCO.TO $WFC $SSO $ELTP ~
Linda Chung
30 Oct 14 08:16:13
#Mobilepayment wars - @Index's Marc Freed-Finnegan tells @TheStreet the one thing #mobile wallets need: http://t.co/N2X1yhptwX $AAPL $GOOG
DennyT
30 Oct 14 08:15:07
NEM Insider Disclosure $NEM $MO $GOOG $XLI $AMZN Opinion Today,Parabolic SAR,Low,Company News,Making Some Nois http://t.co/xOhXQDy2zi
danrocks
30 Oct 14 08:12:29
$GOOG Open Click Here: http://t.co/PTKtlYyOcr Also See: $MO $OIL $GE $KO ~
Stock Relay
30 Oct 14 08:12:18
$GOOG Market Cap Click Here: http://t.co/2hrgyc39jZ Also See: $ABX $IWM $IBB $TQQQ ~
Scott Maizlish
30 Oct 14 08:11:25
RT @diana_olick: Real-time home sales numbers? #Google and @auction claim they have it. How? http://t.co/e6tQrtopMn $GOOG
DennyT
30 Oct 14 08:10:39
$GOOG Message Board Posts Click Here: http://t.co/DPxEiqowya Also See: $SMH $UUP $UVXY $DBA ~
Kadambari Kapoor
30 Oct 14 08:10:12
RT @WSJ: Google is designing tiny magnetic particles to patrol the human body for signs of cancer and other diseases. http://t.co/7FbEMIZ8N…
Craig Bujnowski
30 Oct 14 08:08:32
"Xiaomi is growing in a trajectory eerily parallel to that of Samsung" - @asymco $AAPL $GOOG http://t.co/gyMQR3xZHb http://t.co/HlLSNGD0Qp
Stock Forums
30 Oct 14 08:08:30
$GOOG Change Click Here: http://t.co/K8W0Ld08pp Also See: $FNV $AXCG $MO $MS ~
Rich Yudhishthu
30 Oct 14 08:08:22
Imagine what Google Plus could have been if it aimed to be a socialized version of $GOOG Reader
Quantpost Technology
30 Oct 14 08:06:29
$BIDU $FB $GOOG $GOOGL $IBM $TWTR News: "Today's Market: Tech Stocks Moving On…" http://t.co/ZC3HCsHGII Board view: https://t.co/lqCbjV8fhu
Seeking Alpha
30 Oct 14 08:06:26
Today's Market: Tech Stocks Moving On News http://t.co/jdTr8L5aCA $BABA $BIDU $FB $GOOG $GOOGL $IBM $TWTR
Louie
30 Oct 14 08:04:45
$SNY is not getting much love today. On a down day it would be much lower. $VIX $BABA $TSLA $FB $GOOG $AAPL $NFLX $LNKD $YELP
Stock Moo
30 Oct 14 08:02:03
$goog: Google in the crosshairs of EU’s new digital chief http://t.co/Sjeq7XtsfP
leahanne
30 Oct 14 07:59:45
$GOOG Shares Click Here: http://t.co/XgPOuAlxP3 Also See: $CLF $IYT $ANV $LNKD ~
BUZZ Just-In
30 Oct 14 07:58:09
Track curated news and tweets for multiple tickers- US Tech Giants http://t.co/QnTy4vuEs5 $MSFT $TWTR $AAPL $FB $GOOG
Jake13
30 Oct 14 07:57:17
$ACT Buy or Sell? Click here to find out if $ACT is a buy hold or sell. Watching these stocks. $GILD $GOOG $GS http://t.co/R68gStQoGT
4-traders.com
30 Oct 14 07:55:02
GOOGLE 'C' : launches Uzbek version of its service Maps http://t.co/As5dA98qSz $GOOG
Louie
30 Oct 14 07:45:43
I expect $GNW to drop to the weekly 200MA on the next dip (+/- $10.60) $RDN $MTG $AIG $AAPL $YHOO $TSLA $BABA $TWTR $GOOG $FB $BAC $VIX
EdwardsMartinezGroup
30 Oct 14 07:45:38
Learn from the best, trade with the best. Sharp accurate charting http://t.co/JOb1TwpdVp $FB $AAPL $GOOG $FSLR
Stock Forums
30 Oct 14 07:45:36
$GM Open Click Here: http://t.co/pknDS2D1Cn Also See: $GOOG $DBC $SMH $INCC ~
Vista Partners LLC
30 Oct 14 07:42:07
Tipalti and CAKE by Accelerize $ACLZ Advance Partnership With Richer, More Seamless Integration http://t.co/bEnvpAB78v #attribution $GOOG
ARK Web x.0
30 Oct 14 07:39:04
Lenovo completed acquisition of Motorola from $GOOG - Wants to challenge $AAPL and Samsung - http://t.co/uK9zFH2EO8
				
				
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.