The recent deal between Comcast and Pandora obviously applies just to the US market but signals a worldwide trend towards integration of voice-driven music streaming into TV.
There has certainly been a spate of announcements around voice-control for music streaming from the leading platform or service providers such as Amazon and Google, as well as home sound system specialists like Sonos and of course the big music streaming companies themselves, such as Spotify and for that matter Apple. This signifies how voice control has come to be seen as the killer app which will finally bring music streaming into the mainstream and drive more paid subscriptions. For Spotify uniquely there is the hope that it could at last bring the company into the black. (See Rethink TV Report out in January on Voice TV Remote control).
Be that as it may the Comcast Pandora deal is significant in being perhaps the first full integration of music streaming with a voice interface by a major legacy pay TV operator. It is typical of a pay TV operator deal in that they never have sufficient clout to get the terms they want from a market leader, so they always partner with a 2nd or 3rd placed player.
Pandora was already present on Comcast’s Xfinity X1 hybrid platform, but now has a new voice-driven UI as well as access to the streaming provider’s on-demand Premium and ad-free radio Plus subscriptions over the Internet via X1 for the first time. Pandora’s Chief Product Officer Chris Phillips pointed to explosive growth in music streaming on TV which has become a major competitive platform. Comcast’s Chief Product Officer Chris Satchell reckoned that a key factor driving music streaming to TV has ironically been the declining quality of the integrated speakers as the displays have become slimmer with less space to accommodate sound reproduction. As a result more homes now have separate surround sound speaker systems which makes the TV the best place to play music at high fidelity.
Even so this would still confine TV music streaming to a relatively niche market given that the majority of homes still lack high fidelity speaker systems in the home, with often the desk top PC being best endowed for sound reproduction. But the trend towards integration of streaming with video is clear enough, with voice control emerging as a key driver.
It was notable that when Apple’s commitment to spend $1 billion on original programming in 2018 came to light in August 2017 it was widely hailed as a move to nail Spotify at this stage rather than compete with the big two video OTT players, Netflix and Amazon. Apple after all is keen to narrow the gap in music streaming, having currently around 28 million subscribers worldwide compared with Spotify’s 53 million.
That analyst reaction was not quite right since Apple was also putting a stake in the ground towards becoming a major OTT video player rather than coming in with a big bang, seeking confirmation that it is generating some revenues and pulling in subscribers before closing the content spending gap further on the leaders.
It is true also that Apple’s investment is more in Spotify’s league at present given Netflix has pledged $8 billion for content in 2018 although just half of that for original programming. Amazon likewise is looking to spend $4 billion on original content next year, while we know that Hulu has spent $2.5 billion on all content over 2017. But it did signify how music streaming is becoming absorbed into the overall media content business rather than remaining as a separate field.
This brings us back to the music streaming, for Hulu in August 2017 announced a partnership with Spotify to include both services inside a single subscription plan. Initially it is true this bundle has been being targeted just at US students for $4.99 per month, matching Spotify’s existing student plan, but the companies say they will extend the service to the general population in the US and possibly elsewhere in 2018.
Meanwhile Amazon is further ahead and almost certainly a clear number three in worldwide music streaming, although it has crept up rather beneath the radar as it has not formally published customer numbers. But it is possible to give a good estimate of around 17 million by combining various sources, which would put it around 12.5% or one eighth of the global market. So far Amazon has concentrated its music streaming offensive in its four major markets for its Prime premium subscription, the US, UK, Germany and Japan through its two offerings, Prime Music and Prime Music Unlimited. In these countries it is probably number two to Spotify.
By contrast Netflix has so far eschewed music streaming just as it has live sports, having regarded it so far as a potentially loss-making distraction. It is certainly true that Spotify has yet to turn in a profit, although that was true of Amazon for some years and there are signs the investment could soon pay off for Spotify.
Alternatively it could still be acquired which might be the best option given the risk it could fall by the wayside as the big players pile in. Its financials are still mixed, with on the one hand its losses more than doubling to $568 million for the last financial year, on the other its revenues soaring by 33% to $3.03 billion while operating loss as a proportion of revenue decreased.
Overall though the data shows how expensive it is for a music streaming specialist to gain such ground. Spotify itself has recognized there is no future in remaining just a music streaming specialist and has been edging towards TV in various ways, notably through acquisition in March 2017 of MightyTV, a startup exploiting machine learning to generate lists of TV shows and movies. The aim partly was to help develop programmatic audio advertising, but particularly to create new video content incorporating the music streaming.
The UI is also a high priority for Spotify, which comes back to the voice angle. This is not just about TV, with a major step for all the major music streaming services being their incorporation within speaker systems from Sonos allowing users to control the service by voice commands via Amazon’s Alexa assistant. Full voice control of these systems for Spotify has just been enabled, following Amazon Music, Pandora, iHeartRadio, TuneIn Radio and SiriusXM.
Music streaming is particularly conducive to voice control given the relatively short average length of an item and desire by users to start playlists and sometimes then interrupt them or jump forward to another item on a whim. There is the hope on the part of operators like Comcast that it will help drive consumption of other content, as users become more fluent with voice control and eager to drill deeper within the content catalog to find items they may not otherwise have viewed.