SUBSCRIPTION VS. ADDRESSABLE LISTENING:  The competitive landscape for streaming audio has basically settled into two camps.  One business model is subscription-based, with listeners going behind a paywall in return for an ad-free experience and other product enhancements.  The other model is advertiser-supported streaming, which is free for listeners and makes them Addressable to marketers.  With those definitions in mind, which type of streaming are most listeners choosing?  There’s not a ton of research on that question, which makes the attached Business Wire link worth the read.  It features research from a third party called MusiComms.  According to their study the biggest chunk of listening is Totally Free at 52% – meaning listeners who don’t buy subscriptions, downloads, CDs, etc..  This includes broadcast radio listening at 29%, internet-based audio streaming (mostly Pandora) at 15%, and internet-based video sites (aka YouTube) at 7%.  In a separate question 40% of all respondents said they would never pay more than they currently do for music.  Interestingly, another 40% said they would be open to paying for a music subscription – which is considerably higher than the current industry estimates of 20-25%.  This research frames out an interesting tug of war between two very different ways to consume streaming music.  So who will win?  My educated guess is that Addressable free listening will always be the preferred way to listen, but Subscriptions will continue to rise.

THE (LITERAL) DOWNSIZING OF PHYSICAL MUSIC SALES:  With the continuing surge in streaming music consumption at the expense of physical album sales (remember CDs?), you have to assume that music industry orgs must also change with the times.  It looks like that’s starting to happen at one of the major Labels according to the attached RAIN link.  Warner Music Group has begun offering buyout packages to 130 employees who work on physical music production and distribution.  WMG’s plan is to use the savings from this workforce reduction to “realign resources” towards the digital side of the house.  While nobody ever wants to see anyone lose their jobs, this one feels like a fair and orderly way to move WMG’s workforce from a legacy physical business to a digital model.  I predict Sony and Universal will do the same thing sooner than later, since all of the Labels are going through the same streaming transformation.

THE NEW RETAIL WORLD ORDER:  Full finders credit on this last article to Pandora’s Retail Head of Industry John Gregory.  It’s about the state of Retail in 2018 as predicted by Steve Dennis, a well-known Retail consultant and category blogger.  Mr. Dennis has highlighted 13 insights to keep an eye on in 2018, as described in the attached Forbes link.  I particularly love the following points; #1 retail isn’t dead, boring retail is, #6 the rise of private labels thanks to digital price shopping, #7 digital first retail, and #8 the death of the middle as the market gravitates towards both luxury and economy.  Right now it’s so easy for worn out retailers and skeptical investors to just blame Amazon and give in to the idea that traditional Retail is dying.  But as this article proves, there are tangible ways to change the game and actually thrive in this new Retail world order.

Have a great Wednesday guys!

CES IN THE REAR VIEW MIRROR:  Here we are again. It’s mid-January and the Vegas glitter is finally starting to settle after another whirlwind CES.  If you’ve never attended think of CES as an ultra-concentrated combination of top-to-top business meetings and over-the-top late nights.  I think Digiday has the best summary of CES’18 in the attached link.  As noted Google had the biggest presence – they were literally everywhere promoting their voice-activated AI as a counterpunch against Amazon.  The most notable absence was Snapchat who took the year off (insert “hmmm” here).  In between those two extremes were countless new tech advances in autonomous cars, IoT connected devices, Bitcoin ATMs, medical robots, and even a new smart toilet from Kohler.  All we needed was an ironic power blackout to complete the week of madness – oh wait, we had two hours of that on Wednesday.  The best quote of the week . . . “CES is good for business but bad for your soul”, which is perfectly visualized in the following tweet.  Enjoy!

AT THE INTERSECTION OF IoT AND SI:  One of the most prominent trends at this year’s CES is the growing importance of Audio as a marketing platform in the Age of Voice.  The logic trail goes something like this.  Most of the new IoT devices coming out these days don’t have screens.  So the more we interact with these devices the higher our percentage of non-screen time goes up.  With this as a backdrop, brands which traditionally rely on visual-based ad products (aka Video and Display) need to figure out how to reach consumers in an auditory environment.  The solution is something called a Sonic Identity (SI), and its importance is articulated by Pandora CMO Aimee’ Lapic in the attached AdWeek article/video.  Yes, audio ads have been around for the past 100 years.  But there’s never been a more important time for brands to figure out how to harness the audio medium than right now.

ZUCK GIVES US HIS BEST “ONE LAST THING”:  Remember when Steve Jobs used to close Apple’s Developer Conferences with the understated “one last thing” comment, and then drop an industry-changing bomb shell?  That’s sort of what Mark Zuckerberg did at the end of CES last week, with Facebook’s announcement that it would change the algorithm of its Newsfeed.  As described in the attached AdWeek link, FB will begin reweighting it’s Newsfeed to give individuals more postings from friends/family and less news and sponsor-driven content.  This is part of a New Year’s resolution Mr. Zuckerberg made to “fix Facebook”, by encouraging users to spend more time interacting with one another and less time with sponsors . . . even if that means spending less overall time on the sight.  This pivot came as a shock to third party publishers who rely on FB for most of their traffic, and even spooked investors who see this as a revenue limiting move.  As a result FB’s stock dropped 4% on Friday.  It’ll be interesting to see if Zuck’s newfound social conscience really does significantly change FB’s user experience for the better, or if it’s window dressing meant to make the industry feel better about the social Goliath.

Have a great Tuesday guys!

*** Editor’s Note:  I know it feels like we just got revved back up, but I need to put the DG on hold next week while I’m at CES.  Trust me when I say you don’t want me posting when I’m in Vegas!  But rest easy knowing the DG team will resume the blogging on Tuesday, January 16^th. ***

THE LOGAN PAUL INCIDENT:  Fair warning – this first story is really tragic.  However, it’s an important cautionary tale about the content pitfalls of paid Social marketing.  The attached AdWeek link explains an incident that occurred earlier this week involving a social influencer named Logan Paul.  Mr. Paul is a professional influencer with about 15M YouTube followers.  So when he decided to video a trip to Japan Walmart and Dunkin Donuts signed on as sponsors.  The problem occurred when Logan Paul posted video of a visit to Japan’s Aokigahara forest, which is known as a place where people come to take their own lives.  Unfortunately Logan Paul came across a body, made a light comment, and then posted the video.  Obviously this was a bad move for both Mr. Paul and his sponsors.  To make matters worse YouTube initially acknowledged that this video was vetted by a “human moderator”, who is supposed to review and approve content before it goes live.  Since then Logan Paul and YouTube have taken down the video and issued apologies.  But sadly this incident shows that Social media can never be truly brand safe.

FCC CHAIR + DEATH THREATS = NO CES:  Staying on dark topics for a minute, yesterday the FCC announced that its Chairman Ajit Pai was cancelling a scheduled fireside chat appearance at next week’s CES in Vegas.  While the Secret Service never elaborates on security issues, as reported in the attached Recode link, the cancellation is due to death threats made against Mr. Pai, which are related to his move to eliminate Net Neutrality last month.  Since CES attendees have the most to gain/lose from the NN changes emotions (and tempers) are running high with this group.  Unfortunately if a death threat caused Pai to cancel his appearance the whole industry has lost a chance for meaningful dialogue around this important topic.  Crazy times!

THE BEST BAD YEAR:  If you work in or call on any part of the US Auto Industry you know 2017 was a grind.  After seven straight years of unit sales growth sales declined this past year.  But as noted in the attached Auto News link, there was actually a silver lining in those stormy numbers.  For a level set in 2016 automakers sold 17.55M vehicles in the US.  During the early part of 2017 industry forecasts called for 16.5-17M annual unit sales, which would have been a huge buzz cut for the EOMs.  But thanks to a late year recovery (probably from replacement vehicle purchases related to Hurricanes Harvey and Irma), total annual sales clawed back to 17.25 units – so only a 2% annual decline.  Industry forecasts are for another mild decrease next year (another 2-3% drop), so maybe we’re just seeing a soft landing for an auto industry which had been on a seven year hot streak.  Glass half full, anyone?

THE DARK SIDE OF THE “AMAZON ECONOMY”:  Finally this week, I’d like to give you something to chew on over the weekend.  According to CNBC in the attached link, Amazon garnered 4% of all US Retail sales in 2017, and an astounding 44% of all e-commerce sales.  The primary driver of their growth is the ever-increasing percentage of e-commerce searches which begin on Amazon.  As you can see by the graphic below in 2016 over half purchase-based searches started on Amazon, and the 2017 # (which isn’t out yet) is sure to be even higher.  The cause-and-effect here is simple – if you start looking for things to buy on Amazon you’re way more likely to make the purchase on their platform.  While this is terrific for Jeff Bezos and the gang, what does this mean for the rest of the commerce-sphere?  We know competing retailers are getting killed, with over 6,000 B&M store closings in 2017 and another 4,000 closures expected in 2018.  But what’s even more worrisome is the impact this the trend is having on product manufacturers.  With more and more purchases concentrated on Amazon, manufacturers are basically forced into participating in their Marketplace platform.  This is creating a phenomenon Seeking Alpha has deemed the Amazon Economy in the attached link.  It’s a pretty scary picture of total Retail dominance by one company who gets to set the rules to benefit them while blocking would be competitors.  This is a fairly long article, so maybe save it for when you have 20 extra minutes.  Then maybe you’ll think twice before telling Alexa to add that next item to your Amazon shopping list.

Have a great Friday guys.  Be back the Tuesday after MLK Day!

SIGNS OF A SPOTIFY IPO:  Spotify was in the news on two fronts yesterday.  First word broke that the streamer started the filing process with the FCC for an IPO which could happen by late Q1.  It still appears they’ll try to execute the largest ever “direct listing”, which means existing investors will sell their pre-public equity – but that won’t raise any new capital for Spotify.  This is so unusual that no modern tech company has ever direct listed.  Assuming this goes through the market will finally get a look under the hood at Spotify’s financials, including their cash burn rate (estimated between $300-400M annually), and the percent of listeners who are subscribers compared to addressable ad-supported listeners.  This will also give the Street a chance to price Spotify’s valuation correctly.  Recent private pre-IPO trade deals have been pegged as high as $19B (which seems crazy high).  I guess we’ll all know their true market cap soon enough.  RAIN has the details in the attached link.

AND ANOTHER LAWSUIT:  Staying on Spotify for the second story – RAIN is also reporting a new $1.6B lawsuit filed against Spotify by a publishing group called Wixen.  According to the attached link, Wixen’s lawsuit alleges that Spotify used a third party called the Harry Fox Agency for publishing rights to Wixens’ artists’ music, but that Harry Fox didn’t have the legal authority to offer those rights.  While it’s highly unlikely that Spotify will have to cough up $1.6B in this case it’s another example of the downside of Spotify playing fast and loose with the content it uses, and the resulting consequences.  It’s also possible that this lawsuit, and the handful of other unresolved suits, are the reason they’re considering a direct list IPO.  Because many institutional investors would be squeamish about having a stake in a business with mounting legal exposure.

BEATING YOUR RISK BIAS:  If you’re a regular reader of the DG you know Elon Musk is one of my business idols.  I love the guy because he’s one of the few dreamers who’s audacious enough to turn big ideas into reality.  This begs the question how does he do it?  The answer, it turns out, isn’t what Mr. Musk does, but what the rest of us don’t do.  The attached Inc.com link describes a 2012 Wired interview with Elon Musk in which he explained the motivation to launch (literally) Space-X.  According to Musk most of us have a “tremendous bias against taking risks”, and instead default to “optimizing our ass covering”.  In the aerospace industry the default mode was to build upon the rocket systems that were designed in the 50s and 60s.  Can you imagine how outdated that tech must have been by 2010?  But nobody was willing to stick their necks out to scrap the rockets of yesteryear and start over with a new approach . . . until Elon Musk.  So Space-X went about breaking every space rule in the books.  They bought used rockets from the Soviet Union to keeps costs down, they recycled parts on flight after flight until they had a reliable space transport, and they floated launch/landing pads in the ocean to have moveable touch down sites.  Fast forward just six years and you have a proven space company who’s more nimble and cost efficient than the rest of the industry, and will eventually beat out NASA as the first to send a human to Mars.  Pretty impressive stuff for a guy who was just trying to defy his bias against risk!

Have a great Thursday guys!

Happy 2018 everyone!  Okay, I know it’s January 3^rd, but it’s my first DG post of the year so indulge me.  To kick things off I’m featuring three prediction-type articles on things to look out for in 2018 . . .

INDUSTY TRENDS TO KEEP AN EYE ON:  First up is a set of macro What If’s for marketers, as posed by the WSJ in the attached link.  There are some predictable questions about the impact Amazon’s burgeoning ad business will have on the industry and whether or not Snapchat can regain its footing.  Nielsen and WPP are under the microscope with questions about how their respective business models will change to keep up with market demands.  And then there’s an unusual question posed about the impact Publicis’s new AI platform called Marcel might have on the agency model.  You may remember Publicis decided to entirely sit out Cannes in 2018 and use those savings build Marcel.  So it will be interesting to see what benefits come from that investment.  Needless to say, there’s plenty to watch for in 2018.

DIGITAL AUDIO DEEP DIVE:  RAIN is also out with set of 2018 predictions which are more focused on the digital audio marketplace.  For the attached article they polled about 20 industry experts for their opinions on a variety of ideas.  Hot button topics include Podcasting, Smart Speaker/IoT integration, and the financial benefits of streaming to artists and their labels.  On that last point I thought the following quote for audio consultant Paul Goldstein was telling when he said, “In the boardrooms of record companies, FM radio’s audience hasn’t just lost some of its promotional appeal, it’s becoming an impediment to label revenue growth. The collapse of music sales (CDs, MP3s) and rise of streaming revenue means a non-monetized FM radio listener is less valuable to labels.”  Bottom line . . . in 2018 expect streaming to be even more of a priority for labels than broadcast radio, because that’s where their bread is getting buttered.  I say bring it on!

AGENCY BLUES:  One final thing to watch out for in 2018 is the mounting set of challenges facing traditional Agencies and their parent Holding Companies.  AdExchanger does a good job of breaking down the pain points in the attached link.  The Agencies’ problems include declining budgets (thanks to the lovely phenomenon of zero-based budgeting), automation replacing humans’ billable hours on the buy side, and the trend of clients in-housing more and more of their marketing work.  There’s also pressure from business consultancies (aka Accenture, PwC, etc.), who are replacing traditional agencies with some bigger brands, and transparency demands from clients who are scrutinizing every penny their agencies bill them for services provided.  Of all the players in the marketing ecosystem, Agencies/HCs may find themselves in the biggest squeeze during 2018.

Hope this post gets you in the right frame of mind to tackle 2018.  Time to get after it!