Social network is reportedly investing in video streaming with an eye to launching a music service to take on Spotify, Apple, Google and Tidal.
Rewind just a few short years. The music industry was sick, if not dying. Napster had started the decline, free music for all, albeit illegally. With shrinking revenues and costly licensing deals only Apple was really making any money by selling its breakthrough iPod music player.
Spin on to 2015 and everything has changed. Apple Music just launched to challenge Spotify in the streaming music market, and everyone, from Amazon’s Prime Music to Jay Z’s Tidal to Google’s Play Music, is trying to get a slice of the resurgent market. Now could Facebook be attempting to join in too?
The social network has been making a concerted effort to push video content, recently citing billions of video views, and now a report from music industry site Music Ally suggest it is seeking deals with labels, first for a music video streaming service and later a straight audio service too.
It says Facebook wants to forge a monetisation strategy for music videos – something YouTube does well with both official and user uploaded videos of songs.
Should it manage to compete with YouTube for music video money, next in its sights might be Spotify, Tidal, and the recently launched Apple Music. Facebook’s trump card is that it’s already a social network, something the music streaming services are always trying to replicate in their own offerings, but with little success.
For Facebook, its business model is all about keeping users within its platform, using its services and providing fewer reasons to leave its environment. The same could be said for video and photo sharing.
Providing a music service would mean users don’t leave to go to Apple, Google or Tidal. The social network, a sponge for data, could then collect information on what users play, when, and how often, profiling their music tastes, and so adding to the wealth of personal information it already holds.
Part of Facebook’s existing partnership with Spotify, that allows users to sign into the music service using Facebook’s federated login, is about collecting data.That data can then be used to target ads on Facebook and using Facebook’s advertising network. A lot can be inferred from musical tastes that could be extremely valuable to advertisers. A music subscription service would also provide another important revenue stream for Facebook, independent of its screen advertising business, while adding credit cards to its user accounts ready for other paid-for services.
Streaming music is an important revenue source for the music industry as sales of discs have decreased and downloads are starting to falter. In 2014, 9% of worldwide digital music revenues came from ad-supported streams, and 23% frorose by 39%, making it the fastest growing revenue stream.
Spotify has been a pioneer in the space. Launching in 2008, it has proved that, in theory, the business model can work. In doing so, Spotify’s hard-won rights deals with music labels allowed others to swoop in and strike similar contracts. Next, Google and Amazon entered the market, then rapper Jay-Z arrived with Tidal promising better deals for artists, and finally Apple with its recently launched music subscription service.
Facebook declined to comment on the news, and while it could just be rumour and supposition pulled from crossed wires over ad deals, it would be more surprising if Facebook wasn’t looking at music services.
Meanwhile, as the rivalry between streaming services intensifies, Spotify is urging customers who paid to join its service through Apple to cancel their subscriptions. In an email to be sent to Spotify customers with iPhones, the company says if users pay through Spotify.com they can save money by stopping Apple from taking a cut.
If Facebook enters the market too things can only get steaming.