Uh Oh! Music Industry Hit Hard by Boost in Online Pirated CD Sales

Written by Hannah Karp — Even in the digital era there are plenty of music fans who still buy old-fashioned compact discs for more than $10 a pop. But the money that shoppers have been spending on CDs lately hasn’t necessarily been going to the artists and record labels who created the music.

In the latest challenge for the battered music industry, pirates are flooding Amazon.com Inc. and other online retailers with counterfeit CDs that often cost nearly as much as the official versions and increasingly are difficult to distinguish from the real goods.

One major record company said that in some European markets its direct-to-consumer CD sales were flat, while its Amazon account sales were down 17% or more this year due to counterfeits.

Earlier this month, the American Association of Independent Music alerted its indie-label members about Chinese pirates who have been selling knockoff CDs on Amazon for slightly less than the cost of legitimate albums, bringing illicit copies to market within about two weeks of an album’s release date, and sometimes getting them featured in Amazon’s “buy box.”

Although CD sales accounted for only about 13% of revenue for record labels in the U.S. for the first half of 2016, they accounted for nearly 40% of global revenue for the $15 billion recorded music industry last year, and still make up the bulk of sales in top music markets including France, Germany and Japan, according to the International Federation of the Phonographic Industry.

In late August, the Recording Industry Association of America launched a study to determine the severity of the problem.

Starting with Amazon due to its size, the record-label trade group’s investigators searched for music on the site in a range of categories, from new releases to greatest hits, and placed orders for the CDs that came up in the top search results for each type of album. Of a total of 194 CDs delivered, 44 turned out to be counterfeit—including 18 counterfeit CDs in orders that were fulfilled by Amazon itself, not third-party sellers.

Greatest-hits albums were the most likely to be fake, with 28 of the 36 greatest-hits collections in question proving illegitimate.

Brad Buckles, the RIAA’s executive vice president overseeing antipiracy, said Amazon expressed a desire to help solve the problem after hearing of its survey results this month.

“Amazon should not be playing host to illegal items that would normally be found on the black market,” he said.

Amazon has “zero tolerance for the sale of counterfeits,” said an Amazon spokeswoman, and is “working closely with labels and distributors to identify offenders, and remove fraudulent items from our catalog. We are also taking action and aggressively pursuing bad actors.”

While counterfeiters have been burning knockoff CDs for decades, the problem has intensified for record labels during the past 18 months as more CD buyers shop online. Unlike today’s sophisticated knockoffs, in the past, fakes primarily were sold on the streets, cost much less and often sported photocopied cover art and other obvious signs of phoniness.

Counterfeit sales are an issue for all kinds of retailers who sell their goods on Amazon, not just record labels. Earlier this month Apple Inc. filed a federal lawsuit against a New Jersey company selling counterfeit Apple-branded chargers and cables on Amazon that risked overheating or catching fire. Apple said in the complaint that it had discovered the fakes by ordering what appeared to be Apple products and discovering that the company hadn’t produced 90% of what it received.

Part of the problem stems from the way Amazon manages inventory in warehouses across the country to keep a wide spectrum of products in stock, allowing third-party sellers to pool their inventory with supposedly identical items supplied by official sellers, all of which can end up sharing the same bar code and shelf space.

For the music industry, the phenomenon is just the latest blow to CD sales, which began declining in 2000 as fans started sharing music online on sites such as Napster. Big-box retailers sent revenues down as they discounted CDs to lure shoppers in for bigger-ticket items. Some fans began buying digital albums and singles instead when Apple opened its iTunes Music Store in 2003.

In recent years, sales of CDs have fallen less quickly than sales of digital downloads, which have become less attractive compared with streaming services such as Spotify AB and Apple Music offering 40 million digital tracks for $10 a month.

For some superfans and collectors, CDs remain attractive because of their artwork, liner notes and, some say, better sound quality.

In a letter to the U.S. trade representative earlier this year, the RIAA said it had traced a large number of the counterfeits on Amazon to a CD manufacturing plant in China. “The artwork, packaging and inserts are carefully copied in fine detail. The untrained eye would not even be able to identify them as counterfeits,” the RIAA’s letter said. Russian counterfeits, by contrast, carefully copy the exterior packaging and artwork but can be “sloppy” when it comes to interior packaging, with Russian-language inserts and no effort made to mimic, for instance, various codes printed on the reverse side of the discs themselves, the letter said.

Shoppers, however, can’t necessarily tell where the CDs sold on Amazon are made before they receive them because foreign sellers often mask their location with U.S. addresses on the site, the RIAA found.

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AT&T Purchase of Time Warner Likely to Face Tough FCC Review

Written by John D. McKinnon and Thomas Gryta — Time Warner’s licenses from the Federal Communications Commission could prompt an agency review of its deal with AT&T. AT&T Inc.’s blockbuster acquisition appears likely to face a full-scale review by the Federal Communications Commission because Time Warner Inc. holds dozens of licenses from the agency, experts and people involved in the deal said.

An FCC review—focusing on whether the deal is in the public interest—would subject it to a broader and potentially tougher examination than the antitrust review that already is expected by the Justice Department.

The $85.4 billion deal, agreed upon Saturday, involves only a single FCC broadcast television license, for an Atlanta station owned by Time Warner. That led many on Wall Street and in Washington to speculate that an FCC review could be avoided if that particular license is sold.

But FCC licensing records also show dozens of active satellite, wireless and radio licenses held by Time Warner operations including HBO, CNN and Turner Broadcasting. The licenses themselves say they cannot be transferred without permission of the FCC.

In an interview on Sunday, AT&T Chief Executive Randall Stephenson said he expected FCC review of the deal. “Avoiding any kind of regulatory review is always a benefit,” Mr. Stephenson said. “But we aren’t naive. We aren’t thinking that that won’t happen.”

Some concerned lawmakers already have started pushing for an FCC review.

“As the chief federal watchdog for telecommunications, the FCC should be unleashed on this merger to protect consumers,” Sen. Richard Blumenthal (D., Conn.), a member of the Senate antitrust subcommittee, said on Wednesday.

Although the FCC’s mandate is to regulate U.S. airwaves, it has used past merger reviews to impose conditions on other parts of the industry. For example, the FCC required AT&T to further build out its broadband network when it blessed its $49 billion purchase of satellite-TV provider DirecTV last year.

AT&T could seek to delay or even avoid FCC oversight, for example by getting rid of the Time Warner licenses, some experts said. Jeff Bewkes, Time Warner’s CEO, said on Sunday that owning the local Atlanta station was “not really necessary.”

While sales of broadcast TV stations or cellular spectrum are closely scrubbed, the transfer of satellite licenses such as those used by CNN or HBO historically has required only pro forma review by the FCC, said Christopher Yoo, an antitrust expert at the University of Pennsylvania.

So far, the company hasn’t said it is planning to dump the licenses. AT&T said it is still reviewing “which FCC licenses, if any, will be transferred to AT&T” from Time Warner. It acknowledged, however, that “to the extent that one or more licenses are to be transferred, those transfers are subject to FCC review.”

“One way or another, I expect the FCC to be very engaged in evaluating the competitive concerns with this deal,” said Gene Kimmelman, the president of high-tech public-interest group Public Knowledge and a former Justice Department antitrust official.

AT&T and Time Warner have played down concerns the deal wouldn’t get regulatory approval. The companies have argued that prices won’t rise from the combination and the merger will bring new competition to the cable television and advertising markets.

However, shares of Time Warner are trading at a wide discount to AT&T’s takeover price, suggesting Wall Street is worried about the transaction closing.

Analysts at FBR & Co. said it was crucial for AT&T to avoid an FCC review as the combination “would have a hard time getting through the FCC, which has a public interest standard that is loose and subject to political influence and has no real timetable.”

FCC Chairman Tom Wheeler has sought to bring more competition to broadband and other services where local cable companies often dominate, but he has also taken a tough stance on both consolidation and regulation of the telecom and cable industries.

Multiple people close to Mr. Wheeler said he may stay in the chairmanship role well into 2017 if Hillary Clinton wins the White House. But Mr. Wheeler’s tenure might not stretch as long as a potential FCC review of the deal.

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Amazon crashes Apple's Exclusive Party with Huge Garth Brooks deal

Written by Tim Ingham — You could have set your watch by it. Exactly one week after the US launch of Amazon Music Unlimited, the online retail giant has shelled out the big bucks to lock in a major artist exclusive.

The best-selling solo artist in US history, Garth Brooks, is now available to stream exclusively on Amazon Music.

His catalogue will appear across the three price tiers of the Unlimited service: $3.99-a-month locked to the Amazon Echo speaker; $7.99-a-month for existing Amazon Prime Members; and $9.99-per-month for non-Prime members.

Brooks has been a long-term holdout from streaming services including Spotify, but was rumored to be shopping an exclusive $30m deal for his catalogue earlier this year.

Apple was believed to be first in line, but it appears Amazon may have outbid its rivals. Or maybe Brooks just felt the love.

Amazon Music Unlimited will be the official sponsor of Garth Brooks current record-breaking tour, which will go worldwide in 2017.

“It is a joy to work with a company that is all about the customer when it comes to service, and all about the music and its creators when it comes to the music,” stated Garth Brooks.

“I applaud Amazon on their commitment to quality and thank them for this opportunity.”

Amazon Music Unlimited subscribers can stream Brooks’s latest single, “Baby, Let’s Lay Down and Dance,” from his upcoming new studio album, Gunslinger (Pearl Records, Inc.), in addition to Diamond-selling album, The Ultimate Hits and the two-time Diamond-selling album, Double Live.

All songs on Double Live will also be available on Prime Music, the limited-catalogue tier which is free to Prime members.

More music from Brooks’s catalogue will be added to Amazon Music Unlimited later this year.

“This is a landmark moment for both Amazon Music and Garth Brooks,” stated Steve Boom, VP of Amazon Music.

“Garth Brooks is a legendary country music superstar who continues to shatter industry records and amaze fans three decades into his career. We are honored to make his music available for streaming for the first time ever, exclusively on Amazon Music.”

Garth Brooks has received seven Diamond awards for seven individual albums from the RIAA for selling over ten million units each.

Apple Music has locked down limited-window deals with artists such as Drake, Dr. Dre, Frank Ocean and Chance The Rapper – while TIDAL has scored exclusives to varying degrees with Kanye West, Lil Wayne and Rihanna.

TIDAL remains the only platform on which users can stream the catalogue of Prince and Beyonce’s latest LP, Lemonade.

In August, Universal Music Group CEO Lucian Grainge instructed his label heads to stop signing single-service exclusives following the simultaneous arrival of Frank Ocean’s Endless – a UMG-issued album – and Blonde, which the artist released himself, on Apple Music.

MBW sources told us that Grainge wasn’t only motivated by the Ocean situation, but more due to the dangers of locking out Spotify from a release plan.

The Swedish service, which is yet to announce any exclusives of its own, has more than 100m unique users around the world, compared to Apple Music’s 17m subscribers.

Some in the industry suggest that Katy Perry’s decision to exclusively release her comeback single, Rise, as a two-week Apple exclusive thwarted its chances in the mainstream charts.

Perry’s track, another UMG release, was largely ignored by Spotify’s key playlists, which hurt its performance worldwide.

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Are Streaming Music Services Really the New Record Labels?

Written by Jonathan Robinson for Musictank — In the wake of the release of so many streaming exclusives from high profile artists like Frank Ocean and Beyoncé, it looks to some as though streaming services are poised to further subvert the old media status quo by positioning themselves in an increasingly label-like role.

Much has been written over the course of this year about exclusive releases on streaming platforms, with Frank Ocean’s Blond the latest of a number of high profile, profitable exclusives, with Beyoncé, Kanye West and Rihanna, among some of the industry’s biggest-selling artists carving exclusive deals on services such as Tidal and Apple Music.

Back in 2014 our Artist Economics of Streaming think tank debate heard from a stellar panel including Billy Bragg, Spotify’s Mark Williamson and Beggars’ Simon Wheeler. Session chair, Keith Harris, asked whether Spotify was, in effect, replacing much of what record labels traditionally do, in particular, floating the idea that streaming platforms might morph into a distributor-turned-producer model, akin to Netflix/ House of Cards.

Fast forward to 2016, this in hindsight was perhaps a prescient question, given how much more label-like some of these streaming services have become, not least in their ability to woo top-selling artists’ exclusives.

Comparisons are often made between the release strategies of the film and music industries, whose approach to windowing new releases is significantly different. The former is often hailed as having been highly successful in its ability to control and monetise each release stage and format in a way the music industry hasn’t itself managed.

Of course the film world’s single biggest advantage is in having a primary release format that is a ‘live’ public experience – a cinematic screening – which holds sway over a procession of subsequent release platforms and formats, typically (and in order of maximum return) DVD; pay-per-view; video on demand; broadcast TV.

Such has been the success of this strategy that despite the onslaught of piracy, cinema audience figures in the UK have remained strong over the past 25 years, partly encouraged by innovations in the cinematic experience, with huge investment in digitisation radically improving how films look and sound. Without that windowing of cinematic releases, thereby guaranteeing sustained demand for the cinema experience, that investment would likely not have happened with audiences drifting away, to consume film in other potentially less-profitable ways.

Enter Netflix, and more recently, Amazon Prime who now challenge that model, destabilising the status quo of the ‘old media’ distribution model, with same-day, multiple format release strategies, and with content in which they’re made massive financial investment…Netflix’s £100m royal biopic The Crown and Amazon’s £160m investment in the BBC’s Top Gear team appear to dwarf Apple Music’s $19million investment in Drake’s Views release. . .

Granted, Apple worked with Drake’s labels to unleash what was a massive marketing campaign – traditionally a core label function, not an end-to-end label service, but could this be the start of services such as Apple Music, Deezer, Spotify, Tidal and others making further land grabs in the label space, particularly when looking at current speculation on further consolidation between rival platforms?

Should Spotify secure a deal with SoundCloud, this would see a near-perfect alignment of two digital platforms, fusing one that’s made much of it’s artist-friendly ethos with another boasting a 125m+ catalogue, a large chunk of which is from emerging, independent artists.

Not for the first time, speculation of this possibly signaling the end of the label as we know it are, of course, extreme, however these new routes to market are heaping pressure and increased scrutiny on label business models and their continued evolution in light of technological advances, recently articulated in Bas Grasmayer’s Hypebot post, here.

But this market disruption does highlight the music industry’s disjointed approach to release strategies, not all of which appear to be for long-term benefit. Contrast Adele’s windowing of 25 that favoured locking out streaming services for a period with a physical release, with Drake’s Views Apple Music exclusive, both potentially frustrating consumers who have become pawns in the battle for streaming supremacy, at a time when simply converting the average ‘three-CDs-a year-buying-joe-public’ into a £120 a year streaming service subscriber has been a continued uphill climb, albeit one that appears to have found its stride. But at least these were time-limited exclusives, unlike Tidal, some of whose exclusives have remained within its walled garden of subscribers, frustrating a music-buying public, before leaking onto Torrent sites… So just at a time when mass market streaming really is starting to gain some traction, we further alienate the customer…

But at least these were time-limited exclusives, unlike Tidal, some of whose exclusives have remained within its walled garden of subscribers, frustrating a music-buying public, before leaking onto Torrent sites… So just at a time when mass market streaming really is starting to gain some traction, we further alienate the customer…

The other loser in this arms race is new music. What perhaps gets lost in the hyperbole of advocates of disintermediation is that whether talking about a Netflix or an Apple Music, although their levels of investment in talent are undeniably huge and impactful, the majority of that investment goes to talent that has already cut through; talent that has been nurtured and developed; talent that’s now at the top of its game… and up until now, typically thanks to the investment risk born by ‘traditional’ core industry, be that film, TV or music.

What happens next is anyone’s guess, but for music’s sake, continued mutual co-existence between labels and digital platforms has to be infinitely more preferable than the destructive short-termism of tech-led exclusives.

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New NBC show uses Spotify Streams to Pick Next Big Star

Written by Tim Ingham — Remember The Stream – the Norwegian TV talent show backed by all three majors which promoted or kicked out amateur contestants based on their Spotify rankings?

It's coming to America. . . in a big way.

NBC has snapped up exclusive rights to the show, which it says will feature music industry titans working together to uncover the next superstar artist.

Question 1: Who are these televised ‘music industry titans’?

We don’t know yet, but going off the show’s Nordic forefather, it’s likely to be well-known A&R execs from Universal, Sony and Warner.

How does it work?

Explains an NBC press release: “Everyone will be able to upload their video to The Stream online platform, where it instantly becomes available to the public.

“Once the performance is online, it’s up to users to spread, share and stream their favorite music. All musical talent can participate – whether they are a solo singer, rap-duo or electronic group.”

From there, the 100 most streamed musicians are invited to a showcase where they perform in front of The Stream’s music biz judges – who then choose 30 acts to join them at an A&R bootcamp.

Out of the 30, each major label ‘titan’ will choose and sign their three favorite artists to a record deal – ie. nine record deals in total – before the live weekly shows begin.

The big twist: After these nine finalists perform on weekly live TV shows, audiences ‘vote’ for their winners and losers based on the total number of streams the acts receive.

The most streamed artists stay in the competition while the least streamed risk eviction.

These all-important streams will probably be collected on Spotify… but it’s no sure thing.

After our last story, the makers of the Scandinavian show were very keen to express there was no official link between their programme and Daniel Ek’s service – despite Spotify being explicitly featured in their pitch video.

A spokesperson for Norway TV 2 told MBW: “The deal with Spotify is a non-exclusive one in the sense that the music from the show can be made available through all streaming services, such as Apple Music and Tidal, as well as Spotify. This is up to each label to decide.

“There are nothing in the contracts between Spotify, broadcaster TV 2, production company Monster and the record labels that restricts where songs from the contestants can be made available.”

“‘The Stream’ brilliantly uses technology and social media to draw music lovers in and make them a part of the process,” said Paul Telegdy, President, Alternative and Reality Group, NBC Entertainment.

“We’re excited to discover talent in this modern way and connect the best artists with the industry’s top starmakers.”

NBC claims that the show ‘goes where no television talent competition has gone and speaks the language of our generation’.

Based on a successful Norwegian format, “The Stream” is produced by Universal Television Alternative Studio in association with Monster, TV2, Nordic World and Little Hill.

The deal was packaged by Steve Wohl at Paradigm.

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Why is AT&T looking to get into the music business?

Written by Claire Atkinson — AT&T Entertainment Group CEO John Stankey’s phone is ringing off the hook.

We hear the telecom giant is in big-time acquisition mode and is focusing its efforts on the music business.

Sources tell On the Money that the company, which owns DirecTV, is working on a plan to get much bigger — whether that means signing more artist partnerships or buying a major music label or perhaps even considering a run at radio giant iHeart is anyone’s guess.

AT&T was taking a look at Twitter, but like all of the often-mentioned potential suitors it didn’t move ahead with a bid.

“All the tech companies are trying to figure out the entertainment space,” said a music industry source.

The former Ma Bell has had a few deals in the recent past with Live Nation, which is about to be spun out of Liberty Media.

Taylor Swift’s deal involves sponsorship backing in return for exclusive content on AT&T’s services, along with an appearance during the Super Bowl weekend.

AT&T has also been floated as a possible bidder for Time Warner.

Expect to hear AT&T steal Samsung’s heat in the music space in the months ahead. Samsung had exclusive deals to release Rihanna’s “Anti” last year.

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Judge’s decision leaves music business up in the air

Written by Edward Woodson, for TheBlaze — In mid-September, a federal judge in New York made an abrupt and highly controversial ruling that will impact millions of businesses across the country.

During a routine procedural hearing, the judge overturned decades of industry practice involving the licensing of musical rights.

The target of the judge’s ruling was a recent Department of Justice decision regarding the two largest collectives of the music industry – ASCAP and BMI.

Millions of businesses (from restaurants to night clubs to radio stations to retail stores) purchase licenses to play music through ASCAP and BMI.

However, due to a history of anticompetitive abuses, ASCAP and BMI operate under antitrust consent decrees with the Department of Justice. These consent decrees permit ASCAP and BMI to maintain their monopolies, but include restraints that protect consumers from monopoly pricing.

Over the past several years, ASCAP and BMI have undertaken a campaign to relax the anticompetitive protections of the consent decrees. Despite record revenues, ASCAP, BMI, and their largest music publisher members know that without these market protections, their market power could generate higher fees on businesses.

ASCAP and BMI took their case to the Department of Justice in 2014.

In addition to relaxing the anticompetitive protections of the consent decrees, ASCAP and BMI also asked DoJ to change the way music has been licensed for decades. Specifically, ASCAP and BMI asked DoJ to move to what is called fractional licensing – an approach that would require a license from every owner of a song. While this approach sounds somewhat reasonable, in practice, it would prove impossible. A business like a restaurant or a retail store must license millions of songs to protect itself from copyright infringement claims. Since the average song has several owners, fractional licensing would require businesses to license millions of the same rights multiple times over.

Fractional licensing would not only ground the market for music licenses to a halt, it would expose millions of businesses to a high risk of copyright infringement. There is no plausible way that a business can identify who owns what, much less, who owns what share of a work. This would leave many businesses unsure if they had secured the proper rights and leave many open to massive infringement liability.

Just as bad, the added exposure to infringement liability would promote the same troll-like behavior that has invaded the world of patents. Infringement would be used as leverage to extort higher and higher ransoms from businesses of all shapes and sizes.

Following more than two years of exhaustive review, in August, Justice determined that the marketplace needed to preserve these protections, and opted not to change the consent decrees. Further, Justice clarified that fractional licensing is not permitted under the consent decrees.

This was a monumental loss for ASCAP and BMI, and the two organizations immediately undertook a campaign to undo DoJ’s decision. ASCAP ran to its allies on Capitol Hill, and BMI ran to the federal court for the Southern District of New York, which has jurisdiction over both consent decrees.

It was no accident that BMI took the lead in the courts. The judge overseeing the BMI consent decree has traditionally proven friendlier to the monopolist than the judge overseeing the ASCAP consent decree.

The venue shopping paid off.

In an initial procedural hearing, without the benefit of any testimony, the BMI judge issued his decision to overturn DoJ’s decision on fractional licensing. To say this judge’s actions were questionable is an understatement. Not only was there no testimony on the merits, the fact the judge issued a six page written decision within the hour, suggested the whole event was pre-packaged.

Most industry observers expect that the Department of Justice will not only appeal this decision, and will very likely win on appeal. Beyond the clear prohibition of fractional licensing in the consent decrees, which both ASCAP and BMI agreed to, all legal precedent supports DoJ’s position.

Unfortunately, millions of businesses are left in limbo in the meantime.

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Malware Ads pop up on popular Music Streaming Service

Written by Francis Navarro — With this extremely connected world that we live in now, streaming music services are a great way to listen to a seemingly endless selection of songs and albums we could enjoy whenever and wherever.

Open a music service's mobile app or desktop software and off to musical wonderland you go. Most streaming music sites even have free versions, allowing music lovers to access a wide library of tunes without cost.

It's not entirely free, of course, because in exchange for this access, users are typically served with ads instead.

Recently, however, the leading music streaming software Spotify's free desktop version was found to be serving advertisements that led to questionable websites that serve malware.

Windows, Mac and Linux Spotify Free users complained on Twitter and Spotify Community that the music software kept opening their browsers directed to websites poisoned with malware.

These poisoned websites are dangerous because they bring drive-by downloads and will attempt to install malware automatically without the need for the victim to click on anything.

Spotify responded in a public statement that it has reviewed the issue and it has traced the culprit back to a single advertisement. They have since removed this malware source from the free version of their service but there is no guarantee that the issue will never happen again.

Here's Spotify's statement:

"We've identified an issue where a small number of users were experiencing a problem with questionable website pop-ups in their default browsers as a result of an isolated issue with an ad on our Free tier. We have now identified the source of the problem and have shut it down. We will continue to monitor the situation. If you see this issue again, please let us know the exact date and time in this thread."

This demonstrates that even seemingly benign apps like Spotify can serve up malware unwittingly through third-party advertisements.

Malware infections via questionable ads and drive-by downloads are serious threats that affect internet users every day.

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Amazon's Echo, the Latest Music Streaming Service to Launch

Written by Nathan Ingraham — And the company's full-fledged Spotify competitor is rumored to launch in early 2017.

Amazon has offered a very basic streaming music service for a few years now, but it looks like the company is nearly ready to significantly revamp its offerings. An Echo-only streaming music option may be coming in the next few weeks, claims a report from The Verge -- and a full-fledged Spotify competitor that isn't tied to the Echo might be available in early 2017. The Echo-only service would cost $5 a month, while the more expensive $10 per month option would work across any device.

A second report today from AFTVnews contains info showing the service may be known as Amazon Music Unlimited, a boring but logical name. The publication found an Amazon Music Unlimited banner and ad inside the Amazon music app on the Fire TV.

Amazon's new music offerings have been rumored for a while now -- in June, it was first reported that the company was working on its full-fledged competitor to Spotify and Apple Music, coming in at the same $10 per month price point as most other services. Then, in August, the first rumor of an Echo-only service popped up. It seems Amazon originally wanted both services to launch simultaneously, but -- as is often the case -- it sounds like talks with the music labels is slowing things down.

Amazon has found success with its streaming video service which is bundled into Amazon Prime (like its current music service) , but getting a foothold in the increasingly competitive and cutthroat music landscape is far from a done deal. Android and iOS smartphones both offer a built-in streaming music service, and Spotify of course works on just about any device out there. What Amazon will offer here to stand out remains to be seen, but more competition is rarely a bad thing.

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Sony Music Conflict Causes Delay in Quincy Jones' Royalty Trial

Written by Ashley Cullins — The trial was originally set to begin Tuesday.

Legendary producer Quincy Jones was set to go to trial next week over royalties he says he's owed from albums released after Michael Jackson's death — but that's not happening now because a recent development means defendants Sony Music and MJJ Productions can no longer share a legal team.

Judge Michael Stern in September gave Jones the green light to pursue damages claims related to payment from permanent digital downloads. The producer is essentially arguing that he was shorted because Sony was underpaying MJJ, a song company controlled by the late artist's estate.

The issue boils down to whether Sony should have been treating those downloads as licenses instead of as sales — which would have given both Jackson's company and Jones more money. Artists get half of net revenue from licenses, but only a 15 percent royalty on sales. The payment of digital downloads is an area of continual conflict between artists and labels and has taken center stage in several major lawsuits over the past decade.


Warner Music, Sony and Universal Music Group each have paid millions to settle class action lawsuits involving digital download payments following a major 9th Circuit ruling concerning Eminem's music. There, the appellate court held that, because labels spending big bucks on CD packaging is a thing of the past, treating the downloads as licenses is more appropriate.

Jones raising the issue here complicates matters for defense attorneys.

Until now, Sony and MJJ have shared counsel from Kinsella Weitzman and Katten Muchin. But because this will pit the two against each other on at least one argument, Sony will have to retain separate legal counsel. (Sony Music declined to comment.)

The legal fight began in 2013, when Jones sued both Sony and MJJ, claiming master recordings he produced were remixed after Jackson's death to avoid paying him backend profit participation. Many of the King of Pop's biggest hits, including "Thriller," "Beat It" and "Billie Jean," were re-edited for the projects, and Jones says MJJ breached his contract by allowing third parties to exploit the works without first offering Jones the opportunity to perform the remixes himself.

In February, Judge Stern denied a motion for summary judgment from Sony and MJJ, finding the issues were best decided by a jury. The case was first set for trial in June, but was pushed back to Oct. 11. Now the trial has been put off once again, with no date currently set.

At the center of the delay is an expert report by Gary Cohen. Attorneys for MJJ and Sony fought the inclusion of evidence relating to permanent digital download damages set out in Cohen's Aug. 30 supplemental filing.

Stern agreed to limit Cohen's opinions at trial to those that were offered in his deposition based on his designation, but declined to strike the supplemental report. In response, defense attorneys asked to push the trial back to give Sony a chance to hire separate lawyers. Stern agreed.

It remains to be seen exactly how long it will take for new attorneys to get up to speed and get a trial back on the books, but a status conference is currently scheduled for November.

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Subscription Streaming, the Future of the Music Business

Written by the print edition: Business — Once enemies of record labels, Spotify and Apple are now spinning profits for them

IT WAS an eventful summer in the business of streaming music. Taylor Swift and other artists attacked YouTube over rampant free streaming. Frank Ocean and Katy Perry cut exclusive deals with Apple Music, to the dismay of executives at Spotify, a Swedish rival. Behind the scenes, Pandora, a radio-like service, and Amazon, an e-commerce giant, stepped up their efforts to take on Spotify and Apple. Then last month Spotify began talks to buy SoundCloud, another streaming firm.

All this drama obscures two emerging realities. The first is that subscription streaming is now the future of the music business. The industry suffered a catastrophic collapse in sales from 1999 onwards before beginning to recover last year. Selling music to own, whether via iTunes downloads or CDs, is still a declining business globally.

But American record labels and music publishers are now on track for a second consecutive year of growth. Recent reports on sales of music from Europe, where some countries are experiencing double-digit increases in revenues, suggest that the recovery will also continue in other parts of the world.

Most of that rebound is due to growth in subscription-streaming revenues. In the first half of 2016 subscription streaming in America reached a retail value of $1 billion, up by over $500m in just one year, putting it on a par with digital downloads. Retail revenues from radio-like services such as Pandora, and from ad-supported on-demand streaming such as YouTube and Spotify’s free service are faring much less well—they grew in America by less than a tenth, to $600m.

The second reality is that since Spotify and Apple have close to two-thirds of the world’s nearly 90m paying subscribers to streaming services, they are the ones shaping the future. If Spotify acquires SoundCloud, a mostly free service that claims to have 175m monthly listeners, its position would be stronger still. Last month Daniel Ek, the co-founder and chief executive of Spotify, tweeted that his company had surpassed 40m subscribers—adding 20m since June 2015, as many as it had acquired in its first seven years in operation. Spotify reached this milestone despite intense competition from Apple Music, which has won 17m subscribers since its start in 2015. The smaller firm hands over close to 70% of its revenues to the music business in royalties, says an industry executive.



Hogging the mic

Indeed, peel back the figures and the industry’s reliance on Spotify and Apple’s paid services becomes even clearer. The number of subscribers to all others combined shrank slightly—from 31m to 30.5m—in the year after Apple launched its service, notes MIDiA Research, a London-based consulting firm. Artist-backed services such as Tidal, which is co-owned by Jay Z and other performers, and which claims 4.2m subscribers, aren’t getting anywhere.

As a result, music companies are keenly watching what Apple Music and Spotify might do next. The industry remains nervous of Apple, since its size and multiple lines of activity may at some point allow it to force down royalty payments. In other words, the music industry knows that it needs Apple more than the other way around. Spotify, on the other hand, is a lossmaking firm with only one string to its bow. Record labels have their niggles about Spotifiy but are eager for it to succeed.

The change in attitude is striking. Once the bête noir of the industry for not paying recording labels enough in royalties, Spotify is fast becoming their most reliable moneymaker. The firm recently disclosed that it has paid $5 billion to the music industry to date. Apple, once vilified for decimating album sales with iTunes, is the second-biggest earner. If the music industry is singing a new and catchier tune, it has some erstwhile enemies to thank.

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Music Industry Pumps the Brakes on Exclusive Album-Release Deals

Written by Hannah Karp — Record companies realize restricting sought-after albums to one online service could limit overall subscription-music growth.

The music industry’s tradition of releasing albums via only one particular retailer or online service—often the one that pays for the privilege—endured through physical discs, digital downloads and into the streaming era. But at some record companies, the practice of granting “exclusives” now appears to be headed the way of the eight-track tape.

The music companies now realize that restricting desirable albums to one online service could limit the overall growth of subscription music—viewed by labels as key to their own long-term survival. In their place, streaming-music services are scrambling to hire well-connected “ambassadors” who can help them line up artists to make playlists, videos and other promotional materials to differentiate themselves.

Since launching a year ago, subscription-streaming services Tidal and Apple Inc.’s Apple Music have been paying record labels for the exclusive rights to feature music from a range of artists to quickly attract subscribers. The deal terms vary but usually include a modest upfront fee and, more significantly, promises of millions of dollars of marketing via advertisements on the streaming service, TV or billboards. Both music services are trying to catch up to Spotify AB, which has been in business a decade longer and offers a free tier that they don’t.

Subscription-streaming services generated $2 billion last year for the $15 billion global record business, according to the International Federation of the Phonographic Industry.

But after watching Apple Music and Tidal battle it out for exclusive album releases over the past year, and attracting just over 20 million subscribers between them, some major record-label executives now fret that limiting new releases to one service—even for a week or two—could be costing them, despite the support they get for the exclusive deals. They worry that limiting an album’s availability during its buzziest period reduces listening and frustrates subscribers to services that don’t have the album.

“All the exclusives feel erratic at the moment,” said Steve Cooper, chief executive of Access Industries’ Warner Music Group in a recent interview with Music Business Worldwide, an online publication. “That’s confusing to fans, and that’s not good for the industry.”

The record industry is counting on revenue from subscription streaming to eventually replace falling CD and download sales, and is wary of making moves that could stifle the growth of the nascent and fragmented market, which counted 68 million paying subscribers world-wide last year, according to the IFPI. In an email to some subordinates late last month, Lucian Grainge, chairman of Vivendi SA’s Universal Music Group, indicated that the record company should generally avoid long-term exclusive releases on particular streaming services from now on. The email was reported earlier by music-industry blogger Bob Lefsetz.

R&B artist Frank Ocean, formerly signed to Universal, released his latest album, “Blonde,” exclusively on Apple Music through his own independent label, a move Universal likely wouldn’t approve now without a more nuanced plan to widen the release relatively quickly, or at least broaden the album release in markets where Apple Music’s reach is limited, according to a person familiar with the matter. Depending on the artist, even one week on a single streaming service alone could be costly, this person added—especially given that CDs remain the predominant format in some of the world’s top music markets, such as Japan, Germany and France.

Still, Mr. Ocean managed to top the charts by selling nearly 300,000 copies of the album in the U.S. during its first week on Apple, which hired two antipiracy firms to patrol the internet for unauthorized copies, a person familiar with the matter said. Shortly after, Apple featured its third exclusive release from Sony Corp.’s Epic Records: rapper Travis Scott’s new album, suggesting that the practice hasn’t been written off across the board.

Many record labels still support another form of exclusivity: releasing music to paid streaming services before it is available via free, ad-supported ones. But such decisions are made on a case-by-case basis.

The pullback on exclusives means streaming services must fight harder to stand out from the pack. To do they are courting big-name music acts to make playlists, host radio shows, and create short films and art projects, while in exchange helping to fund the artists’ marketing campaigns that include splashy TV ads.

Last month Pandora Media Inc. said it had hired Questlove, a producer and drummer for The Roots, to serve as the internet radio company’s first “artist ambassador,” while Spotify several months ago created a similar role for Troy Carter, a prominent artist manager whose former clients include Lady Gaga.

For rapper Gucci Mane’s album “Everybody Looking,” released in July, Spotify footed the bill for much of the album’s promotion, from billboard and TV commercials to ice cream trucks—a nod to the ice cream cone tattoo on his face—in New York and Atlanta touting that the album was available on the music-streaming service.

Despite the investment, Mr. Carter still pushed to allow the album to debut on other services at the same time as Spotify, because he said he believes “exclusives are bad” and hurt artists as well as the industry. In exchange for the funding, Gucci Mane is now effectively helping promote Spotify by association, “but in a nonexclusive way,” Mr. Carter said.

When artists sign exclusive deals with Spotify’s rivals, meanwhile, Spotify tends to not promote their songs on playlists it curates in-house for at least several weeks, people familiar with the matter said.

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Ambiguity and Cheating! Lawsuits Question Sony Spotify Deal

Written by Eriq Gardner — 19 Recordings alleges that "American Idol" stars have been cheated of streaming revenue.

When listeners hear "Since U Been Gone" by Kelly Clarkson on Spotify, they might not care too greatly how the exploitation of this song is characterized in contracts. But a judge's interpretation could upend the record industry as streaming platforms continue to grab greater market share.

On Wednesday, New York federal judge Ronnie Abrams delivered a new opinion in an important lawsuit. She finds that many of the licensing agreements that Sony Music has struck with streaming outlets like Spotify, Rhapsody and Last.FM are ambiguous as to how they describe streamed music. The result is that the case will continue — perhaps eventually to trial — and heretofore confidential contracts will be dissected at length.

American Idol-affiliated 19 Recordings is the plaintiff, contending that artists such as Clarkson, Clay Aiken and Carrie Underwood have been cheated on royalties from streaming. Specifically, 19 grants Sony Music the exclusive right to distribute and otherwise exploit recordings in return for royalties. In turn, Sony licenses the works to streaming outlets. If streams are treated as "broadcasts" or "transmissions," under the 19-Sony deal, that means the artists get a 50 percent royalty share. If on the other hand, streams are treated as "sales" or "distributions," then a lower record royalty rate — typically about 15 percent — applies.

The difference is humongous, and Idol artists are hardly the only ones with this arrangement. If 19 Recordings is correct that Sony has been mischaracterizing the distribution of music on services like Spotify as "distributions" rather than "broadcasts," there will likely be class actions brought on behalf of other artists against the record majors.

Back in March 2015, Judge Abrams ruled that in order to figure out whether streams were "distributions" or "broadcasts," the parties would need to look at the third-party agreements between Sony and streaming outlets. How did those classify streaming?

Well, after Sony threw up a huge fight over producing its contracts in unredacted form, the answer is hardly clear.

"Take, for example, Sony's July 1, 2013 Digital Audio Distribution Agreement with Spotify Global," writes Abrams. "19 argues that 'the exploitation' is exclusively characterized as a transmission because 'Stream' is explicitly defined as 'each instance in which any portion of a recording is delivered by means of digital audio transmission which digital audio transmission is substantially contemporaneous with the performance of the recording embodied therein...' The Court agrees with 19 that, under this definition, 'Stream' is unequivocally characterized as a 'transmission.'"

Of course, there's a "but" coming.

She adds, "But what complicates the analysis is the number of instances in which the word 'distribution' also appears in the contract, which raises the question whether those too constitute descriptions or characterizations."

The confused judge has a lot of questions.

"Does the fact that Spotify is described as a 'distribution service' amount to a characterization of 'the exploitation'?" she asks. "Should one take into account where in the contract the purported description or characterization takes place? In other words, where the key words appear in provisions where one would not expect such a description/characterization — like provisions covering the date the streaming service is authorized to release music, assumption of costs, financial audits, the conversion of foreign proceeds, and the currency for payments of service fees in Brazil — does the location bear on whether it amounts to a description or characterization?"

The judge finds that both sides make plausible arguments, meaning the case is now set to move to a summary judgment phase where, perhaps, there will not only be discussion of contracts but also extrinsic evidence pertaining to what Sony and third-party streaming outfits meant when they negotiated the deals.

At the moment, Abrams finds that most of the contracts are ambiguous, but not all. She's granted judgment in favor of Sony with respect to AOL's streaming while granting 19 judgment with respect to Apple's streaming. The case will continue to be a closely watched battle in the music industry.

Here's the opinion

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Sony and Tencent Plan Digital Music Takeover of China

Written by Music Business Worldwide — According to the IFPI, China generated $169.7m for recorded music rights-holders last year – up 63.8% on 2014 – making it the 14th biggest region for labels and artists.

However, with a population of more than 1.35bn people, China’s annual per capita (person) spend on recorded music last year was just $0.10.

Sony Music says it will collaborate with Tencent Music on the promotion, management and online distribution of its repertoire in the region, adding that the new deal ‘continues on from the original terms of the cooperation’.

The initial partnership between Sony and Tencent, inked in 2014, gave the latter company exclusive digital distribution rights for Sony’s repertoire in China (including Beyonce, pictured).

Tencent signed a similar deal with Warner Music Group back in 2014, while it also holds partnerships with Believe Digital and other music rights managers.

Denis Handlin AM, Chairman & CEO of Sony Music Entertainment Australia & New Zealand and President, Asia, said: “We are excited to continue [the] relationship and cooperation between Sony Music and one of our most valued business partners, Tencent Music.

“Tencent Music’s promotion of the legal use of digital music has made a very positive and lasting change to the market for music labels and music fans. The difference we have made together in the development of artists and in fan engagement through our strategic partnership is most significant. We look forward to taking the Chinese music market to the next level, becoming one of the top markets in the world.”

Dowson Tong, Chairman of Tencent Music, said: “I am delighted that the mutually beneficial cooperation between Sony Music and Tencent Music has been extended. Our partnership will continue to flourish as Tencent Music’s influence on the China market grows and as we bring even more great content from Sony Music’s global catalogue of heavyweight artists to China, enhancing Sony Music’s business and thrilling music lovers in the mainland.”

Tencent rival Alibaba signed a major deal with BMG last year, which included access to digital rights for over 2.5m copyrights, including publishing rights in songs from the likes of Bruno Mars, John Legend, Robbie Williams, the Rolling Stones, Aerosmith and will.i.am.

Tencent owns the profitable QQ Music streaming and download platform, which boasts more than 400m active monthly uses.

In July Tencent announced it was merging with China Music Corporation to form a new company in which Tencent had the controlling stake in a deal worth $2.7bn.

China Music Corporation runs two of China’s biggest digital music services – KuGou and Kuwo.

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De La Soul is Not Dead, the documentary that details their Daisy Age rise!

Written by Mass Appeal — De La Soul Is Not Dead takes it all the way back to Amityville, Long Island — a suburban hip hop mecca where three highly creative individuals and high school classmates linked up with DJ Prince Paul and shopped a demo tape to Tommy Boy Records. The label that brought the world "Planet Rock" would soon have another smash hit on their hands with "Me Myself and I" and De La Soul, the so-called "Hippies of Hip Hop." But little did they know what the future would hold.

Many of De La Soul's early classics are difficult to find on digital music platforms due to complex sample clearance issues. As a result, their impact on the development of hip hop is felt from the group's Native Tongues affiliates through Kanye West, Pharrell, and Kendrick Lamar.

It's been twenty-five years since "De La Soul Is Dead," the group's iconoclastic sophomore album, and twenty years since "Stakes Is High," their first project without Prince Paul at the helm. These two pivotal releases positioned the group on the career trajectory that leads them to this extraordinary moment. Last week De La Soul's latest release, "And The Anonymous Nobody," topped Billboard's Rap Albums Chart. Funded by a half-million-dollar Kickstarter bonanza, the group's first new album in over a decade features diverse guest spots from Snoop Dogg to David Byrne. What better time to look back at the legendary trio's rise through the rap game?

Don't sleep on these Long Island cats. They're definitely onto something.

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Is Lyor Cohen's Move to YouTube Good or Bad for the Music Biz?

Written by Ed Christman — The jury's out.

The appointment of former Warner Music and Def Jam chief and 300 Entertainment co-founder Lyor Cohen to YouTube as its global head of music sent a ripple throughout the music industry on Wednesday, with many executives at first unsure what to make of it. But a major vote of confidence arrived soon enough, and, surprisingly, from one of the most vocal critics of YouTube: veteran manager (The Eagles, Bon Jovi) and executive Irving Azoff. Speaking with Billboard, Azoff commented, "Lyor has a long history as a defender of artist rights. … We are counting on you, Lyor, to lead YouTube to provide fair payments to artists and give them more creative control."

It's a hope shared by frustrated music business insiders struggling to collect every cent of revenue available for songwriters and artists. "Lyor basically invented the 360 deal," says one high-ranking source. "He is a true believer in real artist development, and he’s very vocal. Plus he has a dynamic [relationship] -- positive or negative -- with almost every industry player."

Others, however, are more circumspect. Music industry veterans know that Cohen is a proven hitmaker who inspires -- or, failing that, demands -- deep loyalty from his staff, but he is also considered controversial because of his temperament and his penchant for playing hardball. It’s a style that has left some hard feelings in certain quarters.

“He's burned all of his relationships in the business,” one executive says, “so I can't imagine it's going to help YouTube [to foster better industry relations]. There's no good will there.”

Then again, many of the qualities that people point to in Cohen -- a brusque manner, heavy-handedness, a sense of superiority bordering on arrogance -- are also lobbed at YouTube, particularly with regard to the company’s oft-maligned policies on the payment and policing of music content on its service.

“The majors have a little bit of love for YouTube but also a lot of hate,” says one industry executive. “They like it because they realize the promotional value, but when you go higher up [the labels’ corporate chain], everybody hates them because of the miserable payouts.” Sources say that YouTube’s payout on the label side ranges from $0.0010-$0.0015 per stream, the lowest in the U.S. industry. “Can Lyor fix that?” the insider asks.

Cohen himself seem to be pointing to more harmonious relations, saying in a statement to YouTube employees (which has been his only comment on the move to date) that the service can head "toward a more collaborative relationship between the music industry and the technologies that are shaping the future of the business. ... I'm confident that we can bridge the worlds of technology and music in ways that benefit everyone, instead of the zero-sum mentality that exists today.”

Mike Jbara, who worked for Cohen at Warner Music Group and now is CEO of music technology company MQA, says that his former boss's appointment “is a strong statement about trying to find a model for everybody, because you know that’s [Cohen’s] heart is in the development of artists. That’s who he is.”

And while Cohen’s leadership qualities can be divisive, many also cite his “warrior” spirit in focusing an organization. “Lyor has always been able to focus on priorities,” Jbara continues, “and where there is a lack of priorities and vision, he is good at focusing and defining them.”

Several publishers also are hopeful that Cohen will help lead YouTube into addressing the business model.

“There has been a large focus on the value gap issue with YouTube,” says NMPA president and CEO David Israelite in a statement. “For songwriters and music publishers, it is even more extreme as they receive even less than record labels and artist. I am hopeful that Lyor can help make progress to ensure songwriters and music publishers receive fair compensation for their significant contribution to the success of YouTube and Google. We look forward to working with him.”

However, other industry sources consider the idea that Cohen can improve YouTube payment structure to be wishful thinking.

“I don’t think that’s Lyor’s call,” one says. “I think there has to be an appetite at YouTube about changing their ways.”

Industry executives remember that it was Cohen himself who first led the fight against YouTube’s low payment back in 2009, when he pulled Warner Music Group’s music from the site, citing insufficient compensation. And at that time, says one industry executive, YouTube’s per-stream payouts were “substantially higher than where they are now.”

EMI Music Publishing Management CEO Dave Johnson thinks otherwise, and reads the appointment as a sign that YouTube may be ready to address the compensation issue.

“It’s an inspired move putting an executive like Lyor -- who is bright, competitive and enthusiastic -- at the crossroads between music and technology,” Johnson says. “The task is to foster communication at that intersection and I think Lyor would be very good at that.... It strikes me that this is a situation where one plus one equals three.”

However, another executive speculates that Cohen’s role is more likely to be in helping YouTube choose and help develop promising talent culled from the countless unsigned artists using the site. At a time when Apple Music, for one, is behaving more and more like a record label, that approach would seem to place YouTube in competition with the record companies.

And that’s assuming the relationship, which dates back at least to 2013, when Google became an investor in 300, remains harmonious. Cohen has never liked playing second fiddle, and the current structure sees him reporting to Robert Kyncl, YouTube’s chief business officer.

Indeed, in the late 1980s, Cohen played a significant role in the Def Jam split between Russell Simmons and Rick Rubin, which saw the latter -- unquestionably one of the most successful and influential producers of the past 30 years -- leaving to form his own label, Def American (which later dropped the “Def”). In the 1990s, when Cohen reported to Jim Caparro at the then-new created Island-Def Jam label group, it wasn’t long before Cohen usurped control and Caparro subsequently resigned, although they did work together a few years later at WMG.

And in when Len Blavatnik acquired Warner Music Group in 2011 and initially had both Cohen and former owner Edgar Bronfman on board, Cohen tried a power play on Bronfman -- the man who had brought Cohen to WMG and appointed him head of the music operation -- so that he would be the one reporting to Blavatnik as CEO, according to sources at the time

That didn’t work out well for either: Bronfman was kicked upstairs to the board eventually resigning in 2013, but Cohen -- who has been quoted denying that power play -- was passed over with the appointment of Steve Cooper as CEO and subsequently pushed out by both Cooper and Blavatnik, although this time it was Cohen who resigned in September 2012.

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What does it mean that SoundCloud's Annual Revenues are way up?

Written by Paul Resnikoff — SoundCloud managed to boost its top-line revenues by 43% in just one year, according to financial data exclusively shared with Digital Music News this morning. But is this company still bleeding cash?

The following is a developing story, based on SoundCloud financial information that we’re exclusively aggregating. We’ll (hopefully) have a lot more information on other financial data, including net losses and valuations, in the coming hours. Please check back (last updated 10:45 am PT).

SoundCloud is frequently criticized for posting unsustainable losses, year after year. But maybe this company is doing something right. According to preliminary details shared this morning by PrivCo, SoundCloud managed to amass revenues of approximately €24,865,000, or $27,919,665 according to current exchange rates.

The financial estimate represents a 43% year-over-year increase. The gain is probably driven entirely by advertising revenues, though other explanations may also emerge.

PrivCo, based in New York, tracks private company financials, as well as M&A and venture capital transactions. They’re insiders when it comes to this stuff, and they’ve agreed to share some data with DMN.

The revenue bump is potentially a great sign, though major questions still surround SoundCloud’s sizable annual losses. In 2014, the streaming music gorilla lost an astounding €39.1 million, or $43.9 million. That occurred against a lower revenue base of €17.35 million, or $19.48 million, a figure that has now increased substantially.

Back from the brink?

Not only that, SoundCloud’s financial auditor, KPMG, issued a warning to investors about possible financial calamities ahead. “The directors have concluded that the combination of the circumstances… represents a material uncertainty which may cast significant doubt upon the Company’s and Group’s ability to continue as a going concern,” the auditor stated. “Therefore the Company and Group may be unable to realize its assets and discharge its liabilities in the normal course of business.”

Since that point, the Berlin-based audio company has inked deals with Universal Music Group and Sony Music Entertainment, a major step. The company has also initiated a subscription-based platform, Go, though it’s not clear anyone’s paying.

The latest financial data is emerging at a critical moment. Spotify is now considering a possible purchase of SoundCloud, at least according to a recent Financial Times article. SoundCloud, currently valued at $700 million, has drawn funding of roughly $204.5 million ($229.7 million). Bloomberg pegged the potential sale price at $1 billion over the summer.

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