Friday, October 7, 2016

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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