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Music Business News, November 1, 2017

Sony Music earned $1 billion in revenue in Q2 of 2017. And analysts said Spotify is set to hit 200 million paying subscribers by 2020. Also, Pandora added curated playlists to its on-demand music service.


Sony Music Posted $1 Billion in Q2 Revenue


Sony’s total music business – recorded music, publishing and visual media – earned $292.92 billion in the second quarter of 2017, ending September 30, Billboard reported. This is twice the revenue the company earned in the same quarter of 2016.


Sony’s music operations include Sony Music Entertainment, Sony/ATV Music Publishing, Sony Music Japan and its music publishing operation plus the Visual Media & Platform department.


Sony’s music operations brought in $161.28 million last year. The latest figures show a 37.5 increase in revenue and a 97 percent increase in Q2 operating income. The company said the growth was largely driven by visual media gains and music streaming.


Taking into account depreciation, amortization and charges, Sony’s music operations brought in $333.12 million in earnings before interest, taxes, amortization and depreciation in the second quarter.


Sony’s Visual Media & Platform segment includes the production and distribution of animation titles – game applications based on titles and an array of service offerings for music and visual products – and saw the most gains. The revenue in this area grew 80 percent from Q2 of 2016.


Streaming saw huge gains across the board as well. 43.7 percent of revenue in the second quarter was attributed directly to that segment. Recorded music revenue showed streaming bringing in $823 million. Though streaming growth continues to surpass other aspects of the business, declines in digital downloads and physical are slowing down.


Spotify Heading for $100 Billion Valuation and 200 Million Paying Subscribers


Spotify may be worth $20 billion when it goes public in late 2017/early 2018, according to a recent report from investment bank GP Bullhound.


Music Business Worldwide explained that it may also hit 100 million subscribers by next summer.


And the GP Bullhound paper also predicted the streaming platform’s total user base will hit 500 million people by 2020, 200 million of those paying subscribers. Spotify may also be valued at $100 billion by 2020.


The paper said, “Given that Spotify’s growth continues and that emerging market growth keeps average revenue per premium subscriber relatively in shape we envision that Spotify has a long term potential of being valued at $100 billion.”


GP Bullhound, an investor in Spotify also indicated that expected growth will potentially be driven by better deals with labels, plus increased visibility in emerging markets.


Despite these positive notes, the report contained some cautionary items: “Spotify has introduced family plans and student discounts and if we factor in that emerging markets have a much lower average revenue per premium subscriber we believe that Spotify will see a steady decline in revenue per premium subscriber moving towards 2020 compared to today’s value … This is the reason why we have decreased our estimated average revenue per premium subscriber to $80 — compared to $88 in 2015 and $89 in 2016.”


Even though the average Spotify subscriber spend may decrease, the ad-funded aspect of the service may bring in more revenue from “free” subscribers than predicted in past analyses.


The Bullhound report said despite its positive outlook, Spotify will likely continue to struggle with operating losses, which may “distract investors from the true value that is being created.”


Spotify’s operating losses in 2016 were $390 million, with net losses of $600 million. However, Spotify earns $3 back for every dollar invested in a premium subscriber. The company said it believes this return will increase to $5 by 2020.


Bullhound also forecasted that Apple Music is not likely to catch up to Spotify, in spite of threats from its HomePod speaker and impending voice-activated devices.


Spotify will likely go public on the New York Stock Exchange within the next six months.


Pandora Adding Curated Playlists to Its On-Demand Music Offering


Pandora Premium introduced Featured Playlists on October 30, reported Engadget.


Featured Playlists is similar to playlists on Spotify and other on-demand music services and involves 250 curated playlists across categories organized by genre, style, mood, specific artists, activities and “cultural moments.” The playlists will likely also help improve music discovery for artists on the platform.


Premium subscribers can find these playlists front and center in the “browse” section, including a top selection that corresponds to the types of music you listen to most often. Favorite playlists can be saved to users’ libraries.


Pandora also revealed that free users and users of “plus” without access to the full on-demand library will be able to access some stations that are inspired by the new playlists. While they do not have all the same songs featured in the premium playlists, they have the same feel. Pandora will be updating playlists over time, but not likely with the frequency of Apple Music and Spotify.

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