Music (Long Continued Cash Burn)

A few weeks ago, we wrote about the effect Spotify was having on the music industryand suggested that Spotify's (allegedly) imminent direct listing might be an opportunity for creatives such as Liam Gallagher to, in the words of Josh Brown, "own the damn robots". Subsequently, The Wall Street Journal reported that Apple Music ($AAPL) is on pace to overtake Spotify in U.S. subscribers. It's a dog eat dog world out there. 

One reader reacted to our post: 

"Further to Spotify….
 
I was listening to a spot on an NPR show a year or two ago, when Dean Wareham, a singer whose career started with the iconic indie band Galaxie 500 in the 90’s, came on the air as part of whatever broadcast I was tuned into. As a longtime fan, I listened attentively.  He was commenting on receiving his first Spotify royalty check. It was for the one hit they had that broke into the charts, Tugboat Captain.  (It might have been 40 on the charts.) He was saying that it had gotten 100,000 plays on Spotify, which triggered a payment. The royalty he received for this was exceeded by the royalty on the sale of a single ’45 at the time. That’s right, the royalty on the sale of one little piece of vinyl was more than the band  got for all it plays on Spotify.
 
He was mildly bitter about that. He was more bitter about the fact that Spotify wasn’t making money either. Which begged the question, if the musicians aren’t making any money off their ouevre, and neither were the Spotifys of the world, then who was? I hope Dean finds a way to own the robots…."

Here here. And not to add insult to injury but Spotify now has to deal with bigger streaming royalties after a recent Copyright Royalty Board decision. And Pandora Media Inc. ($P) is laying off 5% of its workforce with the hope of shaving $45mm in costs.

Meanwhile, Best Buy ($BBY) announced this week that, as of July 1, it will no longer sell compact discs. Yes, they STILL sold compact discs. In 2017, 89mm CDs were sold in the US - down from 800mm back in 2001. And Target ($TGT) is getting coercive; it demanded that suppliers change from 60-day payment terms to scan-based payment terms, whereby Target only pays when a CD is actually sold and scanned. This is glorified consignment. Choice quote in Billboard, "So far, music manufacturers are not sure what they are going to do, but sources within the various camps say that at least one major is leaning no, while the other two majors are undecided. If the majors don't play ball and give in to the new sale terms, it could considerably hasten the phase down of the CD format." Recall that BMG Columbia House filed for bankruptcy in August 2015. There may still be more players to fall as a result of the slow death of cds.