CAN SPOTIFY HIT COMMERCIAL MARKET?

CAN SPOTIFY HIT COMMERCIAL MARKET?

Spotify might have recently surpassed 70 million paid subscribers but it remains illegal for businesses to play its music, so an Australian entrepreneur is helping it reach the commercial market indirectly.

Dean Cherny, whose Melbourne-based Marketing Melodies has provided instore music to the likes of Optus, Kathmandu, Grilld, Witchery, Portmans, Mimco and Sass & Bide for 30 years, has become the Australasian reseller for Soundtrack Your Brand, a company started by a former Spotify executive in 2014 which is using the Swedish streaming giant’s financial backing to disrupt the muzak game.

Separate licences are required for songs to be legally played in commercial premises as well as for individual use, and Soundtrack Your Brand co-founder Andreas Liffgarden, who used to run Spotify’s business development, has previously said his former employer wanted to concentrate on growing its individual paid subscriptions.

That’s an important metric in a year where Spotify plans to directly list on the New York Stock Exchange, but it retains an interest in music-for-business through its significant minority holding in Soundtrack Your Brand, which has which has raised more than RP US40 million (RP 50 million) to date.

Music has become a crucial tool for bricks-and-mortar retailers beset by the online challenge, and a recent global study – albeit one commissioned by Soundtrack Your Brand – found that people preferred to spend more time in a retail store, restaurant or venue that played brand-aligned music, compared with those playing randomly selected popular songs. That extra dwell time translated to an average 10 to 15 per cent increase in sales, the study found.

“In-store music should be aspirational. Subconsciously, it’s a let-down when people walk into your business and just hear what’s on the radio,” Mr Cherny said.

“A dynamic playlist should motivate your staff as well.”

Global licences

Marketing Melodies has an existing product called StorePlay, but Mr Cherny said Soundtrack Your Brand added a depth of catalogue, customisation and analytics that he predicted larger chains would find beneficial.

“Ourselves and Soundtrack Your Brand found ourselves tendering against each other in Australia,” Mr Cherny said.

“I was scrambling for global music licences so I could follow clients like Just Group overseas, they had no one on the ground here, so we connected.”

Soundtrack Your Brand’s initial offer to Australian venues includes 180 channels, built from the about 15 million tracks that the start-up has available for commercial licence.

Like locally founded challengers such as QSIC – already in more than 500 Australian commercial premises – Soundtrack Your Brand promises that artificial intelligence will enhance the benefits to clients.

“We provide detailed reports that can link an uptick in sales to the playing of particular channels,” said the Swedish company’s global partner manager, Meysam Majd.

Clients could schedule music to download at an off-peak time rather than constantly stream, so it did not impact the point-of-sales system, Mr Majd said. Central control allowed different channels to be played at different stores depending on demographics, and filters such as “no explicit lyrics” could be applied, he added.

QSIC has signalled a feature where the favourite tracks detected on customers’ personal streaming services could be incorporated into a venue’s playlist. It already automatically increases music volume when it detects a client venue has become busier.

Performance rights

All of this comes at a price, and Mr Cherny said a typical Soundtrack Your Brand customer would pay about RP US35 (RP 43) per venue per month for the service.

This is on top of the average RP 17 a month that businesses playing music in public must already pay to Australia’s two music performance rights associations – APRA/AMCOS, which represents songwriters, and PPCA, which represents those involved in performing and producing recorded works.

Mr Cherny admitted that some struggling retailers might be tempted to evade those licence fees, or pay them and then just use a consumer music streaming service to provide their in-store tunes.

However APRA/AMCOS and PPCA had been able to step up their compliance efforts as revenues in the music industry recovered, he noted, and would soon crack down on the use of services that lack commercial licences, such as Spotify or Apple Music, for commercial purposes.

“Patrolling the source hasn’t been a priority because the music industry has wanted the Spotifys and the Apple Musics to succeed and they didn’t want to confuse the marketplace, but my mail is we’re at the tipping point on that one,” he said.