In the past year, the free streaming business model has increasingly come under fire from artists (such as Taylor Swift, Radiohead, Bjork, and Garth Brooks) and industry insiders who critiqued this business model as unprofitable. In the past month, the CEOs of both VEVO and Sony Entertainment commented on that model’s long term viability and a shift towards prioritizing subscription services. The link between these comments is a distributional technique called “windowing,” primarily used when coordinating theatrical releases across different territories or distributional platforms, but is now being re-examined as a means to offer premium content to drive consumers to specific apps or services and further distinguish content available at no cost from content only available to paying consumers.[1]
The windowing concept was most recently executed by Jay Z in the past year, when the artist/entrepreneur limited the availability of many of his and his collaborator’s albums to the Tidal service, including Jay Z’s debut album “Reasonable Doubt”, and Kanye West’s new album “The Life of Pablo”.[2] This move could be seen as a simultaneous attack on both Spotify and Apple Music, since both services act as the middle man between consumers and content creators.
Vevo named Erik Huggers as their CEO in April 2015 and he has already expressed a desire to build the service’s offerings of premium content.[3] This premium content would consist of a higher quality listening experience for music fans in addition to the development of original programming.[4] He also referenced windowing as more established in the digital space due to the existence of the Hulu and Netflix services, suggesting that the consumer marketplace may be more accepting of the idea than some critics might realize.[5]
Sony Entertainment’s CEO, Michael Lynton, has described the increasing look at windowing as the result of overall reduction in revenue derived from digital downloads for music owners which prompted a need to be more strategic in how music is offered.[6] Specifically, he describes a possible solution wherein the music is first offered in a subscription-based service, which would drive profits via subscription fees, and then eventually find its way to a free, ad-support service.[7] This reflects a more nuanced attack on Spotify’s business model. Spotify’s business model consists of two tiers: the free tier and a subscription tier. Industry executives have been displeased at Spotify’s ability to convert free customers into paying customers. The underlying assumption behind Mr. Lynton’s critique is that both tiers would exist, but adds that services, such as Spotify, may need to soften their stances on exclusive deals and windowed releases.[8]
Spotify’s response to that critique is illustrative of the service’s philosophy: wide distribution is the best policy, because “artists want as many fans as possible to hear their music, and fans want to hear whatever they’re excited about or interested in.”[9] The Verge writer, Micah Singleton, points out that while exclusives (and by extension windowing) could be inconvenient for the listening public, avoiding the discussion leaves the service open to the possibility that its competitors will increasingly accumulate exclusive deals with major artists.[10] The service is already confronting this reality. Kanye West’s aforementioned “The Life of Pablo” was released exclusively on Tidal, Rihanna is already signed exclusively to the same service, while Drake has struck a deal with Apple Music giving them a one week exclusive on the release of his next album (and triggering more complaints related to Tidal’s inability to stream Drake’s performance at a fundraising concert due to the Apple Music exclusive deal[11]). And in December 2015, representing the first time that an exclusive deal was worked out for an artists’ video content, Taylor Swift is releasing the concert footage of her “1989 World Tour Live” exclusively to Apple Music (which does ring back to Vevo’s desire to lock down their own “premium content”).[12]
It is increasingly likely that windowing techniques such as locking down album exclusives, artist deals, “premium content” (including concert footage, behind-the-scenes footage, and live streams), along with other methods will be adapted to entice viewers to pay for subscriptions to their favored platforms.