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Why do artists agree to 'windowing' their albums exclusively to one streaming platform?


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So the concept of album windowing (releasing an album on a specific platform while withholding it from others) has become a more frequent business strategy in the past year. Rolling Stone interviewed Sony Entertainment Chief, Michael Lynton, who said album windowing is the future of streaming:

http://www.rollingstone.com/music/news/exclusive-album-windows-the-future-of-streaming-sony-chief-says-20160219 Michael Lynton

What I'm trying to grasp is why artists and especially record labels are agreeing to such deals. By 'windowing' you are instantly restricted to that platforms user base upon release (when hype for the album is at its peak). You are limiting your revenue streams this way in the world of streaming, which has been scrutinised for its low overall pay-out as it is. Why make a bad situation worse?

My only point of reason is that these promotional deals are only really of benefit to the streaming platform themselves and they are paying out huge fees in order to gain this exclusivity. It gets to boast exclusive content over its competitor and draw in numbers that way. Makes sense. But with nobody coming forward as to how much these deals pay out and who initiates the negotiation (at least from my research*), it's hard to gauge what's in it for the recording label and their artist.

Thoughts?

*If you find any data on this please do link it

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Hi

 

it's a concept often applied to games and gaming consoles, where the console company gain exclusivity for a game, often indefinitely, in return for fees, preferential commissions, BIG promotion, bundling with consoles etc.

 

The same thing applied to music has some slight differences but the concept is the same.

 

First, you have to get your head around the modern role and value of albums. So low is the current likely earnings that often they are a loss leader, a promotional vehicle for the purpose of recruiting more fans. Money is instead made on sync rights, ticket sales, and merchandise. There are other income streams, such as appearance money, but these are less common.

 

Second, you have to consider the importance to the artist of being thee artist on a network. Even the simplest of platforms will have listeners in the multimillions.

 

This is a numbers game for labels. They have target percentages for conversion across the different stages of relationship between artists and listeners. For example:

 

Browser to Listener 30%

Listener to Subscriber/follower 12%

Subscriber/follower to Paying Fan  18%

Paying Fan to Super Fan 10%

 

They are likely to have have other categories, and percentages assigned to every conversion (change of relationship status). This includes loss of fans and partial loss or cooling of interest. The label tries to engineer better conversion rates, all with the aim of creating as many super fans as possible (super fans buy everything, including duplicate copies to preserve mint condition copies, different versions of a release (such as with different sleeve art, a bonus song, a bundled video of the song and a load more options).

 

Just going by the above percentages, say exposure was a nice round 1,000,000 browsers.

That would yield:

 

300,000 listeners

24,000 subscribers/followers

4,320 paying fans

432 super fans

 

Make initial exposure 50,000,000 and that would yield:

 

15,000,000 listeners

1,2000,000 subscribers

216,000 fans

21,6000 super fans

 

Then there are ways to increase conversions. They apply a lot of psychological tricks at every stage including using exclusivity, time limited, number limited, competition, controversy, and a load more brand loyalty tricks.

 

They also factor in recruiting fans for stable mates and harder to measure stuff such as increased exposure outside the network, and specifically an increase in desirability due to lack of access. This is what the sales company offering the windowing is looking for.

 

Think of it as similar to the well known phenomenon of a person being more desirable as a mate as soon as they are in a relationship.

 

Sales companies use many other ways to build this and keep interest dynamic, such as special offers, time limiting access or price, bonuses, bundles and more.

 

Hardly a comprehensive breakdown, but hopefully enough to demonstrate the numbers involved.

 

It is important to realise that subscribers/followers is an important step. This means that the label can target people interested in the band to some extent. Not only that they can now pitch multiple records, tickets, merchandise etc, over and over in many different ways. Each of those pitches will likewise have conversion factors. Because of this, a new subscriber/follower is potentially far, far more valuable than any single sale where they have no method of pushing sales messages to you.

 

This idea of limiting (including exclusivity) is used out with music all the time. It is also not new within the music industry. For example, take an old music industry model:

 

A small label has a limited budget. As such they can only create so many physical copies for the first run, they can only afford so much promotion and publicity. There is also a lag between money going out, money coming in and using that money to create and distribute more copies.

 

Say the small label can press 20,000 copies.

 

Without limitation sales typically peak just after release and then die away into what they call "long tail" sales. Without additional incentives, without a queue of prepared super fans, the label maybe only sells 3,000 copies, 2,200 of which are in the first week.

 

With queued, super fans they sell 14,000 copies with say 6,000 in the first week and the rest sold over months or years.. Chart position somewhere areound 300.

 

With warmed up super fans prepared and ready, they sell 17,000 copies with 10,000 in the first week 4,000 in the second week etc. With the rest sold over months or years. Chart position peak, Number 100

 

With warmed up super fans, prepared and ready for release, incentivised with a bonus and with a time limit on the release of 2 weeks, they sell all 28,000, with 18,000 in week 1 and 10,000 in week 2. Best chart position achieved is 46. Additional sales came from people who thought "I'll get in at some point" converted because if they don't buy now they never get it PLUS sales because higher chart position meant increased exposure. Of course the label had to gamble and get a second press because sales were so fast they knew they could sell more units.

 

Sales were deliberately compressed in time scale. It boosted overall sales directly and indirectly, forcing a far higher chart position than they would otherwise have achieved!

 

This whole exercise also created more subscribers/followers, fans and super fans. All in all very useful to label and band.

 

I hope this all makes sense?

 

Cheers

 

John

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