Music streaming in Canada ramps up

In the past six months, Canadians’ usage of streaming music services seems to have jumped, in a trend that’s not only good news for streaming services, but wireless companies as well. Nielsen Co. only began tracking music streaming in Canada in July 2014. By September, when Spotify AB entered the market, streaming had increased by 18 per cent, according to numbers provided to The Wire Report by independent broadcast consultant Andrew Forsyth, who collected the data for Nielsen. Streaming increased another 25 per cent by the first week of December, though it fell eight per cent from that peak by the second week of January 2015, Forsyth said in an email. In those six months, Nielsen noted in a press release on Jan. 15, more than six billion songs were streamed in Canada. It makes for “a major … ramp up in the amount of streaming that’s happened,” Forsyth said in a phone interview. The catalyst, he said, was a decision on webcasting tariffs by the Copyright Board in May 2014 that set tariffs at a fraction of what musicians and record companies had asked for. “That’s now made streaming a much more potentially attractive business in Canada compared to what it is in the United States and the rest of the world,” he said. While streaming services have been around for a while, the launch of Spotify in Canada in late September 2014 was what “really opened the gate,” he said, noting that the low tariff determined by the Copyright Board is “certainly what brought Spotify into play.” “Spotify has a very large following in the United States, and of course Europe where they started, and I think they marketed perhaps stronger than anyone else,” he said. “When they launched in Canada, they were very proactive.” He said that because of the profile Spotify had, and “what they were offering, and the platform in which they offer it to consumers, I think it attracted the consumers a lot more readily than some of the other services.” Rdio Inc. was one of the first international streaming services to enter Canada, he noted. That was in 2010, and the playing field has become more crowded since then, with Deezer, Google Inc.’s Songza and, most recently, Spotify. Micheal Orrbrooke, general manager for Rdio Canada, said that “our thinking and our approach to this is that more companies and more attention only brings more people into the category, into the space.” He said the biggest challenge of operating in the market is awareness, including of what devices customers can use, where and when they can use them, as well as product options, he said. “We’re going through a pretty big transition in the music space, from downloading to streaming, and then the education that comes with that is the biggest challenge,” he said. “You’re looking at having to change consumer behaviour that’s been fairly established for a fairly long time, so that’s never easy and never happens overnight,” Orrbrooke added. “Four years may seem like a long time, but … we look at this as kind of Day 1 still in the music-streaming space. We’re looking at this as a long-term business opportunity and not something that is really a short cycle.” Exactly how successful these companies have been in the Canadian market is harder to determine. Orrbrooke declined to share Rdio’s Canadian subscriber numbers or how much they have grown, as did spokespeople from Deezer and Songza, while Spotify did not respond. What is clear is that none of them are the most popular source for online music streaming in Canada; that would be YouTube, also owned by Google. In Canada, other options also include CBC/Radio Canada’s music service, an app from Stingray Digital Group Inc. that allows customers to listen to its music channels, and services from companies like Quebecor Inc.’s Videotron as well as Saskatchewan Telecommunications Holding Corp. MTM said earlier this year that 64 per cent of anglophone adults surveyed in late 2013 had streamed audio within the prior month, up from 61 per cent in a survey done a year earlier and 57 per cent in 2011. Despite the increasing numbers, they’re not providing a challenge to traditional radio. Jeff Vidler, president of Toronto-based media research consultancy Audience Insights, puts together a report on audio consumption among drivers and passengers, which represents 89 per cent of Canadian adults, called Radio on the Move. He said that in June 2012 four per cent of respondents reported streaming a music service on their smartphone within the past week, which rose to nine per cent by October 2014. Streaming on a computer rose from 11 to 13 per cent during that same time period. Vidler said music streaming in Canada is in its infancy, pointing to Pandora Media Inc.’s absence from the market, a company he described as a “category killer” in the U.S. “Canadians have heard lots about Pandora. And a lot of Canadians have figured out how to get Pandora, using proxy servers in the U.S., but it’s still a tiny percentage,” he said. “That would be the thing to watch, if Pandora comes into Canada.” He noted that in the past two years, Songza and Rdio “started to get more aggressive in terms of marketing their service. “That’s what you see reflected in the growth of streaming these services by smartphone or by computer,” he said. For now, Spotify will be the service to watch, he said, though he doesn’t feel it has yet been aggressive in its marketing in Canada. “I think there’s no question that the arrival of Spotify … has the potential to turbocharge the growth of audio streaming services, but I honestly have not seen evidence of that yet.” Forsyth expects music services to keep growing. “The technology has now created a situation where people don’t have to own the song,” he said, noting that iTunes now makes more revenue from apps than it does from music downloads. “Streaming is where I think the direction of retail goes,” he said, “and therefore, streaming is where people are going to be consuming their music more and more for the foreseeable future.” And if that happens, all that streaming will consume a lot of wireless data. MTM said last June that the number of anglophones who stream audio went up 38 per cent over a year, to a third of smartphone owners. The Google Consumer Survey from the fall of 2014 found that the mobile phone is the most popular method Canadians use to stream music online, used by 47.1 per cent of Canadians who stream music, compared to the 43.1 per cent who use a computer and a 6.4 per cent who use a tablet, according to data provided in an email by Google spokeswoman Leslie Church. Vidler said his data shows that “streaming is definitely moving to mobile,” and that we will see more audio streaming on wireless connections in the near future. It’s something wireless companies have an interest in, said Gartner Inc. analyst Bill Menezes. “I think in general, the cellular companies are really interested in anything that creates consumption, and especially things that create consumption that can be done through multiple devices,” he said. He noted that in the U.S., T-Mobile US Inc. has an offer in which it waives data consumption from major music streaming providers, including Pandora and Spotify. “So if you sign up for a T-Mobile plan and you stream music from one of the providers on their list, then it doesn’t count against your data limit,” he said. “If you’re a heavy music streamer, if you want to put it through a Bluetooth speaker and listen to it all day while you’re in your office or your home, that can add up pretty quickly,” he said. “For a good quality music stream, if you stream that for eight hours a day, you could be looking at over 900 MB, nearly a gigabyte a day of consumption.” In response to whether we could see something like that in Canada, Menezes said T-Mobile is the only carrier offering such a plan in North America. “But I think the others are probably looking to see and doing their own consumer research to determine how compelling an offer that really is,” he said. It’s an offer that also raises questions about net neutrality, he noted. The CRTC did not immediately respond to a question about whether such a plan would run counter to its net neutrality rules. While wireless companies like Videotron and Rogers Communications Inc. have been open about their focus on mobile video, Menezes agreed that although video consumes more data, consumers are likely to do more streaming of audio in any given day. “You would think so. Most people aren’t necessarily going to be sitting in a situation where they can watch a video — they might be driving, they might be working,” he said. “The streaming music services definitely probably constitute a much larger population of everyday, regular streaming users.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Music streaming in Canada ramps up

Broadcast | January 20, 2015

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