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Penny Fractions: Are All Streaming Platforms The Same? A Deezer Story.

Hello, hello, hello. New week, new newsletter! I’ll be taking off next Wednesday, as I’ll be on vacat
Penny Fractions
Penny Fractions: Are All Streaming Platforms The Same? A Deezer Story.
By David Turner • Issue #100 • View online
Hello, hello, hello. New week, new newsletter! I’ll be taking off next Wednesday, as I’ll be on vacation, but will be back on September 11th. My only note before I leave would be to check out my Patreon page, which allows me to pay my copy editors for the great work they do every week. Otherwise, before I catch my flight tomorrow, let’s chat about a little streaming service called Deezer.

This newsletter was originally inspired by my sheer lack of talking about Deezer, but after researching I wished I’d written this years ago. A familiar pattern that’s happened at Pandora and Spotify kept entering my mind: a company suddenly finds an audience, isn’t quite sure how to make money, and begins a decade-long scramble to make the math work. Deezer’s lower profile and unique place within other the European streaming platforms might’ve presented a different narrative, but I quickly started seeing the same tropes. So, let’s go back to 2006 to see where it all began.
Deezer...I Mean, Blogmuzik’s Early Days
Deezer wasn’t originally called Deezer. It was originally a website called “Blogmuzik.net” created by Daniel Marhely, which built upon the popular mid-00s notion of allowing immediate access to the world’s music. (The site also used an iPod-like webpage to interface with the actual music.) Rather than following the file-sharing model of Napster or the Pirate Bay, Marhely looked towards music streaming (for context, Myspace was still popular and YouTube was just getting off the ground). Unsurprisingly, the website ended up in legal trouble because it was using completely unlicensed music. Blogmuzik ended up shutting down in April 2007 but eventually came to a deal with the Société des auteurs, compositeurs et éditeurs de musique (SACEM). That allowed the website to continue to exist, even though it’d be many more months before any agreement would be reached with major labels. 
Though Deezer fought early legal challenges, the company still wasn’t making money nor did it appear to put much thought into a potential path towards turning a profit. By the end of 2007, the website was averaging over a million unique monthly visitors, a number that would grow to over 7 million over the next couple of years. The company opted for on-screen display advertising, which with a decade of hindsight couldn’t sustain the business. Thus, by the end of 2009 a few shifts were made. 
The first big shift was the announcement of a two-tier subscription model: Deezer HQ for 4.99 euro/month, which allowed for higher playback quality music and got rid of ads on the desktop experience, and Deezer Premium at 9.99 euro/month, which included the Deezer desktop app and a mobile platform accessible via iPhone, Android, and Blackberry, a feature even Spotify didn’t offer at the time. (A nice press release from 2009 even notes that the price of a Premium account is only the cost of two cartons of cigarettes!) The introduction of mobile foretold the future of the company, as this rebranded service stumbled out of the gate with only 14,000 subscribers in the first few months. Since neither advertising nor subscriptions were working, the company still needed help. Ultimately one of the co-founders, Jonathan Benassaya, was pushed aside and eventually left the company by November 2010, but not before Deezer found a life raft.
Enter Orange, or Say Hello to the Telco
In 2010, the French telecommunications company Orange was looking for a way into the music market after it’s previous attempt, music site Wormee, didn’t catch the same amount of fire. (It should be said the Wormee logo was a delightful orange worm with headphones!!) And instead of trying to compete in what was becoming a crowded music streaming market, Orange decided to invest in Deezer and put the platform into its phones. By the summer of 2011, Deezer had cracked over a million paying subscribers. 
Deezer did receive early investment before Orange, but the spark that proved the company wasn’t just a money sinkhole didn’t arrive through innovation or new technology. Rather, a large multinational firm simply used its market position to drive consumers to use a product they may or may not have even desired. This allowed for Deezer to somewhat stay afloat even though the core issues of the company (not making money, paying out too much money to labels, and not sustaining real growth) remained. 
In the fall 2012, Deezer raised $130 million in preparation for an international launch that included the United States, and perhaps unsurprisingly, over $100 million of this funding came from Access Industries, the firm that owns Warner Music Group. Over the next few years, Deezer attempted to follow Pandora’s lead and IPO, but backed out in late 2015. Music Business Worldwide laid out a number of reasons for Deezer’s decisions that ranged from it losing subscribers, paying labels too much, not earning enough from its existing subscribers, and still being supported by its deal with Orange. All of these are perfectly valid reasons for the company not to make this move, but it raises the question: who exactly is benefitting from Deezer’s continued existence? 
Just looking at the money raised over the last few years make it fairly clear. In January 2016, post-IPO collapse, the company raised another $109 million from…Access Industries and Orange. Then, last August Deezer announced a new round of investment worth 160 million euro from its old pals Access Industries and Orange, but also the Saudi Arabian companies the Rotana Group and Kingdom Holding Company. Rotana’s buy-in included an exclusive deal for Deezer to launch in the Middle East and North Africa for exclusive rights to Rotana Music, one of the biggest Middle Eastern music labels. That neither Deezer or Spotify are boasting about their success in these new markets a year post-launch does make me chuckle. So, I’ll be glib to state a company that mostly exists to print for record labels and to provide a music service for Orange users isn’t exactly too compelling.
Orange You Glad You Have a Telco
A goal I set for 2019 (but haven’t followed through on) was to try and dive a bit more into other streaming services outside of the Apple Music, Spotify and YouTube. I thought telling the story of smaller streaming services might help contextualize the broader industry, but instead I kept seeing a familiar story. Much in the same way that Pandora wouldn’t have survived its endless pivots in the mid-00s without refusing to pay its entire staff for a couple years and subsequently fighting any attempt to increase how much they pay artists, Deezer would’ve floundered without getting a bailout from Orange. The credit given to the “internet” for the success of these companies obscures what is often just aggressive anti-worker or monopolistic maneuvers that allow these money-losing venture to crawl forward. 
Unless someone can see a per-country breakdown of streaming platforms, it’s hard to precisely say what is driving individual market growth. But, when many non-western streaming services are backed by telco/large media companies and Spotify’s most successful markets (western Europe, the United States, and Latin America) are ones where it was either first to market or tied up with large telco bundles, the real story appears to sitting in plain sight. Now, this isn’t an interesting company narrative about disrupting a stogie entertainment business, but it’s far closer to the truth of what’s happened in music the last decade. Even though it launched outside of the United States, Deezer’s history shows that post-90s media consolidation, not technological advances, is what’s leaving working musicians as pawns in the game of multinational companies. But, I guess stories about A.I. music and all-knowing playlists are more exciting.
Correction
Not quite a correction, but a reader pointed me to the fact that statutory damages for copyright infringement can be up to $150,000 according to United States copyright law, which I’ll editorialize and say is ludicrously high. However, this still doesn’t explain where the RIAA pulled out its $100,000 figure for its many lawsuits. So, if anyone knows, the email is still pennyfractions@gmail.com.
6 Links 2 Read
Does Cherie Hu own a slot in my weekly round-up of links? Technically, no. Does Cherie Hu continue to write great pieces that oddly cover specific niches of the music industry that I spend a lot of time thinking about myself but never cover? Absolutely. So do read her critique of why musicians aren’t crossing over to become Twitch stars. 
The Music Modernization Act is a topic I’ve never really talked too much about, but perhaps I’ll finally start diving more into that piece of legislation with this rather high-profile lawsuit. 
My favorite YouTuber, Sarah Z, did a video about the early 2010s viral song “Friday”. It assesses the particularly harsh internet environment that made the song so popular and the exploitative economics of those who really profited off the material often made by pre-teen girls. 
Here is a solid history of Apple Music’s now-abandoned Connect feature. The piece makes a solid case for why Connect never got off the ground, but I’d love to read about the specific team who was on the project and if there was ever a clear product vision. 
A great dive into the current conversation just below the surface of the mainstream within the electronic dance community. A number of people who read this newsletter and who I’ve shared a beer with are quoted in this piece, so I’ll admit a bit of bias. 
A recession certainly would not be good news for neither Netflix nor Spotify. My only other note is that both companies are approaching the iceberg of stagnating user growth, which certainly isn’t where one wants to be during a global economic slowdown—or at least I wouldn’t!
The Penny Fractions newsletter arrives every Wednesday morning (EST). If you’d like to support it, check out the Patreon page or follow it on Twitter. The artwork is by graphic designer Kurt Woerpel whose work can at his website. The newsletter is copy edited by Mariana Carvalho, with additional support from Taylor Curry. My personal website is davidturner.work. My current job is a Curation Analyst at SoundCloud, so all thoughts here represent me, not my employer. Any comments or concerns can be sent to pennyfractions@gmail.com.
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