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WiMP: 'Nobody in music streaming is making money at the moment'

Rhian Jones
WiMP

Scandinavian company WiMP describes itself as the “delicatessen shop” of streaming services.

Amongst major players like Spotify (available in 55 countries) and Deezer (available in 182 countries), WiMP is relatively small, only operating in Norway, Denmark, Sweden, Germany and Poland.

Despite its limited availability, it is one of the ten biggest streaming services globally. Helped in part by the fact that in the few markets it does operate, streaming is king.

Last year, IFPI Sweden reported that streaming income grew by a whopping 30.3% to pull in 705.9 million SEK (£66.5m) in the year. This income represented 71.2% of the country’s total revenue generated by recorded music in 2013.

In the same year, streaming was the largest revenue source for Norway's recorded music industry, accounting for 65.3% of total revenue and 84.1% of digital revenue.

Funded by paid subscriptions, WiMP doesn’t offer an ad-supported tier. It does, however, offer lossless music streaming in CD quality, available for Sonos, Bluesound, iOS and Android at double the WiMP Premium price. The site has also recently launched music videos on Android, an in-app-magazine and extended track information.

With local editorial teams in each country, the service provides daily recommendations, tips and playlists and is available on computers and mobiles, tablets and network players. 

Here we talk to head of strategy at WiMP Music Kjartan Slette (pictured) on what the future holds for streaming and the possibility of a new model that could benefit the fan-artist relationship, encourage the development of new talent, and ensure the long-term legitimacy of streaming services.

What does 2014 hold for streaming?

By the time 2014 ends streaming will no longer mean rows of tracks and playlists for you to navigate through but rather a seamless experience with video, text and music all integrated. Something you would for example expect from a pitchfork article these days.

And video means music videos?

In the first step, yes. But it can be so much more: live streaming and anything revolving around audiovisual experiences. I don’t think we have really seen what video combined with audio could be. We’re still acting like this was the MTV era, we’re simply displaying music videos. But once video enters music streaming – as I am sure it will this year for all the major players – artists get paid as much for a video stream as they get paid for an audio stream. So artists and labels should be thinking how they can benefit from that. How about an album that only exists as a video? If everything is paid the same you can play with the formats, you don’t release an album in the traditional way anymore.

Some of your competitors are focused on aggressively expanding to as many new markets as possible. They say it’s the key to growth and the key to gaining paying subscribers. Your strategy seems to be different. Can you explain?

Most of our competitors are funded by private investors. For private investors it’s all about return on investment or, in other words, size, growth and land grabbing. We are stock listed through Aspiro AB in Sweden, with the biggest shareholder being Schibsted, a huge media player globally. If you’re stock listed you have some different metrics to work towards.

For us it is most importantly about bringing revenue to our shareholders. One can argue which approach is better and I wouldn’t have the answers. I just know that with our approach we actually need to have a business model that scales. That said: nobody in music streaming is making money at the moment, far from it. We simply don’t have to luxury of launching in a hundred countries in one year.

Than could turn out to be a bad thing because it means you’re not growing as fast as your competitors. But for us, I would say, it’s a good thing because you have to really think through your agenda instead of just going all out.

You do not offer an ad-supported tier to your customers. It is no secret that artists get paid more money from premium streams than from ad-funded streams. Do you receive any feedback from the artist community regarding this approach?

There are two answers to this question. The first one is that streaming is generating 77% of revenue in Sweden and 78% in Norway. It’s not a theory anymore: streaming is the main revenue source. So the ad-funded tier isn’t discussed anymore, it is accepted as a way to funnel customers into the paid model.

That being said: We have always feared that the ad-supported model would hurt our credibility. We always felt awkward to place a Coca Cola ad right next to the new Kanye West track. It devalues the importance of music as something you should pay for rather than something that is placed next to an ad. For us the ad-funded model just didn’t feel right. You could argue about which approach is the right one, you could argue that going ad funded would immensely increase your funnel by reaching millions of people. But we couldn’t do that, it’s not in our DNA. Music should stand on it’s own feet.

How about the rates you pay back to the music industry, rights owners and collecting societies alike. Are they reasonable in your eyes?

That’s a pretty important question and I think it will be the main discussion of 2014. The rates are high. The user pays 9.99 euros per month. North of 75% of that money goes back to the industry – the main bulk reaches the artists and the labels and the rest goes to the collecting societies. We keep 20 to 25%. From a fairness perspective I’d say the model is defensible, because most of the revenue goes back, which it should.

Here comes the interesting part: at the moment the 9.99 euros you pay per month aren’t divided according to your streams. If you’re a huge fan of Kanye West your money isn’t going to him directly. Your money is collected in a huge pot of all collected revenue and divided by all streams. That’s the business model of streaming. This means, if you’re streaming one Kanye West track per month and your neighbor streams 1,000 Jay Z tracks in one month he will decide where the money goes, because you only generated one out of 1,001 streams.

Our theory therefore is that qualitative listening, where you actually sit down and enjoy a whole album rather than just stream track after track after track is perhaps not reflected enough in the payment structure today. What happens if we treat every customer as a separate universe and collect and distribute the money according to the listening habits of each individual user? If, for example, you stream one Kanye West song in one month and nothing else, all of your 9,99 could go to Kanye West.

What are the implications of such a model?

It could mean that an artist will be more motivated to build a strong following, because if you get an audience to listen to you, you’ll receive more money than in the current model.The data comes from Norwegian research project Clouds and Concerts, not from WiMP. We think the model is fair: What you actually consume directs the payment. And it also brings with it the discussion about how niche music is remunerated in streaming, for example classical or jazz. Genres that aren’t background music, genres you actively consume in a more qualitative manner. Currently that kind of music, in my opinion, loses out in streaming, because it is all about the big pot and the genres that generate fewer streams generate very little money. It’s just a theory, it seems to make sense, but we’ll see.

Do you think streaming will one day generate the amount revenues the music industry has seen in its heyday?

It looks like it, which is something that no one expected a couple of years ago. Everybody said it was an artificially high number. But today it looks like we can get back to those levels, perhaps even exceed them. You see, in the old days you had a finite amount music you could choose from. In any streaming service today you can choose from 20 million plus tracks. That means that even if we reach the golden day revenues it will be shared among more artists. And I would say that this is a fairer model than we ever had before. Of course that means that there will be less in average per artist. That’s something you can’t escape. But you have finally given to choice of what to listen to to the consumer. I think that is a democratic model.

On the other hand an artist who makes an effort of being listened to is rewarded more directly…

Exactly. In the physical days, if you got a deal, you got exposure in the record store and you were pretty much set: I got a deal, got distributed, now I can go back into the studio and make another album. That doesn’t work anymore, because now you are always competing against millions of tracks, you have to be active all the time to ensure you’re music is played.

Another important point: Streaming is a rental model, it is based on subscription. So the payouts happen over a long period of time rather than in the couple of weeks after a physical release. It requires a different kind of mind set that some artists haven’t fully grasped yet. You have to be active towards your community all the time. It is hard but necessary.

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