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Furthermore, Forbes (2014) reported that iPhone users are the most engaged tech adopters. It is therefore not surprising
to learn that during the 2013 SXSW festival, over 80% of the attendees had an iPhone. It has also become common
practice for influencing technology journalists to be on iOS. This has created an ecosystem where apps are regularly
filtered out for public consumption, a fact that has made both start-ups and ourselves want to first nail the iOS
experience and gain Apple App Store Certification before moving onto Android (Scoble, 2012).
Moreover, the tendency for Apple customers to be high-income individuals has been reflected in the online store
revenues: iOS had an Average Return Per User (ARPU) that is roughly 4 times that of Googles Android in 2014
(Evans, 2014). Android has a higher percentage of ad-supported apps, but paying for apps is more common on iOS.
v Being on the Apple App Store puts the app in a demanding ecosystem that contains some of the most engaged
tech users and journalists. This will help us receive efficient feedback and build a product that meets the
highest expectations on the market.
MSc. E.I. Hesli Business Plan Final Version 9
Jean-Philippe Serhal PRIVATE & CONFIDENTIAL February 2017
2.1.4 iOSs users are ideal
Aside from being a high-income customer base, the Apple clientele is also
a deeply consuming demographic: ComScore (2014) reported a monthly
64 hour-app-engagement compared to 55 for Android users, on top of
which Forbes (2014) stated an overweight of 65% for iPhone users being
addicted to digital devices. In 2015, the popular Coachella Music Festival,
which caters for a segment of our target users, had 90% of its participants
use the Coachella app on iOS. The festivals Director of Technology G.
Sangha qualified them as heavy iOS users (iMore, 2015).
On top of having almost 5 times the purchasing power of Android users
and being 10% more likely to make in-app purchases, iPhone owners
were deemed more loyal than their Android counterparts with 62% of
them being satisfied with their device compared to 48% for Android-run
smartphone owners. Apple users become more interesting for us to reach
during our early development stages, as they are less likely to switch to
another platform during growth (Crew, n/a).
Thus what has allowed the iOS platform to lead the way in the app market
despite its non-dominance on the smartphone OS market is a deeply
Figure 12: Characteristics of iPhone and Android People
consuming and loyal customer base that has a tendency to install, engage (Forbes, 2014)
and pay more than Android users for mobile applications.
v Being on iOS means interacting with users that are more deeply consuming, more loyal and more likely to
spend than their Android counterpart.
v The introduction of mid-range Apple smartphones is the tech giants answer to an Android-dominated
smartphone market. This will allow the company to reach a broader audience, hence new iOS users.
2.1.6 Conclusion
v Developing our product on iOS will allow us to implement quick and homogenous changes across Apple
devices with close-to-identical hardware, and 88% of which are running on the latest software version.
v Being on the Apple App Store puts the app in a demanding ecosystem that contains some of the most engaged
tech users and journalists. This will help us receive efficient feedback and build a product that meets the
highest expectations on the market.
v Being on iOS means interacting with users that are more deeply consuming, more tech adventurous, more
loyal and more likely to spend than their Android counterpart.
v The introduction of mid-range Apple smartphones is the tech giants answer to an Android-dominated
smartphone market. This will allow the company to reach a broader audience, hence new iOS users that could
potentially become Hesli users too.
v Users in both emerging and developed countries are spending more time on their mobile phones than ever
before thanks to increased capabilities in mobile hardware and software, and the growing availability of
online tools and platforms. Mobile has also become the primary device for accessing the Internet, worldwide.
Facebook, for instance, allows brands and companies to reach prospective customers based on their interests, gender,
relationship status, educational status, age, location and language (Facebook, 2016).
Example: A food delivery start-up will use location and educational status to target their service to current
college students in specific regions.
Similarly:
The Social Media Examiner (2016) also reported that social media marketers with more
than 5 years of experience still showed strong interest in the same social giants (Figure
20). It is worth noticing that none of these platforms use audio or music as their main
advertising content, but the majority use visuals (Figure A8, p.66)). As a matter of
fact, the report stated that 74% of the commonly used type of shared social media content
is visual, followed by blogging at 68% and videos at 60% (Figure A9, p.66). The
importance of image, the Internet Trend Report explains, is due to the fact that millenials
and generation Z-ers both communicate via text and image (KPCB, 2016). The
absence of audio-only content could be also explained either by the fact that no social
platform that serves audio-only content currently exists, or that marketers do consider
audio advertisements but in other types of networks. Figure 20: Platforms Used By Social Media
v All the successful social platforms use visual content that is distributed Marketers With More Than 5 Years Of Experience
and consumed in different forms, but none of them use audio-only content (Social Media Examiner, 2016)
with as much significance, or consider audio-only content as part of the
platforms identity.
Therefore, marketers cannot yet show interest in audio-only advertising on social media networks because no
social media has created a platform where audio-only content is consumed by users. However, music-streaming
platforms, which depend heavily on advertising, have been offering audio advertisement real estate to marketers who
either advertise products during the music experience, or advertise a music experience by itself with sponsored playlists.
v Spotifys State of Mind ad targeting category allows marketers to target users based on their emotional state
thanks to the platforms availability on multiple connected devices and a myriad of advertising formats.
Rossi, Spotifys Global Director of Marketing, said I feel like the industry is in a transitional period; its figuring out
a lot of latent behaviours and I feel like now we are seeing the light at the end of the tunnel, before concluding with
If we target against playlist, age, geography and time of the day, the data becomes immensely powerful.
v Spotify aims to switch to Programmatic Buying in the shortcoming future. This will enable the platform to
significantly grow its advertising business thanks to automated ad buying and selling.
Companies with annual revenue less than $25 million are reported to spend an average of $4000 to $7000 a month on
social media marketing (Small Biz Trends, 2016).
v Companies are increasing their social media marketing budget, which is expected to reach almost a quarter of
their total marketing budget in 2020.
v Companies experience low satisfaction in terms of quantitative impact and ROI measurement on social media.
50% are not worried about using online customer data. 50% say social media is a company performance
contributor. With enhanced measurement software CMOs will continue to increase their social media budget.
v Decreasing prices in mobile-broadband and the increase coverage of mobile internet is allowing emerging markets
to get online; an unmissibale opportunity for advertisers looking for new mobile consumers.
v Users in both emerging and developed countries are spending more time on their mobile phones than ever before
thanks to increased capabilities in mobile hardware and software, and the growing availability of online tools and
platforms. Mobile has also become the primary device for accessing the Internet, worldwide.
v Social media advertising is a booming market that analysts expect to be an advertising industry changer.
v By continuously spending the most on social media advertisement and social media users, North America appears
to be the most favourable market for social media advertisers.
v Native ads are better for brands and for users. Because Hesli is firstly a mobile application, it is important to make
the ad experience as unobtrusive as possible, which is why the platform will use native advertisement. When the
platform moves to a desktop app, banner will be introduced.
v A new social platform can be successful amongst social media marketers and users alike if it creates an
environment where the content consumption behaviour differs significantly from existing social platforms.
v All the successful social platforms use visual content that is distributed and consumed in different forms, but none of
them use audio-only content with as much significance, or consider audio-only content as an intrinsic part of the
platforms identity.
v Studies have shown that audio-only advertising can have considerable positive effects on sales.
v Exploiting audio advertising would allow marketers to engage their customers in an emotionally and contextually
relevant environment in which they can deliver a message that resonates.
v Spotifys State of Mind ad targeting category allows marketers to target users based on their emotional state thanks
to the platforms availability on multiple connected devices and a myriad of advertising formats.
v Spotify aims to switch to Programmatic Buying in the shortcoming future. This will enable the platform to
significantly grow its advertising business thanks to automated ad buying and selling.
v Spotify allows brands to target users based on their mood (determined by a given set of genres and playlists).
v Companies are increasing their social media marketing budget, which is expected to reach almost a quarter of their
total marketing budget in 2020.
v Companies experience low satisfaction in terms of quantitative impact and ROI measurement on social media. 50%
are not worried about using online customer data. 50% say social media is a company performance contributor.
With enhanced measurement software CMOs will continue to increase their social media budget.
v After 19 years of decreasing CD and download sales, the music business experienced its first revenue growth
in 2015 thanks to a proactive digitalisation of the industry and the extensive reach of online audio streaming.
The latter brings efficient solutions to worldwide users and almost half of the population in the industrys 13
leading countries have now opted for these services.
26%
77% 75% More users*
69% 68%
29%
65% 64% More users*
55% 55% 54% 52% 52%
12%
48% More users*
40% 39%
Figure 27: Use Of Smartphones VS Computers For Each Service (MCIR, 2016)
The expanding reach of smartphones is allowing more individuals to get online than ever before. With the music
industry becoming considerably digitalised, streaming services aim to become available to all. Thus by combining the
affordability and portability of smartphones, the new distribution models of online music, and the availability of offline
music allows users to enjoy music streaming wherever they are. It is therefore safe to say that the smartphone industry
contributes heavily to the growth of the music sector, and that both industries are likely to grow together.
v Smartphones are taking over as the preferred device for listening to music, especially amongst paying music
streamers. The expanding reach of smartphones is an open door to the Internet for developing countries,
which are yet to discover and enjoy streaming services. Both industries are highly likely to grow together.
v Social media affects the consumer/artist relationship within and beyond the online experience. Young
consumers consider important to connect with artists on a personal level through different medias.
Figure 31: Gen Zs Favourite Music Figure 32: Music Discovery Sources
Apps (Pandora, 2016) (Pandora, 2016)
v Generation Z is expected to contribute heavily to the growth of the music sector. Their morals toward music
rights have evolved, most of them stream music legally and most of them are willing to pay for it. The
availability of music and the portability of smartphones boost music consumption in every day tasks.
Spotify credited its free tier for its gain of a loyal community. The Swedish Expense Cost (in $k)
service says that 80% of its premium subscribers started on the free tier. It Royalty, distribution and other costs 1,633,289
also declared that 80% of its revenue came for premium subscriptions. In Streaming content expense 14,987
2015 only $219 million were made from the free tiers advertising (61 million Personnel costs 243,366
users, or $3.59 per free tier user), compared to $1.95 billion generated by Travel costs 21,785
premium accounts (28 million paying subscribers in 2015 (representing 41% of Advertising and public relations 87,335
all paying audio streaming users across all services), or $69.64 per premium External consulting fees 49,136
user) (Music Business Worldwide, 2016). The low revenue generated per user Facilities fees 33,389
Other expenses 15,703
on a free tier is one of the reasons why Apple decided not to offer it. It is worth Depreciation and amortization 30,832
mentioning that the tech giant highlights its artist-friendly image by raising the
Total 2,129,822
artists royalty rates, which in turn requires significant income. 84% of Spotifys
total revenue went back into the music industry as royalties. Spotify has been Table 5: Spotifys Expenses By Nature
(Music Business Worldwide, 2016)
able to enlarge its free tier subscribers community and maintain its leading
position (despite young generations showing higher-than-ever support for artists) by offering an efficient solution to not
only individuals, but to also, and despite its outcry in regards to low royalties, the industry.
v Leading platforms share several key features that include great design, extensive music libraries and a
seamless listening experience. A free tier access promotes community growth, however free tier users do not
generate sufficient revenue for the music industry.
If backward-engineered, and by combining both the free and premium tier, publishers and rights holders make
between $0.006 and $0.0084 per stream on Spotify. Pay-out is generally higher if the stream is played by premium
subscribers. This, however, does not represent what signed artists make, as a high percentage of the pay-out is taken by
the label (Figure 34) before paying the artist (in 2015 James Blunt tweeted he made $0.0005 per stream, or between
8.3% and 11.6% of the money paid out by Spotify per stream, and for a total of 3.5 million streams (Twitter, 2015)). It
is why many artists have pulled their music from the service and why streaming platforms are causing outrage.
Figure 34: Typical Percentage Cuts For Signed And Unsigned Artists (Information is Beautiful, 2015)
It is important to highlight that mega-star and mainstream artists who generate millions of streams represent 1.1%
of all signed artists in the world (Digital Music News, 2014)). It is therefore fair to say that making a living solely out
of streaming is often an unrealistic expectation for many. Information is Beautiful (2015) found the number of streams
required per service for signed and unsigned artists to make the monthly US minimum wage equal to $1260:
Despite recent and radical changes within the music industry, which have resulted in the highest recorded levels of
music consumption worldwide, a new and surprising fragment has evolved: low artist pay-outs. The few high-profile
outrages that have spread across press and media are a clear sign of the systems economic instability. It is therefore
safe to say that changes within the music value chain and/or business model are expected to take place in the near future
in order to reach a satisfactory system agreed by all parties.
v Streaming users have more value than average listening consumers: subscription money, especially premium,
raises the artist pay-out. Artist-dependant bodies take the lions share before leaving an unrealistic percentage
to the artists. This is a fragment in the music streaming market and leads to expected changes in the model.
The artist/label relationship is often challenging. Technological advancements promote artist independence.
Labels often edit an album, artwork or song if they believe Artists can make a high quality recording with inexpensive
the product will sell better. This frustrates artists who think equipment. YouTube and Soundcloud are sufficient to build a
this practice alters the message behind their work. loyal following and attract press. Social media can be used for
promotion and events.
Distribution is easier than ever.
Distributors were hired to get a song on a radio or a CD in a Labels take a high percentage cut from revenue.
store, however fewer artists feel the need to produce their CD and legal download sales are down whilst streaming
music in a physical format. Digital distribution is also easier consumption is booming. Streaming pay-outs are low, and with
than ever with the ubiquity of online platforms dedicated to labels taking a large percentage cut, small revenue is left for
music. However, distribution remains a viable business for artists.
niche markets with demands for vinyl (The Balance, 2016).
It is therefore surprising to know that independent labels are still being created, which is explained by the fact that not
all artists can manage their careers by themselves and that having access to financial and human support is always
helpful. These labels tend to be more artist-friendly and more generous in their deals with 50-50 royalty rates. As
mentioned above, labels invest their money in being filters and in remaining a stable reference for audiences looking for
a certain genre, a standard of musical quality, and artists worth taking the time to listen to (The Metropolist, 2016).
v Despite technological advancements that allow artists to record their own work and gain audience reach with
few online resources, record labels maintain their power as music filters and keep their role as providers of
financial and human support for starting artists.
Three solutions apply to increase both the artists income and the markets economic stability:
Become independent or join an artist-friendly label that offers fair royalty deals and financial and human support.
This could help increase the royalties acquired by the artist, however acquiring the necessary amount of streams to
make a decent income will require tremendous efforts. Successful artists have a varied income stream. To be
successful they need structure and an experienced support team (Billboard, 2012).
v Music business growth in all major markets stimulates positive perceptions in regards to the current
business model and optimistic expectations towards the speculated, extensive one.
The wave of opportunities that came with the creation of music streaming platforms has passed, with several of
those services being en route to dominating and changing most of the music industry. The next wave of
opportunities within the sector, and one that music tech start-ups born between 2013 and later are trying to exploit,
lies in the use of the music collected by the streaming services - which are gradually taking the role of digital
distributors - and create a new, creative way to consume that music. This varies from the unification of those
streaming services into a single music ecosystem where all music enthusiasts, independently of their music service
of choice, are able to create collaborative cross-curated playlists, to finding location-based music, following what
ones social circles listen to, discovering new music more efficiently and sharing ones music with the world on
popular social platforms. The full access to music is no longer enough; users want to experience music differently,
socially and publicly. Combining available features present in recently-born music tech start-ups and the needs
found in the results of our questionnaire (Appendices, p.70), the ideal platform would include:
If people are real fans of the artist they will want something that expresses who they are
and that they can put on the shelf as part of their collection
G. Barros, President & CEO, Concord Music group.
With the gradual availability of smartphones, the expanding Internet infrastructure, the change in music consumption
within young generations, the rise of streaming amongst global populations, the urgent need to better remunerate artists,
the growing number of start-ups looking to use the extensive music libraries under different distribution models and the
streaming platforms embracing those new start-ups by including them in respective up and coming music app stores are
clear indicators that a new wave of post-streaming-services opportunities is taking place within the music sector.
v The music industry is going through a post-streaming-services wave of opportunities. Streaming platforms
are turning into digital distributors and will eventually supply independent platforms with music in order to
boost revenue within the sector.
Latest News: Music Week (2016): Soundcloud has reached an agreement with the pan-European licenser ICE, giving it
permission to distribute its premium and free tiers across European territories (previously only UK and Germany),
meaning that apps using Soundcloud will likely experience growth.
v Smartphones are taking over as the preferred device for listening to music, especially amongst paying music
streamers. The expanding reach of smartphones is an open door to the Internet for developing countries,
which are yet to discover and enjoy streaming services. Both industries are highly likely to grow together.
v By leading the trends in smartphone use, music consumption and social media, millennials have become an
essential and dominant asset to the music industry.
v Millennials are widely familiar with music streaming and respond positively to music marketed by a brand.
Paying for music is considered a significant gesture and is done to support an artist.
v Social media affects the consumer/artist relationship within and beyond the online experience. Young
consumers consider important to connect with artists on a personal level through different medias.
v Generation Z is a growing demographic with a growing online power. They have embraced streaming but
their needs and mindset have switched from that of millennials, giving marketers a new challenge to overcome.
v Generation Z is born with a smartphone in their hands. Music is an integral way of self-expression and social
media is a communication tool used to engage with their friends and favourite brands. They consume multiple-
platform content at rapid pace.
v Generation Z is expected to contribute heavily to the growth of the music sector. Their morals toward music
rights have evolved, most of them stream music legally and most of them are willing to pay for it. The
availability of music and the portability of smartphones boost music consumption in every day tasks.
v Leading platforms share several key features that include great design, extensive music libraries and a
seamless listening experience. A free tier access promotes community growth, however free tier users do not
generate sufficient revenue for the music industry.
v Music-streaming platforms and legal bodies aim and contribute to closing the problematic value gap between
the high volume of played streams and the low revenue generated for the artist.
v Streaming users have more value than average listening consumers: subscription money, especially premium,
raises the artist pay-out. Artist-dependant bodies take the lions share before leaving an unrealistic percentage
to the artists. This is a fragment in the music streaming market and leads to expected changes in the model.
v Despite technological advancements that allow artists to record their own work and gain audience reach with
few online resources, record labels maintain their power as music filters and keep their role as providers of
financial and human support for starting artists.
v With the global rise of smartphones and the global rise of music consumption through streaming, distributing
music as content to developers will create an entirely new market place.
v Music business growth in all major markets stimulates positive perceptions in regards to the current business
model and optimistic expectations towards the speculated, extensive one.
v The music industry is going through a post-streaming-services wave of opportunities. Streaming platforms are
turning into digital distributors and will eventually supply independent platforms with music in order to boost
revenue within the sector.