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Music Has More To Gain From The Future Of Transportation Than You Might Think [Cherie Hu]

Going as far back as the FM radio receivers of the 1950s, transportation and music have been inextricably linked; and as the landscape of the transportation industry changes, new marketing. Continue reading [https://www.hypebot.com/hypebot/2018/11/music-has-more-to-gain-from-the-future-of-transporta

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Going as far back as the FM radio receivers of the 1950s, transportation and music have been inextricably linked; and as the landscape of the transportation industry changes, new marketing opportunities for music and artists are emerging.

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By journalist Cherie Hu this first appeared on Forbes.com"Ridesharing, 5G and edge computing are poised to alter transportation, and its accompanying media ecosystem"Ever since the 1950s, when car manufacturers first introduced FM radio receivers inside their vehicles, the mainstream music industry has relied heavily on cars as a significant – if arguably old-fashioned – source of revenue.This is because terrestrial radio still dominates consumer preferences for in-car music listening, despite drastic technological change both on and off the road. While streaming services like Spotify and Apple Music accounted for 75% of the U.S. music industry’s total revenue in the first half of 2018, only 12% of drivers and passengers cite online streaming as their primary audio source in the car, according to Edison Research’s latest Infinite Dial study. In contrast, 56% of respondents cited AM/FM radio as their preferred source.Similarly, Nielsen’s Total Audience Report revealed that radio reached 92% of U.S. adults weekly in Q1 2018—indicating greater audience penetration than any other linear or digital platform, including TV and smartphone apps.As a result, major record labels still regularly delegate the majority of marketing dollars behind a typical album campaign to radio promotion, hiring pluggers to pitch singles to both local and national stations. At large, AM/FM radio stations in the U.S. still generate an estimated $13.7 billion in annual revenue—in part from tapping into a national population in which the average individual spends over 293 hours driving every single year.But newer tech trends like ridesharing, 5G and edge computing are poised to alter transportation, and its accompanying media ecosystem, as we know it. It’s no surprise that the music industry, whose financial health is tightly tethered to mobile and on-the-go media trends, wants in.Recent developments suggest an increasing alignment between music and transportation-tech startups. For example, several music-industry heavyweights invested in ridesharing commerce startup Cargo's $22 million Series A round—including but not limited to Paul Rosenberg (CEO of Def Jam Recordings), Larry Vavra (Co-Founder and President of Deckstar Management) and Steve Aoki (celebrity DJ-producer and Forbes EDM Cash King, who previously cited Uber as an inspiration for his business and career moves).An alum of Techstars’ Mobility Accelerator, Cargo has distributed more than two million products to passengers to date, and aims to scale its platform from 12,000 cars today to 50,000 cars in 2019.The reason Cargo is aligning with corporate music investors: to help expand its current offering from simply a glorified “vending machine” into a more fleshed-out, personalized, hybrid physical/digital ecosystem, potentially encompassing entertainment, location-based ticketing and other services in additional to one-off product purchases. To aid with expansion, the startup has also secured multi-year, exclusive partnerships with Uber and Grab (the Southeast Asia-based rideshare company that recently bought out Uber’s local business in a controversial merger).Meanwhile, Steereo—a startup that pays rideshare drivers to stream music by emerging artists, while providing in-depth rideshare listening analytics and advertising opportunities to artists and brands—recently joined the inaugural gBETA Musictech Accelerator at Capitol Music Group. So far, Steereo has recruited over 13,000 drivers in New York and Austin, with plans to expand to Los Angeles, Philadelphia, Boston, Miami, Seattle and Chicago through early 2019. On the content side, the startup has worked both with unsigned acts and with major-label signees, counting the likes of Capitol Records and Geffen Records among its clients.“We’re starting to think about how in-car media consumption might become a huge part of everyone’s daily mindshare, especially with 5G coming,” Ching Ching Chen, Director Of Business Development and Chief of Staff at Capitol Records, told me. “That experience might not be limited to streaming, but can also involve more immersive content. We want to make sure we’re the first company to start thinking about new artist experiences in 5G with the whole landscape shift ahead, and want to build a network of riders we can plug into for experimenting with new content forms.”The music industry seems particularly excited about trends like integrated automotive commerce and self-driving cars, both of which are further enabled by both ridesharing and 5G.According to Ovum, 5G is projected to cause annual mobile media revenues to more than double over the next ten years, from $170 billion in 2018 to $420 billion in 2028. Entertainment consumed specifically in driverless and “conditionally automated” cars is projected to generate between $15 billion and $20 billion over the same time period.As for in-car commerce, U.S. commuters are already spending a collective $212 billion annually on commerce to and from work, for products including gasoline, coffee and groceries, according to research from Visa and PYMNTS. Much of that commerce is currently mediated through mobile apps that allow users to order items ahead of time, and nearly 75% of commuters indicated they would shop more frequently if the ability to shop were integrated directly into their car.Both Cargo and Steereo seem to be tapping into music as a key strategic lever in this ongoing rise of mobile entertainment, commerce and advertising, molded more closely to transportation habits as 5G adoption increases.“In five to ten years, cars will no longer be cars: they’ll be mobile spaces on wheels that are configurable, and totally redesigned from the inside out,” Jeff Cripe, Founder and CEO of Cargo, told me. “They’ll also still be predicated on comfort, productivity and entertainment—the same three things people value the most in their cars today.”User engagement for apps like Cargo and Steereo still has a lot of room to grow: only 35% of riders exposed to a Cargo box in a rideshare have engaged with Cargo’s digital platform (i.e. its mobile app), according to the company, while Steereo’s website claims that the drivers on its roster use the app for an average of 30–40% of their in-car audio streaming.Nonetheless, these startups' ongoing expansion suggests that the right ridesharing media experience could make a significant dent in music companies' marketing strategy—and in the appeal for terrestrial radio investment overall. 2“From the perspective of someone who sells music for a living, radio becomes less important the more people start ridesharing,” Vavra told me. “When most people get into a rideshare, they don’t want to be bothered. If they want to listen to music, they usually put their headphones on, instead of relying on the driver to curate the right radio station or personalize music for them.”In this vein, Vavra sees a "Trojan horse" with Cargo's mobile app, in which one could incorporate personalized music discovery into Cargo's digital browsing and purchasing experience. At the highest level, this means Cargo could enough data about cross-vertical user behavior and preferences to curate music based on a user’s purchases—akin to what Amazon could presumably do today with Amazon Music through its Echo devices.“Historically, the music industry has made a fortune out of beating down music into the heads of captive audiences until they buy a record, but you could do so much better today with data and streaming,” said Vavra. “People could actually be looking forward to getting into a rideshare or a self-driving car with an experience that’s so personal and curated for them—whether it’s for entertainment, work or whatever they want to do.”If the links between music and transportation tech are so intertwined, why hasn't the music industry cashed in on ridesharing and other similar trends earlier—and where do incumbents Uber and Lyft stand in this landscape?Ironically, one of the most common phrases to describe ridesharing and other temporary, freelance labor ecosystems is the “gig economy”—drawing its etymology directly from live entertainment, whose performers play temporary “gigs” for a living. Yet entertainment has participated in nearly none of the upside of the ridesharing sector, and pales in comparison as far as valuations are concerned. For instance, while Wall Street banks are reportedly valuing Uber at $120 billion, Spotify’s peak market cap was around $35.3 billion this past July, while major label Universal Music Group is reportedly worth around $40 billion.Yet, aside from their nearly $100-billion valuation difference, Spotify and Uber actually have a lot in common. Both are tech-first, multibillion-dollar companies at the forefront of turning their respective industries into access economies—ones in which the primary customers prefer, and often take greater pride in, access to rather than ownership of the core product. Spotify has even recently drawn direct inspiration from the transportation-tech world for its own algorithmic recommendation systems, calling its vision for personalization "self-driving music."3What’s more, transportation startups are increasingly promoting their extensive networks of drivers and passengers as ripe petri dishes for music marketing campaigns, and major labels, festivals and awards shows do frequently work with rideshare companies to spread the word about their artists. But such partnerships to date have been limited primarily to event-based activations pushed by labels’ brand and marketing teams, rather than more granular analytics tools pushed by business development and A&R teams.In fact, recent in-house music campaigns at Uber and Lyft seem to have focused more on honoring the musical talents of their own drivers and riders—whether in recognizing drivers’ participation in the “rideshare hustle” to fund their creative careers, or in providing riders with once-in-a-lifetime networking opportunities in the industry.For instance, in November 2015, Uber launched its #UberBigBreak campaign in Nashville, which gave local singer-songwriters a promo code for the chance to win an in-person audition with senior execs from companies like Warner Music Nashville and the Country Music Association. Earlier this year, Lyft’s Miami office rewarded select local artist-drivers with free studio time and VIP tickets to Demi Lovato’s show in the city; a few months later, Uber invited a handful of its own artist-drivers to perform their original songs at the startup’s own pop-up music festival, Uber Radio Live.On the streaming side, Uber has inked deals with both Spotify and Pandorain the past—but both deals have since fizzled (in part due to privacy concerns), and neither ended up delivering any added-value, car-specific consumption insights back to artists or labels.This is where Steereo comes in with what it hopes to be a cost-effective alternative: any artist can submit their music to Steereo for consideration free of charge, then pay a $39.99 onboarding fee upon approval plus $12.99 a month for 250 guaranteed listening minutes and backend analytics. (The Steereo team tells me they are in the middle of changing their business model to a one-time $12.99 application fee, followed by a wider selection of monthly price tiers corresponding with different numbers of releases that artists and labels want to track.)The one big catch: artists and rights holders currently cannot earn royalties from music streamed on Steereo, even though drivers get paid by the minute. There is also currently no content personalization option for drivers, as in-house curators at Steereo organize playlists ahead of time by genre, mood or activity. Another huge catch is thatNonetheless, rights holders do get access to metrics that are otherwise difficult or impossible to track with other streaming platforms, including but not limited to average volume, skip rate, time of day, geographic location and vehicle velocity for any given track in Steereo's system. As of press time, Steereo has also run over 50 audio ad campaigns for artists and brands to promote new releases and products in between songs.“For the first time, we can use Steereo’s capability to say, ‘I want to target someone with X profile, X times per hour,’ and then be able to track Shazam and other engagement data on top of that, which can inform our investment in other forms of advertising,” said Chen. “We just don’t get that car-specific focus in a lot of other offerings.”Steereo is also currently honing its Contributor app, which gives riders and influencers the ability to rate Steereo-approved music at any time of day, beyond in-car rides alone. The startup currently has over 100 contributors on waitlist, with invites opening up later this month.What's stopping Uber and Lyft from cannibalizing the burgeoning rideshare-media ecosystem around them, strengthening such capabilities and capturing the subsequent revenue in-house?According to Cargo CEO Cripe, it may be a matter of specialization and expertise. “We think about the airline business as a proxy for our business,” Price told me. “Airlines are primarily in the business of transporting people, and there is a marketplace of several multibillion-dollar companies providing food and beverage services adjacent to the airlines themselves, from Gogo Inflight for WiFi to Panasonic Avionics for seat-back streaming. We think all of those things will exist in a format tailored to the rideshare industry, and in a way that is incremental to rideshare transportation companies. Rideshare drivers are independent contractors, and because they can switch among multiple services, you need a third party to be the in-car commerce provider.”While it will take a long time for mainstream behavior to shift, multiple studies point to a future where we will have the technological infrastructure, content supply and consumer demand to improve and rewrite the relationship between the automotive and media industries. With music in particular, thanks to the harrowing effects of piracy and file-sharing at the turn of the 21st century, music companies have learned the hard way about the importance of preempting, embracing and adapting to the next major format change.Cars will likely play a role in defining this next disruptive music format—leveraging sprawling networks of drivers and riders, as well as richer, more targeted media experiences and analytics enabled by 5G, to reinvent how we discover and listen to the next big artist.I'm an award-winning music writer and researcher, passionate about propelling innovation in the music industry using a combination of in-depth business acumen and data-driven storytelling. I take particular interest in how emerging music markets, technologies, leaders and tastemakers make their dent in the status quo. In addition to Forbes, you can find my writing in Billboard, Music Ally and the Harvard Political Review. I speak regularly at conferences like SXSW, Sónar+D, SF MusicTech and FastForward, and my newsletter Water & Music reaches several hundred creative professionals every month, including executives at Spotify, Disney and all three major record labels. Before diving into journalism, I spearheaded a research project on innovation in music at Harvard Business School, interned at Interscope Records and Ticketmaster and studied classical piano at Juilliard.To follow more of my thoughts about music, technology, creativity and business, you can find me on Twitter and/or sign up for my newsletter, Water and Music.

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