New movies aren’t available to Netflix subscribers until at least 28 days after they’re released to the public (even 56 days in some cases). Movie studios use this practice of delaying releases, called “windowing,” in order to stop subscriptions from cannibalizing DVD sales and rentals.
Soon, that same practice could become more commonplace in the music industry, where a number of popular artists believe “windowing” might offset any potential for subscription services to cannibalize single and album sales. It represents a huge obstacle for Rhapsody and Spotify, which are concerned with keeping their music libraries fresh in the eyes of iTunes-addicted consumers. And it’s a a practice that Jon Irwin, Rhapsody’s CEO, hopes to stop.
“Windowing,” Irwin says,” [is] fundamentally the wrong thing to do.”
Rhapsody is the No. 1 subscription service in the U.S., and Irwin has seen plenty of big-name artists question whether it’s better to release their albums on iTunes before Rhapsody in order to boost sales revenue. Coldplay, for example, released Mylo Xyloto in October, but it was nowhere to be found on streaming services such as Spotify and Rhapsody until earlyer this month. There was no official window that Coldplay agreed to–the band simply added it (quietly) to Rhapsody and Spotify several months after it went on sale.
“EMI, in this case, said, ‘They’re not releasing it for streaming; you can’t put it up in your feed,'” Irwin recalls. “I said, ‘Okay, well, are they going to?’ And they said, ‘I don’t know.’ We try to have a dialogue with the labels and the band management to understand why [they’re] making this decision.”
The reason was simple: “Spotify competes with download stores,” Dave Holmes, Coldplay’s manager, said in January. He was “very concerned” that subscription services would hurt Coldplay’s sales–and who can blame him? The band set digital-sales records in the U.K. with Mylo Xyloto. Now that it’s released on Rhapsody and Spotify, Coldplay stands to continue to generate revenue off the album each time it’s streamed.
Irwin believes that theory is wrong. For one, he says there is no evidence that Rhapsody and Spotify have cannibalized CD or MP3 sales. If anything, he argues, streaming services help cannibalize pirated music. “I think [the “windowing” theory] is wrong because Rhapsody provides incremental revenue,” Irwin says. “There are people who are going to continue to want to own and purchase music–those people who are buying it on iTunes are probably still going to buy it on iTunes. There are going to be people who want access and who would never pay–those people who are aren’t buying it on iTunes are never going to buy it on iTunes. And there are people who, if it’s not available on streaming, they’re going to steal it. They’re going to pirate it. They’re not going to go out and buy it.”
When asked if he could understand why a band as big as Coldplay might want to sell their music on iTunes first to make as much revenue as possible from album sales first, Irwin acknowledges that an album stream won’t be worth as much as an album purchase. “But what happens to that album over time? That streaming revenue model goes on and on and on–it’s going to compensate you forever and ever,” he says. “You’re trading analog dollars for digital pennies–maybe digital dimes–and hundreds of millions of plays will become billions of plays and trillions of plays.”
Still, it will likely take sometime before streaming revenue becomes that significant–Rhapsody boasts just 1 million subscribers, and Spotify 3 million. Until it does, though, Irwin believes “windowing” isn’t worth it, as it might “potentially alienate your fan base.”
While Irwin believes artist adoption of streaming services is inevitable, some believe it could be the policy of “windowing” that is inevitable too. Music analyst Mark Mulligan anticipates that “windowing” will help artists release albums across various digital services. “That is a really easy way to mitigate a lot of the risk of streaming,” Mulligan told the Financial Times. “The relationship between streaming and the download could be the same as radio and the CD. Radio cannibalizes sales as well…but artists get many multiples higher on Spotify per play than they get on the radio.”
In this sense, perhaps the idea of “windowing” is out of the hands of Rhapsody and Spotify, which rely on artist and label content as heavily as Netflix relies on movies and TV shows from studios.
“I just fundamentally think it’s the wrong thing to do, which would probably indicate what our behaviors will be,” Irwin says, stressing so for a second time. “We don’t have the choice because the labels and the artists are making the decisions about the content and the art that they create, and the rights they grant the labels, and what the labels can in turn grant to us.”
Then he adds: “I don’t really have a say in it.”
[Image: Flickr user James Calder]