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An interview with Carter Adamson, Co-Founder of Rdio, the music subscription service aiming to change the way you consume music.

Rdio is a music streaming subscription service available on computers, iPhones and iPads, Android devices, Windows Phone 7.5 and Blackberries, on eBooks, on Sonos, and more.

There are, of course, several other subscription services already available. But as this market grows, Rdio is perhaps one to watch (or listen to), given that many of its key players come from the team which took Skype to its common dominant position in the consumer VoIP arena, and some from the simply-too-successful Kazaa file-sharing platform.  

Adamson himself was previously Head of Product at Skype, and was most recently Entrepreneur-in-Residence at Atomico Ventures. We spoke to him today during his visit to Sydney.

Sound+Image: We’re very excited to be having proper music subscription services in Australia at last. Why have they taken so long to get here, and why have they all come at once?

Carter Adamson: Well it’s only been recently that services like this were even possible, for a number of different reasons. The licences weren’t there until recently, the technology really wasn’t there with the 3G and 4G networks, and the adoption hasn’t been there until recently. Mainstream consumers now have smartphones and apps on their smartphones, and a number of different connected devices in their lives. I think the music industry in general has followed the playback device, so you had your record player, your CD player… and now we’re in a world where any device can talk to the internet as a playback device. For the first time it no longer makes sense to buy your albums and tracks ‘à la carte’. The only thing that makes logical sense is to subscribe, like electricity, for access to all the world’s music across all of your devices. It just wasn’t possible until very recently.

altSound+Image: On the mobile front, perhaps, but there have been services like Rhapsody for several years in the States, but not here in Australia.

Carter Adamson: Again, I think we’ve been trying to crack the combination on what is the right price-point, the right value proposition and the right format. And the truth is that seamless mobility has really not been around until the very recent past, and we had to go through various fits and starts in digital music, with DRM and all these things, until we finally arrived at a point where streaming was actually possible, and caching locally on your mobile phone was possible, and the adoption was there. And again, the licences were there. Now we’ve reached a point where we have the right price and the right proposition, which is really about mobility, and new music discovery.

altSound+Image: Are all the various streaming services negotiating individually with the record labels, or are some using a middleman, so they’re effectively the same service, with different front ends?

Carter Adamson: Well, we’re involved in negotiating individually, so all of our deals are different in some respects, we don’t really have the visibility what the other services are negotiating. It’s all done on an individual basis. And that’s the other reason why it’s taken so long — each new country and territory has its own set of rights holders, and it takes time.

Sound+Image: Do you see subscription music plans as an alternative to buying music, or complementary to buying music?

Carter Adamson: I think buying physical music is never going to go away — a certain number of people will always buy LPs and CDs and even à la carte downloads. But I think what’s pushing this is that consumers have a number of connected devices in their lives, and it doesn’t make sense logically if your phone breaks and you have to replace it, or your computer or whatever. We used to manually ‘pour over’ from your external hard drive all your entire music collection to each and every device. The only thing that makes logical sense is to pull down whatever you want, whenever you want, on whatever platform you want.

Sound+Image: So where’s the differentiation between the various services becoming available? What's special about Rdio?

Carter Adamson:Well on one level everyone’s offering the same thing — unlimited access to the world’s music for a low price, like 32c a day, it’s compelling in relation to what’s been available. But differentiating Rdio — the first thing is the social discovery aspect. Because the first problem is how do you give people seamless mobility to the world’s music… then the next problem is how on earth do I make sense of this? It’s a daunting proposition.

So discovery is key. We felt like the algorithmic approaches to discovery — your Geniuses and others — they were at best right about 50% of the time, then when they’re wrong one or two times, they become a blind spot and completely useless. And we felt the most natural way to discover music was through people — the guy in the record store, or the magazine that you follow, music writers et cetera, so we wanted to put the discovery thing back into its natural environment, which is around people who know a lot around music.

And 97% of the people I’m following on Rdio are people that I’ve never met before, but they may be the artist or band or a blogger or a magazine or a radio station I like, or some random person in Germany who has a deep knowledge of Russian house music. And it all makes sense to me personally. When I go to Rdio I’m not looking at the ‘top 50’, I’m looking at the top 12 albums from the people I’m following. That makes sense to me — it’s not what the labels or the industry is pushing at me. We hear from our users all the time, saying ‘In the past two days I’ve discovered more music than in the last two decades'. So I think we’ve cracked the discovery problem. And we’re the only service that really builds from the ground up on this notion of discovering music through people — the others sort of bolted it on.

Also our approach is different — unlike other services like, say, Spotify, which only allow you to follow people within your Facebook network. On Rdio you can follow anyone – we’ve taken the Twitter approach, which is again unlimited access to every single web page and YouTube clip, you follow people whether they be newscasters, comedians or athletes…

Sound+Image: How do you find them on Rdio?

altCarter Adamson: A number of ways — so there’s a section called ‘people to follow’ where we profile various types of people, whether they be influencers or bands or radio stations or magazines or popular people, or people who have a similar taste to you, or people who are new on Rdio. And you can also manually import your friends from Gmail, Hotmail, Yahoo!, Facebook and Twitter. Then additionally once you start to follow people, and they start to follow people, you see who they’re following and if they’re of interest to you. And finally, if you’re playing one of your favourite artists, you can see who is listening to that artist, who’s made a playlist of that artist’s songs, etc, so you can stumble upon new people to follow that way. So there are different ways to find people.

On Twitter, I think Ping [Apple’s iTunes-based social music network] and Rdio are the only music services natively ‘baked’ into Twitter, which means if you tweet an Rdio link you can pull up that song or artist or playlist directly in the righthand pane.

Sound+Image:What’s Rdio’s streaming quality in Australia, 128kbps, 192? It presumably differs if you’re listening at home or on a mobile device?

Carter Adamson: Yes it does — we do something called bit-rate peeling, so we look at what your connection is, and what your platform or device is, then we serve you the best possible quality given your environment. And that changes dynamically, so if you go into a better Wi-Fi area, it goes up.

Sound+Image:And what is the best possible quality?

Carter Adamson: 320kbps.

Sound+Image: Oh that’s great. So that’s, what, 120 meg an hour…

Carter Adamson: Something around that.

Sound+Image: So if you’re playing three hours a day at home, you could be pulling a good few gig a month in data, do you warn users about use? We don’t all have your massive American data plans over here! I know when some Sonos users signed up to Rhapsody and maybe left it playing all day, they got bill shock at the end of it.

Carter Adamson: Well on the mobile plan we have the capability to ‘offline’, or save as many songs as you like locally to your device, so that prevents you from streaming anything. It’s locally cached on your device so you can play it on the aeroplane or the subway or anywhere you don’t have wireless or internet connection.

Sound+Image: But how do they get onto the device?

Carter Adamson: By Wi-Fi at home.

Sound+Image: Delighted to see you’re on Windows Phone 7.5 as well as iOS and Android. And also on Sonos — how important is Sonos to your footprint in Australia?

Carter Adamson: Sonos has been a phenomenal partner. I actually hadn’t been a Sonos customer until recently and I must say it’s completely changed my life! It’s unbelievable, very important, and our Sonos users are incredible active, you know. It’s background music for the most part, so it’s on most of the day and they’ve been phenomenal to work with. That’s another way we’re differentiating ourselves from the others — we’ve covered most of the smartphone platforms, we’re on Sonos, in Pioneer car stereos, basically every e-Book reader there is, and soon to be on more platforms and devices. Coverage is another way to differentiate.

Sound+Image: In your terms and conditions, it says in order to use the Desktop Service application, Rdio “may need to review your music libraries and communicate information without limitation to Rdio’s servers.” That’s rather intrusive behaviour, isn’t it?

Carter Adamson: That is an optional thing — if you one of these people that don’t like to play music from a web browser or you have multiple browsers open and you don’t want to do the work to find out which tab your audio is in, we have an optional desktop client you can download, a native desktop client. And this also has a function which will allow you — only for convenience — to match your  digital music collection on your hard drive or iTunes app to the audio cloud. So it looks through the metadata of all the songs you have on your desktop, and if we have the rights to stream it we automatically put it into your audio collection. Whether you bought it legally or even if you procured it another way, if we have the rights to stream it we will put it in your collection and the artist is being paid any other way.

Sound+Image: So if half my tracks are tagged with a Russian website, you get that information, and what do you do with it?

Carter Adamson: Well if we have it and we recognise it, then we put it into your audio collection. If it’s something obscure and we don’t have the rights for it — yet! — then we won’t do anything with it.

Sound+Image: And if some authority comes to you and says 'we want all this information from you because we believe there’s a copyright breach here'…

Carter Adamson: We don’t do anything with that information, it’s there for convenience if you would like to archive your digital music in the cloud. You don’t have to do it, and we do nothing nefarious with it.

Sound+Image: Glad to hear it. So you’re dealing direct with the record labels on this — what’s the mood among labels with regard to subscription music?

Carter Adamson: Everyone’s tremendously excited about music subscription streaming services. Again we’ve been through 10 years of fits and starts trying to get the model right. You mentioned Rhapsody — for years Rhapsody was stuck at 600,000 subscribers, and within the past year we now have over a handful of subscription services that are well over the million subscriber mark.

That said it’s still a cottage industry — in a world where everyone loves music we’re still only a little over 13m subscribers around the world. But that’s quickly shifting, only within the past year. And I think there are a lot more people, trying them all and realising for the first time, ‘Why haven’t I been doing this before?’

Sound+Image: How are record companies paid? Is this like performing rights broadcast royalties, or more like CD sale royalties?

Carter Adamson: The details of our individual deals with the labels are all different and therefore confidential. But we deal directly with each of the labels, the aggregators, generally paying them for each stream.

Sound+Image: It’s song-specific?

Carter Adamson: Yes.

Sound+Image: And not caring particularly about the record companies, how does the artist benefit?

Carter Adamson: The deals that the labels do with artists we have no visibility on, because each is different. I would presume they do cover music subscription; it would be weird if they didn’t. But to answer your question, I think the underlying theory behind these services from a business perspective is that you have a very small slice of the music consumer chain who are spending an inordinately high amount on music every year. Then you have a very large segment that’s spending $30-40 a year through iTunes gift cards and things like that. And then you have a massive segment who’s spending nothing on music every year. And the idea behind this is, you know, because the price is so low, again around 32c per day, you’re going to get to these segments that either haven’t been paying anything or have been paying $30-40, and you lift the entire music consumer value chain up.

And also these services are tremendously good as marketing tools. We’ve left the physical world of record stores where you had to pay for cardboard pop-ups and floorspace, to a decentralised world wide web and the only thing that makes logical sense is for you to market through these social networking sites, follow people you like and stumble on relevant or related artists that way. From that perspective these services are tremendously powerful in embracing new acts — and finding old stuff, when you’ve lost your CDs or the albums, and you rediscover them.

And people in general are rediscovering and getting reengaged with music. When we got to this space at the beginning, we found a lot of people were just giving up on music entirely after university because it was too time-consuming to keep up with what was going on. And people are rediscovering music again — every Tuesday new albums are coming out and for the first time you don’t have to spend $18 for an album, or a buck a song, to try them out. We’ve freed up the price constraints and the technology constraints and we’ve made it easier to discover music, through people. 

Sound+Image: So I saw your history with Skype, in fact three of the team are ex-Skype, more?

Carter Adamson: Yes, and a number of the family members have rejoined the band! I think – back to your differentiation question, everyone forgets that VoIP was an incredibly crowded and hypercompetitive space. We had everyone — Apple, Google, AOL, you name it, everyone was doing VoIP. And the reason why Skype was able to get so far ahead of everyone was because in the end we delivered the experience that resonated the most with the largest number of people. And we’re doing the same here with music. And atypical of other start-ups, we have a very large staff of designers, and the experience, the look and the feel, the design, is of paramount importance to us, as it was with Skype — the experience gets you ahead of the pack.

Sound+Image: Care to recommend any new music to our readers?

Carter Adamson: I’ve been really into Tame Impala, they’re amazing, sound a lot like the Beatles. And Tycho, sounds a lot like Boards of Canada. And a lot of classical music, and a lot of hip-hop! My own taste is very eclectic-positive...

ENDS

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