Stingray to Pattison FMs in Local Edmonton Restaurants

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Stingray to Pattison FMs in Local Edmonton Restaurants

Postby jon » Mon Jul 11, 2016 11:38 am

It may just be coincidence, but the two restaurants that I visited in the last 24 hours have, in the last few days, switched from Stingray Music to local FM stations.

Edmonton's only White Spot was running UP, and our only Cheesecake Cafe has NOW playing. Both UP and NOW are owned by Pattison.

While Two is hardly a statistically significant figure, it is interesting given that, over the last year or so, Stingray Music had taken over nearly all of the restaurants that I haunt.
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby Recordman » Mon Jul 11, 2016 3:13 pm

What I can`t figure out about Stingray Music is,where I work we have it,music selection sucks.But if you go to the cable channels that are Stingray Music,the music is much better.More variety than you get on local radio.Just my 2 cents.
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby jon » Mon Jul 11, 2016 7:27 pm

Why Stingray Digital is betting it all against streaming music
The Montreal-based company that runs all those music channels at the top of your cable dial has global ambitions
Canadian Business
Feb 25, 2016
Joe Castaldo

Eric Boyko steps out of a boardroom and exclaims to no one in particular, “That was a lot of work for one phone call.” He’s wearing a light pink shirt, open at the collar, a mop of sandy hair resting atop a face that seems permanently flushed. Boyko has just completed a quarterly earnings call for the company he co-founded, Stingray Digital Group, which went public last year. He’s evidently still adjusting to some of the demands of operating a publicly traded entity. But Boyko doesn’t dwell on this for long. He heads to his office, grabbing a sludgy protein drink along the way. “I have to do my two scoops,” he explains. “I’m running around all day from meeting to meeting.” Indeed, after sitting for part of our interview, Boyko says he has to use the washroom and does not return.

The francophone entrepreneur, who has signed his emails with the exhortation, “Go, Go, Go,” for years, has good reason to hustle. Stingray Digital, based in Montreal, is an unlikely player in the US$15-billion recorded music industry—an industry that’s changing rapidly and plagued with uncertainty. On-demand streaming services such as Spotify, Apple Music and Google Play have been heralded as the future, giving consumers access to millions of songs on their device of choice for only a few dollars a month. A handful of smaller online players are fighting for music lovers too, including Tidal, Pandora, Rhapsody and Deezer. Stingray’s strategy is markedly different. All of those genre-specific, audio-only music channels way up in the triple digits that come with your cable or satellite subscription? Stingray produces those, employing a team of 100 music experts to assemble playlists for every conceivable genre. On the surface, the business model seems downright foolish. Cord cutting is expected to accelerate, cable packages are being unbundled, and consumers are spending more and more time with mobile devices.

But Boyko argues that not only does Stingray have a place in a world with bigger, better-funded competitors, but it can also thrive there. “The whole market is being subsidized by venture capital,” he says of some of his peers. “Once the VCs stop funding them, the only players out there will be Google and Apple. Maybe Spotify has a chance, but the other guys—it’s a matter of time.” There’s evidence to support this view: In 2014, Google purchased streaming music service Songza, while last November, Pandora picked up the remains of Rdio, which declared bankruptcy and shut down. And once you dig past the surface, Stingray’s strategy is not quite as outlandish as it appears. Its direct customers are cable and satellite providers—not fickle consumers—who pay the company to carry its channels. Stingray’s service is considered non-interactive, meaning users can’t pick and choose songs. As a result, the royalties it pays to musicians are far lower than those disbursed by on-demand services, making it cheap for telcos and subscribers alike.

Because of Stingray’s carriage deals, the company reports that 138 million households have access to its channels worldwide. (Spotify, in contrast, has signed up 20 million paying subscribers.) And it’s a global play: Pay television may be threatened in North America, but adoption is growing in developing countries in Africa and Asia. As such, Stingray is attempting to consolidate the market, snapping up similar companies around the world—all the while hedging its bets by venturing into mobile.

It amounts to a counterintuitive bet: a passive music service delivered by cable firms and operated with financial discipline can win against flashy VC-backed on-demand streaming companies. It’s an approach built on not a grand vision for the future of music but a deep understanding of industry dynamics and of how to exploit them profitably. You could accuse Boyko of short-term thinking, but for him, disruption is a distraction. There’s money to be made now.

That Boyko ended up in the music industry at all is something of an accident. Back in 2006, Boyko left the fundraising company he founded in search of a new business opportunity. He ended up partnering with Alexandre Taillefer, a serial entrepreneur who formerly starred on the Québécois version of Dragons’ Den, and François-Charles Sirois, CEO of investment firm Telesystem (and son of media mogul Charles Sirois). The trio set loose criteria: They wanted to start by buying an existing asset in the digital media industry that could scale quickly.

They looked into an eclectic mix of purchasing opportunities, including a popular birdwatching website (“It’s a 42-million-person market,” Boyko says) and the board game Trivial Pursuit. Another option was a struggling karaoke company out of North Carolina called Sound Choice. Sirois wasn’t enamoured with any of the prospects; he thought karaoke, in particular, was cheesy.

It wasn’t the first time Sirois had raised eyebrows at one of Boyko’s business ideas. In 1999, Boyko sat in Sirois’s office soliciting cash for his company, EFundraising.com, which provided fundraising products and services. “I told him it was very bad, and I would not put any money into it,” Sirois recalls. Two years later, at the height of the tech bubble, Boyko sold the business for more than $20 million to the owner of Reader’s Digest. (He stayed on as CEO until 2006.) “When [Boyko] realized he was getting way more value for his business than he should [have been], he sold it,” Sirois says, “and that’s what made him a very good business person.”

So Sirois suppressed his feelings about karaoke and took the proposal seriously. In 2007, the trio put down $6 million for SoundChoice and scored themselves a library of 16,000 songs along with the Karaoke Channel, which was available to roughly 15 million households in the U.S. The plan was to bring the library of karaoke tracks online; the fact that they now owned a television channel too was something of a bonus. But two subsequent deals put the venture—now called Stingray—on a different path. In 2008, the company made a bid for Napster, the file-sharing service that had relaunched as a subscription music product, but bowed out when the asking price was too high. Best Buy nabbed the assets for $121 million—one month before the financial crisis hit.

Having averted a potential fiscal disaster, Stingray pursued a more promising acquisition. Talks began with the CBC about Galaxie, a suite of music channels it owned. The asset looked promising, since cable companies provided a steady revenue stream to carry the channels, which meant Stingray wouldn’t have to chase after consumers. In 2009, the company purchased Galaxie, which then had 45 channels, for $65 million, starting a consolidation strategy that continues today.

After the deal was completed, Taillefer left the company. Differing opinions about Stingray led to conflicts among the three bullheaded businessmen, and Taillefer had grown frustrated. “It got complicated,” Boyko says. Things became especially fraught when negotiating the purchase of Taillefer’s stake in the company. “Lawyers were involved. It was not fun,” Taillefer wrote in an email. The relationship between the men suffered as a result, though they still run in the same circles. “There’s been a lot of water under the bridge, and I have moved to other projects,” Taillefer wrote. (Indeed, he is backing a Montreal Uber rival called Téo Taxi.)

When Stingray purchased Galaxie, of course, the media landscape was different. Cord cutting was an abstract fear, and mobile streaming was still nascent. Today, the trends appear to be working against Stingray.

Jason Thomas admits he is not Stingray’s target listener. The company’s senior director of content, Thomas is the kind of guy who would spend his Saturday alphabetizing his vinyl record collection. Thomas oversees a team of 25 music curators in Montreal—they sit around the corner from his office, all of them wearing headphones—plus 75 more around the world. (Stingray has offices in Miami, Fla.; Tel Aviv, Israel; and Amsterdam.) Every day, these curators assemble and tweak playlists that can consist of more than 2,000 songs. In addition, the department works with corporate clients, such as retailers, to provide music for their facilities. (This business represents about 25% of Stingray’s revenue today.)

Like Thomas, who previously managed Montreal art-rock band The Dears, these curators are typically recruited from the music industry and have deep knowledge of specific genres. After all, obsessive geekery is needed in a company that has a channel dedicated to schlager—pop music that emerged in Europe after the Second World War.

Stingray views its curators as a competitive advantage. While both Spotify and Apple use algorithms to generate playlists and recommendations, Thomas argues that humans are better equipped for the job. “Music is a human experience, and those human messages can’t necessarily be identified by a computer,” he says. Boyko likens the process to cooking. “For sure you can make a cake, but we have chefs for a reason.”

It’s just one of the unexpected elements in Stingray’s game plan. That strategy is on full display in Boyko’s office, where a large world map hangs on the wall, dotted with dozens of thumbtacks to mark the cities the ardent traveller has visited. He wants to take Stingray around the world too. Today, two-thirds of the company’s revenue is derived from Canada. But there’s little room left to grow here, and the number of traditional TV subscriptions is expected to drop quickly. A report from the Convergence Consulting Group revealed the number of Canadian households that pay for cable and satellite declined by 0.7% in 2014. That’s marginal, but change is coming fast: In a 2015 report, Forrester Research estimated that by 2025, 50% of all TV viewers under the age of 32 in the U.S. will not pay for television “as we understand it today.”

Boyko is well aware of these trends. Yet, puzzlingly, he maintains that the U.S. is his top priority. There are more than 102 million households with cable subscriptions in the U.S., he says, and Stingray’s core music channels are only available in seven million of them, through an agreement with AT&T. Even if cable subscriptions fall off, Stingray can grow revenue and market share by scoring deals with additional cable providers, thereby getting into more homes. The company’s biggest competitor in the U.S. is New York–based Music Choice, which often makes multi-year deals with carriers. Stingray hopes to take over those contracts as they come up for renewal. “It’s a head-to-head war right now,” Boyko says. (He won’t rule out a deal with Music Choice, either.)

The story is different outside the U.S., where, in some markets, pay television adoption is actually projected to grow. Since 2006, Stingray has completed more than 20 acquisitions to expand abroad, snapping up companies in Europe, Israel and Australia. Television, the company argues, is still seen as a status symbol in emerging markets. Stingray projects the compound annual growth rate for pay television adoption will be 6.3% in Latin America and 8.5% in the Middle East and Africa between 2013 and 2018, for example. It’s a view reflected in Boyko’s own experiences. He recalls a trip to Namibia last year, during which he passed through a tiny town with no running water or electricity. Still, a number of households had televisions—powered by car batteries.

So far, Bay Street is buying into the story. All three analysts who follow Stingray have an Outperform rating on the stock. “Stingray is well-positioned to capitalize on its global growth ambitions and consumers’ embrace of curated content,” wrote National Bank Financial analyst Adam Shine. Stingray is modestly profitable (it earned $9 million in its last quarter), whereas some of its peers are perennial money-losers. Spotify, for example, has to spend heavily on marketing to acquire new customers and is believed to pay out a hefty amount of revenue in royalties. Andrew Sheehy, chief analyst at market research firm Nakono in the U.K., wrote in a report that Spotify’s model is “inherently unprofitable.” He concluded: “Our analysis is that no current music subscription service…can ever be profitable, even if they execute perfectly.”

And despite the hype, streaming music services are not yet taking over the world. According to the Recording Industry Association of America, 8.1 million Americans paid for streaming music subscriptions in the first half of 2015, but growth is slowing; that was only a 2.5% jump compared with 2014. (These figures predate the launch of Apple Music.) Most worrying for streaming companies is that when Nielsen surveyed Americans about their music consumption habits, 78% of respondents said it was unlikely they would pay for a subscription; nearly half of those said the cost was too high.

That could be because these services appeal to a small audience of music aficionados—the type of person who would, say, obsessively track down a Japanese import of a Sonic Youth record. “The vast majority of people still like to be told what to listen to,” says Mark Mulligan, a media and technology analyst and managing director of Midia Research in the U.K. (Indeed, that Nielsen survey revealed 61% of Americans still find out about new music through traditional and satellite radio.) “The mass-market consumer has been left behind as music companies focus on the superfan,” Mulligan says. Stingray is tailored toward casual fans who have neither the time nor the inclination to pay $9.99 per month (in the case of Spotify and Apple Music) to curate their own playlists; for them, it’s far easier to turn on a Stingray channel they’re already paying for and have it play in the background.

As much as Stingray appears to be tied to television providers today, the company seems to be preparing for a post-cable future. Last year, for example, it introduced Stingray Vibes, a mobile app that gives users access to music in roughly 100 different genres. On mobile, the app is available free to users who have a cable television subscription with their wireless provider. In Quebec, however, anyone with a mobile subscription to Vidéotron can access the app, even if they don’t pay for TV. It’s a model that could bring Stingray to a wider audience of consumers who will probably never pay for cable. Still, while Stingray says the app has been downloaded nearly 600,000 times, data from analytics firm App Annie shows Vibes rarely cracks the top 20 most popular iOS music apps in Canada. But the app is important for another reason: It could eventually find its way onto non-traditional television platforms, such as Apple TV and Roku. Stingray has no immediate plans for this, but allows that it’s a possibility.

The challenge down the road will be convincing consumers to use its mobile and television apps. “We believe that at some point Stingray must address the consumer market directly,” wrote GMP Securities analyst Deepak Kaushal in a report, “which may require more capital and a new set of skills and strategies.” Stingray would have to market itself more aggressively to end-users, for example. (Indeed, the company’s data shows that 34% of Canadians who listened to Stingray in January said they’d never heard of the brand.) Kaushal is willing to give Stingray the benefit of the doubt: “We believe this is several years away and expect management to take the same profit and return-focused approach to meet this challenge.”

What may help Stingray is if the music market eventually splits into two distinct groups: Premium services such as Apple Music and Spotify could fight it out for music nerds, while inexpensive, bare-bones offerings such as Stingray target the mass market. “Their hope is the market bifurcates and there will be a lot of roadkill from those companies that are not profitable,” says an analyst who follows the company but is not authorized to speak on the record.

Credit Boyko for maintaining a focus on financial discipline, lest Stingray become roadkill itself. He’s actually an accountant by training, which is hard to square with the fact that he refers to himself as Stingray’s chief energizing officer. “I have an accountant’s mentality at the end of day,” he insists. It’s a trait that’s certainly helping Stingray today. He just has to be careful his focus on details doesn’t blind him to the bigger changes in the industry.
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby dmehus » Thu Aug 18, 2016 4:33 pm

jon wrote:It may just be coincidence, but the two restaurants that I visited in the last 24 hours have, in the last few days, switched from Stingray Music to local FM stations.

Edmonton's only White Spot was running UP, and our only Cheesecake Cafe has NOW playing. Both UP and NOW are owned by Pattison.

While Two is hardly a statistically significant figure, it is interesting given that, over the last year or so, Stingray Music had taken over nearly all of the restaurants that I haunt.


Interesting anomaly, jon. I think terrestrial radio has a better shot at surviving than Sirius XM satellite radio, unless the latter drops its pricing in a big way. As data plans inevitably get cheaper and/or public wifi becomes more prevalent, Internet streaming will dominate, whether through Stingray, Spotify, Google Play Music, Apple Music (does anyone even use that!?) or something called "Deezer" than my mom uses - or Internet streams and mobile apps of terrestrial FM stations, which explains the Bell Media "iHeartRadio is coming soon" ads on TV likely meaning they're going to rebrand (yet again!) their mobile app to listen to either free, ad-supported streams of their stations or maybe paid, ad-free streams. Pandora could've dominated in Canada but they've largely "missed that boat." :)

It amazes me why someone would pay in excess of $20 per month plus tax per device for satellite radio and, in the face of Internet streaming, Sirius still tries to get away with charging extra for Internet streaming. Sirius management needs to get serious and come up with a viable business plan, I think. ;)

Cheers,
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby jon » Fri Aug 19, 2016 11:02 am

dmehus wrote:terrestrial radio has a better shot at surviving than Sirius XM satellite radio

Neither are going away any time soon.

Last I heard the Sirius/XM business model was (1) to do what they have been doing, and (2) try to be the platform for Internet in vehicles, instead of the cellular networks. Both strategies focused on paying vehicle manufacturers to install their (satellite radio or satellite data) technology in new vehicles. Though a new approach has been to buy some of the existing suppliers of "entertainment technology" to multiple vehicle manufacturers.

As for pricing, you can get it down to $13.75 a month on a 3 year plan, which is not much of an increase from where it has been since they came to Canada, when XM was $9.99 and Sirius was $12.99.

They have always charged an additional monthly fee for a second radio, in the $7.99 to $9.99 range. The deals have been on the price of the second radio itself, as low as free for simple models. Streaming is really just a cheap alternative to additional radios.

There is a parallel in terrestrial radio, too. Vehicle manufacturers are being paid to include HD Radio capabilities in new vehicles.
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby dmehus » Fri Sep 16, 2016 6:50 pm

jon wrote:Neither are going away any time soon.

Last I heard the Sirius/XM business model was (1) to do what they have been doing, and (2) try to be the platform for Internet in vehicles, instead of the cellular networks. Both strategies focused on paying vehicle manufacturers to install their (satellite radio or satellite data) technology in new vehicles. Though a new approach has been to buy some of the existing suppliers of "entertainment technology" to multiple vehicle manufacturers.

As for pricing, you can get it down to $13.75 a month on a 3 year plan, which is not much of an increase from where it has been since they came to Canada, when XM was $9.99 and Sirius was $12.99.

They have always charged an additional monthly fee for a second radio, in the $7.99 to $9.99 range. The deals have been on the price of the second radio itself, as low as free for simple models. Streaming is really just a cheap alternative to additional radios.

There is a parallel in terrestrial radio, too. Vehicle manufacturers are being paid to include HD Radio capabilities in new vehicles.


Interesting, thanks jon. Didn't know about the three-year plan and the lower pricing but, still, if you're locking into a three-year contract/plan, one would think they could throw in additional radios - or maybe add them in for an extra $0.99 to $1.99 per month for the life of the contract. I just think, eventually, the cell phone companies, starved for growth, will have to throw in unlimited data for Internet music streaming services (which wouldn't bode well for net neutrality supporters, though). They're loathe to lower pricing for cell phone data packages and, in a few years when customer and regulator furor reaches a fever pitch, this is a likely avenue they could introduce and say, "look what we just did," and not have to lower prices. I guess I just don't like Sirius' current business strategy - they're becoming somewhat anachronistic, even the strategy of tying in with car manufacturers is outdated as everyone seems to pair their smartphone via Bluetooth, hence why Internet-based streaming is likely to take off and at a lower cost/free, potentially, for the consumer that is.

I also agree that I don't think terrestrial is going away. At the most, I think you may see some station consolidation, to a certain extent, in some urban municipalities and maybe in smaller towns where several towns may get together and create a regional station with several repeaters.

One thing that could save Sirius is to adopt the freemium model, with an ad-supported plan and limited channels. Also, does the CRTC have to approve each satellite radio channel or just the satellite radio service? I'm thinking it's the latter and, if so, perhaps you might see Sirius partner with the major radio station groups to allow them to simultaneously broadcast their terrestrial radio station signals via satellite as a sort of way to get around traditional rules prohibiting one market's station from "beaming" itself into another by adjusting output, contours or antenna height. Also, this could provide enhanced, crystal clear sound to small market stations that are currently burdened with having to maintain a network of repeaters or limit themselves only to one town.

Stingray's got competition, sure, but as an investor, if I were so inclined...I'd tend to favour it over Sirius and, of the terrestrial radio groups, Newfoundland Capital Corporation would be my pick. I like NewCap's model of centralized management and shared service functions but still having locally-run stations. And their revenues are growing, albeit modestly. :)

That said...can't say I like K96.3's new, boring red/black logo. Did they change formats or are they still classic rock?

Cheers,
Doug
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby jon » Sun Jan 22, 2017 11:34 am

Lose one, Gain another.

Stingray now has London Drugs. It was someone else running the music in London Drugs as recently as a week ago. But Stingray now.

As for the two restaurants mentioned in my original post at the start of this thread, in the past week, I've heard both running Stingray again.
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Re: Stingray to Pattison FMs in Local Edmonton Restaurants

Postby jon » Mon Jan 23, 2017 3:40 pm

Here is a service I did not know by name that has a pretty impressive customer list:
http://pcmusic.com/

A local pizza chain that debuted a few years ago has had them since they first opened.
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