In this post we will study "Rdio", which was a popular Music Streaming Product that failed miserably.
2010 Aug
Rdio; the first modern music streaming service; was launched by Skype's founders Niklas Zennström and Janus Friis.
It had to compete with services such as Deezer, MOG, Napster, Rhapsody, and Spotify.
It offered a $5 web-only streaming plan (on the assumption you might not have a mobile device) and a BlackBerry app (in case you had a bad one).
Its catalog was limited to 7M songs, well short of the 30M tracks that it and its rivals now provide.
2013 Sep
Rdio added a music recommendations feature that delivered personalized albums, stations, and playlists.
2014 Jan
Rdio introduced some free streaming options, supported by audio advertisements.
2015 Nov
Rdio filed for bankruptcy.
Reached a deal to sell certain assets and intellectual property to a competitor, Pandora, for $75M.
2015 Dec
Rdio service was discontinued.
Using Rdio felt like the future.
Though, securing label deals took so long that the app was in development for two years before it launched, and it showed in the polished product delivered by its team.
Its blue-and-white design was calming.
Its simple grid of album artwork was a powerful rebuttal to iTunes’ nightmare spreadsheets.
It had innovative social features, showing you what your friends were streaming in real time.
It had a "heavy rotation" playlist that highlighted albums based on how many friends had listened to them.
"Social from the ground up — it sounds like marketing speak, but it was legit," said Chris Becherer, Rdio’s head of product. "The founding premise was the best music recommendations come from the people you know. That was the whole idea."
It got music people to explore and listen to more new+old music than they ever had before.
It always surfaced things people didn’t yet know they should be listening to.
Overall an excellent product.
Early as it was to the United States, Rdio was born in the shadow of Spotify, a cunning and well-financed competitor that excelled at generating buzz — and using that buzz to acquire paid subscribers.
As streaming music became a playground for giants, Rdio turned to a terrestrial radio company in a last-ditch effort to grow the user base.
Ultimately, executives decided that Rdio’s only future lay in becoming part of an internet-based platform, even if it meant disassembling the service they had been building for more than five years.
Even in late 2010, when it began to spread among design-savvy early adopters in San Francisco, people were already talking about the coming launch of Spotify.
The Swedish streaming service wouldn’t launch in America for several months, but it quickly came to define online music in the popular imagination.
Its secret: free on-demand streaming, supported by advertising.
By contrast, Rdio required a paid subscription.
Rdio eventually developed a free tier, but it came long after Spotify launched in the United States.
More pressingly, the company struggled to make the case for its own unique service.
Rdio never had a dedicated marketing chief for more than a few months at a time.
Early on, the company contracted with West, a San Francisco-based agency run by Allison Johnson, Apple’s former head of marketing.
But many people inside the company blamed the lack of in-house marketers on its lack of traction. Later, Mark Ruxin, who joined Rdio after it acquired his app Tastemaker, served in the role.
But he only served in it for a few months before leaving.
By 2013, Spotify had rocketed to 24 million users, 6 million of whom paid.
Struggling to stand out, Rdio turned to Cumulus Media, which operated 525 terrestrial radio stations.
Cumulus took a large equity stake in the company; in return, its sales force began selling ads for Rdio, which enabled the company to finally offer the free, ad-supported version of the service that Spotify had been offering in various forms since 2008.
Cumulus also promised to promote Rdio on its popular stations.
But the resulting signups were apparently nothing to brag about.
Rdio sometimes focused on the wrong things.
It invested many product cycles in refining its queue — a place to collect things you want to listen to later.
Every other music streaming service offers a queue that’s a simple list of tracks.
But if you dragged an album or a playlist into Rdio’s queue, Rdio would recognize it as a distinct object, so you could drag and drop an album above a track, or a full playlist below an album.
"That was not a major differentiating factor," says Wilson Miner (Design Head) "If we hadn’t had something like that, nobody would have noticed and it would have been fine. I still wish we could have solved it, but it was more of a personal quest than a brutally honest assessment of priorities."
Jun 2013, just before the Cumulus deal was announced, Rdio CEO Drew Larner announced he was stepping down.
Former employees say Larner was never totally comfortable being CEO; his expertise was in dealmaking, and he thought the company needed a leader whose talents lay in product and user growth.
Malthe Sigurdsson, its head of product and the person who oversaw its innovative design efforts, quit a month after Larner.
In Nov, Rdio laid off a third of its staff.
And while development on the core product continued, it increasingly felt radio-focused.
In August it added live radio stations to the app, a move designed to capitalize on the success of iHeartRadio, an app developed by the company formerly known as Clear Channel.
Earlier this month, Cumulus wrote down its investment in Rdio by $19 million.
The economics of streaming music are brutal. Record labels have nearly all the leverage, and take most of the gross revenue from streaming services.
The only way to win is to achieve a massive scale — which is why Spotify has raised more than $1 billion, spending heavily to add subscribers in hopes they will lead to a sustainable business.
Rdio realized this only belatedly.
"Rdio, I guess, made the mistake of trying to be sustainable too early," Wilson Miner says. "That classic startup mistake of worrying about being profitable and having a business that makes any sense before you’ve reached this astronomical growth curve. Which is partly the trap of the business model itself. Because of the content licensing deals, the margins for the business were so incredibly thin. No matter what we did, the labels made the lion’s share of the revenue. You have to make it up with extreme volume, which is why you see Spotify going after every human being in the world."
And yet even with more than 75 million users and 20 million paid users, Spotify still isn’t profitable. It remains to be seen whether Apple or Google can turn their own streaming offerings into viable businesses — or whether they will simply use music as a loss leader to draw consumers further into their respective ecosystems, making the money back on hardware sales or other services.
Multiple!
Marketing failure, Growth failure, and Leadership failure.
******* Choronology *******
2010 Aug
Rdio; the first modern music streaming service; was launched by Skype's founders Niklas Zennström and Janus Friis.
It had to compete with services such as Deezer, MOG, Napster, Rhapsody, and Spotify.
It offered a $5 web-only streaming plan (on the assumption you might not have a mobile device) and a BlackBerry app (in case you had a bad one).
Its catalog was limited to 7M songs, well short of the 30M tracks that it and its rivals now provide.
2013 Sep
Rdio added a music recommendations feature that delivered personalized albums, stations, and playlists.
2014 Jan
Rdio introduced some free streaming options, supported by audio advertisements.
2015 Nov
Rdio filed for bankruptcy.
Reached a deal to sell certain assets and intellectual property to a competitor, Pandora, for $75M.
2015 Dec
Rdio service was discontinued.
******* Experience *******
Though, securing label deals took so long that the app was in development for two years before it launched, and it showed in the polished product delivered by its team.
Its blue-and-white design was calming.
Its simple grid of album artwork was a powerful rebuttal to iTunes’ nightmare spreadsheets.
It had innovative social features, showing you what your friends were streaming in real time.
It had a "heavy rotation" playlist that highlighted albums based on how many friends had listened to them.
"Social from the ground up — it sounds like marketing speak, but it was legit," said Chris Becherer, Rdio’s head of product. "The founding premise was the best music recommendations come from the people you know. That was the whole idea."
It got music people to explore and listen to more new+old music than they ever had before.
It always surfaced things people didn’t yet know they should be listening to.
Overall an excellent product.
******* Growth & Marketing *******
As streaming music became a playground for giants, Rdio turned to a terrestrial radio company in a last-ditch effort to grow the user base.
Ultimately, executives decided that Rdio’s only future lay in becoming part of an internet-based platform, even if it meant disassembling the service they had been building for more than five years.
Even in late 2010, when it began to spread among design-savvy early adopters in San Francisco, people were already talking about the coming launch of Spotify.
The Swedish streaming service wouldn’t launch in America for several months, but it quickly came to define online music in the popular imagination.
Its secret: free on-demand streaming, supported by advertising.
By contrast, Rdio required a paid subscription.
Rdio eventually developed a free tier, but it came long after Spotify launched in the United States.
More pressingly, the company struggled to make the case for its own unique service.
Rdio never had a dedicated marketing chief for more than a few months at a time.
Early on, the company contracted with West, a San Francisco-based agency run by Allison Johnson, Apple’s former head of marketing.
But many people inside the company blamed the lack of in-house marketers on its lack of traction. Later, Mark Ruxin, who joined Rdio after it acquired his app Tastemaker, served in the role.
But he only served in it for a few months before leaving.
By 2013, Spotify had rocketed to 24 million users, 6 million of whom paid.
Struggling to stand out, Rdio turned to Cumulus Media, which operated 525 terrestrial radio stations.
Cumulus took a large equity stake in the company; in return, its sales force began selling ads for Rdio, which enabled the company to finally offer the free, ad-supported version of the service that Spotify had been offering in various forms since 2008.
Cumulus also promised to promote Rdio on its popular stations.
But the resulting signups were apparently nothing to brag about.
******* Feature Prioritization *******
It invested many product cycles in refining its queue — a place to collect things you want to listen to later.
Every other music streaming service offers a queue that’s a simple list of tracks.
But if you dragged an album or a playlist into Rdio’s queue, Rdio would recognize it as a distinct object, so you could drag and drop an album above a track, or a full playlist below an album.
"That was not a major differentiating factor," says Wilson Miner (Design Head) "If we hadn’t had something like that, nobody would have noticed and it would have been fine. I still wish we could have solved it, but it was more of a personal quest than a brutally honest assessment of priorities."
******* Leadership & Radio-focus *******
Former employees say Larner was never totally comfortable being CEO; his expertise was in dealmaking, and he thought the company needed a leader whose talents lay in product and user growth.
Malthe Sigurdsson, its head of product and the person who oversaw its innovative design efforts, quit a month after Larner.
In Nov, Rdio laid off a third of its staff.
And while development on the core product continued, it increasingly felt radio-focused.
In August it added live radio stations to the app, a move designed to capitalize on the success of iHeartRadio, an app developed by the company formerly known as Clear Channel.
Earlier this month, Cumulus wrote down its investment in Rdio by $19 million.
******* Economics of Music *******
The only way to win is to achieve a massive scale — which is why Spotify has raised more than $1 billion, spending heavily to add subscribers in hopes they will lead to a sustainable business.
Rdio realized this only belatedly.
"Rdio, I guess, made the mistake of trying to be sustainable too early," Wilson Miner says. "That classic startup mistake of worrying about being profitable and having a business that makes any sense before you’ve reached this astronomical growth curve. Which is partly the trap of the business model itself. Because of the content licensing deals, the margins for the business were so incredibly thin. No matter what we did, the labels made the lion’s share of the revenue. You have to make it up with extreme volume, which is why you see Spotify going after every human being in the world."
And yet even with more than 75 million users and 20 million paid users, Spotify still isn’t profitable. It remains to be seen whether Apple or Google can turn their own streaming offerings into viable businesses — or whether they will simply use music as a loss leader to draw consumers further into their respective ecosystems, making the money back on hardware sales or other services.
******* Cause of Death *******
Marketing failure, Growth failure, and Leadership failure.
Niklas Zennström
Credits:
Linkedin.com/in/drew-larner-5b51bb34/
Linkedin.com/in/wilsonminer/
Linkedin.com/in/becherer/
Linkedin.com/in/malthe/
Linkedin.com/in/niklaszennstrom/
En.Wikipedia.org/wiki/Rdio
TheVerge.com/2015/11/17/9750890/rdio-shutdown-pandora
Linkedin.com/in/wilsonminer/
Linkedin.com/in/becherer/
Linkedin.com/in/malthe/
Linkedin.com/in/niklaszennstrom/
En.Wikipedia.org/wiki/Rdio
TheVerge.com/2015/11/17/9750890/rdio-shutdown-pandora
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