The Streaming Audio Marketplace










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The Streaming Audio Marketplace

by Michael Gariffo

Docid: 00021017

Publication Date: 2011

Report Type: MARKET

Preview

Since the launch of the first Internet radio show in 1993, streaming
audio over the Internet has been a fast growing, often contentious, but always
important way for musicians to
reach their listeners.1 Although standard radio continues to thrive, the
streaming audio services of today, particularly those that offer a paid
subscription option, have become the new leaders in quality, quantity, and
customizability of each listener’s experience. Where traditional radio listeners
have always been at the mercy of the DJ’s choices, streaming audio listeners can
select stations that have been carefully curated, whether by a machine or
human beings, to suit their listening tastes. If this option should not
appeal, many services also offer the ability to stream individual tracks,
albums, full band discographies, and more. It is easy to see why streaming
audio services have skyrocketed to account for about 80 percent of
all revenue spent on music during the first half of 2019.2
This report will dive deeper into the benefits streaming audio can offer, the
costs and issues associated with it, and the leaders currently driving the
streaming audio revolution.

Report Contents:

Modern Streaming Audio Services

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Before going into the particular players of the streaming audio market, it is
important to understand its scope and the level of the growth being created by
the companies that will be examined below. The fact that the streaming audio
market now accounts for very nearly 80 percent of all
music revenue in the US is a good start, but it may not fully convey the rampant
adoption of paid streaming audio services over the past half-decade. Between 2014 and the mid-point of
2017, paid subscription services grew from just 7.9 million subscribers to over
30 million.3 With just 1.8 million active
subscriptions having been recorded by the Recording Industry Association of
America in 2011, this means that streaming audio users grew exponentially
in just six years, and continue to eat into the modest contributions still
provided by other channels within the music industry. The uninformed may wonder what could be
drawing so many people to pay for something that they could be getting for free
over the existing airwaves or why someone might subscribe to a service to
listen to music that they will never actually own. The reason for each user is,
of course, different. However, the overarching theme in most subscribers’
decisions to join a streaming audio service is choice. Not only does this refer
to the choice of what actual tracks or recordings that they will listen to, but
also the choice of where to listen and how. Whether it’s on a smartphone, a
gaming console, a smart TV or speaker, a home stereo, in the car, or a bevy of other
places, streaming audio services are available on nearly any connected platform.
This, and other reasons for choosing streaming audio, will be examined in depth below.

  • Accessibility – As stated above, streaming audio services, to
    varying degrees, are available across a staggering number of platforms, with
    more and more device manufacturers either supporting the download of apps
    from the top streaming services or building those services right into
    their products at launch. Pandora-equipped cars, tablets that ship with Spotify on board, and Apple’s own Apple Music showing up on all of its
    devices are par for the course. In some cases, streaming services can
    even help the user leave behind the requirement for an active Internet
    connection by allowing them to download tracks of their choice for offline
    listening. With the variety of platforms and this storage capability, it is
    hard to imagine a situation in which a savvy user would find
    themselves without access to their favorite audio.
  • Variety and Customizability – Although there are plenty of radio
    stations on the air catering to numerous tastes, they simply cannot
    match the massive variety of tracks offered by even a single one of the top
    streaming audio contenders. This is due, in part, to the choices traditional
    radio stations make on what to play during their limited airtime,
    driving them to stick with the Top 40 or a relatively small
    selection of well-known
    classics of their genre. However, the customizability of streaming audio
    means that all tastes can be catered to. Things as wide ranging as
    Death Metal and Korean Pop can both be streamed on a single user-created
    station, meaning no subscriber should ever have to feel like their listening
    needs are only being partially met. 
  • Track by track listening – Despite all the choices in
    music that are part of each audio stream, most users often want to just listen to
    the exact tracks they desire, with no third-party involvement. For them,
    most of the top streaming audio services offer the ability to bookmark tracks,
    artists, and whole albums for a listening experience that is essentially
    identical to the user owning the tracks themselves. This experience is
    typically further enhanced by the offering of customizable playlists, as well
    as the aforementioned ability to download the tracks for listening while
    offline. There is one important caveat to note on downloaded
    tracks from a streaming music service, however. Unlike purchasing the tracks
    outright, the user does not actually own the downloaded data. Instead, it is
    being stored on their device as part of the app through which it was
    downloaded and will be removed or rendered inaccessible should that user
    ever uninstall the service in question or cancel their subscription. 
  • Cost – Some critics may say that paying a monthly service fee for a
    streaming audio service is a waste when that same money could be used to
    actually acquire the listener’s chosen music permanently. However, there are
    two reasons why that argument may not be true for many consumers. First,
    if a person spends more than $10 per month on music (the average
    cost of most individual streaming music service plans), they have already paid more than the
    cost of a subscription, very likely with the acquisition of nothing more
    than a single album. For this, the buyer will have gained permanent
    access to 10-15 music tracks, but that’s all. This leads to the second
    reason, which is the richness of the music library provided by a streaming
    audio service. For that same price, the buyer will have gained access to tens
    of thousands of tracks or a music library that would cost a quite literal
    fortune to acquire, should it even be possible. Of course, each subscriber
    is only likely to listen to a tiny fraction of that massive library, but if
    their listening habits include more than one album per month, as most do, it
    instantly makes streaming audio services a good, if not great value. 
  • Music Recommendation – Discovering new music has traditionally been
    a hit or miss proposition. Recommendations from friends help, as does making
    careful note of a good, new song played on the radio. However, these methods
    typically result in new discoveries being made infrequently and often result
    in bands that a given listener would love going totally unheard of simply
    because they may be a bit obscure or
    only popular only in another country. Streaming audio services are able to
    ameliorate this by taking a given subscriber’s preferences,
    inputting them into a system of sophisticated algorithms, and producing
    recommendations based on scientific analysis of the user’s past listening
    habits. Although not all of these recommendations are always a huge hit,
    this aspect of streaming audio services does provide a much more focused and richer pool of new music from which each listener can expand his or her
    horizons. 

Service Descriptions and Analysis

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This section will examine the top available
streaming audio services, with special attention paid to the listening
options, subscription costs, and other benefits of each provider. 

Figure 1. Spotify

Spotify

The frequent leader in terms of global subscribers, Spotify has become
something of the public face of streaming audio.4 Launched in 2008,
the company did not reach widespread adoption for several years, having only
become a household name within the past few years. The reason for Spotfiy’s success is hard to
pinpoint, but is likely a combination of its ability to offer the latest
features among streaming audio providers, having one of the widest range of tracks
available among all providers, and having been among the first
providers to stream individual tracks, rather than curated radio stations. Spotify is arguably responsible for today’s
streaming audio boom, having played a huge role in proving to record companies
and artists that it is possible to make money from streaming music. While this
may have once been questioned, the above statistics show that the answer is now
known, and it is helping an industry that was, and to a lesser degree still is,
plagued by piracy. Simply put, humans tend to want more than they can afford. In
the case of music, listeners with this particular conundrum would have
previously only had the option of resorting to piracy to gain access to
individual tracks on a massive scale. Now, Spotify provides access to more
tracks than any consumer could even store for a relatively small fee. This
converted many pirates who were putting no money into the music industry into
paying customers. In fact, the European Commission has estimated that for each 47
tracks being streamed over the service, one less track is pirated.5
Given the scale on which tracks are streamed by Spotify, that means millions and
millions of tracks have been saved from piracy. It is very likely that being
able to neutralize the greatest nemesis of the modern music industry is what gained Spotify
the clout it needed to land deals with the record labels and provide it with one
of the largest streaming audio libraries in the world today.

Service Description

Spotify is a monthly subscription-based service offering streaming access to
more than 50 million songs as either single tracks or as part of streaming
radio stations. These stations can be based around a single artist, genre, or
even an activity that the user will be doing while listening. Stations can be
curated by the users themselves, friends, celebrities, or DJs. 

Individual tracks can be downloaded for offline listening but will always
require the presence of the Spotify app and an active subscription.
Users can also add their own local files to Spotify so that they can be listened
to alongside the company’s streaming music. 

Supported Platforms

Desktop – Windows, Linux, and OS X.

Mobile – Android, iOS.

Other – Playstation, various smart TV, smart speaker, and stereo platforms.

Benefits 

  • Catalog With more than 50 million songs, Spotify
    has one of the largest music catalogs on the planet. These include entries
    from every conceivable genre of music, from every time period, and for every
    taste.
  • International support – Spotify currently offers its services in
    92
    countries around the world. This international support, as well as an
    accompanying catalog with broad, global appeal, has resulted in Spotify
    boasting more than 130 million paid subscribers, with more than 150 million
    users total.
  • Free Tier – Although Spotify’s bread and butter is its paid tier,
    it is actually among the few streaming services that offer users the
    option to listen to individual tracks for free. Although this option is
    time limited, it does make the service very attractive to new customers, and
    is likely a large part of what has drawn so many customers to the company’s
    subscriptions in the first place. 
  • Social Integration – Spotify can tie into users’ Facebook and
    Twitter accounts, allowing them to share playlists and listening habits as
    well as letting them access playlists made by friends or celebrities. 

Pricing

  • Basic – Free, ad supported
  • Premium – $9.99 per month, per user for an individual
    plan, $12.99 per month for a "Duo" plan with the ability to share playlists
    and content between accounts, or $14.99 per month for a family plan with up to six accounts. A
    student-only $4.99 per month plan is also available.

Figure 2. Apple Music

Apple Music

Despite the fact that Apple Music is already a major player in the streaming
music market, it is actually one of the newer entries on this list.
While Apple’s iTunes had been a huge factor in the sales of digital music for
years, the company still lacked a product to directly compete with the likes of
Spotify or Pandora. It remedied this situation with the purchase of Beats Music
in 2014. That service, which was later absorbed by Apple, was launched by the
audio equipment manufacturer of the same name earlier in 2014. The $3 billion purchase
provided the basis and technology that Apple would need to launch its own
subscription-based product, while its already massive presence in the music
industry and numerous deals with nearly every major record label provided the
media to fill its catalog. Although Apple did have to put some work into
renegotiating many contracts in order to support streaming a given track in
addition to selling it, the existing relationships it had established as well as its
overall clout streamlined the process to a degree that other streaming audio
providers could only dream of.

Service Description

Apple Music closely mirrors Spotify in that it is a monthly
subscription-based service offering that streams access to approximately 50 million
songs as either single tracks or as part of streaming radio stations. These
stations can be based around a single artist, genre, or can be one of the
DJ-curated stations the company offers such as its seminal Beats1 radio station,
which provides 24-hour access to tracks hand chosen by DJs in Apple’s employ.

Individual tracks can be downloaded for offline listening, but will always
require the presence of an active subscription to play. The service is closely
tied into Apple’s existing iTunes and App Store storefronts, allowing the use of
existing accounts, payment methods, and musical preferences.

Supported Platforms

Desktop – Windows (via iTunes) and OS X.

Mobile – Android and iOS

Other – Apple TV, HomePod speakers

Benefits 

  • Catalog Apple Music claims to have
    essentially the single largest streaming audio catalogue in the industry,
    currently resting at approximately 50 million tracks, and growing.
  • Massive ecosystem – The Apple brand gives Apple Music access to an
    existing ecosystem of peripherals, companion services, and software that is
    unrivaled in the industry. Essentially all Apple mobile devices have access
    to the service, guaranteeing that speakers, headphones, and other accessories
    designed specifically to work with iPhones, iPads, and iPod Touch models will
    work with Apple Music. The service is also tied into Apple’s personal digital
    assistant, Siri, and can be activated with a voice command on compatible
    devices. This includes playing a given track, album, music from a certain
    artist, or a user-defined radio station.
  • "For You" music curation – Like most streaming
    audio services, Apple provides recommendations on new music to each user.
    However, unlike most others, Apple employs a number of human DJs and other
    experts who tweak and edit the algorithms to make recommendations based on
    both the science involved and their own instincts of the music industry.

Pricing

  • Basic – Free (Restricted to certain Apple Music radio stations with
    limited skipping of tracks)
  • Premium – $9.99 per month, per user or $99.99 per year,
    per user. A monthly family plan is also available for $14.99, with support
    for up to six streamers, as is a discounted $4.99 per month student plan.

 

Figure 3. Pandora

Pandora

Pandora, also known as Pandora Internet Radio, is the oldest entrant on this
list and was one of the first streaming audio services to gain any form of
significant traction. Launched in 2000, Pandora was based on the "Music
Genome Project," an initiative to catalog and analyze up to 450 distinct
characteristics in each piece of music.6 This made the Internet radio
service one of the first in the industry to take user’s preferences into
account and apply those tastes to its choice of future tracks to stream.
Although the music genome project has expanded over the years to include
additional traits and aspects of user taste, Pandora has maintained its
original business model: Providing streaming access to user-created radio
stations that, over time, collect listening data to provide the best playlist
possible. Despite the launch of competing products that offer single-track
listening, Pandora continues to have a significant following and continues to
expand its assets, having acquired the now defunct streaming
service Rdio for $75 million in 2016.7 Although it took some time,
this acquisition allowed Pandora to finally create its own single-track music
service budded Pandora Premium. This offering functions nearly identically to
the above offerings, providing playlists, albums, and single tracks for
unlimited streaming to paying subscribers.

Service Description

Pandora offers both its well-known streaming radio stations curated by its Music
Genome Project technology and single-track listening. The curated music
technology on which Pandora was founded draws on up to 450 aspects found in
music to discern which of these facets of a given song appeals to each user. This
data is then applied to the company’s available song catalog to create a radio playlist that should, in theory, be pleasing to each user’s ears. This
automated curation is also available for single tracks and playlists on the
Pandora Premium service, with full support for the thumbs up/thumbs down
favorites.

Supported Platforms

Desktop – Any desktop OS with Internet access and HTML5 support.

Mobile – Android, BlackBerry OS, Windows Mobile, and iOS.

Other – Many connected devices with Internet access, a browser, and
support for HTML5 audio streaming. Most popular smart speaker platforms.

Benefits 

  • Catalog – Pandora provides a catalog of nearly 40
    million songs for listening via its customized radio stations. The company
    has, so far, not released any figures on how many of those tracks are
    available via its Pandora Premium single track listening service.
  • Availability – Pandora is available on nearly every connected
    platform in the world. It has been installed in cars, radios, TV sets, audio
    receivers, and is always available on the Web. This provides users with a
    massive range of options for accessing the service, as well as the flexibility
    to pump music through headphones, speakers, automobiles, and other outputs.
  • Price – Pandora is available, first and foremost, as an
    ad-supported service. Although some users may find the interruptions caused
    by these ads to be disruptive, most are happy to put up with the occasional
    commercial break for free access to streaming radio. In addition to offering
    access to specific genres and artists, this free tier also lets users skip
    tracks they do not like, albeit a limited number per hour. Even if users
    should find the ads or lack of unlimited skipping too offensive, both
    limitations can be removed by subscribing to the company’s Pandora Plus
    service, or its Pandora Premium service, which includes access to the
    company’s full library of single-track offerings.

Pricing

  • Basic – Free, includes streaming of curated stations, but limits
    the number of skippable tracks, and inserts pauses when listening for
    extended periods.
  • Plus – $4.99 per month or $54.99 per year. 
  • Premium – $9.99 per year, or $109.98 per year, with
    various discounts available for students, families, and military members.

Figure 4. Deezer

Deezer

Although it does not have the same household name as most of the other
entrants on this list, Deezer has made a name for itself by being one of the few
Europe-based competitors and by slowly but surely growing its track catalog
to match or exceed the offerings from the largest players. Deezer began life in
2007 in France with a relatively tiny number of available songs. However,
through constant courting of some of the largest record labels, the service
quickly grew to offer more than 8 million songs.8 This trend of
constant catalog growth continued through today, with the service now boasting
more than 28 million tracks. Even though it began as a European company, Deezer has
since grown to cover much of the world’s population and has seen its customer
base grow accordingly. 

Service Description

Deezer is a monthly subscription-based service offering streaming access to
more than 56 million songs as either single tracks or as part of streaming
radio stations. These stations can be based around a single artist, genre, or
activities. 

Individual tracks can be downloaded for offline listening but will always
require the presence of an active subscription to play. 

Supported Platforms

Desktop – Windows, OS X

Mobile – Android, BlackBerry OS, and iOS.

Other – Chromecast, select car stereos and numerous connected TVs and
Hi-Fi systems.

Benefits 

  • Catalog – Deezer, despite being a lesser known entrant, provides
    users with access to 28 million tracks.
  • Availability – Like Pandora, Deezer is available on nearly
    every connected platform in the world. It has been installed in cars, radios,
    TV sets, and audio receivers This provides users with a massive range of
    options for accessing the service, as well as the flexibility to pump music
    through headphones, speakers, automobiles, and other outputs.

Pricing

  • Basic – The company’s free "Discovery" tier
    includes ad-supported streaming of user-curated radio with limited skips per
    hour.
  • Premium – Deezer closely matches the likes of Spotify, offering individual subscriptions for $9.99 per month and
    family plans for $14.99 per month, with support for up to six users.

Figure 5. Spotify

Amazon Music Unlimited

Amazon, like Apple, has long been a powerhouse in the digital music market.
The company was among the first to sell MP3 albums and tracks, and has one of
the largest customer bases in the world of any digital music provider. This was
later bolstered by the company’s Amazon Prime service, which offered the ability
to stream around two million tracks as part of its $99 per year fee. However, it
is only within the past few years that Amazon has launched a direct competitor to the likes of
Apple Music and Spotify. Like these competing services, Amazon Music Unlimited
offers access to "tens of millions of songs," complete with offline
listening, unlimited track skips, personalized and curated playlists, and
all the trappings provided by its more well-established competitors seen above.
On top of this, the service is also tied closely with Amazon’s Echo ecosystem,
as well as its Fire TV and Fire Tablets, offering a wide variety of listening
platforms.

Service Description

Amazon Music Unlimited is a monthly subscription-based service offering streaming access to
"tens of millions of songs" as either single tracks or as part of streaming
radio stations. These stations can be based around a single artist, genre, or
activities. 

Individual tracks can be downloaded for offline listening but will always
require the presence of an active subscription to play. 

Supported Platforms

Desktop – Any PC with an active Internet connection

Mobile – Android, iOS, and Amazon’s own Fire OS.

Other – Fire TV, Kindle Fire Tablets, and nearly any other
Internet-connected device capable of HTML-based audio streaming.

Benefits 

  • Catalog – While Amazon has been somewhat cagey about
    providing its exact catalogue size, its existing deals with record labels
    and artists assures that the company’s selection is, and will continue to be
    on par with Apple Music and Spotify. 
  • Prime Benefits – Amazon offers one of the largest
    varieties of subscription plan options, largely thanks to a built-in
    discount which drops the price of Amazon Music Unlimited for subscribers
    that already have an active Amazon Prime subscription, as well as a robust
    family pricing option. 
  • Echo Integration – Not only does Amazon Music Unlimited
    allow users to call up tracks, artists, or albums via its selection of
    Amazon Echo devices and apps, but the company has created a unique
    subscription plan that is exclusive to Echo owners. This discounted $3.99
    per month plan offers all of the same benefits as Amazon’s own $9.99 per
    month offering, but restricts users to accessing their music via one of
    Amazon’s selection of Echo speakers. Given the popularity of these products,
    the option could provide a way for consumers that were doing the majority of
    their listening through Echo speakers anyway to gain access to the company’s
    streaming audio service for less than half of its original price. 
  • Lossless Tracks – In 2019, Amazon began offering its Amazon Music
    HD plan option. This service launched with a premium subscription price in
    exchange for access to HD tracks (streamed at 16-bit / 44.1KHz) and Ultra HD
    tracks (streamed at 24-bit / 192KHz), with the latter being considered
    "lossless," or completely uncompressed.

Pricing

  • Basic – Amazon’s only "basic" service offering
    comes in the form of Prime Music, which still requires an active Amazon
    Prime subscription ($99 per year). This offers access to two million tracks
    with unlimited listening and skips.
  • Premium – As stated above, Amazon offers a wide variety
    of pricing options, including a $9.99 per month plan (discounted to $7.99
    per month for Prime members), a $14.99 per month family plan (with no Prime
    discount), and a $3.99 per month Echo-only plan. Additional discounts can be
    taken advantage of by customers willing to pay on a yearly basis, with
    annual subscription options priced at $79 for an individual Prime
    subscriber, or $149 for a family plan. The newly-added Amazon Music HD
    service raises the standard Music Unlimited price to $12.99 per month for
    Prime members, or $14.99 per month for non-Prime subscribers. A $19.99 per
    month family plan is also available with 6 accounts included.

A Note on Google Play Music and YouTube Music

In 2020, Google decided to shut down its Google Play Music service. The
offering, which was previously one of the major players listed in this report,
provided most of the same features as Spotify or Apple Music, but specialized in
offering cloud-based storage of the user’s own tracks alongside these streaming
offerings. During the Shutdown, Google attempted to attract users to its YouTube
music offering. This subscription offers access to streaming audio and premium
music video services on the company’s YouTube streaming video site and apps. The
heavy reliance on integrated video, lack of ability to acquire individual
tracks, lack of cloud-based track storage, and other differences put off many
long-time subscribers during the transition. At the time of writing, YouTube
music’s success as a replacement for Google Play Music remains largely unknown,
with Google having remained mum on the service’s success since its closure of
Play Music. While it is pure speculation, one would assume any massive exodus of
users to YouTube music, or influx of new users would have been touted heavily by
Google. The lack of any such boasting makes its silence on the topic worrisome.
This is not to say that YouTube Music cannot become a major competitor. But, it
does not appear to be there just yet.

The Lesser-Known Competitors

The list above represents the top five contenders based on music catalogs,
user base size, and other factors determining the importance of each service. They are, however, not the only players in
the streaming audio game. While the niche and genre-specific offerings are too
numerous to count, two more services do warrant mention here, due to their
potential to unseat any of the aforementioned major players should they find
just a bit more success in the future.

  • Tidal – Owned by Shawn "Jay Z" Carter and endorsed by
    some of the most famous musicians in the world, Tidal has the potential to
    become a major player in the streaming market simply from the clout of the
    names behind it. The service offers more than 60 million tracks and music
    videos, but does not provide a free tier. It does, however, offer a $19.99
    per month subscription that provides lossless files similar to Amazon Music
    HD, in
    addition to a standard $9.99 per month subscription that streams MP3 quality
    tracks. Various family plans, as well as discounted student and military plans
    are also available. While the facts of Tidal’s business may make it seem
    like it could directly compete with many of the services listed above, the
    reality is that the company’s subscriber base, which it has remained
    extremely cagey about, has been estimated to be, at most, around 3 million,
    a tiny fraction of the hundreds of millions shared by top contenders like
    Apple Music and Spotify.9 
  • Napster – Born from the DNA that created the original Napster
    (and renamed to Rhapsody for a time), the new Napster is supported by
    its own line of MP3 players. It is a lesser-known service that, nonetheless, offers most of the same features as the more successful
    competitors. While Napster’s offerings are essentially bog standard, it managed to accumulate some three million subscribers and is only a short way
    behind Pandora in user adoption.10

Summary

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Figure 1. Paid Monthly Users by Company11

Figure 1. Paid Monthly Users by Company

With just the services listed in this chart accounting for
nearly 140 million paying streaming audio subscribers per month, it is easy to see how
streaming audio has expanded to account for over three-quarters of all music
revenue in the US. Thankfully for the industry, it seems that the growth is
showing no signs of slowing. The proliferation of smartphones and more and more
varieties of connected devices will only serve to provide streaming music
services with additional outlets for their products. Connected cars and even
connected appliances could soon be the best place to listen to Spotify, Pandora,
Deezer, or any other supported service. This level of flexibility and ease of
use means that audiophiles can sit in front of tens of thousands of
dollars worth of audio equipment and listen to the same services that the average Joe
streams in the shower over his smartphone. More and more often, users are turning
to connected devices to provide them with access to their favorite tracks,
and the music industry has finally embraced this fact, showing the
cooperation that was always needed to make streaming music as successful as over-the-air music had been
in the previous century.

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References

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About the Author

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Michael Gariffo is an editor for Faulkner Information Services. He
tracks and writes about enterprise software and the IT services sector, as well
as telecommunications and data networking.

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