The long tale - ten years in the life of digital music

Different versions of this post might appear on Music Tank’s web pages and in the Record Of The Day editorial.

Music Tank’s panel debate ‘Let’s Sell Recorded Music!’ (Part 1, ‘Here We Are Now Entertain Us’) started off in fine form, shaped into a good quality (for a panel!) discussion and then sadly, deteriorated into a debate about the pros & cons of legalising file sharing. The shock for me was the latter, which I hadn’t prepared for but should have seen coming. But let me first recap on events...

Feargal Sharkey opened with a keynote that drew heavily on statistics (impressively off the cuff) from the recent survey conducted by the University of Hertfordshire which, I gather, was all about how excited young people are about getting music through their ISP. This included an impressive 80% of those surveyed claiming they would happily pay a fee if given an unlimited music option with their internet service. Feargal also noted that each of the six major UK ISPs had done their own research into added value services, and that “the five letter word beginning with music” had come top on the list of consumers’ desires in every single case.

Basically the CEO of the newly created UK Music told us that the scene was set and the call to arms had begun. In his words "I can't think of any other industry that has total certainty and confidence at both ends of the supply chain. It's just the bit in the middle - the industry - which needs fixing".

I followed Feargal (note this isn’t easy!) with a review of legal music services, both newly launched, soon to come and those sadly recently deceased, like Wippit. Digital music has had a troubled birth – taking some ten years of development to reach just 20% of the market by value in 2008 – still a niche (one happily ignored by the likes of ACDC with zero impact on revenues & success it seems). I spelt out the five key reasons for this: a stubborn licensing policy by the labels; the complexity of securing global rights; a bungled DRM policy; high market entry costs and low consumer adoption. But since all of those are steadily improving here are five things to improve on as we move into a big digital year in 2009:

1. Recommendation technologies aren’t good enough – we need more emphasis on editorial and programming expertise.
   
2. Service relationships still need to improve – labels - license the music, by all means collect the advance, but then continue to service the relationship.
   
3. Content development & product innovation need to overtake payment models as a major issue for discussion.
   
4. Commercial models – we need services that offer multiple payment methods and partnerships that share equity, but don’t make it unnecessarily complicated J-V vehicles.
   
5. Measurement, reporting & payment to creators – we need to get beyond the digital black box as a matter of urgency and start paying a decent slice to artists promptly.

But, in the spirit of the title of the debate I pointed to the optimism of the new major brands coming to the market – Nokia, MySpace, Amazon, Sky et al and even just for fun, compiled my own Top five (multi-market) digital music services to challenge iTunes in 2009 and the reasons why I picked each.

5. 7 Digital – why? Its partnership approach and MP3 policy.
4. Amazon – the Shopping Basket and MP3.
3. Omnifone Music Station – mobile is the long game & so are cars & home hi-fis which Music Station is branching into.
2. Spotify – proves how ease & simplicity of use is still the key feature.
1. Nokia CWM / Sony Play Now Plus – total music will change the game – we don’t know how or when but it will.

The panellists then chipped in with what I thought were great, valuable comments. Ben Drury and Russell Hart agreed that quantity wasn’t everything & that quality is what really matters, with Russell pointing out that his own consumer research suggests the average music fan loves only three songs a month (that many!). Phillippe Steinmetz of France Telecom pointed out that the Musique Max all-you-can-eat subscription was not cannibalising a-la-carte sales (as TDC in Denmark and Telus of Canada have also previously declared). Paul Hitchman stated how access was overrated and that it was the consumer relationship that mattered. All good, solid stuff to be taken on board by any new service provider in this complex game.

But then Andrew Orlowski (trust him) of the Register kindly introduced us to “the elephant in the room” – namely file-sharing. The trouble with any of the new services coming to market is that they just don’t match up to the file-sharing experience.

And so the key question in the debate surfaced and it’s a good one: with the new crop of digital music services emerging and the recent service developments shaping up (such as removal of DRM on downloads) would there be any need for ‘legalised’ P2P options in the market place anytime soon?

For me the answer is clear, but I hadn’t appreciated just how wedded some are, still, to the concept of legalised file-sharing. With statistics being quoted left right & centre about how many people would pay for the privilege (though they haven’t yet and there was no consensus on how much) and how many would then still buy or not by CDs or downloads, my only response was to look on open mouthed (and drink a bit more beer). For if I’ve done enough of anything at all in my time in this business, its research.

All the research I’ve commissioned, bought, read or seen suggests to me two certain things:

1. We’ll never know the impact on the music business of a legalised file sharing approach until it actually happens and;
   
2. That it will never happen, so we’ll never actually know.

The key trend in music if there is one at all, is fragmentation of consumption. Music fans want different things, not the same thing. They use multiple platforms in different ways. They like different types of music and to access it, listen to it and store it in different ways. Some fans are loyal to artists & some aren’t. Some like to own & collect music, others aren’t bothered about that. Some are wedded to the album concept, others to the song. Some want access to everything, others like to be told what to like. Demographics do influence this, but not as much as people think.

We can’t respond to this as a business simply by making everything available. Not without the risks being clearly understood or the guarantee that such an offer would be sustainably funded to cover the costs of doing business – not for one year or five but for the foreseeable future. For artists, it’s absurd to expect to make a reasonable living under a one size fits all model where all music is a utility. The incentive to create anything of real quality just isn’t there.

As for consumers, the ones we need to care about more are those with the conscience to pay for music, those who don’t file-share or those who do but would happily pay for a convenient or better alternative. In other words we should look to develop new digital music services for the vast majority of music consumers, not flip the entire business on its head to pander to a cynical minority.

Can we move on please people!