Friday, 24 October 2008

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!


Gareth Main said...

Keith, how are things in the clouds? Seriously, you really do live in some sort of bubble that is detached from the real world – artists only motivated by money? Jeez, perhaps every single open mic night should not bother, perhaps karaoke bars should close since nobody enjoys singing, perhaps all those DIY artists making music in their bedrooms should give up because they won’t make a fortune, perhaps that guy scrabbling away in some dingy flat trying to put together a 7” that 3 people will ever hear should just not bother – after all, if there’s no money in it, why bother at all?

One thing is for certain, the answer isn’t easy. Another thing I am sure of but willing to be proven wrong is that online digital media can never successfully replace the turnover generated by physical media. If you have P2P sites (I’m not talking The Pirate Bay here) that give you a whole host of brilliant, rare, unreleased, live and alternative albums unavailable from anywhere else in a whole range of formats for free, isn’t that a good thing? If people can get their hands on brilliant music and share it with others, isn’t that what the music industry was built on?

This is the case as I see it: consumer paid for online digital music is unworkable because there’s always a free, better quality option out there for anyone who bothers to look. Therefore the labels need to focus on what will generate money. Perhaps ISPs is the answer, perhaps taxation is the answer – the government and local authorities pay for an element of our musical entertainment as it is, why not a little more paid for via tax? It may work, it may not, but I’m sure the general public wouldn’t mind a tiny addition to their bill in exchange for such a free service. It is an option that the record industry might have to face.

One thing I can’t get my head around is why aren’t people in the industry talking to the real innovators? I’m talking about, and you’ll probably not agree with me, people like Alan Ellis who, instead of being asked ‘how did you get 180,000 people together to talk about and share music?’ is being taken through the courts on bogus charges – wasting taxpayers’ money while they’re at it. Ellis invented something bigger and better than Napster and even had Trent Raznor - who until last year was signed to Universal - singing his praises, declaring OiNK “the world’s greatest record store.”

The key points to this quote are the quantity and quality of titles on offer, the recommendation services of fellow consumers and – of course – the price.

The other great quote he pulled out: “I’m not saying that I think OiNK is morally correct, but I do know that it existed because it filled a void of what people want.”

And that is the whole point: give the people what they want rather than punishing them. The only important people (really) in music are the artist and the consumer. The artist provides something beautiful and wants the consumer to listen to it. All we need to make those two happy is a distribution network that gets a-to-b. The only issue is that in the archaic industry a middleman has emerged – the record label – and they still want their plush office and nice dividend.

I think what we’re seeing is that few people actually care about record labels, they’ll buy the vinyl if they love physical records and like something enough but that small minority has always existed and always will, therefore, in all likelihood, so will smaller independent labels. What has been removed is the need for mainstream distribution and now that people don’t need it, they’re more than happy not to pay for the privilege of it.

As for artists who are only in it for the money, there are plenty of ways to make money from writing and performing music. In fact, I don’t think any artist in the world (one who writes their own material anyway) makes the majority of their money from record sales, all that this argument is about is big record companies wanting to keep their slice of the pie big and juicy and just because their existence is obsolete now, they’re trying to cash in as much as possible by kicking and screaming on their way down.

Of course you probably wouldn’t say that, I mean, they pay your wages after all.

Keith Jopling said...

I'd just done a nice reply to this when my machine shutdown on me for updates! So maybe this debate will run & run, but these are good points well made Gareth so thanks. Your observations about artists are interesting, but there is plently of evidence that what motivates artists once they've made their art is to get it heard by the widest audience possible and to be recognised and rewarded for it. Artists are competitive and want to rise above the rest. I'm not defending record companies especially with this particular posts (i sometimes do though). On digital, they have been slow and all need to just get better, quicker. Those that do will do well. The legal file sharing route is a last resort for a a broken business that can't be fixed. But i think this business is fixing, slowly but surely.

Gareth Main said...

There is a startling difference between artists wanting to be ‘recognised and rewarded’ for their art and your suggestion that money is the only incentive for artists to make ‘something of real quality.’

As a case-in-point, I met recently with an artist who has released three critically-acclaimed records through Domino. His band is now gearing up for the release of their fourth record and it isn’t going to be on Domino after a debate surrounding creative control. He wants to make a record for him – the one, he says, that he will be most proud of. The band has never made money, is in debt to Domino and the lead singer is 37 years old. Having a conversation about ‘illegal’ filesharing sites all he said was “what I want is to be able to go to a gig and have 200 people there who really care about our music”. Do you think that is more likely to come from selling albums at £8-£10 a time or offering his music to 180,000 people to download for free?

Put in a different light - the one about money - do you think that his band is likely to make more money in the scenario whereby they sell their records traditionally through shops to 20 people and those 20 people turn up to a show OR do you think giving away 180,000 downloads of his record, getting 200 people in to a show who love the music and having 10% of those like it so much that they buy a record directly from the artist for £10 – they could even have it signed or buy T-shirts, exclusive tour CDRs, posters, badges etc etc to enhance their experience?

Even more importantly, do you think that the route by which record labels are currently progressing is going to reward the artist with the decent living you state that they crave? Do you not think that this personal touch, getting to the grassroots and ensuring that as many people as is humanly possible can hear your work would ultimately give the artists a more profitable (both psychologically and monetary) existence?

We7Steve said...

You can't force a generation who have never paid for music to have the conscience to pay for it, they do value music, but in a different way - gigs and merchandise. you can, however, still make money from digital music if you give them legal, safer and easier to use alternatives, than the pirate sites they use.

Steve Purdham
CEO - We7

Evan Rowe said...

I think a compromise solution would be to figure out how to lower the floor price on mp3s.

I want my band to be able to make the maximum cut possible while selling mp3s at maybe 10 cents a song. I think at 10 cents, it's worth it to not even bother to pirate. (10 cents.. what is that .07 UK?)

But more than anything, we've had a hard time even getting any recognition at all... very frustrating.

Anonymous said...
This comment has been removed by a blog administrator.
Keith Jopling said...

Helan (or was it Barbara?) thanks for the complimentary comment and keep reading the blog - sorry i deleted your comment but there was some link to an ipod shop on there and i felt the need to 'just say no' to any accidental sponsorship!