Sunday, 30 November 2008
It was a brochure I wrote and self published, about six ways in which record companies could build new revenue streams during these challenging times. When I got back to my office I skimmed through it with dread. 18 months is a long time and thinking moves miles on in that time frame.
I felt a bit embarrassed reading it, but a tiny bit proud as well – just for giving it a go and getting it done. After all, this brochure helped win me a couple of projects. And there it was on Guy Hand's desk the day he hired me to help Terra Firma understand the record business. The opening line of the brochure was quoted in a widely read leader piece written by Robert Sandall for Prospect Magazine. And, people who read it liked it, so I guess it served its purpose at the time. But on re-reading, I wondered, especially given the dizzying pace of change in the music business, how much of what I'd written 18 months back was in any way still relevant in the here and now.
It seems timely to consider this after a few weeks in which we've had a number of interesting things said by the majors – three of them anyhow. First we saw EMI reveal its new strategy of three new operating divisions: New Music, Catalogue and Music Services, along with the soon to be launched D2C 'learning lab' on emi.com. Meanwhile, Warner claimed that all new artist signings would have some element of multi-rights – partial 360 degree deals. And Universal (currently literally wiping the floor with its major competitors) somewhat audaciously revealed operating results that included a growth in revenues of 4%.
Revenue growth in the record business? Is that still possible these days? Obviously the answer is yes, though the vast majority of this was driven from core album business, thanks to two out of four major artist releases now belonging to the Universal roster. Pure market power works, even in a steadily dwindling market.
But my brochure was about going beyond the traditional and diversifying the core record business into new – and more profitable – revenue streams. My six ways to drive new business were as follows:
1. New retailing.
2. Brand partnerships.
3. Personalisation & recommendation.
4. Commercialising communities and D2C initiatives.
5. Customer loyalty.
6. Product innovation & programming.
Aside from evaluating whether this really is a list of coherence rather than a brain dump, I'll take a very brief look at each one, benchmarked against the success of real efforts made by the labels – or new entrants of course - in each area.
The idea here was to take particular titles or repertoire outside the traditional physical retail space and look for new retail partners. The Spice Girls famously did this with Victoria's Secret for example. And Hot Topic, Nordstrom and Starbucks had all entered the CD retail business in the US, so it seemed like momentum was building and might transfer from the US to other markets.
But it's gone rather quiet. Starbucks has scaled back due partly to the tough economy, but also due to a now badly exposed lack of real commitment to music. One-off successes like The Spice Girls have proved harder for the labels to scale across the piece. Meanwhile no new dedicated entertainment retail brand has emerged (I've been approached twice in the past two years by new physical ventures, so there is interest, but no execution). In the UK have we seen Virgin's enthusiastic re-branding as Zavvi, but that's not new. Giving a school grade verdict on new physical retail for music then, over the last 18 months? Has to be a D, for disappointing.
This has been a potential industry panacea for a while now. No question, brands have been a shot in the arm for music in several key ways. One-off licensing deals have secured vital bottom-line income for labels. Some artists (notably Groove Armada) have successfully gone outside the mainstream label system directly through brand partnerships. And the synch business itself has grown impressively, as has public performance of music in general.
The innovation and creativity around individual campaigns (ads, festival sponsorships, TV soundtracks) has been a genuinely great development for the music industry. Listen around you – wherever you go or whatever you see on TV or in film, the music has become intriguing and of consistently high quality. No more jingles and less library music and a lot more money being generated. However, labels have so far failed to truly scale this across the piece, with initiatives like Universal's BrandAmp and Warner's Brand Asset Group fairly quiet after fanfare launches two years or so ago. Labels have not become creative agencies for their artists. For the industry this has to be a B+, but for the music labels, a C+.
Personalisation & Recommendation
By this I meant prioritising licensing to technologies focused around this. Back in December 2005, Gartner Research and Harvard predicted that, by 2008 25% of online music purchases would be driven from recommendation technologies. That just hasn't happened. It's taken iTunes ages to come up with Genius. As ever with Apple, it’s doubtful they'll share data on the impact on sales directly from that feature. Meanwhile, despite a flurry of activity, no real breakthrough has occurred. Pandora has struggled (partly due to licensing prices but also due to the hit & miss nature of the way it works). Recently launched Mufin has attracted rotten user reviews.
Besides, where a service is actually built around recommendation itself, there is and always will be a monetisation problem. Consumers won't pay directly for recommendation. The other issue is the illogical nature of music recommendation and discovery. It can't really be efficiently coded can it? Real music fans are so far underwhelmed by recommendation technologies – either collaborative, music-genome based or otherwise.
Personalisation is another thing entirely. The BBC & Google have both understood the power of allowing users to very easily personalise their home page and web navigation experiences. But when you login to the iTunes Music Store, where exactly is your personalised home page? Spotify is better at this and allows you to personalise the user interface in nice, subtle ways.
So things are developing. But overall the technology, services and licensing in this area has not driven anything like the impact predicted by Garner & Harvard. Combined industry efforts hear get a C- could and should, do better.
Label, Artist D2C
It's funny, 18 months ago I wrote passionately about artists creating communities for themselves (via artist websites primarily) rather than letting others do it for them. I tipped Radiohead to be the first to succeed with the approach – an obvious choice that turned out as expected with the In Rainbows digital release. Right now there is a lot of talk about capturing the artist-to-fan relationship better, and understanding fans individual and collective needs better.
Even if a lot of the talk is hyperbole right now, there probably is something in this. However, no artist has been really successful to date except Radiohead and Trent Reznor (although the definition of ‘success’ might lead to a different conclusion). In my previous post on this subject, I tip Topspin Media to make the most impact for artists going direct to consumer. Anyone interested in why should check out Ian Roger's recent keynote at the Grammy music conference in the US. Ian posted his slides online – recommended reading.
As for label D2C – we have a couple of imminent releases – so I will reserve any judgement until then. But the timing is iffy. With a slew of new digital services recently launched but yet to bed down, and even more coming, I don't think this is great timing for launching a D2C service. The impact could get lost in the crowd. So as I write this, commercialising artist communities gets a C, with label D2C specifically a D, notwithstanding new launches next month.
The point I make in the brochure is that many fans would spend more on their favourite artists if given the opportunity, conveniently. Pre-orders, special-edition versions and fan loyalty schemes could be used to extract more value from fans. This has been done successfully, though again Radiohead and Nine Inch Nails seem to have capitalised more than most on the idea. I have hopes that Amazon, with its deep retailing expertise and scale, can achieve a lot in this area for a wider array of artists. Also, I think subscription services – yet to really come of age – can drive the elusive ARPU that everybody talked about when these first arrived a few years back. I think this is an area with a lot of commercial promise, but I don't think a huge leap forward has been made in the past 18 months really. Grade C.
Product Innovation & Programming
For me this is the single biggest area of impact. With the core music formats – albums, songs and videos being gradually commoditised from the combined impact of file-sharing, unbundling and music ubiquity, classic management theory would suggest that what this industry needs most is a re-invented core product.
But what would that be exactly? Digital brings all kinds of possibilities, such as multi-media bundles and of course, the all-you-can-eat music subscription. I'm surprised that we haven't had more EP type formats in the digital space, though there have been a few examples. I like iTunes Complete My Album as it is a dynamic price model – the more you buy the better the value (though isn't an all-you-can subscription 'complete my catalogue' by default?).
I still believe that long-form video and greater innovation with audio-visual content using digital channels, can improve music as both a product and experience. What did I mean by programming from a label viewpoint? Firstly, every label - the majors especially - needs a production business (most majors do and in Sony’s case of course, SiCo is a major contributor to the bottom line).
Rather than simply making multi-media programmes around artists, new albums or even non-music ventures, this function needs to do much more for the labels strategically. In order to achieve maximum impact for artists, there is a need to make the right content, get it through the right channels and platforms, at the right time and using the right brands as sponsors – all to reach the right audience. This is new in music marketing and is a subtle, strategic discipline that can be offered as a true holistic service to artists. No longer can labels simply spread content around in the hope that some of it will stick and trigger off demand for an album. The game is changing. Look back to my very first post on this blog on HBO – Music lessons from a content powerhouse – for more thoughts on this subject.
Wednesday, 19 November 2008
A lot of recent talk that has intrigued me has been of ‘owning’ the artist-to-fan relationship, and making more of all that. Ticketmaster just bought Front Line Management and is re-launching itself with the intent of capturing the whole artist-to-fan experience, thing. We’ve recently had majors, most specifically EMI, talk about the same concept, quite a lot. Live Nation bought Music Today a few years back and Music Today was doing this from the outset – selling all sorts of artist stuff – direct through artist websites to a mailing list of signed-up fans. Now Amazon has launched 100,000 artist stores aiming to do a similar thing.
Not only that, a number of brand new businesses have been launched recently, with the central business model of helping artists manage relationships with their fan bases directly – same theme again. There’s been a whole slew of these launched, but my personal one-to-watch in the space is Topspin Media, for fairly obvious reasons – smart leadership and a well funded operation with some early successes in working with the likes of David Byrne & Brian Eno on their recent collaborative release in the US. The attraction of a model like Topspin, to artists, is that it enables artists to get a good start in managing all of their digital spaces and properties themselves and so to begin building a fan base that way (without signing to a label deal). Even more clearly, to my mind, these services enable established artists who already have a core & loyal long-term following, to keep their digital plots well watered.
I don’t doubt there is something in all of this, but what exactly? Is it just me, or is there a slight suspicion of alchemy with this concept?
As a fan (of say Elbow, which I am, big time) I can pretty much get whatever I want from Elbow, the way I want it, already. I’m happy to sign-up to the artist site provided I don’t get bombarded. I haven’t struggled to get tickets for the band’s shows and of course I buy the records and have bought a video from iTunes and rented another from Virgin Media. I read interviews with Guy Garvey in music magazines and listen to his 6 music show sometimes. As an Elbow fan, that does me, and is very fulfilling experience, thank you very much (after all, it is Elbow’s music that matters to me most). What’s more, I enjoyed shopping around for these things and the serendipity of just finding them available at the right time & place. I feel no particular need to get them all in one place at the wrong time.
Now it may well be that Elbow wants more fans like me or desires a wider audience. No problem there either. I have been evangelical about the band for two years and especially this year. I’ve recommended them, bought their record as gifts and taken friends to the shows. In some cases this has led to more fans for Elbow, thanks to that most powerful of mediums – word of mouth – something the band inspires a lot of I would imagine, just by doing what they do.
For the greater part of the artists out there that’s the way success will continue to happen. To this day, we don’t really have an example of an artist that has ‘broken’ (okay I’m not defining that term) through digital media alone. No artist that I know of has been able to make a living via building a direct relationship with their audience through just a kit bag of digital tools, unless that audience was built previously during a commercial recording career.
How many separate artist places does a fan want to sign up to and want to get stuff from anyhow? We’ve had artist subscriptions – Prince, The Who (remember ‘Hooligans’?), Madonna etc. - these have all struggled as commercial entities in themselves. And that’s for major superstars!
In this day and age, with more & more releases, commercially via the mainstream and via DIY platforms, are a zillion direct-to-fan artist properties what’s required? As an artist, can you work to foster loyalty in an age where, because choice and media proliferate, loyalty is exactly the quality that consumers demonstrate less and less? I’m not sure very many artists will be able to do that.
Myspace is living proof of the need to build a collective concept around what artists can provide individually. Fans aren’t dedicated to one myspace page. They will use myspace as a resource to find out about artists that interest them – including sampling the songs of course.
In the artist-to-fan space, who will win out? Myspace, Last.fm and iLike have sucked traffic away from artist pages for a couple of years now. If the labels want to take a more direct role in building the artist-to-fan audience, they will need to win this traffic back to artist sites. Either that or do deals to get data from these sites. But data feeds from these services might not make sense for specific artists when taken out of the context of the service itself. I’ve worked with data for a good chunk of my career and I’ve worked on CRM concepts – the execution of which is 100 times harder than thinking up the concept. If and when you do get the data and it’s clean and has context, it’s then what you do with it that counts.
Where choice explodes and content supply proliferates, common sense tells us what is needed most are aggregators, filters, curators etc. In digital, we need content brands that package & programme multiple artists and music genres in pretty much the same way magazines and retailers do in the traditional physical space. Just new, better ones with more immersive, addictive experiences for fans.
With digital, come all sorts of new opportunities for new entrants in the aggregator space – including ISP’s, device makers, music editorial and radio brands, even labels (if the roster makes cohesive sense). These aggregators bring in and build fans for artists with the added functionality of a direct transaction. Sure, if the fans want more from a particular artist, they might sign up to the artist’s site, but that happens already doesn’t it? And labels have the data from those, don’t they? So what exactly is new in the artist-to-fan space?
So again, my issue with exploring brave new territory in the artist-to-fan space is this: what is the big value-add? What is the nature of the connection being made, with what experience and content, and how, via which platforms?
Artist’s & managers should quickly delve beneath any hyperbole on this (in the same way they have done for 360 degree deals), and ask the searching questions about what relationship they want to build with their fans, how, and who should help them do it. The choices are out there and growing, but no one has really nailed it yet. It isn’t clear who will win out among the providers of these services, mainly because the services themselves are not being clearly articulated.
Friday, 7 November 2008
I also boycott several retailers every year due to an absurd commercial policy of launching Christmas before the Autumn is gone! But you know what? The clocks have changed, the nights are drawing in and my kids are already pouring through Christmas catalogues paying attention to detail that would put senior copyright lawyers to shame. Musically, we can all at least start to plan composition of our ‘best of the year’ lists (this blog will have one!). We will be reading such lists in the major music magazines in just a week or two as of course they launch their December issues in early November (who invented this need to bring everything forward?).
On the music market the big news in the UK this Christmas is of course, Nokia, which has at last launched its big Christmas market play, CWM (I assume no need to expand the abbreviation on this blog). I’m fascinated to see how it goes down, as is the industry in general. Will consumers go for it and more critically, if they do, will they stick with it? Making CWM a lasting proposition is Nokia’s biggest challenge.
This year, I am going one better than Starbucks, Boots, Q Magazine, Nokia and the rest of them by moving 14 months ahead - I am going to write my Christmas list for 2009, and it’s a list of applications I’d like to see working on top of my total music service.
Let’s make the assumption that CWM (and the swarm of all you can eat ‘total music’ services that follow) will take off and that music ubiquity will be with us (i.e. all of us who don’t already help ourselves on file-sharing networks) by Christmas 2009 (forecast warning: neither assumption is safe). Since we can all expect the entire music catalogue in some form or another for Christmas that year, I want some music based applications that can help me discover, choose, engage with and play my music. I want something that will get me beyond the snack fatigue I discussed a couple of posts ago.
New filters are needed, and by building application platforms on top of total music libraries, we can let music and technology fans and nerds let rip with creative ideas on helping consumers connect with music. Among the chaos this will create will be some truly ingenious concepts that will cleverly fill gaps in previously unmet consumer needs, or even drive new music consumption habits.
There is plenty of source material for app builders to get their code into: music editorial (okay that needs some licensing), music wikis, mp3 blogs and aggregators, mix tape & playlist sites and existing recommendation technologies (which need to be greatly improved upon). We even have twitter type applications which might become interesting when they can work for ‘rich media’.
I came up with seven desired apps before I began to run short on ideas, but it didn’t take too long to come up with these, so I’m guessing the actual quantity of music apps that could exist by this time next year is limitless.
The music apps market is about to become very, very competitive. Currently, most music apps are based on allowing users to create very basic tracks themselves, or to add ‘digital packaging’ to new releases – as with Snow Patrol, Pink and ACDC’s spreadsheet app. But apps that enable music discovery & choice, filtering the total catalogues we will have available to us, is where the big breakthroughs can come next year.
There might be around eight million or so digital tracks available by Christmas 2009, with up to a million newly released during next year if you count commercial and ‘DIY’ releases. As the common industry wisdom goes, only a tiny fraction of these will be commercially successful. The same goes for apps. With music ubiquity comes some sobering news, not for music companies necessarily, but for technologists, and it’s this: that fabulous, unique, fun music app you thought could be the next big music platform solution for the industry is now ready for you to submit, fully coded and tested, to iTunes & Nokia along with the other thousands of apps that will be developed for music. If you’re lucky, your app might chart and if you are really, really lucky, people will actually pay money for it. Technology is a hits business after all. Best of luck!
Here’s my starter list. How many could be hits? How many would you pay for and how much? Or do you think this will take the mystery out of music discovery? Feel free to comment and post your own suggestions.
- A ‘listen/buy’ hover-over button for the Sony e-book reader and Amazon Kindle, so as I read my copy of The Best 1000 Albums You Must Hear Before You Die (the fabulous book by edited by Robert Dimery) I can get the some direct audio experience right there & then.
- A Metacritic.com plug in that enables me to order the week’s new releases ranked by their average critical review scores (so I can listen to the best-reviewed albums). I can also rank recent releases by their average user review scores. At last, I can sort the wheat from the chaff using crowd-sourced human opinion rather than a flaky recommendation engine.
- An app that shows me the guitar chords and tabs to Who Are You by The Who (it’s my favourite pop song and I can’t play it on guitar, yet) on my iPod or mobile screen in real time as the song plays. Lyrics ‘be handy as well of course, and no doubt karaoke apps will be big in Japan.
- A playlist generator for what I am about to do. For example, taking a business trip to Iceland today? Okay I’ll get Bjork’s “Wanderlust” of course but I might also get the Pet Shop Boys “Opportunities: Let’s Make Lots of Money” (although please forgive any credit related issues re Iceland). No more than ten songs per list though, its quality not quantity we want.
- My music heritage. It’s a social network app (sorry about that) with a difference. It enables me to punch in three song or album recommendations friends have made that have changed my life musically, but critically, why, how, where & when. The social networking technology does the rest.
- Instant song art. The blog Ear Farm did this, by entering a song title into Google with the words ‘picture of’ before the title. Results are random but fun, but then an app could do all sorts with the idea. Much better than those awful pattern graphics standard music players generate.
- Story text. It could be anything. It could be official, lovingly written sleeve notes by the artist or it could be a simple message from another fan about what the song means and means to them, or what listen out for in the song that might make it a more interesting experience for the listener. If I’m listening I’d like to read, and maybe write, some stories of the song I’m listening to.
Footnote. I may be getting a little ahead of myself with this post. For at least the past five years Deloitte’s Christmas Retail survey has shown the good old CD as the number 1 Christmas gift purchase in the UK. Surely this is the year that will change.
Footnote 2. I really like the Nokia CWM advertising in the UK. The choice of Santogold track is great and in the press ads the concept (that you can playback a song for what is happening in your life at any time) is really cool. But there is no way for consumers to make that an easy and fun thing to do, hence my application number 4 above!