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!

Time to bring back proper music television

Are Andy Burnham MP’s recent flirtatious comments about music on television an example of how far out of touch politicians can be from the industries that they represent, or is this the incisive intervention of a culture minister who is enough of a music fan to have a go? Was he really angling for a return of Top Of The Pops (TOTP) as some reporters interpreted? Surely not – that would be more than being just out of touch – it would suggest a tendency towards clumsy meddling.

Observing the industry’s response to the ultimate demise of TOTP a couple of years back was bleakly, sardonically amusing. This was like a music industry equivalent of a national wake on the scale of the death of Princess Diana. There was shock, grief but most of all a lack of acceptance. ‘How could the BBC has allowed it to come to this’? Music Week was awesome that week, especially a charming story about the BPI acquiring some rights to the TOTP brand. What were they thinking?

For a much more insightful review of the current state of music television you can read the Alexi Petridis cover story account in last week’s Guardian Film & Music (what a wonderful supplement this is for us lucky UK content fans – see my blog links). After spending a whole day surfing music based channels on mainstream TV (i.e. the telly itself not the internet version) and talking to a few wise owls in the production business Petridis dissected the current status quo succinctly as follows:

1. There is actually more music on TV than ever before – just not during prime time.
   
2. Subsequently, today’s music channels don’t feel like community viewing and they aren’t since viewing figures confirm hardly anyone else is watching.
   
3. Pure music programming (i.e. excluding X-factor type formats) never pulled in huge audiences in the first place, with TOTP very much an exception to the rule.
   
4. Music ‘television’ currently exists in a more invigorated form beyond the TV itself (i.e. online & mobile – an observation made by Malcolm Gerrie of Whizzkid).

It does seem that the last place to look for music shows is television, but only if you go to bed before midnight. Musically speaking, as a child of the 80s myself, there is no modern equivalent to The Tube (produced by Gerrie mentioned above) – a thrilling, edgy magazine show that not only showcased great music but delivered it with such swanky verve – ushering in the weekend brilliantly. But there is 4Music, Later With Jools Holland and Live from Abbey Road. Buried away deep on Sky Arts you can find the wonderful From The Basement, while BBC’s 3&4 are superb for archive music documentary. But the actual dedicated music channels – all 30 of them – are arguably all underperforming for their host networks these days.

The problem is that the majority of the target audience for these shows actually goes to bed before midnight. We’re beyond 30, we’ve got demanding jobs and kids and we are exhausted by 10.30 on a Thursday and a Friday night. It would be great to wind down with some quality music programming but we just can’t hang on that long. And the show line ups often fall a bit short to make that extra special effort don’t they? How often do major A-list acts crop up on the current crop of music shows?

We know from endless reams of research that the 18-24 year old audience are not watching telly but busy multi-tasking their way through a backlog of internet bookmarks, messages, texts, twitter feeds, downloads/uploads and maybe a touch of revision.

Basically, one has to ask: who are music television shows being broadcast to exactly?
We do have iPlayer of course and we have PVRs, so some of the target audience will get ‘round viewing music shows. But still, TV is not exactly a mainstream platform for new potential superstars that it once was.

But new platforms aren’t great for music shows either. The internet is actually more problematical for music than television is. Despite a recent glut of internet music TV destinations (Muzu.tv, MOG.tv, Pitchfork.tv, FabChannel, et. al. – some of them quite good) there are major barriers to the success of internet music television. There isn’t enough variety, depth and most critically, quality of content to go around. The reason for this is that these new internet based networks don’t/won’t/can’t pay decent prices for content. In short, there isn’t a working business model beyond promotion, yet.

As recently stated in a Deloitte research report (Loves Me, Loves Me Not, Perspectives on the UK Television Sector) “Until there is clarity over how the internet may pay its way, more and better quality content may not be forthcoming”. That’s absolutely true. It hardly matters that the internet actually surpassed TV this year as the biggest platform for advertising expenditure (according to Ofcom), because the individual destinations on the web simply aren’t rich enough to license, distribute or create the best content.

Here’s the supply-side problem in a nutshell: if you have a branded platform on the internet, it seems it’s not economical to pay good rates for high quality content, because your ad CPMs won’t cover it and you haven’t figured out how to make users pay. If you are a content producer, you can’t make content of the quality you want to if you can’t license it at a profit to the platform providers. It leaves a business in search of a model and a potentially massive audience without the content they would love to see. So we all have to get by on YouTube.

This analysis is all a bit sober and it doesn’t reflect my optimism for the future of music television at all. So let’s look at some of the possibilities.

First, the emerging live performance streaming business online. FabChannel and the forthcoming Love Live both represent lively new entrants in what must be seen as a promising sector. The previous supply-side barriers of technology (mainly bandwidth) and licensing seem to be coming down, the latter at least for non superstar acts. On the demand side, recent consumer research from Entertainment Media Research referred to the sector as ‘a potential goldmine’.

The real problems in this still nascent sector go back to business models. With FabChannel insisting on streaming being free, we may once again be setting too low a bar for what consumers are willing to pay to watch concert footage online. Relying solely on ad revenues simply won’t cover production costs be they £10k per hour at the lower end or ten times that at the high end.
Recent music releases in the theatrical sector have also been interesting. Last year VUE Cinema’s live, satellite fed showing of a Genesis concert in Düsseldorf (to multiple cinemas around the UK, broadcast in a unique high definition mix with Dolby Digital 5.1 audio) was an example of a new, much needed release window for music content. Though only valid for superstar acts (why Genesis though? Have you seen a more sedentary live act?) the idea of paying £10 to see a beautifully filmed, surround sound performance might be an attractive proposition for many music fans. I’ll be interested to see how the forthcoming Arctic Monkey’s movie release does.

Both online and theatrical platforms for music also make sense in the current economic climate. The looming recession is bound to hit the live sector hard and music fans may wish to get their live music fix in cinemas at a small fraction of the actual concert price. After all the live boom of recent times has not been about the art of performance as much as social drivers – the need for people to get together and party basically. If VUE, Odeon or other players can do something clever to meet these social needs, with great content at the core, they might crack open a new market.

But enough of niches, don’t we now have mass market technologies that favour music content both in the home on the sofa and out and about? Just about everyone has now invested in a HD ready widescreen TV – so can producers and networks deliver the content worthy of this new platform that gives audiences a much better audio-visual experience. The same goes for touch screen mobile. Ideal for music television, maybe not for screen size, but certainly for the combination of mobility and audio experience (watching a music video or live clip is far superior with headphones plugged in and the volume turned up – try it).

It seems to me we now have enough platforms for new music television formats – of the magazine type, music documentaries, films and filmed live performance. All that’s lacking is the content itself.

So maybe the UK culture minister is really onto something. TOTP is long gone, but we music fans deserve better than the current crop of music shows on offer. ‘Later’ is tired and the newer shows like Live from Abbey Road are just a little too high brow or lacking in really enticing line-ups. This is the perfect time for producers to come up with something new and exciting and for business thinkers to create a business model that can sustain itself.

Footnote - QUICK PLUG - The wonderful MUSIC TANK are running an event Tuesday 21st October at which i will speak about digital service development present, past & future - see links

Total Music will leave real music fans wanting

I’ve read with interest some of the coverage over last week’s announcement by Nokia on its highly anticipated Comes With Music service. It’s fascinating how much of the debate has missed the point entirely. The two most major of many criticisms levelled at Nokia have been for the fact that the service is a) heavily DRM’d (not MP3) and b) non renewable without a new device (i.e. not a music subscription service).

Those look like heavy limitations – and they are. But that isn’t the point of Comes With Music. Nokia isn’t really launching a music service so much as the mother of devices that happens to have music on it. Since nobody, including Nokia, knows quite how consumers will respond, the whole thing is an experiment – but a pretty significant one for the music industry.

You can see where it might lead. Project ahead just a couple of years. Buying a new hi-fi for Christmas – great - do you want the one with or without music? New car – with or without music? Laptop – same. No wonder the clever Omnifone is in discussions with servicing these platforms.

New fridge, microwave, disposable razor – would you like that WOWM (with or without music)? Maybe that’s going a little far but you get the point. One way or the other we are rolling slowly, inexorably towards music ubiquity. And, for many of us, that is both a hard concept to accept and an even harder one to understand from an entertainment point of view.

Think of an example – how many of your favourite albums did you become instantly attached to while snacking through it track-by-track , 30 seconds at-a-time, on your phone, on the bus, in a hurry to get to work and in a bigger hurry to check out the other 116 tracks you downloaded that morning? Answer = none. To really enjoy your music it just can’t work like that.

A few years back when Napster and Rhapsody launched what will now be known forever as ‘1st generation music subscription services’ i had a good play with both. For the first three months i was like a kid let loose in a sweet shop. The ability to sample whatever new music you wanted when you wanted (remember Windows DRM 10? I got it working on one Creative Zen device with both Napster and Rhapsody side-by-side! It blew up, but it was beautiful for a while there).

Then something curious happened – actually two things. First, i became blind & deaf when i signed in – i just couldn’t decide which of the 3 million songs i wanted to hear at that moment. Second, i got fed up spending all my precious listening hours ‘sampling’ new stuff that i didn’t ever get to really like. I listened to a lot of crap basically. I also suspect that most of it actually wasn’t crap, but just didn’t sound as good as it deserved to, when there was so much stacked up in the queue right behind it.

The concept of listening to whole albums became unworkable. I missed the old way of giving a record time to grow on you. Giving it time to unfold and reveal itself to you as a thing of relevance and depth, sometimes beauty (in a way i imagine the creators kind of had in mind). Hell i even think it may have helped to have invested some cash in the music to get proceedings underway! At least spending a tenner on the album motivated me to LISTEN and to listen properly, repeatedly.

This ‘snacking fatigue’ is the hidden downside in total music services and it may well be a more significant problem in the long run than compatibility and price. It’s these factors combined that result in the heavy churn rates for music subscription services (note snacking fatigue doesn’t have the same impact for movies, games or sports).

But will snacking fatigue weaken a proposition like Comes With Music? Not necessarily. For starters, by wrapping the music within the life-cycle of the device, Nokia has cleverly minimised churn at least within the first 12 months.

Beyond that, it’s really all about the audience. Nokia has thought this one through as well. CWM is squarely aimed at a younger music & phone fan, who probably file-shares regularly even though they can well afford to obtain a cool device. To the under 24 tech savvy multi-tasking brigade, music just isn’t what it used to be and they just don’t care. Music is a song-led snack, a soundtrack, a backdrop. It’s also sometimes used as social glue - it’s an APP for goodness sake.

A shame but there you have it. The key question is this: as a business, would we (the collective music industry) rather have £50 for everything, than £0 for nothing. The answer isn’t straightforward because it doesn’t fit well with the current supply model.

I think it’s worth a try, because it might be the beginning of something – and that something is a new, legal relationship with the under 24 year old modern music fan. The ones we’ve largely lost.
This brings questions for Nokia which go beyond the obvious ones raised so far. How does Nokia plan to gather & use consumption data to understand the CWM customer base? Will it share the data? How can it quickly segment those users with higher value potential and offer added-value services to keep them? What suite of added-value services will CWM develop? No doubt these are areas in which mobile network operators feel they could play a part.

We’ve recently witnessed another small success in one area of the uncomfortable marriage between music and technology - once again courtesy of Apple. The popularity of music related applications such as Shazam and Pandora for iPhone, demonstrate where we are headed. As with ringtones, it may well be that applications built to make music more fun on platforms like phones is where the future value is for tech-friendly audiences – play-listing, quizzes, rock family trees, games, re-mixing etc. And these apps work best when the music is just there, not a transaction away.

And for us real music fans, the old guard (note, plenty of under 24s fit into this category as well)? CWM just isn’t for us is it? The limitations are off-putting, but so is the snack fatigue. So is the sound quality of file playback on the phone. Nothing about it is for us just yet. Whether Nokia, and other new providers ushering in music ubiquity want to change that, is up to them.

This does mean that for the time being the industry can relax about one thing – cannibalisation. CWM, in its current form, won’t cannibalise music sales. It just won’t. Recent data from TNS ‘suggests’ that users of total music services in the UK might download 2.1 billion songs a year. Whatever this curious data point actually means (what possible value does a stat like that add?) it’s mildly interesting and encouraging that enough people are interested in the total music concept at all and that many of these are frequent file-sharers. But, for reasons discussed here, the impact on the business in the first few years is unlikely to be anything spectacular (see Jupiter's more sobering but realistic analysis on Mark Mulligan's blog).

This is the start of a new relationship with a large group of important music consumers. It’s how we manage that relationship over the next few years that will matter most.