Tuesday, 3 March 2009

Targeted digital music services have begun to arrive, but can they thrive?

With digital channels opening up a long tail of music content (or so the theory goes), I have been expecting niche – no niche is the wrong word, let’s call them targeted - digital music services, to arrive for roughly the past eight years.

I’m intensely curious as to why this hasn’t really happened. It’s been happening in the magazine sector, where digital has been a major driver for niche (let’s call them specialist) b2b and d2c titles since the turn of the century. Not all have survived, but the specialist magazine sector has been transformed.

I’ve always thought that a great digital music service would be a bit like the equivalent of a magazine, but with all of the interactive elements that magazines lack. Even the advertising could be appealing, since it is targeted to the user. I can easily find myself distracted browsing the ads in The Word or Uncut.

It’s what physical magazines do very well – target audience segments of like-minded consumers. In doing so, each and every magazine effectively creates its own sub-culture. Magazine editors understand this acutely and as a result, often know their readership intimately. And not a single cold call of market research is needed, it’s all just interpreted.

Why hasn’t this kind of market activity been mirrored in the digital music space? And, why haven’t established music editorial brands such as Mojo, Q or Kerrang! made brand-extension plays into the digital music space, in the same way they did in commercial radio, for example?

We know some answers of course. Market entry in digital isn’t easy. It’s a different business with different rules to the physical space. Until recently it was probably expensive to set up (before b-to-b platforms like 7 Digital became established). And most significantly, we had DRM – if anything could put off a potential market entrant it’s that dreaded acronym. And of course some big music names in the physical space did enter digital – and bungled it badly.

While editorial music brands have stayed clear of creating digital stores, few equivalent new niche services emerged in the space. Some have. Beatport (dance) and Bleep (indie) are good examples. There are a few classical music services. But that’s less than a handful out of hundreds of digital music service launches. The irony is that many of those launches converged around the same concepts: the widest music libraries possible; the latest big releases etc.

Most tellingly, so many digital music services have been busily targeting the under 28 demographic. In my eight years working the space I think I’ve come across less than half a dozen digital services squarely aimed at music fans over 30 (the ones with the money who buy music and are, increasingly, going digital). This reminded me of the basic mistake of commercial radio channels – all converging on the same mass audience with indistinctive offers.

I’m glad to observe that this finally looks like it is changing, with some new, targeted audience brands emerging in 2008. Whether they will thrive longer-term is all in the execution, but I think they have some major plus factors going for them:
  1. Ubiquity: with digital making everything available, the trusted filters and catalogue curators are more needed now than ever.
  2. Total music: as distinct from music ubiquity, if music through your ISP or phone handset does catch on, then expect these platforms (the good ones) to host targeted content brands within them to help the broad base of users with music discovery.

  3. Revenue: targeting to audiences means you can expect a higher proportion of engagement, but even more critically, transactions.

  4. The recession: as an advertiser or funder, show me an audience that’s relevant and connects passionately and deeply with the service – quality not quantity.

A couple of examples I like that want to mention in brief and another one I’m disappointed with

Lost Tunes [here]

Launched in 2008 by Universal, Lost Tunes is self-titled “the very first UK digital store specialising in rare and exclusive material”. The sentiment there is scarcity – something technologists might argue is impossible with the web. Customers of Lost Tunes beg to differ.

Out of a mere 1059 titles available (as at now, but what does the volume matter?), Lost Tunes has no less than 453 exclusives. It has also created some high profile products which it has kept as exclusives, most notably Paul Weller’s BBC Sessions.

Lost Tunes teaches some interesting lessons for digital music. For starters, it was one of the first DRM-free, 320k MP3 stores – uncomplicated and compatible. The service concept is to “replicate the experience of being in a trusted record store” – nicely swimming against the tide of making everything available. Lost Tunes is editorially led – “a breathing music magazine” according to the team that created it. For this market, that’s a concept that will never be replaced by a recommendation engine. But Lost Tunes does rely on search. Indeed, its ‘smart search’ works really well – mainly because the associated metadata for the titles in the Lost Tunes catalogue has been entered by hand. It’s a clear signal that to deepen music discovery, mainstream digital services will need to work much harder on improving metadata.

Though the total user base is small, it’s the level of engagement that really impresses, with 37% of customers repeat buyers. Developed on a ‘very modest’ budget but with enough success to wash its face commercially, the good news is that Universal is backing Lost Tunes to the next level of development. Its big challenges will be to attract catalogue from outside the Universal chambers and to take the store outside the UK, preferably with global rights clearances for the catalogue.

Calabash / Mondomix –[site here]

Calabash music first launched (in the UK and USA) early in 2006 and benefitted early on from some fairly vocal support from Elvis Costello, who declared the store his favourite digital music destination in an interview with the LA Times. The service’s strap-line was “easy access to hard-to-find-music” and although very clearly targeted to fans of ‘world music’, of course the service never associated itself with that much maligned genre, but declared its repertoire mix as “artists that move us”. Indeed, its catalogue is much wider with each of its main 12 genres (Afro to Sountracks), further split into sub-genres, giving over 100 categories.

In January this year the service was merged with French ‘world music’ free listings magazine Mondomix, with the new store subsequently launched globally in beta. It has a catalogue of 150,000 tracks, which might not sound like a lot. But again, that’s not the point. Services like Calabash/Mondomix are about connecting a select catalogue of music with a select audience – quality rather than quantity. The user base is currently small, although Mondomix did tell me that it has a very high conversion rate of turning site visitors into buyers.

Finally, there is an interesting take on social networking in which users can create not a personal (and self-centred) profile, but ‘projects’ – user generated channels which feature music from the service but enable the creator to wax lyrical about issues much wider than music.

How not to do it: ShockHound

Mmm. I did have great hopes for ShockHound at first. Launched in the USA by Hot Topic, the hugely successful merchandise brand targeted at Emo Kids, I would have thought they’d be onto something by launching a digital platform aimed at those very same Emo Kids. A high-value music consumer segment if ever there was one, a digital channel for the shoe-gazers of the modern age might have been a marketing masterstroke. But ShockHound has aimed way too wide. With Nickelback, Snow Patrol, Van Halen and Avril Levigne awkwardly juxtaposed in the ‘Top Artists’ tab (and Eminem, Beyonce & Lady GaGa among the Top Tracks). If the service doesn’t re-align its goals more closely with its core audience, the initiative is bound to fall over.

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