Monday, 1 November 2010

Innovation Papers #1 - BPI's Innovation Panel

This is last week's opinion piece on the Innovation Panel as published RotD Friday 29/10/10 and the first of a series of posts on innovation in the music and rights-based media sectors:

The BPI’s Innovation Panel - long term digital success can begin with a brainstorm

When I read Music Week’s leader piece on the BPI’s Innovation Panel ‘brainstorm it made me think back to music industry investors conference in 2001, hosted by Morgan Stanley. It was the first of this type of event I had attended, new as I was to the music industry – but it has stuck fast in the memory.
The event lined up the various facets of the industry – labels, publishers, management, artists (Jean Michel Jarre did the honours) and retailers - and an analyst from Morgan Stanley said his piece as well. All the various sector representatives spoke articulately and entertainingly (particularly memorable was a quip by ex-Manager Ed Bicknell about the music industry move to digital being a difficult process akin to a “dolphin swimming with a hard on”).
They spoke with passion, expertise and confidence. And they all said completely different, contrary things. I don’t know what investors in the audience were texting back to their colleagues but it can’t have been too encouraging. Putting it mildly, it looked like working with the industry across the piece might prove challenging.
However, it certainly didn’t do any harm to the tide of investment and innovation that swept across the music industry during the remainder of the decade. At the Morgan Stanley do, management guru John Rose – then a recent addition to the EMI Board – claimed EMI had licensed over 60 digital partners already – and this pre-dated iTunes!
Digital innovators will complain about the music licensing process until the cows come home – but the number of services that have secured licenses and launched in the marketplace globally is huge. The IFPI kept a ‘log’ of all new digital music launches worldwide and by the time I left there at the end of 2006 there were well over 500 services on that log. More recently, for the past three years MusicAlly has produced an annual report of the ‘top 200’ digital music start-ups each year – just the top 200, mind (though not all these services require anything like comprehensive on demand licenses).
So, on such fertile ground – how come there is such a debate raging right now, as we approach the end of the decade (particularly in the US but over here too) about the state of innovation in the music industry? Recent pieces featuring music services iMeem (closed), MOG (building) and Rhapsody (‘maturing’) have all made their case and the take-away is that the industry’s record of innovation is, at best, patchy.
While the digital market is still growing it has become clear that there aren’t enough thriving services to continue the current pace of growth and perhaps of more concern are the number of services that have recently shut down or gone quiet. In the UK, where the digital market is showing greater health than the US (as is the music scene as a whole) there are still too few successful digital music services given the huge amount of industry resources that have shifted focus to digital during the decade. Something has to change.
UK consumers are served fairly well at present. We have major download stores iTunes and Amazon and the recently re-launched HMV Digital as well as digital. We also have the genuinely successful music start-up story of the decade in Spotify, but others too have set up first in the UK, including We7 and Mflow. And we now have the first wave of ‘cloud’ services arriving, beginning with Carphone Warehouse and Catch Media.
The first thing to acknowledge is the level of innovation at work here. Though not easy, the digital music market is there – functioning and growing. There has been a huge effort to get here on the part of all members of the commercial value chain and not least, the work of the industries trade groups in their collective efforts to create and sustain the fertile ground for commercial innovation.
But more can be done and must be done. The BPI’s Innovation Panel is a positive first step in taking what’s ‘good’ in the market and attempting to make it better – from merely ‘functioning’ to thriving would be both desirable and admirable objective. Our work as an Innovation Panel has thrown up many areas for improvement with the major ones as follows:
  • Clear unmet gaps in music consumers’ needs  (and therefore market opportunities
  • A generally poor appreciation (or communication) of the potential of these opportunities (as well as a unified understanding of potential impact on the existing marketplace)
  • A lack of structured process in the development of new music propositions (with services having to ‘hawk’ their models around the various industry sector organisations one by one)
  • No alignment of view on major business model variants (streaming, cloud services, payment models for example) with opinions allowed to vary widely due to a lack of factual research and insight
There are many other issues and challenges of course. We know that music services and innovators would like a smoother licensing process (or failing that a complete overhaul) and ‘cheaper’ licenses / greater margins. However as a trade body the BPI’s boundaries are clear in that it is prevented by competition law to enter in to dialogue on commercial issues. So far I can see only advantages in this limitation.
The current go-to-market process for music services needs a clear pre-cursor to the rounds of commercial negotiations, beginning with a shared vision of the opportunity itself. The BPI aims to create a first stage ‘Proposition Development’ process whereby a multi-disciplinary team drawn from the majors and indies sit, down with music service innovators and use a range of resources – research & insights, shared data and experience – and a tight agenda – to drill through some key questions:
  • Who is the service for? (consumer segment)
  • What is the nature of the opportunity? (unmet consumer need)
  • What are the key features that meet the need? (service design)
  • What is the potential of the opportunity? (market size)
  • What is the potential impact of the opportunity? (market impact)
With the aim of establishing clarity from this collaborative and structured approach to proposition development, we can hopefully provide clearer context to the commercial rounds that follow. There’s much further to go and no guarantee of commercial success, but the chances can be improved at the outset. It begins where most innovations begin – with a brainstorm.
Keith Jopling has been Chairing the Innovation Panel