Putting the Crowd in the Cloud

[Please note that this post first appeared on the Forrester Consumer Product Strategy blog.  Over the coming month or so I will be migrating all of my activity there.  I will soon be posting new information here for you to amend your feeds and subscriptions. Thanks]

[Posted by Mark Mulligan]

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I have a favour to ask of you: I have the germ of an idea which I am developing for a forthcoming report and I want try it on you.  So please let me know your thoughts.

Apart from the persistent pressure of free, two of the recurring trends that look set to shape the future of digital music are:

1. The Cloud
2. Social

First a few thoughts on the cloud….

The cloud is of course is already with us, but largely as a collection of disparate connected music experiences (e.g. Pandora, Spotify, Comes With Music) rather than as something more all-encompassing.  I’m skeptical of the truly ubiquitous experience happening anytime soon.  Indeed, the practical limitations on ubiquitous connectivity mean that connectivity will in fact fall short of ubiquity for some time (more on that from my colleague Ian Fogg later this year).  But it is clear that over the next few years more of the dots will be joined.  And sometimes the dots will be joined by innovative workarounds, such as Spotify’s ‘offline’ streaming solution.

And a few thoughts on social…

Readers of my Music Product Manifesto will know that I’m a stronger believer in the near term potential of social in music experiences than I am of the cloud.  In order to effectively compete against free music products need to create new, unique music experiences and social interactivity is a key means of achieving this.  If you put a $0.99 iTunes download against a $0.50 Amazon download against a BitTorrent $0.00 download the BitTorrent download will always win.  Future music products need to do more. Formally layering social functionality into the experience is key here, both to add a connected element but also for discovery.  With so much noise online, trusted taste makers (or ‘curators’ as Nettwerk Music’s Tony McBride calls them) are key.  And who do we trust most for recommendations?  People we know and connect with.

My thesis is that these two dynamics not only don’t have to be, dare I say it, disconnected, but that they should be inextricably linked. Their paths should be moulded together.

The likes of Last.FM (Audio Scrobbler) and Apple (Genius) have started to demonstrated the power of ‘Crowd Sourcing’ in the music discovery journey.  Spotify and YouTube and many others are showing the way for cloud based music experiences.

The time has come to be the crowd in the cloud.

Social tools and media are of course already inherently connected and inherently cloud based, whether it be Facebook, Twitter or MySpace.  When woven into the fabric of a digital music offering they bring that experience to life.  In a connected music experience that exists across multiple devices and multiple platforms, social connectivity is more important than ever. Social connectivity turns a bored 10 minutes waiting for a train into a connected a fun engaged interaction with a friend, sharing playlists on MySpace. It transforms looking for something new to listen to on your iPhone into a social discovery journey.

This idea’s still taking shape, so I’d love to hear your thoughts.  I’ll post further on the concept as it evolves.

 

Five Music Predictions for 2010 (and Five Reasons Why 2009 was a Flop)

[Please note that this post first appeared on the Forrester Consumer Product Strategy blog.  Over the coming month or so I will be migrating all of my activity there.  I will soon be posting new information here for you to amend your feeds and subscriptions. Thanks]

Lots happened in 2009 but it wasn’t a vintage year for digital music (in fact it was the year it well and truly lost the digital buzz to eReaders). All in all I’d give 2009 a 6 out of 10, with the launch of Spotify accounting for at least couple of those points and the following as the 5 key disappointments:

1. Comes With Music under-whelmed (as did Play Now plus)
2. ISP services didn’t get off the ground (including unlimited MP3’s nearly but not quite moment)
3. Apple’s new killer music format was….oh iTunes albums
4. imeem gave a master class in how not to make money out of social music
5. The big boys (MySpace, Apple) snapped up the innovative competition (Lala, iLike, imeem)

So will be 2010 be any different?  Though I don’t think it will be the year digital music will really come of age (that’s at least a couple more years away) I do expect it on balance to be a stronger one than its predecessor.  Leaving aside the few specific developments I’m not able to talk about here are a few of my predictions:

1. Apple launches a major refresh to the music experience.  (I’ll caveat this first prediction with the disclaimer that Apple make a habit of proving wrong those of us foolish enough to try to second guess them.)  With that said, there are many things Apple could do with music in 2010.  Whatever they do, they have to do something significant if they are to stay on top of their game. They’ve spent much of 2009 collecting user data via the Genius app and they’ve acquired some top notch streaming and programming expertise via the Lala acquisition. And of course they’re busy developing with content partners for the forthcoming touch screen note book.  Here’s hoping that this will all add up to something like an integrated on-device, connected, interactive and immersive music experience where the cost is bundled into the price of the device (perhaps with the touch screen note book as the flagship device for the offering).  Apple wouldn’t be in the game of hiding the cost of music to the consumer (a la Comes With Music) but they may use content subscription bundling as a way to maintain premium price points and differentiation for their devices.
2. MySpace deepens its focus on music. Though MySpace will spend most of 2010 simply ingesting iLike and imeem, the acquisitions form part of a longer term strategy to breathe much needed new life into MySpace’s music role.  The new management talent is tasked with pulling MySpace from the brink of becoming a garbled also ran and dragging it by the collar into the 2^nd decade of the century.  Though they’re unlikely to admit it, the mainstream social networking race against Facebook is as good as over. By contrast they remain the #1 destination for artist communities online, yet without a major reinvention they’ll start to feel the competitive pressure bite there also.
3. Spotify scales back its US launch. Spotify appears to be paying the price for the major labels having second thoughts about ad supported on-demand content.  Those pesky US licenses have been proving tough to tie down and I’d expect to see Spotify’s US launch to be more strongly focused on the premium tier than it is in Europe.  If so, it could actually prove to be something of a blessing for the Swedish upstart, allowing it to consolidate the monetization of its core user base rather than building a US ad business from scratch whilst millions of free US subscribers add cost to the bottom line. Whatever the case, Spotify’s European revenue fundamentals should improve in Europe in 2010.
4. ISP music services don’t pack a killer punch. I’m a firm believer that ISPs will become established as a core element of the digital music value chain and the best way of fighting piracy head on.  In 2010 we’ll see more services launched both in the US and in Europe, especially the UK.  But I don’t see anything yet to suggest they’ll be adequately provisioned to flourish. It’ll take another year or two of revenue pain decline for the labels to adjust their license requirements sufficiently. What do I think will work?  5 pounds / euros / dollars a month for household access to near unlimited (i.e. fair use) MP3.
5. Semi-pro sites and services prosper. I’m not sure I’d go as far as to say 2010 will be their year, but it will certainly see continued growth for the likes of SellaBand, MyMajorCompany and Tune Core. These sites that create a route to audiences for artists either not good enough or not yet good enough for record deals, play to the strength of the Internet as a social channel for artists and fans. Which of course is all the more reason for MySpace to be watching its back.

To conclude, 2010 will be another year in which digital music continues to find its feet, but significant progress will be made.

 

So just what does Apple want with Lala? (some questions and answers)

[Please note that this post first appeared on the Forrester Consumer Product Strategy blog.  Over the coming month or so I will be migrating all of my activity there.  I will soon be posting new information here for you to amend your feeds and subscriptions. Thanks]

Apple has confirmed the acquisition of streaming music provider Lala.  The move is significant (even though Apple appear to be trying to suggest otherwise) because it is one more piece in the gradually emerging puzzle that is Apple’s future music strategy, which for a few years now has remained relatively static.

Why is Apple’s music strategy in need of revision?

If the iTunes Music Store had evolved half as much as the iPod had over the last few years we’d have a cutting edge music service. Instead we have one that remains market-leading in terms of basic functionality (i.e. store to device synching) but behind the curve in terms of experience, discovery and community. Whilst the web threw up the likes of imeem, Spotify, Last.FM, MOG etc. the iTunes Music Store stuck to selling 99 cents downloads.  Don’t get me wrong the iTunes store is a crucially important platform that accounts for the majority of the current paid download market, but it isn’t yet equipped to drive the digital music market to the next stage.  In its current guise it is essentially a transition technology: with one foot in the distribution paradigm of selling units of stuff, and one in the consumption era of on-demand access.  It has done a great job of helping consumers take baby steps into the digital age, but has pretty much reached the limits of its potential as a music service. (You’ll note my continued and fully intentional implied distinction between the music store and the App Store – more on that in a moment).

So why buy Lala?

Well it gives Apple a short cut into the social and streaming music arenas.  This is where the momentum of digital music has shifted and where Apple needs to be if it is going to remain relevant in the digital music landscape, even if revenue hasn’t yet shifted there.

But why would a high margin focused company pursue a potentially loss leading marketplace?

I said at the start that Apple hasn’t innovated hard with the iTunes music proposition in the way that it has with the iPod.  It hasn’t done so because it hasn’t had the competitive pressure.  It still doesn’t have that pressure from music stores, but the rise of social music is where the music consumption story is going.  And that matters a lot to Apple.  From the ‘Rip Mix Burn’ campaign through to the launch of the iTunes Music Store in April 2003, Apple’s music strategy has been all about making the music experience on its devices as good as possible.

The launch of Genius was the first step towards Apple opening a new chapter in music.  The Lala acquisition is another step.  Apple now has a rich set of assets it can put together to create a new, cutting edge music experience.  It has the rich usage data Genius is providing, the streaming capabilities of Lala and the every growing portfolio of music Apps and associated usage data.  The App store provides an important music asset which Apple would be wise to more formally integrate into its music offering.

Where is Apple heading with all of these assets?

Apple of course often outsmarts those who try to second guess it, so rather than make a bold prediction that could be held up as a hostage to fortune, here’s a very brief synopsis of one direction in which Apple *could* head:

Imagine unlimited streaming music seamlessly integrated into a rich discovery based environment in which the user has access to Apps, videos and downloads (probably with some allowance for number of downloads allowed per month) all bundled into the cost of the connected device (note that I’m not limiting this to iPods).   There are of course many directions in which Apple could head, but this is the one I like best, not least because it’s essentially the vision I laid out for the music industry in my Music Product Manifesto

Whatever Apple does decide to do will all be about creating a differentiated music device experience. The music industry will be hoping that this next chapter in the Apple music story has more in common with the iTunes store chapter than it does the ‘Rip Mix Burn’ chapter.

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MySpace Music UK: First Take

[Please note that this post first appeared on the Forrester Consumer Product Strategy blog.  Over the coming month or so I will be migrating all of my activity there.  I will soon be posting new information here for you to amend your feeds and subscriptions. Thanks]

MySpace today launched its UK music offering, over a year after its US launch.  However tempting it is to position this as a Spotify challenger (and the BBC and many others do) it simply isn’t.  It isn’t, both out of intent (more on that later) and also out of poor execution (more on that later too).

Music matters to MySpace more than ever before. Why?  Because it is has lost the race with Facebook for social networking supremacy, in fact Facebook is about to lap MySpace.  But MySpace remains undisputed leader as the global social music destination (a position consolidated by the recent acquisitions of iLike and imeem).  If you are a band, you’ll have an artist page because that’s where the online music audience coalesces for engaging with bands. Sure there are better, more innovative alternatives, but MySpace has the momentum and the scale.  And if you’re an artist looking to reach audiences that is exactly what you want.  Bebo and Facebook have both tried to challenge MySpace’s position here but have not had meaningful success (a recent report indicated that 77% of Facebook fan pages have less than 1,000 fans).

So whilst the mainstream social networking momentum may be shifting elsewhere, MySpace remains at the heart of the social music experience.  In many ways MySpace is in a similar position too YouTube, which is getting left behind in the online video revolution as the momentum moves beyond skateboarding dogs to full length shows on the likes of Hulu and iPlayer.  But it remains the number one destination for music video.  So MySpace and YouTube both find themselves repositioning around music, perhaps more out of necessity than out of choice.

All of this leads to why MySpace Music is not a Spotify challenger:

• Strategically: MySpace is building its music experience firmly around social and community.  It knows that is its differentiation point and the essence of the artist-fan relationship which MySpace delivers.  So the music experience is wedded to that. Spotify is a straightforward music experience.  No community (at least within the application itself) and no artist-fan dialogue. So the music content is deeply integrated into the social experience (hence the focus on playlists for example).
• Execution: But it is also not a direct challenger to Spotify because it isn’t executed well.  That deep integration brings great challenges also.  If you are looking for a Spotify-like experience on MySpace, you won’t find it.  But the odds are you won’t easily find the music you want either.  For example, MySpace poster girl Lily Allen is one of the featured artists on the home page (despite her just announced career break), but finding her music isn’t easy.  As you can see from the screenshot at the bottom of this post, you have to go all the way to the bottom of the page to find a genuine song.  And the top result, which is out of shot here, is for the ‘This is not the real Lily Allen’ profile page.  Those results below are all songs by unknown and small time artists.  Yes that is part of the essence of MySpace’s music community, but they shouldn’t be pushing the genuine Lilly Alen track to the bottom.  Also note all those ads by competitor music services!

All that said, MySpace Music is an important part of the digital music landscape and I expect to see much more fromo them over the coming 12 months as the leverage the iLike and imeem assets to the full.  But they also need to innovate hard.  There is a huge amount of activity in this space and MySpace can’t simply wait for each of the competitors to fail and then buy them up on the cheap.  The fact MySpace music is a Joint Venture sets them in good stead, with reportedly significantly below market-rate license fees (as this artist’s account also seems to suggest).  But MySpace doesn’t have a JV by accident, its financial security makes MySpace an important partner for the music industry. It can plan ahead with MySpace in a way that you cannot with an unproven start up, however well funded it may be right now. Here’s hoping MySpace use that power to the full and don’t rest on their laurels.

 

Take part in Forrester’s digital music executive survey!

Forrester is currently running an executive survey assessing the ‘state of the nation’ of digital music.  We are surveying right across the value chain, from labels, through artists to digital services and companies such as telcos and brands that are working with music. We’re looking at what’s working and what’s not, competing against free and changing business models. If you are involved in some part of the digital music value chain then we’d love to hear your opinions.

 

All results will treated as strictly confidential and results will only ever be presented a aggregate level.

 

You can take the survey here: https://deploy.ztelligence.com/start/index.jsp?PIN=15VMGXK5XCSPX

 

 

Digital Music Executive Survey – Take Part!

Forrester is going to conduct a digital music executive survey that will test the pulse of the digital music industry right across the value chain, from artists, through managers, labels, services and technology companies.  The survey will address a broad range of topics, including, among others:

• to what extent digital is meeting expectations and needs
• the role of free music and of piracy
• shifting relationships between artists, fans and labels
• new business models
• ways in which artists and labels are using social tools

If you would like to take part in the survey,  send me an email directly and I will ensure that you are sent an invite to the survey.

Your email address will only be used for the purposes of this survey and will not be used for any marketing, sales or other such purposes.

Please put ‘MUSIC SURVEY’ in the header and please do not spam me.

My email address is MMULLIGAN AT FORRESTER DOT COM

 

Why EMI’s Launch of Abbey Road Live is a Peak into the Future

Follow the link to see my Forrester blog post on Why EMI’s Launch of Abbey Road Live is a Peak into the Future

http://blogs.forrester.com/consumer_product_strategy/2009/11/why-emis-launch-of-abbey-road-live-is-a-peak-into-the-future.html

 

Sky Songs: First Take

See my post on my Forrester blog for my First Take on Sky’s new music subscription service Sky Songs:

http://blogs.forrester.com/consumer_product_strategy/2009/10/sky-songs-first-take.html

 

‘Music As Free’ – What You Think

I’m going to do something I’ve never done before, I’m posting the highlights of the comments from a blog post.  The quality and the quantity of the comments was such that they deserve extra attention.  In fact the quantity is part of the reason I’m doing this summary: they added up to just under 8,000 words(!) so for those who don’t have the time to trawl through them all, this is for you.  For those who do have the time I heavily recommend reading them here

I’ll be writing up a follow up piece to my original post soon, addressing some of the recurring themes in the comments.

In the meantime, here are the comments.  I’ve tried to keep a balanced representation of opinion and they are largely chronological.  There are some real gems in there too.

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Your nostalgia for a golden past is wrong-headed because there was never a golden age in the first place, except for a small minority of superstars

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As an artist, it’s my choice whether to give my music away or try to force the common public to pay for it.

Do I deserve to be forced to? No.

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If everything is for free then how do artists make money. Why should art be free but not anything else?

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Music doesn’t have to be free to be fair to the consumer, it just needs to be sensible.

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A strange thing happened to me this morning. I had to get a new car battery and you know what? The guy from AAA wanted me to pay him for it!!! I said to him, “How are you gonna build any brand equity this way?!?! I finally caved in and paid the guy. Unbelievable!

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The profits labels experienced years ago were inflated….Those days are over…

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Record labels and artists are just as guilty as consumers for not being innovative and either going along with it blindly because the got a deal or because the same old prehistoric fat cats that have been exploiting artists for decades are still there and refuse to give up the excess they are used to.

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Not everyone fits the profile of an indie band. If every person on the planet wants to work for free, maybe the people in the music biz will join in. In the meantime, everyone needs to buy food, provide shelter, and take care of their families.

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It seems like the music business is disappointingly LAST to realise that giving something away for free isn’t the end of a relationship

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Composers and songwriters do not have “add-on services.” They do not have advertising revenue….not everyone fits the newcomer “indie band” model that can sell T-shirts and CDs at their next concert.

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$0.99 for a song is a ridiculously good deal for something you want, can keep forever and play on all your personal devices.

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Good tunes aside, everyone who wants my stuff for free should also want to pay – UPFRONT – for the cables, gear, time, talent, etc that went into the music they like.

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Q. EVERYBODY GETS PAID FOR WHAT THEY KNOW AND HOW THEY EXECUTE. WHY SHOULD MUSICIANS BE TREATED ANY DIFFERENTLY?

A. Because if people CAN pull it, they will.

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People are happy to pay McDonald’s, tobacco companies, and anyone else their hard-earned money to kill them slowly and break their bank, but to pay for something you enjoy, that does all of the things that art does for us, if you can steal it, why bother?

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Frankly, anyone should be happy to assign a reasonable value to the work of those responsible for creating the soundtrack of our lives. I know I do. The Music Business is indeed an incredibly tough one to survive. Thank goodness for those willing to stay the course.

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I believe piracy in general does the industry more good than bad and my livelihood will depend on this fact, since I’m getting in the music promotion business

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As far as giving away 200 digital copies online to sell 20 – that makes perfect sense to me – much more so than giving a plugger or publicist $2k!

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We are all learning. That’s why we’re blogging about this topic. But so far, I’ve only gleaned that you gotta be well established in order to devalue your main craft and make a living at it.

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I mean look, you believe free stuff is the way to go, too…
That’s cool if you pay my bills. When I can afford to be a philanthropist, I will.

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I’m not in favor of free music, but when it comes to 30-second snippets and other promotional tools (even a CD if a band WANTS to give it away), I believe they ought to be very, very free.

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Why the ‘Music As Free’ Argument Just Doesn’t Hold Water

Regular readers of this blog will know that I take a pretty hard line on the idea that music can ‘just be free’ and that I take a fair share of flak for my position  (see my previous post here for background).

Numerous sites, forums and discussion boards pride themselves on their ‘everything should be free stance’ and argue that only money grabbing cynical artists would ever take the side of record labels in the piracy debate.  This is patently not the case.  Last week’s statement on tackling piracy from a 100 UK artists illustrates that artists care about this.  They understand that if people stop buying their music and download it for free that they simply won’t be able to be professional musicians anymore.  I for one used to be a struggling recording artist, many years ago.  I never made enough money from music sales to give up the day job, but I would have loved to be able to.  Not so that I could be rich, but so that I could spend more time doing the thing I loved: making music.

It is easy to argue that if consumers want music for free that the industry will simply have to adapt and develop free business models. But we don’t like our favourite artists because they or their record labels are good business people.  If the music industry proves inflexible enough to adapt to a free model and many professional artists go back to their day jobs who has won?  If the music business (in whatever guise it may evolve – i.e. it doesn’t have to be record labels at the centre of it) locks into a race to the bottom, ultimately less money will filter back to the artists.  That means that fewer artists will get contracts, and artists will have shorter careers.  Many more aspiring artists than today will never make it out of their MySpace page or their day jobs.

One of the counter arguments used by commentators is that having a MySpace page is an ends in itself these days.  No, it is a means to an end, and the VAST majority of artists see it that way.  If an aspiring artist doesn’t get signed to a label / publisher / agent they’ll remain one of those many tens of thousands of artists struggling to stand out from the crowded pack on MySpace.

The majority of artists just want to play their music to their fans and to be able to make a living out of doing so.  Most artists with record deals won’t and don’t make much money out of it, but they get to do what they love, and we get to enjoy their music.  But that model breaks down if people stop paying for music, whether that be buying CDs, downloads, gig tickets, ring tones etc.  And yes, of course, ‘feels like free’ models can pick up the slack, but they won’t do the job on their own, and they certainly won’t do enough whilst illegal free services continue to dominate.

But rather than try to persuade you with my words alone, please take the time to read this blog post from an artist that just felt the impact of file sharing (note this was recently reprinted in the UK’s Guardian by UK Music).  This is the pain of a real life artist and reveals the fallacy of the music ‘must be free’ argument

http://blogs.myspace.com/index.cfm?fuseaction=blog.view&friendId=62653487&blogId=485944356