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.

———————————————————————————————————-

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

———————————————————————————————————-

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.

———————————————————————————————————-

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

———————————————————————————————————-

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

———————————————————————————————————-

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!

———————————————————————————————————-

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

———————————————————————————————————-

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.

———————————————————————————————————-

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.

———————————————————————————————————-

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

———————————————————————————————————-

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.

———————————————————————————————————-

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

———————————————————————————————————-

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.

———————————————————————————————————-

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.

———————————————————————————————————-

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?

———————————————————————————————————-

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.

———————————————————————————————————-

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

———————————————————————————————————-

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!

———————————————————————————————————-

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.

———————————————————————————————————-

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.

———————————————————————————————————-

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.

———————————————————————————————————-

 

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

 

Why UK Artists are Taking a Strong Stance on Music Piracy

Yesterday 100 UK based musicians got together in a behind-closed-doors meeting to thrash out their differences and agree on a position on file sharing.  This was done in the context of a deadline next week for submissions to the UK government on suggested provisions for tackling file sharing.  It also comes in the week that Lilly Allen closed down her ‘anti-file sharing’ blog after just three days because of the vitriol that came her way as a direct result of starting it.

After a reportedly heated debate the artists agreed on a statement to “alert music lovers to the threat that illegal downloading presents to our industry” and voted to support a plan to send two warning letters to file-sharers before restricting their broadband speeds that would “render sharing of media files impractical while leaving basic e-mail and web access functional”.  There is obviously a distance between this position and the record label position of termination of access on the third strike, but it still represents a massive change in artist opinion.  Compare and contrast with Travis’ Fran Healy stating that file sharing was ‘brilliant’ back in 2003, hot on the heels of Robbie Williams having said it was ‘great’ earlier in the same year.  (It’s worth noting that the Featured Artist Coalition of which Williams is a member was a part of this week’s meeting).

So what’s changed?  The decline in music sales can now be seen as a fundamental market realignment rather than the blip it looked like at the turn of the century and artists are beginning to get worried.  Many might not have seen much money from their labels once costs had been recouped but they recognize the marketing and talent development value that labels bring and that without them they wouldn’t be able to sell as many gig tickets or t-shirts.

It worth keeping a sense of perspective on this though.  Are we to believe that these 100 artists suddenly coalesced around this issue just as their paymaster record labels are nearing a pivotal stage of their lobbying efforts?  Probably not.  Also Radiohead’s Ed O’Brien said that the meeting got “quite emotional” and “a little heated at times” which suggests that there was strong diversity of opinion and that this statement is not a definitive representation of all artist opinion.

However, the fact remains that these 100 artists did attend and did bury their differences to deliver a powerful compromise statement at first time of asking.  This illustrates their collective recognition of the urgency and seriousness of the situation.  So even though artists and record labels will always have differences of opinions and agendas, they’re beginning to recognize that they have a lot of common ground. Together they can start to educate the marketplace that music cannot just be free.  Somebody somewhere has to pay else the investment in artists ultimately dries up.  It’s easy for a file sharer to say that music should be free and that labels and artists and labels are greedy, just in the same way it’s easy for a burglar to say that the owners of a nice house are greedy once he’s stolen from it.

A wholesale revision of music business models and practices is both necessary and is beginning to happen, but that is not an excuse to allow file sharing to go unchecked until that process has run its course.  Of course compelling and differentiated legal services are the best way to fight piracy, but there also needs to be a clear legal framework and, even more importantly, a shift in consumer mindset.  Most file sharers wouldn’t dream of stealing a CD from a music shop, but don’t hesitate to download tracks via BitTorrent.

If this shift towards artists being seen to take a stance against file sharing helps to start the requisite change in mindset then that will be a true achievement, more so than if they influence the legislative process.

 

Is Apple Playing a Subtle But Smart Platform Strategy?

I have to admit to being a bit under whelmed by Apple’s announcements today.  I’d been hoping for something a bit grander from a music perspective.  I’ve spoken about the iTunes Album launch and explained my thinking that it falls short of what it could have been. But on the other hand there is an argument that Apple’s relatively modest tweaking might be part of a bolder strategy: that of establishing iTunes as a platform that explicitly coexists with the big name social platforms, namely YouTube and Facebook.

Apple is all of course all about selling devices.  But part of that strategy is building compelling user experiences that establish and reinforce the value of usage scenarios of their portfolio of devices.  This is the context into which to consider approving the Spotify app, enabling posting of iTunes song information into Facebook and Nano captured video into YoutTube.  From that perspective Apple is playing a smart game that builds the social context of their devices as explicit extensions of the value proposition of the iPod an iPhone ranges.  Take it one step further and you could even build an argument that Apple are building a range of devices that are flexible enough to mould around the degree of social engagement the user wants.  Interestingly this strategy echoes much of Nokia’s current positioning and also establishes a scenario in which iTunes builds as a media platform coexisting with the large established social platforms. Social context is what defines and reinforces the position of iTunes and Apple devices.  Sounds a lot like Nokia’s World view?  I think so.  Perhaps finally Apple are taking some of Nokia’s vision rather than vice versa?

 

So Why Did Apple Approve Spotify’s iPhone App?

So they did it: Spotify got their iPhone app approved and it is available today (as is the Android app).  I won’t pretend I’m not surprised.  I felt this competed too directly with core iTunes music player functionality for Apple to approve it.  And of course Spotify isn’t even available to the vast majority of Apple customers so they wouldn’t be affected by lack of availability to kick up a fuss.

So just why did Apple approve it?  Well my take is that this reinforces Apple’s play as a platform, albeit a heavily controlled one.  They want to ensure that the iPhone and iPods are the places where you can find the best music experiences.  Last.FM, Pandora et al enhance and deepen that music experience.  Spotify will also.  But Apple is a company that is as sharp as they come and this is a very calculated move.  The Spotify app is free to download by only works for Spotify customers that pay 9.99 a month.  So it is only going to be a pretty small number of people who’ll actually get exposed to this, a tiny tiny fraction of Apple’s installed base of portable device customers.   So Apple get to look inclusive and welcoming, with minimal impact on their business.

The other possibility of course is that Apple has some new music service up its sleeve that would make the Spotify app look obsolete….and oh look, there’s a music themed announcement by Apple on Wednesday…

 

PRS and YouTube Settle Their Differences

Finally, the PRS and YouTube have agreed a deal that ensures music videos will be back up on the site in the UK until 2012, following their licensing spat. (See my previous post for more details).  The only real surprise is that this took so long to happen.  It was patently in the interest of both parties to get the videos back up.

I’ve been asked a few times today who will be most happy with the deal. Given that both sides took very public, very strident positions in the debate, they were never going to make public details of a settlement.  By definition such an agreement would leave egg on the face of one or both parties.  But I would argue that YouTube needed this settling sooner rather than later.  In the age of Hulu and iPlayer, YouTube is no longer the same dynamic force of online video that it once was.  2 minute clips were the centre of the early days of online video, but full length TV shows are now the sweet spot.  YouTube is going through an identity crisis, where its core differentiated asset that it has left is music (and skateboarding dogs).   So music is more important to YouTube now than at any stage before.

And this makes YouTube highly important to the music industry.  Online music video consumption is now a core element of the digital music experience, and as an ends in itself rather than just as a discovery mechanism.  Which is what makes it ironic that the PRS could prevent the record labels utilizing the resource for a period of time.  Many people I have spoken to who are at companies that are outside the music industry are amazed that there can be such dysfunction on what should effectively be the same part of the equation.

The fact that YouTube got a single fee agreement rather than a fee per stream settlement is important.  This assigns YouTube a similar position as the BBC has in the UK.  In effect this is YouTube’s blanket license.  The downsides of this are:

• No opportunity for the PRS to participate in any significant upturn in Youtube music activity over the mid term.  Though the settlement will include calculations around future growth, any bet on future activity is a gamble.  The flip side of this of course is that PRS secures guaranteed revenue and (depending on the payment schedule) bank deposit interest revenue.
• The polarization of the streaming market.  Other on demand music providers will be wondering what it takes for them to get a blanket license rather than pay per stream.  Currently the likes of Spotify have the pain of every stream beinig cost to the bottom line.  The bigger their audience gets and the more they listen, the higher their costs.  YouTube is now partially immune to that dynamic (record label fees still need to be considered of course).  So does this set a precedent that if you’re big enough you get preferential treatment? And if so, what does that do to the dynamics of a competitive marketplace?

 

Spotify’s Marathon

The news that Spotify’s mobile app is now available for the Android platform, coupled with an anticipated Autumn US launch, are both part of the music service’s inexorable rise and media interest.  Spotify undoubtedly has momentum and potential in abundance.  But, even without considering the issue of cash burn, it is also important to keep a sense of scale. Spotify has done a great job of acquiring a sizeable audience after a short period of time, but needs many users more before it can be considered on a par with some more established services that get a lot less attention (these days at any rate).

In the chart below I have mapped the number of users of Spotify and a number of other key free music services, each from launch.  What is clear is that Spotify has made a solid start is growing at a stronger rate than Pandora was at the same stage.  If Spotify ever reaches Pandora’s scale and business model viability, it will rightly be considered a success.

But it is also clear that other services like Last.FM and imeem grew more quickly.  And just to put the absolute scale of Spotify into perspective, the Pandora iPhone app alone is mapping almost exactly in line with Spotify’s entire user base. (No coincidence of course that Spotify see the iPhone app as a crucially important ticket to further success).

So what can we conclude from these numbers?

• Extrapolating Spotify’s early user growth suggests that if it is sustained it could reach the 20-30 million user range within 2 years
• A US launch will significantly accelerate audience growth (all of the other services mapped here have US reach.  imeem and Pandora have reached their scale in the US alone)
• Spotify will need to accelerate its revenue model maturation if it is going to be able to sustain this projected level of growth.

The last point is key. All of the other services in the chart have had to deal with the challenge of audience cost sustainability:

• imeem has had well publicized financial difficulties with WMG writing off millions of debt
• Last.FM recently closed its free service to countries it couldn’t operate in profitably
• Pandora closed its non-US operations when it couldn’t strike deals with rights owners that would enable it to operate profitably in international markets.  Pandora has long focused on building financially sustainable audiences, a strategy echoed by We7 in the UK.

Spotify has run a fast first lap, but it is a very, very long race.