Making Online Music Pay – Round Up

Firstly let me apologize for not having posted for a while on here, and thanks to the messages and emails from those prompting me to get posting again.  I’ve been snowed under with project work but normal service will now resume!

Today I ran a series of panels (well, a succession of thinly disguised vendor presentations) at Music Week’s Making Online Music Pay conference in London.  Here are my highlights of the day.

First up was Andy Burnham, the UK Secretary for Culture, Media and Sport.  I have to say I was really impressed by him, he came across as a genuine guy with a real interest in and understanding of the media business.  His speech was a master class in how to land a series of killer punches by nuanced implication.  He was keenly aware that the audience was hoping for some pointers on what the final Digital Britain report is going to look like.  He said he wasn’t going to be able to do so, but went on to give some pretty solid indications, largely by ruling out what wouldn’t be there.

He built up a case for broadband access being comparable to water and electricity as a basic necessity of modern day existence and cited his ideological belief that access to information was key to enabling the right of equality of opportunity.  So it was no surprise that he then explained he didn’t believe that the graduated response or ‘Three Strikes Approach’ would work, that it was “too abrupt” and that “you don’t go straight to a solution that cuts people off.”

But just as the head of the ISP association guy started to visibly lift and the shoulders of the label execs sag, he delivered this:

“One option we are considering is giving Ofcom (the telecoms regulator) reserve powers to compel ISPs to apply technical measures to limit and restrict activity [of file sharers]”,

So in short, ‘Three Strikes You’re Out’ is, well, out, and ‘Speed Bumps’ are in.

As with any good compromise both sides will doubtlessly be dissatisfied with the solution, but my first instinct is that this is a workable, realistic, solution that should deliver results.  Assuming of course (and this is crucial) that these measures are backed up with compelling legal services for the ISPs.  The BPI’s Geoff Taylor suggested that ISPs may be able to get compensated for converting file sharers to legal services.  This is innovative thinking that shows understanding of the need for their to be meat in the game for the ISPs (who when it comes down to it are facing a similar race to the bottom as the labels are).  Here’s a left field thought (well, wild hypothesizing): Spotify’s long term future road map incorporates MP3s and the viability of the business model is defined by becoming part of subsidized ISP bundles.  Just a thought….

Back to the real world and Andy Burnham.  He made an apparently harmless well meaning comment that the debate needs to be “internationalized” and that “we need to find the right balance and then internationalize that”.  Which is all well and good, but when coupled with his comments about graduated responses effectively dismisses the recently pass French ‘Three Strikes’ legislation as bunkum.  What we might be seeing here is the start of a political digital face-off between France and the UK.  France used its Presidency of the EU to drive the debate on defining European policy on ‘creative content’ in the digital arena.  It looks like the UK government might be planning to use the “Digital Britain” report as a blueprint for a “Digital Europe”….and perhaps beyond.

Geoff Taylor also asked Andy Burnham whether the government was still committed to reducing music file sharing by 70-80% within 3 years, now that we’re 1 year into that commitment.  The response was that the government would absolutely “not retreat”.  Something pretty drastic is going to have to happen in the next 24 months to deliver those results.  More realistically the government will change and targets with it.

The following panel took the discussion a bit farther though back within the more familiar realms of debate that have characterized the MOU-related process.  The Music Publishers Association’s Stephen Navin was nothing short of hilarious (though insightful also).  He delivered my favourite quote of the day (in the context of device manufacturers and digital content:

“The fine wines of Bordeaux are not just content for the glass manufacturers.”

He also highlighted the different state of affairs for the music publishing business compared to that of the record labels, expressing his continual surprise at

“spending 95% of our time making 5% of our business pay.  The business of making music available is still a buoyant world.”

In my first panel we had representatives of many of the current bright hopes of digital music (Spotify, Last.FM, We7, 7Digital).  Though each of the ad supported guys tried to paint a bright picture for the rude health of ad supported, they each in fact highlighted its failings, albeit unwillingly and by implication rather than directly.  For example Last.FM talked about the hundreds of markets which had now become subscription markets i.e. the ad supported business just didn’t work in those territories.  When I pressed on this issue Last.FM’s Miles Lewis cited the example of Poland, which had accounted for about 10% of their streams but where the “online ad market was worth about three pence” and the affiliate market even less.  When I asked whether this was a short term necessity or long term strategic shift he said that it was likely to be the latter unless the online ad market suddenly exploded.  Similarly Spotify’s Paul Brown emphasized the importance of their premium models succeeding and spoke about the mobile offering which will likely include 30 minute stream caching.  (Which by the way I’ll be interested to see if they can convince rights holders that this should be considered as stream rather than a download.)

Joining the dots, the consensus from those right in the mix is that the dynamics of ad supported digital music still need further revision if this second wave of ad supported services isn’t to go the same way of Spiral Frog.

I had a few people come up to me and question why I hadn’t given my panelists a harder time with more probing questions.  They had a point.  On reflection perhaps I’m feeling empathy for them in these difficult times? Either way, that’s no excuse.  I’ll be back to my old probing ways at the next conference. Thanks for putting me back on course!

Oh, and Apple hardly got a mention….even though they account for 75%+ of online digital revenues….times are a changing.

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3 thoughts on “Making Online Music Pay – Round Up

  1. Yep – it was all very interesting Mark – i too was impressed with the outlook and frankness of Andy Burnham. My worry is that he won’t be there in weeks/months to come and god only knows what the next person in line will do when it comes to delivering legislation that will work.

    I was also surprised that Apple didn’t really feature, but it’s dangerous to rule them out of any future world beating products. They’ll probably come up with the answer.

  2. Wish I understood the report. The turns of phrase and terms could stand a glossary. It’s an airy language. Puts me in mind of computer manuals.

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