MusicQubed Puts the Rise of Listen Services Into Numbers

Back in October I wrote about the emergence of a new wave of music services: ‘Listen Services’. Namely music services that sit at the opposite end of the sophistication spectrum to ‘Access Services’ like Spotify and Deezer.  While the on-demand Access Services are focused on immersive discovery experiences for the engaged music aficionado, Listen Services are aimed at the mainstream music fan that does not have the time nor appetite for searching out what to play from a catalogue of 30 million tracks.  Listen Services, and their addressable audience, are a key priority for the music industry as it is becoming increasingly clear that Access Services, while fantastic at monetizing the top tier of fans, are not the right fit for the mainstream. To date the main focus for this segment has been ad supported personalized radio from the likes of Pandora and Slacker.  New entrants have started trying to drive digital spending from these consumers with cheap subscriptions, players like MusicQubed, Bloom.fm, Blinkbox Music and Nokia Mix Radio (interestingly there is a distinctly European company bias in this sector). MusicQubed has released some figures to illustrate how this emerging segment is developing.

To celebrate the first anniversary of its launch into market, MusicQubed last week released a combination of performance metrics for its services and some related statistics:

  • 85% of UK radio play comes from the top 120 tracks
  • The Forgotten Fan (above average listening but below average spend) accounts for 30% of consumers
  • Daily listening time of MusicQubed users = 30 minutes
  • 30% of all active users are subscribers
  • 1.5 million consumers have used MusicQubed services to date
  • O2 Tracks (O2’s UK music service powered by MusicQubed) has 60% female users and an average lifetime value of £33, while 20% buy at least one download a month after having discovered it in the service

While MusicQubed is a long way yet from challenging Spotify in terms of total users and paying subscribers, the numbers do hint at a validation of this too easily neglected consumer segment. Of course everything starts small and it is worth remembering that a year after launch (i.e. by end August 2009) Spotify only had in the region of 100,000 paying subscribers.

Will Listen Services Define the Next Phase of Digital Music?

The history of digital music has evolved in roughly 5 year chapters, each defined by a key service and the problem it solved:

  • Phase 1: Napster gave consumers frictionless access to all the music in the world
  • Phase 2: iTunes made the paid download make sense
  • Phase 3: Spotify fixed buffering and gave frictionless (legal) access to all the music in the world (well most of it anyway)
  • Phase 4: Beats, Blinkbox, Bloom.FM, MusicQubed are all candidates for defining the next phase. Spotify gave access to 25 million songs and now these services are each doing at least one of a) trying to make sense of that 25 million via curation and b) making music subscriptions affordable for the mainstream

4th phase

Once we have another 12 months or so of market activity we should be in a position to make a more definitive conclusion on which service, or services, will emerge as the defining reference point for the next era of digital music.

Listen Services, affordable subscriptions and curation-centred services are only just getting going, but they will be key to long term sustainability.  As subscriptions eat into the spending of the most valuable download buyers, it is clear that a ‘digital plan B’ is required.  This new generation of services are part of that plan.

IFPI and RIAA 2013 Music Sales Figures: First Take

The IFPI and RIAA today released their annual music sales numbers.  Though there are positive signs, overall they make for troubling reading 

  • Total sales were down 3.9%.  Based on 2012 numbers the trend suggested that 2013 revenues should have registered a 2% growth, so that is a -6% swing in momentum.
  • Digital grew by 4.3% which was not enough to offset the impact of declining CD sales, which has been the story every year since 2000 except last.
  • Download sales declined by 1%. Continued competition from apps and other entertainment, coupled with subscriptions poaching the most valuable download buyers is finally taking its toll.
  • Subscriptions up by 51%: An impressively strong year for subscriptions but not enough to make the digital increase bigger than the physical decline on a global basis nor in key markets, including the US.

Global numbers of course can be misleading and there is a richly diverse mix of country level stories underneath them, ranging from streaming driven prosperity in the Nordics, through market stagnation in the US to crisis in Japan – where revenues collapsed by 16.8%.  The Nordic renaissance helped push Europe into growth but data from the RIAA, show that total US music revenues were down a fraction – 0.3%.  US download sales were down by 0.9% while subscriptions were up an impressive 57% to $628 million.

On the one hand this shows that Spotify has managed to kick the US subscription market into gear following half a decade or so of stagnation.  But on the other it shows that subscriptions take revenue from the most valuable download buyers.  This backs up the trend I previously noted, that streaming takes hold best in markets where downloads never really got started.  Thus markets like the US with robust download sectors will feel growth slowdown as high spending downloaders transition to streaming, while in markets like Sweden where there was no meaningful download sector to speak of, subscriptions can drive green field digital revenue growth.

The Download Is Not Dead Yet

Though subscriptions now account for 27% of digital revenue, the value trend obscures the consumer behavior trend.  For Spotify’s c.9.5 million paying subscribers (or 6 million last officially reported) Apple’s installed base of iTunes music buyers stands at c.200 million (see figure).  The IFPI report that there are now 28 million subscription customers globally.  In the US and UK this translates into 4 or 5% of consumers. Subscriptions do a fantastic job of monetizing the uber fans, just like deluxe vinyl boxsets and fan funding sites like Pledge do so also.  But they are inherently niche in reach.  This is why downloads remain the music industry’s most important digital tool.  Downloads are the most natural consumer entry point into digital music, and if anyone else had been able to come close to matching Apple’s peerless ability to seamlessly integrate downloads into the device experience, then the sector would be much bigger than it is now.

service bubbles

Do not confuse this with being a luddite view that streaming and subscriptions are not the future, they are, but there is a long, long journey to that destination that we are only just starting upon for most consumers.   And before that there is a far more important issue, namely how to get the remaining CD buyers to go digital.

Sleepwalking Into a Post-CD Collapse

Last year the IFPI numbers showed a modest globally recovery but despite the widespread optimism that surrounded those numbers I remained cautious and wrote that it was “a long way from mission accomplished.”  My overriding concern then was the same as it is now, namely that the music industry does not have a CD buyer migration strategy and it desperately needs one.  So much so that unless it develops one it will end up sleepwalking into a CD collapse.   In fact I predicted exactly what has happened:

“CD sales decline will likely accelerate.  Among the top 10 largest music markets in the world CD revenue decline will likely accelerate markedly in the next few years.  In France and the UK leading high street retailers are on their last legs while in Germany and Japan the vast majority (more than 70%) of sales are still physical.  So the challenge for digital is can it grow as quickly as the CD in those markets will decline?

The IFPI have stressed the fact that Japan’s dramatic 15% decline was the root cause of the global downturn.  While this is largely true – without Japan included global revenues still declined 0.1% – Japan’s problems are simply the global industry’s problems squared.  In 2012 a staggering 80% of Japanese music sales were physical but despite the digital market actually declining 4 successive years total revenues increased 4%.  As the world’s second biggest market, when Japan sneezes the global industry catches a cold.   But expect Japan to continue to drag down global revenues and also keep an eye on Germany.  Germany saw a modest 1.2% increase in revenues in 2013 but only 22.6% of sales were digital.  The most likely scenario is that Germany will follow the Japanese trend and go into a CD-driven dive in 2014 and / or 2015.

In conclusion, there is still cause for optimism from these numbers.  Subscriptions are going from strength to strength, at least in revenue terms, and the download sector remains robust in buyer number terms.  But unless the CD problem is fixed, the best both those digital revenue streams can hope to do is consolidate the market around a small rump of digital buyers.

Decoding the Digital Music Consumer: New Report

Today MIDiA Consulting published a report: Decoding the Digital Music Consumer. The report deep dives into the music activity of UK consumers leveraging data from a brand new MIDiA consumer survey.

The music industry is in a peculiar spot: digital is where all the momentum is and yet it remains but a small part of the equation. Across the globe digital accounted for just 25% of recorded music revenues outside of the UK and US in 2012 but even in the UK, one of the most digital markets, traditional consumption modes still dominate (see figure one).

survey1

These are some of the key findings from the report:

  • Radio and CD still outshine all digital music activities other than online music video
  • 10 years after the launch of the iTunes Store, music download buyer penetration is just 14%, though album purchasing is now just as widespread as single track buying
  • Music video is the only digital music activity that has gone mainstream so far
  • Streaming adoption is still relatively niche and paid subscriptions stand at just 4% penetration
  • Pricing, commitment issues and trepidation all act as barriers to consumer adoption of subscription services
  • The CD still reigns even for digital consumers, with 55% of digital music buyers and 45% of music subscribers buying CDs at least monthly
  • Non-Network Piracy is replacing P2P as the music sharing choice of Digital Natives, with Digital Immigrants still clinging to P2P
  • A quarter of music subscribers are also pirates
  • There is a music subscriber gender divide: 63% of subscribers are 
male
  • Subscription service churn is going to become a major component of the digital market: 46% of the entire subscriber audience have either churned or plan to churn

survey2

Churn from subscription services will become an increasingly important part of the digital music landscape (see figure two).   Looking at the entire base of consumers that have either previously been subscribers, currently are subscribers or plan to become one, 44% have either already churned or plan to do so. Just 32% are current subscribers that intend to remain so.  This base of churned music subscribers poses a key challenge for the digital marketplace: these consumers have tasted unlimited on-demand music without ads, on their phones, but are now going cold turkey. The question is where they will get their next fix? If it is not from subscribing to another service then the illegal sector beckons. This is the challenge that the music industry must meet over the next couple of years. It must ensure that these consumers either reengage with full fat music services or instead are nudged towards lower price point alternatives.

The report is available free of charge to MIDiA clients and subscribers to Music Industry Blog.  If you are not a subscriber to the blog but would like to subscribe please add your email address to the email subscription field on the right hand side of the blog home page.  If you would like to learn more about how MIDiA can help you with your digital music strategy please email info AT midiaconsulting DOT COM or visit our website here www.midiaconsulting.com  You can also find all previous free reports for download here: http://musicindustryblog.wordpress.com/free-reports/

 

A Tale of Two Cities: What Sweden and the US Tell Us About the Outlook for Streaming

Streaming is the digital zeitgeist, that much is clear.  How it will shape the future of the music business, from artists through to labels is less clear and things are not helped by an increasingly confusing and diverse set of data, each suggesting a slightly different outlook.  A look at two very different digital music markets – Sweden and the US – gives some sense of what the next couple of years should hold.

Notes: for sake of readability the term ‘streaming’ is used to refer to subscriptions and ad supported streaming combined. Also all current year figures are 2013, extrapolating half year figures to create full year estimates.

Two Very Different Streaming Stories

se-use1

Sweden is streaming’s heartland, home of Spotify and the stand out good news story for music subscriptions. Streaming now represents a whopping 95% of digital revenue in Sweden and 67% of all recorded music revenue while downloads make up a paltry 4%.  Streaming growth has been equally impressive (see figure one) and has propelled the total Swedish music market into growth for two successive years.  That growth came at the direct expense of downloads (which declined by 15%) and it accompanied a dramatic 51% collapse in CD sales.  But 2013 revenues look set to come in at just a little below 2003 levels, no mean feat.   Although we need to bear in mind that a surge in growth can easily reverse (as the experience of South Korea shows us) it is clear that streaming has been a strong positive force on total Swedish music revenues.

se-us2

The picture is very different in the US however, where streaming has grown less dynamically and only represents 23% of digital and 14% of overall spending.  As I previously noted, the strength of Apple and the download sector have acted as a pronounced brake on streaming growth in the US.  Neither, however are invincible, and some of Spotify’s 2013 growth has come at the direct expense of download spending which looks set to decline by a percentage point in 2013 (see figure two).  Little wonder Apple has launched iTunes Radio, though ironically the app may well spur a resurgence in download sales.  So in the US streaming is becoming an increasingly important part of the market but shows no sign of suddenly acquiring Sweden-like ubiquity.  Which in part explains a 5% decline in total music revenues between 2010 and 2013.

CONCLUSION: streaming can quickly drive strong growth in markets where downloads never got a foothold but takes more time to impact strong download markets.

The Impact on Total Digital Revenue

Streaming’s impact on the total digital market and indeed on total music sales is of course what counts most, and it is here we see a really interesting divergence between Sweden and the US. Over the last 6 years streaming drove a comparable rate of overall digital growth in Sweden that downloads powered in the US in the mid 2000’s.

se-us3

But when we plot the growth of digital as a percentage of total music sales in the US between 2005 and 2010 against the same data for Sweden between 2008 and 2013 a stark contrast is immediately apparent (see figure three). Whereas digital share growth remained strong throughout the 6 years in Sweden it slowed markedly in the US.  Though growth returned later it didn’t ever replicate those pre-2008 levels.  The number one slowdown factor was the end of iPod sales growth (see this figure to see just how strong the effect was).  Interestingly digital share growth looks likely to slow moderately for both Sweden and the US in 2013.  In Sweden some level of slowdown is to be expected (there isn’t much physical market left to transition!) but there is still a lot of CD ground to be made up in the US.

CONCLUSION: streaming has driven market growth in Sweden and accelerated transition away from the CD and the download. While in the US the CD and the download both still hold much greater sway, culminating in something of a worst of both worlds, with streaming apparently eating into downloads but not having enough headway to transform the market.

The Artist Conundrum

But what does all this mean for artists?  It often feels that something doesn’t quite seem to add up when artist income is brought into the equation. For all the growth in streaming income, a vocal minority of artists and songwriters feel that streaming is damaging, destroying even, their ability to earn a living from music sales.  As I have argued before, a rounded understanding of streaming income for artists must both put streaming in a revenue continuum (i.e. compare it to radio not just downloads) and consider the life time value of a song (i.e. think of the income it will generate over a period of years instead of the revenue full stop a download represents).  In this context streaming is still worth less than a download, but nearer to 5.5 times less valuable rather than 280 times (see my Consumption Analysis piece for more on this).

us-se-4

There is however an added complexity, namely the amount of artists that get revenue from streaming versus downloads and streaming (see figure four).  If we take Spotify’s reported US metrics from 2012 as a benchmark and assume that the average subscriber listens to a modest 5 different artists a month then this is equal to 60 different artists per year per subscriber.  Working with an average total royalty pay out of $0.01 per stream this translates into an average royalty per artist per subscriber of $0.72 in the US.  When applied to the 3 million reported US Spotify subscribers this would equal an average annual royalty of $2.17 per artist.  (Though it is crucial to note that this refers to the total royalty payment made to rights holders and not to whatever share is eventually shared with the creators themselves). Also, there is of course no such thing as an average artist, and in practice a comparatively small number of artists would earn much more than that and most much less (there are after all 27 million tracks’ worth of artists so the tail is super long).

For downloads, extrapolating from Nielsen mid year numbers, the average downloader buys 2 albums and 27 single tracks.  If we assume each of these is for a different artist then we end up with 26 artists per downloader and an average royalty of $1.22 per artist per downloader (using a 70% royalty assumption).  This isn’t actually that much higher than streaming, but things change when it is applied to the total number of download buyers (which at 63 million far outstrips paying subscribers) and results in an average royalty per artist of $76.34 (again total royalty before distribution to creators).

In Sweden though, where there are more subscribers than downloaders the picture is very different.  Applying the same Spotify metrics to an assumed subscriber base of 2 million in Sweden (which feels about right based on survey data and IFPI numbers) we see an average royalty per artist of $1.44 compared to $1.22 for downloads.  (The average royalty per buyer is higher in Sweden because a smaller number of people are buying a smaller number of downloads resulting in the revenue being split fewer ways).

CONCLUSION: streaming can generate meaningful revenue at scale but will still be lower than downloads because of the above mentioned life time value factor and because revenue is split more ways across a wider selection of artists.

The Cost of Democratization of Artist Income

Thus artists are effectively paying the price for the democratization of music: more artists are getting listened to more regularly and as a consequence the pie gets cut into smaller slices. Which raises the interesting dilemma of whether artists speaking out against streaming are also indirectly speaking out against a more equitable distribution of income among artists?!  The core question though is whether the pie can get large enough for those slices to represent anything more than an apetizer for the average professional artist.

All of this extra data may appear to add as much fuddle as it does clarity to the debate, but it is crucial that debate is based upon reasoned understanding of the most complete grounding of data available.    The next couple of years will see streaming go from strength to strength but its impact on global music revenue will be less dramatic than it has been in Sweden, if perhaps more vibrant than it has in the US.

How Downloads Will Determine the Future of Streaming

There is no doubt that streaming subscriptions will play a major role in the future of digital music, but their impact is going to be far from immediate. There also needs to be great caution applied to interpreting the encouraging early signs of the advanced streaming markets and the potential impact on total music sales.

Norway and Sweden both experienced an upturn in music sales in the first half of 2013 thanks largely to the impact of streaming subscriptions, while most of the rest of the global music market continued in its struggle to return to growth after more than a decade of decline.  The easy conclusion to draw is that when streaming subscriptions take hold across the globe, music revenue grow.  While there is some truth in the argument, it is too simplistic.

streaming 1

An analysis of the leading streaming markets (Sweden, Norway, France, Netherlands) and the leading download markets (US, UK, Germany, Japan) – see figure one – reveals that streaming took hold in markets where downloads had not.  The markets where downloads represented the lowest share of total music sales in 2010 (before streaming really kicked off) are those that in 2013 had the rates of streaming as a share of digital music revenue.  In markets where downloads were making the biggest contribution to total music income (not just digital) streaming did not get much of a look in in 2013.  In the US and UK streaming subscriptions were in market long before Spotify and Deezer, but most digital music consumers opted for downloads and have been unwilling to switch allegiances since.  It will happen over time, but right now downloads have a firm grip and that is largely because of Apple.

streaming 2

When we look at the same countries plotted by streaming share against Apple device penetration we see an even more pronounced trend – see figure two.  Here the relationship is clear: streaming has taken hold where Apple has not.  In short, there was no established mainstream digital music service and streaming subscriptions filled the void.  But of greatest significance is the impact on total music revenue.  These strong streaming markets contribute just 10% to global digital revenue, even though France and the Netherlands are two of the world’s top 10 music markets.  Meanwhile the UK and US alone count for 54%.  If you factor in Japan and Germany too you have 71% of all digital music income, and within these four countries (the four biggest music markets) streaming accounted for just 10% of digital revenue.

On the other side of the equation, streaming has brought unparalleled growth in its core markets: across Sweden, Norway and the Netherlands digital revenue grew by an average of 213% between 2010 and 2013, compared to an average of just 40% across the big four markets (though Japan’s declining digital sector pulls that average down).  And of course the Swedish and Norwegian music markets both grew in 2012 and 2013 while the rest did not.

While there is not a clear cut ‘answer’ to streaming’s likely long term impact we can however draw a few important conclusions:

  • Streaming will grow more slowly in markets where Apple and the download market are strong (which helps explain why growth of Spotify et al appears to have slowed in markets like the US and UK).
  • Streaming can make a digital market grow more quickly than downloads can (though it does so normally at the direct expense of downloads – download sales shrank in both Sweden and Norway in 2012 and 2013)
  • ‘Home turf’ counts.  Most of the big streaming markets have their own local heroes (Sweden – Spotify, Norway – WiMP, France – Deezer) – all of whom also benefited from hard bundles and marketing support from their incumbent telcos. Meanwhile Apple of course prospers on its home turf and that of the English speaking UK.
  • Consumer behavior and technology are all edging towards a more access based world and it is inevitable that the download will become less important.  So although these brakes on streaming adoption exist in many markets, they will slow rather than halt the transition. Streaming will near 50% of global digital revenues by 2018.

Streaming remains bedeviled by countless issues – not least artist payments – but what is clear is that it has the ability to transform the shape of the digital music market.  And while that change may be slower to come than the Swedish and Norwegian experiences might suggest, come it will.

 

 

Just How Much is Curation Actually Worth?

Dance music powerhouse Ministry of Sound have commenced legal action against Spotify for breach of copyright with regards to user generated Spotify playlists replicating Ministry compilations and sometimes including Ministry labeling.  The case obviously raises some important legal issues, but more significantly it raises the question of just how much is curation worth?

All of the big streaming services have been falling over themselves to state that curation is at the core of what they are and of what makes them different.  Unfortunately the term curation means nothing to most consumers other than conjuring up images of fusty old librarians.  But leaving that small inconvenience aside, the value of curation to the industry side of the equation is clear…or is it? The problem with 22 million songs is that the consumer is paralyzed by the tyranny of choice.  There is so much choice that there is effectively no choice at all.  Curation, editorial, programming, whatever you want to call it, is crucial.  People are sheep, they need leading.  Some need leading a little, some need leading a lot, but all of them – or at the very least the vast majority of them – need leading.

In the analogue era when media companies controlled the distribution channels most audiences relied upon professional ‘curators’ to show them what to consume.  These curators were radio DJs, newspaper and magazine editors, TV show hosts etc.  They were trusted voices whose influence status was validated by dint of the fact that they were paid to shape the tastes of millions. One of the founding ideologies of the internet was that these curators would be brushed aside in a groundswell of democratization of consumer choice.  These curators suddenly became labeled gatekeepers and became a symbol of the old control-era. The problem is that not only have those gatekeepers been replaced by the algorithms of technology companies, but the algorithms that have replaced them inherently lack the years of human experience and expertise the old curators brought.  Initiatives such as the Music Genome Project and the Echonest are standout examples of technology-driven recommendation best practice, but few would question that the human touch also plays a crucial role in curation, whether that be personal recommendations from friends or family, or playlists selected by Pitchfork. But wherever you stand on the human vs robot debate, the value of curated discovery in a boarder sense is universally recognized.

Which brings us to the Ministry of Sound situation.  Ministry have spent years building the expertise of knowing how to put together a dance compilation and as a result building a brand as a trusted curator of taste.  It is all too easy to dismiss the role of compilations as superficial and irrelevant in the age of the playlist, but there is a reason that some compilations, such as the ubiquitous Now series, do so well and others do not.  As a former DJ I know only too well the depth of thought and preparation that goes into building a set, into identifying which songs mixes well into the next, ensuring that one track does not play out of key with another when it is pitch shifted into the next, of how build a progression of sound that ebbs and flows, that balances consistency with variation.  There is a reason that Spotify users have been recreating Ministry of Sound playlists rather than creating their own dance music playlists.

As the Ministry court case progresses there will be a stern test of whether the copyright of a selection of songs holds legal water in the digital arena in the way that sound copyright does.  Whether it does or not though is almost not the issue.  The core question here is just how much do streaming services like Spotify truly value curation? Do they value it in terms of ‘yes it’s a nice little extra to have’ or do they view it as ‘it is a crucial part of our users’ experience and therefore of our future success and we thus value it at x’?  If it is the latter it is time for them to put the money where their proverbial mouth is.  If it is not then it is time for streaming services to stop talking about the value of curation.

Note: I am indebted to Eli Pariser’s ‘Filter Bubble’ TED speech for some of the ideas in this blog post

Songkick Detour And The Middle Class Musician

 Songkick today announced the official launch of Detour, which it has been successfully trialing in a small invite-only beta until now.  At risk of over simplifying, the basic concept of Detour is enabling fans to help artists decide where to gig by pledging in advance for concert tickets, much in the same way PledgeMusic works but for live. In the trial 1,000 fans made 10 concerts happen in London (you can read Songkick’s Ian Hogarth’s blog here).

I am a big fan of Songkick and the company is one of a relatively small number of digital music start ups that are genuinely changing some of the fundamentals of the music industry.  With Detour, Songkick is harnessing the power of its highly engaged music fan audience and using it to deliver real value back into the business. 

Obviously it is still early days and Detour is still currently focused on London, but crowd funding of concerts is an area with growing momentum with specialist sites like Gigfunder and Queremos! all growing this emerging marketplace.  Crowd funding concerts is a very natural next step from crowd funding albums and EPs.  For middle ranking artists who aren’t big enough to be on a big label but are bigger than the amateur and semi-pro tiers of artists, tools like Songkick Detour and PledgeMusic are increasingly important.  They empower artists to build sustainable careers, making the most of scarce resources and squeezing out every last drop of their potential.

But perhaps most importantly of all these tools strengthen the bond between fans and artists.  Something that is inherently less easy for a superstar artist to do.  Sure the likes of Lady Gaga do a fantastic job of making their global fan bases feel close, but that proximity can never be as genuine as a band whose just come to London to play a gig off the back of 80 dedicated fans pledging their support and hard earned cash. So the long-term outlook becomes one of increasing divergence between the aristocracy of the superstar artists and the middle class of hard working, hard gigging artists.  Think of it as a democratization of music, with the intimacy of the artist-fan relationship the currency of success and authenticity.

Detour has got a long way to go, but that is only because it has so much potential.  Now the fun really starts.

PledgeMusic, Janet Devlin and Reinventing Scarcity in the Post-Scarcity Age

The analogue-era music business traded on scarcity.  It was the record labels and retailers’ absolute control of supply that created scarcity of music product.  If you wanted a high quality version of a song or album you had to buy it, when, where and for how much the labels and retailers decided.  In June 1999 Shawn Fanning launched Napster and in an instant scarcity was not only thrown out of the window, the window was instantaneously bricked up behind it.  The contagion of free has now reached epidemic proportions (due to both licensed and unlicensed sources).  Consequently we are now in the post-scarcity age, which has made music buying a lifestyle choice.  It has changed music buying from opt-out to opt-in.

If there is to be a mainstream future for music products, it will come from creating new scarcity that people want to pay for.  Of course it is no longer possible to ensure the music itself remains scarce, but it is possible to build scarce experiences around music and additional assets.  This is exactly what the guys at PledgeMusic have done in conjunction with former X Factor contestant Janet Devlin.

I’ve been a long term admirer of PledgeMusic’s model and approach, but I am particularly impressed with this release.  Firstly, fans get the option to select music from a typical Pledge menu of products ranging from the standard CD, through to highly personalized products like a Skype chat with the artist, a personally dedicated video performance and even appearing on the album.  Though the unit prices go high (£500 to appear on the album) these are scarce experiences that simply cannot be got on a torrent.  Of course many of these options don’t scale too well, but some of the intermediate products like exclusive concerts and signed albums most certainly do.  Also, all pledgers also get the download of the album before it is released anywhere else, a semi-scarce commodity, but nonetheless a great way to communicate value and exclusivity to fans.

What I like most about this release though, is the clever use of the pre-release cycle as an artist subscription. Anyone who pledges will get a steady stream of content from Devlin as she progresses on her work with the album.  She will release exclusive (i.e. scarce) content such as video, audio and photo blogs to these pledgers, giving them a window into the creative process, deepening their engagement with her and most importantly, building up interest and demand for the release of the album.  In many respects Devlin is taking a leaf out of the X Factor’s book, recognizing the immeasurable value of creating a community of fans and building their interest and engagement with exclusive content right up to a final release.

One of the reasons I like this release so much is of course because it ticks so many of the boxes of my Music Format Bill of Rights report (which you can download for free here).  But make no mistake, creating scarce experiences and seeding fan communities with scarce content is going to be at the centre of future music products.  Not everything here is entirely new or unique of course, but the unifying vision is most certainly that of the future. Janet Devlin and PledgeMusic are assuming the role of pioneers here and their peers will do well to pay heed.

Rara Sets Sights on the Global Streaming Opportunity

Today UK-headquartered streaming service Rara issued a slew of announcements (squeezed in just ahead of Apple’ iPad mini launch) including expanding from 20 to 27 markets, increasing their catalogue to 18 million tracks, iOS and Windows apps and a deal with Lenovo.  Rara have been in the market for some time now but have largely slipped under the radar.  Now though they appear to be ready for taking a shot at the big time.

There is of course no shortage of streaming music services (Spotify, Deezer, Rhapsody, Wimp, Simfy, Sony Music Unlimited etc etc) but there is also a massive amount of opportunity.  Streaming will become increasingly pervasive as the music world continues its steady switch from the distribution age of selling-units-of-stuff to the consumption era of access-trumping-ownership.  In fact streaming will become so ubiquitous that it will become anachronistic to talk of ‘streaming services’.  Streaming is merely the technology that enables on-demand, consumption based music experiences.   So when the leading on-demand services only number their total users in the low tens of millions and paying users in single digit millions, while Apple touts 450 million credit card iTunes accounts, the scale of the untapped opportunity is abundantly clear.

The challenge is how to sell streaming to the masses.  Personalized radio is one approach: Pandora have made a lot of progress, with more than 150 million registered users and 7Digital just announced a $10 million finance raise to (among other things) pursue their own personalized radio play.  Rara’s strategic ambition though, is to take on-demand streaming to the masses.  Rara has built its user experience and market strategy around targeting the mass market consumer, opting for moods and a visual navigation approach over the traditional list-based navigation.  But an inherent difficulty with selling premium subscriptions to the mass market (Rara do not have a free tier) is that those very consumers are the ones who are going to find renting streaming music an unfamiliar concept.

Rara have built a service designed to demystify streaming. The partnership with Lenovo (Rara will be pre-installed on laptops and tablets) will help.  But a new stealth competitor will be present on those devices, in the shape of Microsoft’s subsidized xBox Music on all Windows 8 devices.  When you consider the challenge of persuading a new laptop owner to pay for a music service when the device comes with a free music service embedded in the OS you realize just how disruptive Microsoft’s new music play is.  As I have said before, I’ll be very interested to see what the European Commission make of xBox Music’ Windows 8 bundle, considering that years ago they compelled Microsoft to unbundle Windows Media Player from Windows for being anti-competitive.

The xBox challenge is of course a hurdle all music service will have to navigate, but Rara will be hoping that being pre-installed on the devices of one of the world’s biggest PC manufacturers will give them an advantage over the rest.