The Hybrid Album: A Music Product Strategy Proposal

We are in the midst of a transition from ownership to access models but it is a shift that will take a generation to complete.  The intervening years will all be about managing the transition, both in terms of educating consumers but also with regards to ensuring that the revenue shift is as smooth as possible.  The download and the stream will co-exist for many years – especially in many emerging markets – and Apple’s iTunes Radio is a key example of how the two technologies can live side by side.  But more still needs to be done.  To that end what follows is a product strategy proposal that puts streaming into the very heart of download experiences while simultaneously driving download spending.

The Hybrid Album is a very simple and straightforward proposition:

  • Entire album download: when ever a download store customer purchases more than one individual track from an album the entire album and album art will download to the purchaser’s device.  The two track threshold is important as this proposition is not intended to swim against the tide and clutter the path for consumers that only ever want to buy single tracks.  Buying more than one track from an album though indicates a little more than passing interest in that album and represents an opportunity to engage the buyer with the entire release.
  • Two free streams per track: the purchased tracks will behave as normal downloads, the remainder of the album though will be presented with a stream icon that informs the purchaser that all the other songs on the album can be streamed free of charge, twice each.  Once any track has been streamed twice the icon will change to a click to buy icon.  Also when any single track has been streamed twice a ‘complete this album’ call to action will appear with a ‘save x% if you buy within the next 24 hours’ or ‘get an extra exclusive track free if you buy within the next 24 hours’.

And that is it.  Very simple but with the potential to be highly effective.  It gives download customers a taste of the on-demand streaming experience but directly drives spending.  The licensing that would underpin the Hybrid Album will be more complex than the consumer proposition but it is not exactly an insurmountable challenge, with plenty of analogous precedents to leverage.

It is a proposition that is comparatively simple to implement and with low risk.  Let’s get it done!

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.

The Tale of Emily White, Scarcity and the Future of Music Products

Unless you spent the first half of this week on the digital music equivalent of planet Mars, you will have noticed the Emily White furore. The long and short of which was NPR (US public radio) Intern Emily White blogging that she owned 11,000 songs of which just 15 were albums that she had purchased and pining for a universally available universal database of music.  The post was swiftly followed by reasoned critiques against, foragainst, and for, and also by vacuous foul mouthed grandstanding. What surprised me wasn’t the strength of feeling on the topic, but a view by some that this was somehow a watershed moment, a changing in collective perspective.  It wasn’t.  For anyone who has followed this space closely for more than a few years this debate will be seen as another chapter in a long-running discourse.  An important chapter, but just a chapter nonetheless.  Long time readers of my blog will remember a series of posts on ‘why music can’t just be free’ and the heated debate that surrounded them.  For those who didn’t, some of the posts are here and here.  (And for an insight into how ‘free’ impacts an artist take a look at this evergreen artists’ post.)

But the point of this post isn’t just to pour another layer of opinion into the simmering cauldron.  Instead I want to try to move the debate on from diagnosing the symptoms onto identifying a potential cure, or at the very least some palliative care.

For argument’s sake let’s assume the following:

  • A large share of consumers have fallen out of the habit of buying music and a larger share of younger consumers have simply never learned the habit
  • Fewer people place a monetary value on music than used to and yet more people listen to more music than ever before
  • High spending music consumers do exist though, and across all age groups, albeit in declining numbers

Understanding the Role of Scarcity

The key reason fewer people buy music is because they don’t have to.  In the analogue age there was a monopoly on supply of music: if you wanted to get new music you had to buy it in high street shops when record labels decided you could, paying the price they and retailers decided you should. The alternative was making a poor quality cassette copy from the radio or friends.  People who liked music had little choice but to associate a very specific monetary value to music.  Napster threw that scarcity model out the window.  With paying for music now a life style choice the monetary value of music has been subjected to hyper deflation.  The ‘price it and they will come’ logic now only applies to a small subset of music fans, a subset that is at risk of becoming an endangered species.

This doesn’t mean people don’t value music anymore, but instead that a majority no longer value it monetarily.  This dynamic is beautifully encapsulated in a response from a 12 year old file sharer that Feargal Sharky was fond of quoting

“I love music and if I could download my Nike I would pay for my music”.

Nike still has scarcity, that’s why so many kids pay for their trainers but not their music.  Like it or loathe it, as far as music products are concerned,  we are in the post-scarcity age.

What, if Anything, Can Be Monetized in the Post-Scarcity Age?

So if scarcity has gone – and it is gone for good – how can recorded music revenues ever be rebuilt?  Indeed should they?  Some argue that charging for music is an outdated model, but you will find that 99.999% of those people also believe that they should still be able to get that exact same music which they don’t think should be paid for i.e. they value the product, just not the price.  Their world view is shaped by the last decade of experience but lacks grounding in basic economics.  The music needs making and that costs money.  Whether that is the money the label invests when it takes a punt on an artist or the cost of an artist getting by on an often very modest income.

Arguing that artists should make their real money in ‘ancillary services’ misses the bigger picture.  Only a tiny subset of music fans pay for merchandize and only about half of music buyers go to concerts.  And the number 1 music consumption channel?  It’s still radio.  So those ancillary revenues are a much smaller addressable market.  They are also largely irrelevant if you are a songwriter rather than a performer.

Recorded music is still the core product. 95% of us listen to music most days.  The vast majority of music consumption (by all people) is recorded music.  Why shouldn’t it also be the core revenue stream?  Scarcity has been disrupted, not market demand.  None of us would reasonably expect a plumber to fix our washing machine for free and then go out into the street and make his money by selling overalls and tools.  Also let’s not forget that most artists make music because they love making music, not T-Shirts.

Why the Flat-Rate Isn’t the Answer

Don’t get me wrong: of course artists have to learn how to make money across a much wider range of income streams than ever before, but there is no inherent reason that they should have to accept that their core creative asset is no longer monetize-able.  The channel, product and pricing strategies may be broken, but the creative heartbeat of music is not.  Simply applying a ‘flat rate’ fee on all the music in the world might seem like an elegant and ‘convenient’ solution.  But it will only exacerbate the problem.  It will formalize and legitimize the concept that music has little value.  It will also accelerate the demise of those music fans who still like to support their favourite artists by buying their music. ‘Flat Rate’ is a pricing strategy for the low end of the music market, not all of it. Even if music has to end up like water, there should still be a market for bottled mineral water.

Of course unlimited access to music in the cloud will play a really important part of the future of music, it will probably be how most people consume music.  But that is a service which should have clear monetary value.  Everyone accepts that premium Cable and Satellite TV packages are paid for commodities.  In fact consumers pay more to have some of that content provided on-demand.  The reason it is different for music (and indeed news) is of course scarcity.

The New Wave of Scarcity

Scarcity still exists for music, predominately in the form of live, and consumers pay premiums accordingly.  If recorded music spending is ever going to rebound, scarcity must be reintroduced to music product strategy.   Not, however, scarcity in the sense of building walls around content (it will always leak out) but instead by creating scarcity of experience. The success stories of paid content to date (iTunes, Kindle, xBox, PlayStation etc) may be walled gardens but their success is derived from the quality of experience that is delivered within them and cannot be experienced externally.  Music products must learn how to create uniquely valuable experiences around music, fully leveraging the interactivity, connectivity and sociality of the contemporary digital world.  Current digital music products do not do so.  As I outlined in my Music Format Bill of Rights report (which you can download for free here) music products must be:

  • Dynamic
  • Interactive
  • Social
  • Connected

The future of music products will be app like experiences that deliver unique, interactive and curated music experiences where the whole will be far greater than the sum of the parts (see figure).  Pirating the individual components will lack the context rich, curated and programmed environments in which the music experiences will occur, and will consequently have massively diminished value.  Scarcity will have returned to music products.

Future Music Formats Must Be: Dynamic Interactive Social Curated

Waiting for an iPad Moment

Monetizing convenience only accelerates a race to the bottom.  Convenience should be an inherent part of the value of music products, but only one part.  Just because current music products don’t deliver enough tangible extra value to persuade the likes of Emily White to pay for music does not mean that it must always be thus.  Until 26 months ago the market between smartphones and laptops was that of netbooks.  At that stage most consumers not only did not own a netbook, they would have reported that they never intended to buy one either.  Then along came the iPad and suddenly we have a product revolution on our hands.  An apparently dead market segment transformed virtually overnight into gold-rush prosperity.

The music industry needs an iPad moment.  When it does come (and it will) even the likes of Emily White may finally start to see the value in paying for music again.