Despite commendable progress the digital music market is still way behind where it should be. It is an easy mistake to view the global music market through the Anglo-American lens but if you strip out the UK and US from the statistics the result is that three quarters of global ‘rest of world’ music sales are physical. Thus ten years since the launch of the iTunes Store digital is still only a quarter of non-US and UK revenues. The role of Apple is, as ever, key: Apple knew how to make an elegantly simple user experience that just worked. Thus where Apple was strongest (US and UK) digital music sales prospered. But most consumers do not have Apple devices so the music industry needs more music services to be as elegantly simple as iTunes if it is going to push the needle on that 25%. The problem is that most of the services on which industry hopes are being pinned are anything but.
Innovating for the Elite?
Streaming subscription services are undoubtedly at the leading edge of music technology sophistication and recent innovations from Spotify in particular are setting the bar high for immersive digital music experiences. But paradoxically this is part of the problem. At the end of 2012 subscription and ad supported services accounted for just one fifth of global digital music revenues. Though that number will grow markedly in 2013 – and already over indexes in the digital sophisticate Nordic and Dutch markets – it will not overtake downloads anytime soon. There are of course many factors, including the key issue of pricing – 9.99 is not a mass market price point, but there is a more fundamental one: streaming subscription services are just too sophisticated for mainstream users.
The reality is that mainstream music consumers are not heavily engaged with music and like programmed, curated music experiences. For all the music industry turmoil of the last decade radio listening has remained relatively steady, even growing in many markets, and it also remains the number one music discovery source – still far ahead of YouTube. Radio’s enduring popularity stems from its simplicity. A common product strategy error is the assumption that more features = better quality product. But more often than not, less = more. The extra discovery features in subscription services are fantastic tools for the niche audience of engaged music aficionados that use these services but they also make them less accessible for mainstream users. This is what I term the Complexity Coefficient.
The Complexity Coefficient is a simple way of understanding a complex problem and can be calculated as follows:
Feature Benefits – Feature Sophistication = Complexity Coefficient
In short, the more sophisticated the features of a service, the less the benefits will be felt by the user. When this is applied to less sophisticated users a multiplier needs to be applied: a heavily featured sophisticated music service will already have barriers to use for an aficionado but will be entirely inaccessible for a mainstream user. The Complexity Coefficient manifests itself in another way also: the more complex a service, the longer the music journey is. For music aficionados that can be a good thing, but for radio-centric mainstream users it is a barrier rather than a benefit.
The Tyranny of Choice
When we apply this thinking to the digital music landscape something really interesting emerges (see graphic). The on demand subscriptions that monetize access – ‘Access Services’ – sit at the top right, highly sophisticated, but therefore also complex, with the longest music journey. These services provide access to a vast, vast catalogue of music. A catalogue that is growing rapidly every single day. Last week 7Digital’s Ben Drury reported that his company now has 27 million tracks in its catalogue and is growing at a rate of 100,000 a week.
Choice is fantastic but too much begets choice paralysis. There becomes so much choice that there is effectively no choice at all. This is the Tyranny of Choice. 27 million tracks is an unwieldy vastness of music that would take 205 years to listen to. What matters about music catalogue is the music that truly matters not the total size. Of those 27 million perhaps 3 to 6 million are ‘core’ catalogue. Of those how many really matter to any given listener? Perhaps 10,000 at the most? Even that would be 2 months of listening for someone who listens 10 hours a week and doesn’t listen to the same song more than once.
With the growth in catalogue each ‘Access Service’ must get 100,000 tracks worth of being better at its discovery job just to stay as good as it was last week. And despite the vast progress that is being made, few would argue that there is a long way to go yet before we can come close to arguing that the discovery problem has been fixed. So the odds are against a worsening status quo not an improving one.
The ‘Listen’ Services
But at the opposite end of the Complexity Coefficient scale a very different picture emerges. Here we have services like Pandora, MusicQubed’s O2 Tracks and Nokia’s Mix Radio delivering highly programmed, lean-back music experiences for the mainstream users, where the music journey is shortest. Whereas Access services give the user access to all the music in the world, Listen service take the user straight to the music that matters. One leads the user up the garden path, the other just opens the front door.
But there is an overriding monetization issue at the lower end of the Complexity Coefficient: most of these services predominately generate revenue via advertising. The majority of Nokia Mix Radio’s and Pandora’s users are on free tiers. O2 Tracks is the exception, with users paying for all tiers of access (other than a free trial).
In many ways the Access services are taking a TV broadcaster approach to discovery: they are trying to encourage users to discover as much new content as possible, to send the user on a rich journey of serendipitous discovery. The Listen services however are focused squarely on delivering a smaller selection of music the user is most likely to like, and keeping firmly within those parameters. To an aficionado the Listen service approach may feel restrictive and limited, but to a mainstream music consumer it fits their exact needs. But what is clear is that music services at the lower end of the Complexity Coefficient scale are going to be crucial for pushing digital music towards the mainstream. Welcome to the age of the ‘Listen’ service?