One again, continuing my bid to provide more fuel for the ‘music should be free’ fire this is the third in my short series of ‘Music Myths, Misconceptions and Mistakes’ posts, tackling one big ‘free’ issue at a time. Today’s topic is Subsidized* (the previous two posts can be found here: Part 1: File Sharing Part 2: Ad Supported).
*i.e. a service where all or most of the cost to the consumer is paid for by the content provider e.g. Nokia’s Comes With Music (CWM), Sony Ericsson’s Play Now plus (PNp) and TDC’s Play
Subsidized: 10 Mistakes, Myths and Misconceptions
1. Misconception: subsidized offerings will not further erode consumer perceptions of music as a paid commodity. Whatever the restrictions on marketing (see #2) consumers are smart enough to perceive CWM as being free music: they pay nothing for the music and the device costs the same as without the music.
2. Mistake: not calling CWM ‘Free’ or ‘Unlimited’. ASA concerns for the latter, and label imperatives for the former, mean that CWM cannot be marketed to its strengths. The effect described in #1 will happen regardless of whether the messaging is overt. Weakening the message will only weaken consumer adoption.
3. Myth: Subsidized offerings are a necessary but ultimately short-term tool for driving digital music adoption . A whole digital generation has grown up with no concept of paying for music online. Those habits are engrained. Free, subsidized services, and ad supported, will become permanent features of the digital music landscape.
4. Mistake: Managing consumer life cycles. Make no mistake, lots of mistakes will be made (!) as the industry learns how to manage these services. One of the biggest challenges is correctly segmenting users into those who will never pay, and those who can be migrated up the food chain.
5. Mistake: Positioning. Services like CWM and PNp can’t be allowed to be too successful – they need to be focused on core target consumers (e.g. young file sharers) and not be widely adopted by strong music buyers, else their spend will be cannibalized.
6. Myth: CWM and PNp will revolutionize the digital music market in the next 5 years. These services are vastly important (arguably the biggest thing to happen to the music industry in years) but their core impact will be longer term. Near term growth will be slowed by geographic roll-out, consumer awareness / education, handset replacement cycles, value-chain tensions.
7. Misconception: Subsidized offerings will not cannibalize premium digital spending. As long as targeting is kept tight, negative impact on spending on operator OTA services and online stores should be minimal, but it will decrease a little, though overall revenues will increase due to licensing income.
8. Misconception: Consumers will not ‘max-out’ these services. TDC’s Play service has had phenomenally high usage rates (see my post here for details). When people get unlimited access to free music, they use it!
9. Mistake: Not having licensed to fully subsidized offerings sooner. CWM etc. are the best tools the music industry has to fight file sharing with. They should have licensed to them sooner.
10. Mistake: If licensing terms don’t enable Nokia etc.to make money. If fully subsidized service business models are not financially viable (which doesn’t necessarily mean profitable BTW) their current proponents will eventually move onto something else, leaving what will be a gaping hole in digital music provision, which will quickly be filled by illegal free alternatives again.