Regular readers will know that I’ve dedicated quite a lot of time to the debate over the threat that free music poses to the music business, but that I’m also a strong believer in embracing free as a legitimate business in the right way. It’s a difficult equation to balance and I’m not going to pretend I have answers to every question that the strategy raises: the next five years will see the music business learning those answers for itself.
But there is a simple inescapable fact: if consumers are not offered compelling free alternatives to file sharing, the long term future of the music business is in serious doubt.
A broad range of tactics have been used to address the problems posed by music sharing on peer-to-peer networks, including legal action, technical measures and dialogue with ISPs. These are all important tactics, but the basic behaviour also needs harnessing. If the tap could ever be turned off on peer-to-peer file sharing another technology would evolve to meet the demand. A whole digital generation of youth has grown up expecting music to be free, unlimited in choice of catalogue and essentially disposable.
Those attitudes cannot be turned off. In fact, it could be argued that file sharing is becoming a technological manifestation of new behaviour patterns.
These behaviours need short term and long term attention.
The long term focus is to develop new perceptions of the value of music. Values that will be very different than those of the nineties, perhaps even very different from now, for the right mix of value hasn’t yet been hit upon. The digital youth need to learn a new sense of why music has a value to them that is strong enough for them to opt for legal options over illegal ones.
The short term focus is on providing enough compelling alternatives now, so that as the illegal sector becomes less and less appealing (due to legal action etc.) that there are genuinely interesting legal alternatives that they can jump to. I’ve discussed some of the possible types of services here. One interesting post script to that post is the success of Spotify with a purely streaming solution which is positive news for ISPs looking to push streaming services. They may thoughhave to accept they’ll need to subsidize rather than charge for such services and even lean on ad revenue. But if you layer in a mobile streaming story into the mix too, then for a telco with fixed and mobile businesses you’ve got a compelling proposition that also drives mobile data usage.
Beyond those services though, a crucial additional layer exists: the social music services. 32 million Europeans are already social music fans and Forrester predicts that the number will grow to 78 million in 2014 (see the press release here with more stats). That is key addressable market. But whereas the social music sites (e.g. YouTube, MySpace, Last.FM, imeem, Pandora etc.) had historically been seen by many in the music business as a good discovery tool, it is becoming increasingly clear that they are also an end in themselves.
The discovery capabilities of social music sites cannot be ignored: they are very positive drivers of music spending and many sites have robust affiliate relationships with digital and physical music retailers. But the discovery is not, and should not be considered to be their Raison d’être. The technology as technological manifestation of new consumer behaviour applies many more times more strongly to social music than file sharing. Social music services, in their various distinct ways, use the Internet to create something new, an immersive experience that did not exist before the Internet.
MySpace music’s success of 40 million streams in the first seven days after launch in the US (17-18 streams per person) show just how much consumption can be tapped, but many services don’t have access to the sort of deal that MySpace has achieved via it’s unique negotiating position to make such large stream counts a viable business model.
The digital future of the music business is a complex and multifaceted one, but social music services will be a crucial component of it. Key to that success though, will be a shift in assumptions and revenue models.