Finally Someone Builds a Digital Music Service the Way It’s Meant to be Built!

Regular readers will know that I’ve been a long-term and vocal advocate of radical music product innovation.  There have been modest encouraging steps from a diverse mix of places, such as iTunes Pass, Topspin, Open EMI, Björk’s ‘Biophilia’ app, Swedish House Mafia’s ‘One’ app, Pledge Music etc.  All have edged forward disparate aspects of music product strategy but they have also all lacked a unifying framework to pull them together.  Today comes the first stab at a music service that pulls together many of those parts.  But it doesn’t come from one of digital music’s big players, nor from a major record label, but instead New York dance label Fools’ Gold Records with their Fools Gold: The Goldmine subscription service.

[EDIT: The Goldmine is powered by Drip.FM]

Subscribers get new and old music, curated content, remixes, DJ sets, extras, merchandize discounts, priority access to events and more.    This is almost exactly the list of product features that I laid out for the Music Product Manifesto back in 2009 so it should come as no surprise as quite how enthusiastic I am about the offering.

The reason I listed those attributes three years ago was that this broad selection of multimedia assets truly reflect what an artist is in the 21st century, so much more so than a CD or a download does.  They are also the assets which labels (majors in particular with their 360 deals) are increasingly becoming active in.  It is little short of a travesty that more has not been done until now.  Hopefully Fools Gold’s innovation bravery will help nudge the industry wide needle forward.

Of course it is much easier for a small label like Fools Gold to pull together the disparate artist assets necessary to create the holistic offering, but as I argued in my presentation to Midem in 2011, “the scale of the potential rewards is more than big enough to justify the sizeable effort: what is at stake is the entire future of premium music products.”

The Goldmine also ticks most of the boxes of my DISC principles that I laid out in my Music Format Bill of Rights (see figure):

Dynamic:  One of the things I like most about the service is its guarantee to deliver every new release on the label automatically to the user.  This is what music products need to do in the digital age, pushing relevant content to the consumer rather than relying on them to pull.

Interactive.  The service includes accapellas and remix stems for users to step out of passive listening into active creation.  This of course works perfectly for the dance music audience where a large share of the audience are aspiring DJs and producers.  A great next step would be some in built functionality that allows even the most novice user to play around with stems, perhaps  in the context of a social gaming environment.

Social. This seems to be the only key DISC element not catered for by the Goldmine, but they certainly have the building blocks to deliver on this, most notably the membership base.

Curated.  Fools Gold curate tracks from the archive as part of the service and in addition deliver exclusive content and extra content.

The Goldmine isn’t the full package, nor does it signify a turning point in music product strategy (because that requires major record labels to jump on board), but it does represent the bravest innovation step yet taken.

Fools Gold just set the standard for the rest to follow.

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Media Industry Blog Report: The Media Format Bill Of Rights

Today I have published the first Media Industry Blog report:

The Media Format Bill Of Rights: A Manifesto for the Next Generation of Media Products

The report is available free of charge to subscribers of Media Industry Blog (to subscribe simply head over to Media Industry Blog and submit your email address in the form on the right of the page).

The Media Format Bill of Rights builds upon a series of concepts and frameworks first discussed in the report ‘The Music Format Bill of Rights’ (which can be downloaded here).  Although some principles translate cleanly across other media industries many others have a more complex story.  This report looks at just how diverse the challenges are, and makes the case for a media product innovation framework across multiple media industries.

Click here to read highlights of the report.

The Tale of the CD, the Digital Refusnik and the Charitable Collector

Earlier this year I raised the question of whether the music industry was going the way of the newspaper industry, whether its core audience was aging, stuck on its physical format while the younger generation feasted on free content.  It is becoming increasingly clear to me that this dynamic is arguably the most sizeable challenge facing the recorded music industry.  Product innovation (my hobby horse) is of course crucial, but its remit will be drastically reduced unless the ‘CD Problem’ is fixed in tandem.  Indeed, the two are intertwined.

The CD is polarizing the music buying marketplace

The importance of the CD is at serious risk of becoming a hindrance to innovation, particularly as its core customer base becomes more entrenched:

  • The CD as fossil fuel. I have often argued that the CD is the record labels’ heroin, a habit which they simply cannot kick and which is hindering their ability to move on in life.  The analogy is probably a little unfair, as it implies the relationship is a purely destructive one.  A fairer metaphor is the world’s dependency on fossil fuels: we all know that they should run out some time in the not so distant future.  But we also know that we have been hearing about their imminent depletion for decades and yet they are still here, thus far at least.
  • Digital is creating a fault line across the music buyer landscape. With all of focus on digital strategy it is sometimes easy to forget that the CD is still the beating heart of music revenues and the most widespread music purchasing behavior, even in the US, that most digital of western music markets (see figure one).  What is of concern is that a very large proportion of those CD buyers only buy CDs and what is more, they buy them offline in high street shops, malls and supermarkets.  The industry used to view these consumers as the next wave of digital customers, the buyers who would naturally transition to digital.  Unfortunately it is becoming increasingly clear that many of these consumers are better viewed as ‘Digital Refusniks’, consumers who have either actively chosen not to go digital (e.g. vinyl junkies) or see no appeal (mass market middle America, Mr Main Street, Mondeo Man etc).  But these consumers are getting older (see figure one) and unless a transition strategy is implemented they will just carry on getting older until they are with us no longer, just as is happening with newspaper readers.
  • CDs work fine while we all still have CD players.  The problem with CDs is that you need somewhere to play them.  That might not feel like a problem now but it is going to become one.  Technology expenditure in the living room has shifted from audio to video.  Our TVs have got bigger, as has the size of the piles of boxes underneath them (which for some reason are still called ‘set-top’ boxes even though most TVs don’t actually have ‘tops’ anymore).  Meanwhile the Hi-Fi has become the second class citizen of the living room. People used to change their Hi-Fi’s simply because manufacturers changed the colour they made them in, now the average living room either has a dusty old midi system or an iPod docking station.  For the Digital Refusniks – most of whom of course don’t have docking stations – there will come a time, not so far from now, when that dusty old Hi-Fi looks just too old and will be put away in storage.  At which point the CD will have disappeared out of the living room and there will be little reason for buying CDs anymore, which will actually mean just not buying music anymore for these consumers.  The TV, radio and the CD player in the car –as long as there still is one – will sate their music appetites instead.

A physical-to-digital transition strategy must start with a keener understanding of what makes CD buyers tick

The Digital Refusniks need bringing into the digital realm with hybrid physical-digital products before they simply fall out of the music buying population.  The case for a physical-to-digital transition product strategy is clear, but it needs basing upon a clear understanding of why people value CDs. Across the music industry, consumer research projects must create a detailed and nuanced picture of CD buyers’ wants and needs.

To this end, but in an entirely non-scientific, not statistically significant and largely subjective manner, I yesterday canvassed my Twitter followers with this question: Do you still buy CDs, and if so why?  The results, as long as they are considered in a purely directional and illustrative sense, present some interesting trends (see figure two):

  • 77% of my tech-savvy music aficionado skewed base of Twitter followers still buy CDs
  • A fifth of those CD buyers also buy vinyl
  • Ownership, supporting favourite artists and artwork are the top three reasons for buying CDs
  • Just over a fifth only buy CDs for ‘special’ albums and just under a fifth only buy CDs rarely
  • 14% said they had either stopped buying CDs altogether or were buying fewer because of streaming music (in most cases they were paying for 9.99 subscriptions)
  • 12% buy CDs because they are scared of their PC and / or cloud services crashing and losing all their music

Say hello to a new music buyer segment: the Charitable Collector

The broad picture is one of the CD as a hybrid of a collector’s item and an honesty box: people buying CDs to support their favourite artists and to own something tangiable and visual.  Perhaps the best label for describing this very specific group of conscientious CD Buyers is Charitable Collectors. Of course the music industry cannot afford for the CD to become relegated to a role as the picture disc of the 21st century.  Also artists should be working out ways to deliver much greater value to their dedicated fans than just a plastic disc which they often don’t even see much income from.  But challenges aside, there is a rich seam of value for music product strategy to tap and to test.

It is important to consider that my Twitter followers skew towards tech-savvy music aficionados so this is more of an insight into the minds of digital music fans who also still value CDs rather than the Digital Refusniks.  Nonetheless there are some key learnings here which translate across both groups and which, if nothing else, provide some solid foundations for exploring just what the industry should be asking about to truly understand the diverse priorities of CD buyers.

Without fixing the CD problem revenues will decline in the long run

Finally, the revenue case for a physical-to-digital transition product strategy is simple: unless it happens music revenues will decline.  Figure three shows a scenario forecast for global music sales that assumes that things stay the same as they are now i.e. that digital growth remains around the 7 to 8 percent mark and that CD revenue decline slows, as sales consolidate around the hardcore of Digital Refusniks and Charitable Collectors.  In this scenario we will most likely see some modest growth by 2012 and 2013 but after that the market will enter steady decline despite continued digital growth.  The reason for this is twofold:

  • Digital needs a new generation of music formats to drive stronger growth (see my D.I.S.C. post for more on this)
  • CD revenues will start to decline at a steady CAGR of 5% or so due to natural wastage among the remaining CD buyers due to all the various reasons highlighted above

The CD remains one of the music industry’s most valuable assets, second only to those consumers who are still its loyal buyers.  Now those consumers need a new generation of music products that meet their needs in a way that downloads and streams clearly do not.

Agile Music (the Midem Speech)

For those of you who weren’t able to make it to Midem last week here are the text and main graphics from my Midem Visionary Monday speech.

Agile Music: Artist Creativity and Music Formats In the Age of Mass Customization

Today I want to talk to you about a concept called Agile Music, a framework for understanding how artist creativity, industry business models and music products must all undergo a programme of radical, transformational change.

I’m going to start by outlining the catalysts for this change.

This time last year on this very stage I argued that the digital music market was at an impasse, that momentum was seeping out of the space at an alarming rate.  Unfortunately 2011 lived up to the pessimistic billing.  The market further consolidated around the Triple A of Apple, Amazon and Android and digital revenue growth remained stuck in single digit rates.

The simple fact is that the digital music market should be hitting hockey stick growth curves by now.  And don’t think that hockey stick growth curves only exist in the crazy minds of industry analysts, take a look at this chart: hockey stick growth rates are what the music industry itself used to be used be based on.

This chart also reveals a crucial fact: each time an analogue music format went into decline its successor was already firmly in the ascendency.  The same is patently not true of the digital products and their failure to generate a genuine format succession cycle is dragging the whole market down.

So we had a year once again defined by declining revenues.  And though streaming (especially Spotify) had a fantastic year, we saw the emergence of the debate over whether access based streaming services cannibalize ownership.  The third key trend of 2011 was the emergence of new ecosystems to challenge the dominance of Apple’s iTunes.  Ecosystems from Facebook, Spotify, Amazon, Android.

2011 also saw the first real stirrings of three key trends which will shape 2012: firstly, Social listening: a niche activity thrust into the mainstream by Facebook’s subtly brilliant content dashboard strategy. Open innovation, supercharged by age of the API and connected consumption, powered by increasingly ubiquitous connectivity.  These three trends are also the fundamentals of Agile Music.

And so, onto Agile Music itself.  The access / ownership debate is in fact just one part of a much wider transition in content consumption.  In the analogue era media consumption was characterized by ownership of linearly programmed physical formats that we leant back to consume.  In the digital age we lean forward, interact and value access.

A new generation of music formats is needed that are built for the digital age rather the current ones which essentially squeeze the analogue square into the digital circle.

But just in the same way that HD TV and 3D movies need new content, this new wave of products needs to be built upon an entirely new approach to artist creativity.

Analogue-era music formats shaped artist creativity.  In the 50’s artists recorded singles, in the 70’s 8 song albums, in the 90’s 14 song CDs.  In the 21st century, well for some reason they’re still recording 14 song albums. When of course there is no music format reason for them to do so anymore.

The other big change is that artists now have at their disposal a much wider range of creative inputs into their music, such as fan forums, social networks, fan remix apps.  Inputs that should be harnessed in a structured manner rather than the ad hoc approach which currently dominates.  And don’t mistake these inputs for just being marketing opportunities, or tactics for boosting ‘engagement metrics’.  They are genuine windows of creativity that artists and their labels simply cannot afford to ignore.

This fan input comes in three key forms, what I call the three Cs of fan-fuelled creativity:  Customize, Create and Contribute.  The degree of fan participation ranges from modest on the left, to deep on the right, because of course all fans are not the same.

These three levels of fan engagement need embedding into the creative process , which you’ve probably realized by now, means a much deeper level of participation for the average artist. I’m not suggesting that everyone has to become Imogen Heap, but the needle certainly needs shifting further along the dial from where it currently sits.

Agile Music means embracing fan fuelled creativity; it means breaking free of the straight jacket of the 14 track album and releasing music when it is ready; it also means releasing some of it before it is ready, to let fans help shape the music .  Agile Music means allowing music fans to customize their music experiences, and for those music experiences to be dynamic and ever changing, free of the stasis of physical media formats.

But a vibrant future for music products and revenues can only occur with networked collaboration right across the music industry’s various value chains.  Artist, labels, developers, technology companies, telcos all need to pull together to create a generation of music formats that will be a genuine successor to the CD.  This collaboration is needed, and it is needed now, because what I am proposing here is merely verbalizing what consumers already expect.

And this is why the future of music products must be built upon a consumer centric Music Format Bill Of Rights, which can be defined by four key principles: Dynamic: they must always change and update with new content (the format stasis of the download and the CD need consigning to the history books); Interactive: empower consumers to participate in their music experiences; Social: music has always been social, now it is massively social and music products must place this at their core; Curated: the curation of dynamically updated music content will not only be part of the key value, it will become part of the creative construct itself.

Now the irony of these principles spelling that most physical of terms DISC is intentional, but make no mistake, these are the basic building blocks that any new music product must contain if it is to have any long term viability.

And to whet your appetite here’s a glimpse of what a DISC product should look like.  It looks a lot like an app experience and for good reason.  The future of music products will be app-like experiences.   . DISC products will leverage the potential of apps to deliver rich, curated streams of artist content incorporating everything from photos, interviews, games, outtakes, remix apps through to core music audio and video itself.  But the central value of DISC products will come from how they are out together. It won’t matter whether kids upload elements up to Rapidshare or Torrents, the value will lie in the uniquely curated context of the product, just as our favourite magazines and websites deliver a value as a whole which is much greater than the sum of their individual parts.

And not only do DISC products compete with piracy, they mitigate the access / ownership debate.   Because DISC products will be artist specific.  Music fans will buy DISC products for each of their favourite artists and then use streaming services for the rest, thus solidifying a complementary and additive role for streaming.  A fan will pay to get everything their favourite artist does for the next 18 months, delivered directly to all of their devices (and I do mean to all of their devices because we are in the per person age, not the per device age, and it is time for licensing practices to embrace this reality).

So to conclude:

– The paradigm shift in consumer behaviour is not just here to stay

– No single part of the music value chain can fix this on their own, and artists must play a more active role

– Music fans already expect D.I.S.C. experiences.  Don’t meet those expectations, exceed them

Now I know that a lot of this is easy enough for me to lay out here on stage but complex to implement.  However the stakes are high enough to justify the sizeable effort.    The next generation of music formats needs to be dictated by the objective of meeting consumer needs, not business affairs teams’ T&Cs.  It must be defined by consumer experiences not by business models.  The cart’ of commercial terms, rights complexities and stakeholder concerns must follow the ‘horse’ of user experience, not lead it.

The Music Format Bill of Rights

Today I have published the latest Music Industry Blog report:  ‘The Music Format Bill Of Rights: A Manifesto for the Next Generation of Music Products’.  The report is currently available free of charge to Music Industry Blog subscribers.  To subscribe to this blog and to receive a copy of the report simply add your email address to the ‘EMAIL SUBSCRIPTION’ box to left.

Here are a few highlights of the report:

Synopsis

The music industry is in dire need of a genuine successor to the CD, and the download is not it. The current debates over access versus ownership and of streaming services hurting download sales ring true because a stream is a decent like-for-like replacement for a download.  The premium product needs to be much more than a mere download.  It needs dramatically reinventing for the digital age, built around four fundamental and inalienable principles of being Dynamic, Interactive, Social and Curated (D.I.S.C.).  This is nothing less than an entire new music format that will enable the next generation of music products.  Products that will be radically different from their predecessors and that will crucially be artist-specific, not store or service specific.  Rights owners will have to overcome some major licensing and commercial issues, but the stakes are high enough to warrant the effort.  At risk is the entire future of premium music products.

D.I.S.C.: The Music Format Bill Of Rights

The opportunity for the next generation of music format is of the highest order but to fulfil that potential , lessons from the current digital music market must be learned and acted upon to ensure mistakes are not repeated.  The next generation of music format needs to be dictated by the objective of meeting consumer needs, not rights owner business affairs teams’ T&Cs.  It must be defined by consumer experiences not by business models.  This next generation of music format will in fact both increase rights owner revenue (at an unprecedented rate in the digital arena) and will fuel profitable businesses.  But to do so effectively, ‘the cart’ of commercial terms, rights complexities and stakeholder concerns must follow the ‘horse’ of user experience, not lead it. This coming wave of music format must also be grounded in a number of fundamental and inalienable principles.  And so, with no further ado, welcome to the Music Format Bill of Rights (see figure):

  • Dynamic. In the physical era music formats had to be static, it was an inherent characteristic of the model.  But in the digital age in which consumers are perpetually online across a plethora of connected devices there is no such excuse for music format stasis.  The next generation of music format must leverage connectivity to the full, to ensure that relevant new content is dynamically pushed to the consumer, to make the product a living, breathing entity rather than the music experience dead-end that the download currently represents.
  • Interactive. Similarly the uni-directional nature of physical music formats and radio was an unavoidable by-product of the broadcast and physical retail paradigms.  Consumers consumed. In the digital age they participate too.  Not only that, they make content experiences richer because of that participation, whether that be by helping drive recommendations and discovery or by creating cool mash-ups. Music products must place interactivity at their core, empowering the user to fully customize their experience.  We are in the age of Media Mass Customization, the lean-back paradigm of the analogue era has been superseded by the lean-forward mode of the digital age.  If music formats don’t embrace this basic principle they will find that no one embraces them.
  • Social. Music has always been social, from the Neolithic campfire to the mixtape.  In the digital context music becomes massively social.  Spotify and Facebook’s partnering builds on the important foundations laid by the likes of Last.FM and MySpace.  Music services are learning to integrate social functionality, music products must have it in their core DNA.
  • Curated. One of the costs of the digital age is clutter and confusion: there is so much choice that there is effectively no choice at all.  Consumers need guiding through the bewildering array of content, services and features.  High quality, convenient, curated and context aware experiences will be the secret sauce of the next generation of music formats. These quasi-ethereal elements provide the unique value that will differentiate paid from free, premium from ad supported, legal from illegal.  Digital piracy means that all content is available somewhere for free.  That fight is lost, we are inarguably in the post-content scarcity age.  But a music product that creates a uniquely programmed sequence of content, in a uniquely constructed framework of events and contexts will create a uniquely valuable experience that cannot be replicated simply by putting together the free pieces from illegal sources.  The sum will be much greater than its parts.

Table of Contents for the full 20 page report:

Setting The Scene

  • Digital’s Failure To Drive a Format Replacement Cycle

Analysis

  • Setting the Scene
  • (Apparently) The Revolution Will Not Be Digitized
  • The Music Consumption Landscape is Dangerously Out of Balance
  • Tapping the Ownership Opportunity
  • The Music Format Bill Of Rights
  • Applying the Laws of Ecosystems to Music Formats
  • Building the Future of Premium Music Products
  • D.I.S.C. Products Will Be the Top Tier of Mainstream Music Products
  • The Importance of a Multi-Channel Retail Strategy
  • Learning Lessons from the Past and Present
  • We Are In the Per-Person Age, Not the Per-Device Age

Next Steps

Conclusion