It’s Windowing Jim, But Not As We Know It

Back in 2009 I wrote a report for Forrester Research entitled ‘Music Release Windows: The Product Innovation That The Music Industry Can’t Do Without’ (you can read the summary blog post here, and the ‘money’ graphic is here).  In the report I proposed that the music industry should adopt three release windows based around a ‘Preview’ window for premium customers, a ‘Mainstream Pay’ window for CDs and downloads and a ‘Free to Air’ window for ad supported streaming.  With all of the brouhaha surrounding the Atoms for Peace withdrawal from Spotify, release windows, and the role of streaming services more widely, are very much back centre stage.  But whereas I strongly believe in the case for release windows, I believe that, as per my 2009 report, that paid subscriptions should be in the first window, not the last.  It is free-to-consumer, ad supported streaming that needs to be pushed to the back of the queue and it is high time that the windowing and streaming debate in general makes a clear distinction between the two very different propositions.

Subscription Service Hold Outs Actually Hit the Best Fans Hardest

Music fans that pay 9.99 for a Rhapsody, Spotify, Deezer or Rdio subscription are among the globe’s most valuable music consumers.  These music fans need treating as such, almost regardless of the business models that may surround their consumption points of choice.  It is not their fault that the music industry and tech sector contrived to construct business models that have propagated doubt and division among many of the industry’s key stakeholders.   This is not to dismiss the absolutely crucial issues of sustainability and equitability, but instead to raise the issue of who is paying most the price of windowing?  The services or the fans?  There isn’t a clear-cut answer, and the decision dynamics are analogous to those of applying economic sanctions on a nation state.

Delay Releases to Free Platforms, Not Paid Ones

But if we for the moment view the issue through the lens of the music fan, then it becomes abundantly clear that if a high value music fan deserves to be treated like a VIP then something analogous to the opposite is true for those consumers that choose not to pay for music.  This is the case for why the ad supported tiers of music subscription services, along with Pandora, the radio and YouTube should all be put into the last release window.  This is already how the movie industry behaves.  Now clearly this proposal is not without controversy.  The music industry’s entire discovery mechanisms revolve around putting the best content on free-to-air platforms first under the remit of promotion. But this proposal does not have to be the death knell for that approach, as long as the potential of digital platforms are properly harnessed:

• Think of subscription services as ecosystems not silos: There used to be a physical journey between the radio and the music store.  Now in subscription services discovery and consumption are symbiotically joined. This means that the radio promotion approach can be played out in subscription services and in doing so reach the most valuable customers based on their music preferences. Thus when the radio window hits weeks later it will be targeting a largely distinct group of consumers for whom it will still be the first time they have heard the music.  And for those that are subscribers and radio listeners, the few weeks delay may prod them into reengaging with the album they first heard on their subscription service.
• Window albums not singles: Singles are invaluable tools for promoting albums and tours.  There is less need to apply windows to singles, or rather to the lead singles from the album.  To protect the value of the premium release window though, it is important that only one single hits the free to air channels before the album hits the first window. Else the impression is given of too much content being too widely available elsewhere.
• Combat scarcity with new products: Of course the biggest challenge to windowing is the lack of scarcity i.e. what’s the point in turning off the tap if its available elsewhere?  There are two answers to this 1) by ensuring content is available first only on the premium platforms, the availability of content on free platforms is markedly reduced (radio and YouTube account for the VAST MAJORITY of music listening, P2P is in decline) 2) more has to be added to the premium music products to make the windowed content act as a complement to a rich, curated product experience not available elsewhere.  Two examples of how to do this are artist subscriptions and D.I.S.C. products.

Holding Back from Paid Subscription Tiers Can Be a Missed Opportunity

It is still too early in the emergence of widespread streaming adoption to draw definitive conclusions about the impact of windowing but there is a growing body of useful evidence.  Spotify’s Will Page this week released a report that brings some invaluable evidence and analysis (you can read the report here). Although Will is obviously on Spotify’s pay roll and Spotify clearly have an agenda to push, Will is a diligently objective economist with an impressive track record at the UK’s PRS for Music, and his work should not be dismissed on the grounds of assumed bias.  In the report Will pulls data from Spotify for streams, GfK for sales and Musicmetric to compare the performance of albums across all three channels for windowed and non-windowed albums.  The broad conclusions on the sample of albums tracked is that non-windowed albums did not appear to lose sales  but that windowed albums had much higher piracy rates.  Significant caution is required when interpreting this type of analysis, principally because it is impossible to definitively identify causal relationships e.g. the marketing strategy of one artist might tend towards piracy activity than another, as might the geographical location of the artist and the global distribution strategy.  But even with these caveats, the report presents some solid directional data. The market needs much more data like this and I will be adding to the data pool later this summer with a white paper that I’ve been working on for some months now.

Windowing Doesn’t Solve the Streaming Debate, But It’s Not Meant Too

Windowing does not address most of the broader issues that currently surround streaming.  It can however be an important part of the equation if, and only if, it is done on the basis of distinguishing between free-to-air streaming and paid streaming.  Though not quite as distinct as an iTunes download is from a Torrent download, the parallel is nonetheless provides useful context.  This is not to discredit the huge value of radio, YouTube and Vevo in driving music discovery, nor the equally strong value of freemium service free tiers in acquiring customers.  This is not a proposal to remove content from free-to-air channels, but instead one to simply not put everything there straight away. As the music discovery journey and consumption destination become ever more entwined, it is time to think long and hard about just how much leg needs to be shown to make a fan fall in love with an artist’s music.

The Long Tail Will East Itself: Covers and Tributes Make Up 90% of Digital Music Service Catalogues

In the early days of digital music, stores and services fell over themselves to boast about their burgeoning catalogue sizes.  Back then, when majors didn’t license widely, it really was something of an achievement to break the 1 million tracks mark, catalogue size was often a good indicator of the comparative breadth of choice among services.  But by the second half of the last decade, most of the majors had most of their catalogue online in most of the stores and services.  Independent labels lagged for a number of reasons but the majority of the independents (by market share) were also on the majority of services by this stage.  And yet since then, the average catalogue size of digital music services has grown from 4.3 million in 2008 to 16.4 million in 2012.  What fuelled this new catalogue arms race? It would be nice to think it was down to labels digitizing vast quantities of back catalogue, or even because of a surge of semi-pro artists.  The answer though, or at least the lion’s share of it, is much less appealing. Digital catalogues are so much bigger now because of filling and fluffing from covers, tributes and karaoke tracks.

Covers and Tributes Make Up 90% of Digital Music Service Catalogues

To test the theory I looked at the available tracks on iTunes for 10, randomly selected, top tier artists (see figure).  The startling key takeaway is that on average just 10% of the tracks listed for an artist is actually music by that artist.  And bear in mind that many of those tracks are duplicates.  The average U2 song for example, is listed multiple times ranging from original albums, remastered albums, EPs, greatest hits, compilations etc.

The vast majority of the remainder of tracks listed for an artist is filler drivel, endless cover versions, tribute acts and karaoke tracks.  As Peter Robinson highlighted in 2009, many of these cover versions sound all but identical to the original, while others have full intent on being identikit copies but poor musicianship and production leaves them sounding pitifully poor.  In among there are the occasional example of leftfield creativity, such as ‘Bass Parodies of Coldplay’ by Joe Bob’s Upright Bass Trio.  But artistic expression is hardly being tested with the likes of ‘Yoga to Coldplay’, ‘Led Zepellin Lullabys’ or ‘Dance Tribute to Lady Gaga vs Black Eyed Peas’.

When the Long Tail Goes Untouched

So just how much of the current 16.4 million songs on digital services are ‘the real deal’?  Back in 2008 24/7’s CEO Frank Taubert stated that 66% of his service’s 4.5 million tracks had never even been downloaded once (and remember these are the guys who power the vastly successful TDC Play unlimited free music service). That means that just 1.5 million tracks had been played, which is pretty close to the 1.6 million tracks we get if we apply the 10% rule across the entire 16.4 million catalogue count.

The number is probably bigger than that though.  eMusic responded to Taubert’s 66% claim with their own: that 75% of their 4 million tracks had been downloaded at least once.  But even if we take a straight average of the two (i.e. 44% of catalogue is untouched) we are still short of the complete picture.  Because even those tracks that have been played at least once will include multiple versions of the same song (e.g. album version vs single version).  Nielsen underscored the dynamic in 2009 when they reported that 3.6 million tracks sold less than 100 copies and just 1% of tracks were responsible for 80% of sales.

The Pseudo Long Tail is Killing the Real Long Tail

It is at this stage we start to see the core of the problem.  The short head will always dominate the long tail, but no more so than when the genuine long tail (the experimental artists, the up and coming, the niche genres) gets drowned out by the pseudo long tail of karaoke and 3^rd rate covers.

Discovery in the long tail is already a potentially market-crippling problem.  It is time for music services to stand up and be (down) counted.  16.4 million songs means nothing if the vast majority is useless filler.  This is not to say that there isn’t a place for this strata of bottom-feeder music, but that place is not as part of the main results of original artists.  At the very least music services should file those tracks away in their own section.  But even if they can’t bring themselves to do that, they should stop listing these tracks in total catalogue sizes. The 90% filler tracks paint a misleading and confusing picture of digital music availability.  The best solution of all though is for music services to do away with them all together, and if there is really a market need for them, then let some niche player fill that gap instead of blighting real music services.

Announcing the Music Industry Blog Start-Up Showcase

Over the last few months I’ve had conversations with a lot of really exciting early-stage music start- ups with a refreshingly diverse array of products and propositions.  Many of them though share the same problem: the challenge of getting from great idea and team to market awareness.  So, as this blog is read widely by investor and music industry decision makers alike I’ve decided to do my little bit by launching the Music Industry Blog Start-Up Showcase.

Over the next month I will be taking submissions for inclusion from *music* start-ups.  I’m specifically interested in early stage music start-ups, so if you are pre-funding, seed and / or chasing Series A then you could be just the sort of company to be featured in the showcase.  (There might be the occasional case for a later stage company to be included but there will have to be a very strong case).

The most important criteria of all though, is that your business is interesting, exciting and is doing something different.  That doesn’t mean you have to be a unique service or business model (though that would be great).  It does however mean that you must at least have a unique approach, a novel twist.

If you are interested in taking part then please answer the questions below and send them to me directly at musicindustryblog AT gmail DOT COM

Closing date for entries is 31^st May.  I will only be selecting the best of the entries for inclusion so I can’t guarantee your inclusion.  I will also be strict in applying impartiality, so that means even if I’m working with your start-up in an advisory capacity it doesn’t mean that you will necessarily be included, (sorry!).  For sake of full disclosure I will state clearly if I am advising for, or have been so at any stage, any of the start-ups selected for inclusion.

If you have any questions, queries or concerns please feel free to send me an email or reach out to me on Twitter @mulligan_mark

Music Start-Up Criteria

If you would like your start-up included in the showcase please answer and submit the following.

What capacity are you representing the company in?

The express elevator pitch (what you do in *one* sentence)

What problem are you solving / why does the music industry need you?

What is your business model?

What is unique about what you are doing?

Who do you see as your main competitors and why can you do things better than them?

Why do consumers and / or businesses need your service(s)?

Where do you want to be in 2 years’ time?

What investment stage are you at (boot strapping, seed, series A) and who are your investors?

250 words on your company (include things like management team, value proposition, go-to-market strategy, clients/partners, etc.)

Company URL(s)