Yesterday I delivered a keynote at the Music 4.5 Mobile music conference. My presentation was entitled ‘Mobile Music: Apps, Ecosystems and the Cloud’ and here are some of the highlights.
I’ve been a music industry analyst for more years than I care to remember and I recall my first mobile music experience being on a Wap 1.0 handset with a monochrome screen and no graphics. Mobile music has obviously come on a long way since then but it remains hindered by the recurring error of trying to do too much too soon. Mobile seems to be perennially burdened with developers’ aspirations being one step ahead of what contemporary mobile technology can deliver. Witness the continually delayed arrival of ‘NFC payments are about to go mainstream’ as a case in point. Mobile music’s poster child Shazam, was itself far too early to market. I remember being demoed the tech by the founder a decade ago. It took the advent, many years later, of the iPhone and the iTunes App Store to enable Shazam to become the runaway success it currently is. Most start ups aren’t lucky enough to manage to wait for the pieces to fall in place.
Mobile music is undoubtedly going through an unprecedented period of buoyancy, perhaps even prosperity, driven by two key dynamics: the rise of smartphones and the app boom. 46% of UK consumers have a smartphone (see figure 1) which at first glance presents a great addressable audience. But as my former colleague Ian Fogg observed, as smartphones go mainstream we end up with the quasi-paradoxical situation of smartphones with dumb users. (By way of illustration one panellist referred to a customer request supporting for his HTC iPhone). Most new smartphone users don’t even use a fraction of the functionality on their devices and this creates big problems for music strategy. Because mobile music apps are inherently the domain of the tech savvy, not the tech-daunted majority.
It is easy to think that the future of mobile is apps. But as a cautionary tale consider that UK ring tone revenues plummeted by 32% in 2011. Once ring tones looked like the future of mobile music. Things change, and quickly so.
Apps are just one step in the evolution of mobile
Mobile Music has had more than its fair share of false dawns, largely because of wrongly set expectations. The App revolution appears to have finally kicked mobile music into market maturity, though in actual fact it is just one more step on the journey.
One of the key reasons apps have been such a runaway success (Apple just announced its 25th billion App download) is because they play to the unique characteristics and strengths of mobile as a channel. They deliver fun and convenient experiences that are typically also social, location sensitive and instantaneous. All integral parts of the mobile phone’s DNA.
All of which is great of course, but there is a risk that the current infatuation with Apps is a focus on form over function. Apps may have driven a paradigm shift in mobile behaviour but they are in the end just software. They are a natural part of the evolution of the mobile platform and experience. They play just the same role as software does for the PC. But of course we don’t excited about having McAfee and Excel icons on our desktop (see figure 2). The reason why it feels so different for Apps is because of the channel strategy, namely App stores. There’s just one place to go and get every type of software you could want, all of course with the same billing details and some guarantee of quality of experience. A far cry from the PC experience of searching the web for the right software, reading reviews and creating a new user profile on yet another online store, hoping that the retailer is safe and secure.
The history of mobile music to date can be broken down into three key stages (see figure 3):
A lot of consumer got burned in that first stage of mobile music stores, finding themselves subjected to poor quality experiences that paled in comparison even to the supremely average contemporary online stores. The main mistake made was to expect too much from the rudimentary technology that was available: handset memory and screens were both too small and connectivity was far too slow and patchy. WAP 1.0 and GPRS simply weren’t music delivery technologies. The first stage of mobile music development failed because mobile tried to be a ‘mini-me’ PC music and was doomed to never stand up to the test.
The wave of the current App boom has lots of force left in it yet. But when it finally does subside, the marketplace is going to be left realizing that Apps are the tool not the endgame. The next stage of mobile music will be putting into practice what the app revolution has taught us about what mobile should be, what role it should play and where it should sit.
Value chain conflicts
Perhaps one of the most challenging aspects of launching a mobile music service is the conflict across the value chain. In highly simplistic terms there are three key constituencies in the consumer mobile value chain: the handset makers, the carriers and the retailers. Of course sometimes one entity can play two or even all three roles. Each wants to own as much of the customer relationship as they possibly can. Throw music in the mix and suddenly each of those stakeholders is busy trying to leap frog the other (see figure 4). This of course is what Nokia found themselves up against when trying to take Comes With Music to market: the carriers simply saw Nokia trying to circumvent their own heavily funded digital music services and yet Nokia was still asking them to subsidize those very same handsets…
The mobile music service value chain has become a complex place to navigate, with not only competition but also a diversity of business models each with their own unique twist on carving up the revenue pie (see figure five).
Value Chain Conflict Translates into Consumer Confusion
But value chain conflict doesn’t just impact business, it hits consumers as well, with an increasingly confusing mish mash of music brands on any given phone. And then of course there is the added complexity of ecosystems and operating systems. Consumers are inadvertently being forced into make bets on their long term mobile future. Once a consumer has opted into an app store ecosystem, paid to download apps over a 2 year contract, uploaded their music to a locker, saved their playlists etc it becomes very hard to move. Not so much velvet handcuffs as clapped in iron chains. Add to that the complexity of handset operators developing their own app and music service ecosystems within each of the OS siloes (see figure 6) and an increasingly complex picture emerges. All of which skews the field to music services which are not tied to any single operating system fiefdom. Perhaps the biggest winner out of all of this mobile music fragmentation will be Facebook? Currently quietly collecting the world’s most comprehensive set of music service user data, come the end of the year Facebook will be uniquely well positioned to act as cross-service, cross-OS conduit. Spotify might be making a play for being the operating system for music (I say the API for music, though that’s probably semantics) but Facebook could become operating system for music *services*.
The Future’s Bright, Probably
There is no doubt that mobile brings a huge amount to the digital music equation, making music discovery, acquisition and consumption more immediate and fun than it has ever been. With the help of the likes of TopSpin and Mobile Roadie it has become the ideal conduit for deepening direct to fan relationships. And though mobile will play a key part in cloud focused music services it is the app developer community which has transformed mobile most. While paid mobile music services remain mired in internecine value chain conflict, Apps have transformed mobile as a music channel from an awkward, underperforming curiosity into something vibrant and truly differentiated.
Tablets add important context. They turn the conversation from mobile music strategy to connected device music strategy. (They also do a better job at most music experiences than phones). In fact talking about mobile as a separate channel is no longer that instructive, rather we should think about mobile as one consumer touch point in an integrated channel and platform strategy.
But, once again, it is crucial to consider that Apps are the enabler, not the objective. Remember, ringtones were the future once too. The challenge for developers is to navigate through the wild west gold rush, and establish long term learnings from the App boom experience. Think of the App economy as one big market research project (that’s certainly how Apple views it). When the wave subsides the mobile music landscape will have changed forever. Artists, labels, managers, developers, carriers, handset makers all need to work together to ensure that that future is as positive a force for the music industry as the early signs suggest it could be. The depressing alternative is that we look back in 5 years at the App era as another ringtone bubble.