Comes With Music Finally Gets Its Route To Market

Orange today announced they will be ‘exclusively’ providing Comes With Music on the Nokia 5800 in the UK.  Finally Nokia’s Come With Music gets the route to market it needs.

I’ve long been a strong advocate of CWM and that belief remains intact despite reportedly poor sales to date.  Nokia always needed strong channel partner participation to make the service a success. Without the route-to-market, marketing support and – most crucially – subsidy support that the operators provide CWM is left looking like an overpriced, under featured oddity.  But with the support of an operator it comes into its own.

Orange packages start at just 25 pounds a month.  For this consumers not only get a decent number of voice minutes and texts, but they also get the handset for free and unlimited music that they get to own for ever.  That is a compelling proposition and offers genuine value for money. Unsubsidized, the cost in Italy for the same handset and music service, but without a voice and text tariff is just short of 500 Euros.  The comparison is stark and is central to why CWM has under-whelmed thus far.

CWM is an exciting product because, when packaged correctly, looks and feels like free to the consumer.  In this context DRM restrictions and a phone that falls short of iPhone sexiness are entirely tolerable.  But with a premium price point they become non-starters.

CWM, along with the likes of Spotify, We7, Last.FM and imeem, is one of the key weapons that the music industry has in its armoury to fight free with free itself.  CWM may not be free, but packaged like this it ‘feels like free’ and that’s enough to have real potential of pulling young music fans away from illegal downloading on a scale that hasn’t yet been achieved.

The Pirate Bay Ruling: What Does it Actually Mean for the Music Industry?

The problem with mixing lawyers and legislators with business is that the results can be unexpected and inconvenient. With the Pirate Bay case there was always a good chance for the music industry that the ruling would at best be short of definitive.

However the music industry has come out of this with a ruling that is more positive for them than many had been expected. Behind the technicalities of the legal arguments, there were two basic principles underpinning the case:

  • the Pirate Bay actively provides a service to help consumers download content without the express permission of the copyright owners
  • the record labels have internationally recognized ownership of the copyright and the right to exploit it

There are some interesting implications from this ruling, most notably the question of whether Google could now be held responsible for posting links to content that does not have copyright cleared?

Though the music industry have ultimately won (subject probably to an appeal) the ruling is not going to stop file sharing, nor have much long term impact  on file sharing activity.  So why they take on a case that delivered so little and had such a high risk of what would have been very public failure?

The music industry was always stuck between rock and hard place on this one. They couldn’t turn a blind eye because the Pirate Bay were positioning themselves as 21st Century digital Robin Hoods, stealing from the ‘fat cat media companies’ and redistributing the wealth to the ‘poor consumers’. Their provocative message to the record labels was essentially “Come and get us if you think you’re hard enough”.

The history of file sharing is of course littered with the detritus of legal action against the networks and even the users themselves. But in most markets file sharing has grown year upon year. By the time that each major file sharing destination is finally closed down by the music industry the file sharing masses have moved onto the next big thing. Whatever the ruling would have been, file sharing wouldn’t have gone away. In fact the problem is worse than that, the new additional threat of non-network file sharing (via Instant Messenger, email, blogs, newsgroups, iPod ripping) is growing strongly and becoming firmly established. And then there’s also a whole mass of anonymous networks lurking in the wings.

So ten years on from the launch of Napster why is the music industry still suing the file sharing destinations? The simple answer is because they have to be seen to. It’s the same reason that customs officials and police continue to fight illegal trafficking of drugs and other contraband despite doing little more than scratching the surface of the problem. If the music industry isn’t seeing to be taking action then it effectively turns on a green light to the illegal sector.

The good news from the music industry’s perspective (and indeed from the consumers’ one also) is that the industry is well into the process of fighting free not just with the courts, but also with free itself.

There is a poetic symmetry to the fact that Sweden is home to the defining icons of both sides of the free spectrum: the Pirate Bay and Spotify. With services like Spotify the music industry is giving consumers genuine compelling, and crucially free, alternatives to illegal file sharing.

So although the ruling may not be exactly to the music industry’s taste, out of the ashes of the case the parallel free universes of Pirate Bay and Spotify will continue to plot their disparate courses. The music industry can taken comfort from the knowledge that the latter is gaining genuine momentum. Free may just succeed where 10 years in the courts failed.

What the ISPs and the Record Labels Need to Do Next

The UK music industry and ISPs have been working towards the goals of the government-brokered Memorandum of Understanding since last summer but we’ve yet to see concrete results, in particular with regards to new music offerings. All stakeholders recognize the crucial importance of having a big fat carrot to accompany the stick. Yet we still seem to be some distance from the ISPs being empowered with truly compelling music services they can offer to their subscribers as a genuine alternative to file sharing.

On the surface of things this week’s reported tie up with Sky and Omnifone for a music subscription services seemed like a positive step forward. However, the lightest of scratches beneath the surface reveal it to actually be a microcosm of broader problems. Omnifone’s press announcement pointedly doesn’t even mention Sky as a partner for their new ISP white label offering. Although many press reports imply Sky have signed up, the only actual substance is that Sky are considering using Omnifone to power some of the technology on its offering.

The nuanced specifics here are important. Last year Sky and Universal Music proudly announced a music JV. Details were scarce in the extreme but the strategic ambition was bold. Sky has since then not been able to add any of the other 3 majors onto the JV roster. Part of this may well relate to the other majors getting increasingly narked about UMG’s highly proactive (even aggressive) digital strategy. But more broadly it talks to the fact that there is a lot of distance between what Sky wants to be able to offer its customers and what the labels feel they can provide for the financial terms Sky are willing to consider. This follows on the heels of Virgin Media dropping pursuit of PlayLouder’s MSP offering due to label concerns and also 7Digital so far failing to get any ISP to take up their white label offering.

The root of the problem is that the ISPs want to offer consumers more content and flexibility for less money (and pay the labels less) than the labels are willing to countenance.

But most UK ISPs have good reason for having high demands, as do many other continental European ISPs. They’ve been burnt once, launching poorly featured, weakly differentiated services near the turn of the century. Their inadequacies (and the subsequent failures) weren’t the fault of the ISPs per se, rather they were products of their time, restricted to the terms that the major record labels were willing to countenance back then. (e.g. 99 cents downloads that could only be played on your computer)

Apple changed the rules of the game and the failings of the ISP services were only accentuated.

The ISPs know now that if they get back in the game they have to be differentiated and be able to compete with Apple. But they also know that most of their file sharing subscribers are unlikely to be able or willing to pay much either. So the ISPs want compelling (ideally MP3) services that cost little or nothing to consumers. The labels business models can’t support that model without the ISPs picking up a lot of the cost, which they can’t afford to do due to falling broadband ARPU.

So we’re in a stalemate that nobody really expected to be in. (Indeed back in the summer of last year BMR CEO Feargal Sharkey said he expected to have something to announce “within a matter of weeks”). The labels thought the ISPs would lap up what they had to offer, and the ISPs thought they’d get more. The record labels are not about to change the fundamentals of how they value their IP, but there are some viable mid term compromises that can get us out of this malaise:

  • A series of Joint Ventures: MySpace have created a blue print for using this approach to get favourable licensing terms to deliver free music that wouldn’t have been financially viable otherwise. And the labels get lots of potential upside and to extend their role in the value chain. JVs would bind the ISPs and labels closer together, create common purpose and engender greater strategic flexibility.
  • Focus on free, not MP3: the success of Spotify has shown that MP3 isn’t everything. Free music streaming with good catalogue and easy to use UI is actually a winning formula. The business case for hiding the cost of a streaming service in the access subscription is a lot stronger than for MP3 downloads
  • Leverage all elements of the multiplay: ISPs typically have multiple products (TV, mobile etc.). Fully leverage these. Creating a compelling music offering means going beyond a balkanized online vs mobile vs TV strategy. Fully integrate and actually drive other business areas in the process e.g. extending a streaming music offering to mobile via an on-handset app will drive mobile data usage

Time is of the essence: every day that goes by, file sharing grows in popularity and becomes more entrenched. So agreeing on intermediate solutions with a view to a longer term roadmap is far favourable to stalling until the perfect solution can be agreed upon.

Music as Free: When Discovery Becomes Consumption

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.

RIAA to Stop Suing File Sharers: First Take

The RIAA is set to halt its campaign of suing individuals for copyright infringement and is shifting to working with ISPs on something that looks and smells a lot like ‘Three Strikes and You’re Out’.

For years the RIAA has effectively been a bad news story for the music industry, giving it unwanted bad press when it least needed it. Whereas there is a role for some high profile action against high sharing volume individuals, there is a way to implement the policy and a way not to. European organizations such as the BPI and local IFPI’s focused on education first and targeted, measured cases thereafter. The RIAA’s strategy probably didn’t differ that much in essence but it was light-years away in style. The RIAA almost seemed to relish the ‘bad cop’ role and insisted on pursuing individuals for amounts which were widely perceived to be unreasonable. Their heavy handed approach also caught many soft targets (e.g. 12 years olds, dead people (yes they really did)) and aggravated much of the legal community with their railroading.

Indeed the latter point may well be a key issue here. As I blogged back in October Harvard law professor Charles Nesson recently decided to take the RIAA on for their action being unconstitutional. Many legal minds expected Nesson to come out on top.

But whatever the reason, the move has been taken. The RIAA is facing up to the fact that suing individuals alone doesn’t meaningfully impact file sharing traffic, neither directly nor indirectly as a deterrent. The partnerships with ISPs is a tactic borrowed straight from the BPI in the UK. One hopes that the RIAA will be as shrewd as the BPI and do their best to offer the ISPs the carrot of licenses for compelling legal music services.

It won’t be plain sailing. ISPs have agendas that are often out of synch with content owners. But it’s a step in the right direction, as long as the strategy is underpinned with an ambitious licensing strategy.

Music Mistakes, Myths and Misconceptions. Part 1: File Sharing

To provide more fuel for the ‘music should be free’ fire I’m going to run a short series of ‘Music Myths, Misconceptions and Mistakes’ posts, tackling one big ‘free’ issue at a time.  Today’s topic is File sharing.  Do comment.  I can tell from my blog stats that there are large numbers of you reading these posts in silence.  Remember, this is Web 2.0, it’s a dialogue not a one-way conversation!


File Sharing: 10 Mistakes, Myths and Misconceptions


  1. Mistake: The record labels tried to sue Napster out of existence rather than focus on harnessing the new, emerging behaviour patterns.  A store with even iTunes-like catalogue and usage rights (let alone a Comes with Music or Datz) in 1999 / 2000 would have stunted much of the growth of file sharing
  2. Misconception: The labels didn’t understand what was going on with file sharing.  The labels did have tech expertise, nothing like they have now, but enough to know what was going on and to build some pretty sophisticated legal cases,
  3. Myth: File sharing actually grows the music industry.  There’s no doubt file sharing’s impact is not all bad (40% of European digital music buyers file share also) but any positive impact of file sharing is significantly outweighed by the negative impact and the long term damage to consumers’ perception of music as a paid commodity.
  4. Myth: Illegal file sharing is theft.  Downloading copyrighted works without rights owner permission is copyright infringement, not theft
  5. Mistake: Not exercising the option to launch a legal free service on Kazaa.  As part of the settlement the labels established the legal framework for launching a legal service on the network and to share in any revenues if sold.  Could you imagine how successful a CWM or Spotify or Last.FM or Qtrax would have been on Kazaa?  Sure most would have voted with their feet, but even if just 5% of the tens of millions of Kazaa users opted in…
  6. Myth: File sharing applications are predominately designed and used for innocent, legal activity.  How Kazaa’s lawyers could keep a straight face when arguing that Kazaa had been developed for legitimate purposes and was widely used for such, I just don’t know.  The argument is still used today.  Sure, there are legal uses, just in the same way there are legal uses for an AK47 assault rifle.  Legal uses are not what most file sharing applications are designed for.
  7. Myth: You can’t build filtering technology into file sharing applications.  Whilst it is correct that it is impossible to create a watertight filtering system, there are enough tactics that can hinder the illegal file sharing experience to such a degree that it will deter many users from conducting the activity.  Solutions include simple metadata checks (e.g. song names), audio fingerprint tests, etc. 
  8. Misconception: Illegal file sharing can be eradicated. It can’t be and it won’t be.  The best target is to drive illegal file sharing to the margins in just the same way that shop lifting is in high street music shops.
  9. Misconception: The record labels expect to win just through legal action. Legal action against individuals is part of a multi-pronged strategy which, particularly in Europe, includes string focus on licensing to innovative new services.
  10. Misconception: File sharing is the core problem.  Consumers are increasingly going ‘off-network’ to share music e.g. Instant Messaging, email, forums, ‘iPod ripping’, USB etc.

Why Music Can’t Just Be Free: continuing on the debate


Over on my JupiterResearch weblog I wrote a post about why music can’t ‘just be free’.  It’s proven to be one of the most contentious posts I’ve written, stirring up some pretty fiery debate and comment.  As Jupiter’s blogs don’t enable comments I’m bringing the debate here.   Read my original post to see the source of the debate.


My opinions are just that, and Jupiter has always believed that good opinions are shaped through debate.  So please leave your comments here and I’ll respond as best I can.


Some ground rules:

  • I’m not going to get drawn into cat fights, so let’s keep the debate focused.  No insults, personal attacks etc
  • I’m not going to respond to every single criticism / critique of every aspect of my analysis.  People are entitled to their opinions, as I am to mine.  What I’d like to focus on is the bigger picture.  (I will though highlight when something is factually incorrect or has been misinterpreted e.g. I didn’t make any reference to car theft, rather to the concept of a car industry that gave cars away rather than selling them.  Sound like a silly concept?  Yes it does.  In my opinion though, it sounds no less ludicrous than the concept of the music industry giving away all of its product)
  • I’d like this debate to deliver some solid outcomes I can summarize in my blog.  So anywhere that there is some consensus, all the better, even if I don’t personally agree.
  • Finally, feel free to continue to take this debate onto your own blogs etc. if you so wish, just please link back.


Let the games commence