Google's Music Strategy - Search to Buy

In a very democratic fashion, Google announced partnership with most of the major online music services yesterday, to allow music searchers to “find and discover” music. Check out my colleague Mark Mulligan’s post on Google’s relevance to digital music from last week. The note worthy point about Google's execution  is how carefully it nudges searchers to buy music and not just stream it for free. The two main partners, Lala and iLike, that are getting premium placement by the play button, allow only limited streaming of the song. iLike lets you stream only some songs full length for the first time. After that users can only listen to 30 second sample of the song or buy an MP3. Lala also allows one free listen per song and then offers 10 cent Web singles or full MP3s.


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Will Apple soon also partner with TV service providers?

The time may soon come when TV service providers are also going to compete for the rights to exclusive distribution to the Apple Tablet...

There are long running rumors that Apple will soon launch a new device that will look like the iPhone but with a much bigger screen and with great capacity: the so called Apple Tablet. Whether Apple launches such a device or not, there appears to be a market opportunity for a mid sized touch screen, media focused device.  It seems that there are also lively debates around where consumers would actually fit such a new device into their daily life.

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Why Some Channels Are More Convenient Than Others: A Convenience Quotient Analysis

That was the title of colleague James McQuivey’s track session here are Forrester’s Consumer Forum in Chicago.  For those unable to attend, here’s a quick synopsis of what James covered:


While attendees may think they have had enough of the term – and the concept of – “multi-channel,” the truth is that multi-channel has only just begun.  It’s not just in-person vs. phone vs. online.  The mobile channel is prominent today, and we’ve got new options coming, like connected TVs, that won’t emerge for another year or more.


James’s theme is this:  Your product or service is never more convenient than the channels through which people access it.  And convenience is bigger than you think.  It’s not a need or feature – it’s a measure of how well your features provide consumer benefits.  Regular readers of this blog will know that we at Forrester have captured the notion of convenience in the following equation


Convenience Quotient = Benefits – Barriers


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Hulu to Charge in 2010?

For months we have heard rumores that Hulu will eventually launch a paid service. Well according to News Corp's Depuity Chairman, Chase Carey, that move could come as soon as 2010.

At Forrester, we have detailed the need to launch an online subscription service for online video in our Reinventing the TV Industry report.  I've always thought Hulu with its passionate community of users would be in good position to launch this service.  However, looking through the comments on EW's link to the story, Hulu's equity as a "free service" could alienate users.  I've posted a sample of the comments below:

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What Google Could Bring to Digital Music

 There are numerous reports that Google is about to launch a music service.  Whether the rumours have foundation or not I think it is worth reflecting on what role Google could play in digital music and their various assets.  Here are some initial thoughts:


  • Google is already a major player in the online music space via YouTube (in Europe, the home of Spotify, more people watch music video online than listen to streaming music)
  • Google shouldn’t (and probably won’t) try to be an ‘iTunes killer’.  The bottom line is that the iTunes / iPod / iPhone ecosystem is successful within that niche, but it is just that, a niche.  The 99 cents download model isn’t a mass market proposition
  • Google has its Android asset to leverage, potentially ensuring it is a truly cross platform music play
  • Google is in a unique position to target music demand at the earliest possible stage i.e. when consumers start searching for music


The last point is where I think Google’s core value proposition for the music industry comes in.  Apple can do little about iPod owners downloading from BitTorrent (and our survey data shows they are very likely to do so).  But Google on the other hand can.  Just imagine if when a consumer searches for a song, alongside all of those Torrent results is a heavily integrated Google music offering.


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XBox and Sky raise the bar for IP-delivered video

The link up between Xbox LIVE and BSkyB, announced earlier this year, goes live next week in the UK, and the jointly-funded ad campaigns are under way. From the live demo I’ve just seen, I’d say this raises the bar for internet-delivered video.

Users with an Xbox LIVE Gold account and a Sky subscription will soon be able to watch Sky’s live channels (such as Premier League football on Sky Sports 1 and 2, or Sky Movies) on their TV via their Xbox. This allows them to watch at the same time as similarly connected friends, with who they can communicate via on-screen avatars (in a virtual front room) or via their headsets.

It’s a fun, social way to consume content, and in an age of increasingly fragmented audiences reinvents the notion of TV consumption as an event. Even better, it supports and reinforces Sky’s fundamental principle that its high-end content is worth paying for, however you receive it.

One small gripe – there’s no obvious way yet of connecting via live text feed on-screen – inputting text onto a TV screen is still a hurdle for interactive products -  although Xbox does separately support Facebook and Twitter. Some kind of future link-up allowing users to send messages direct to their virtual on-screen friends from their laptop would be fantastic.

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Spotify: Comes With Music's Latest Threat

As I referenced at the end of my previous post, Spotify – the European streaming music service – has struck a deal with UK mobile operator 3, bundling the cost of their premium subscription into the phone tariff.  I’ve done a few press calls on the story today and the recurring question has been “where does this leave Nokia’s Comes With Music”.


Although the business model and value proposition are very different in many respects (thus suggesting risk of direct competition is low), there are also many similarities. Both offer unlimited music free to the end consumer, and now both are mobile. The distinctions between streaming and downloading is becoming increasingly irrelevant to end users (though rights bodies will continue to obsess about the distinction). The differences the consumer feels are of course what matters.  Given that CWM and Spotify have comparable catalogue, the key differences between fully subsidized mobile offerings will be:


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Music Subscriptions wherefore art thou?

With paid music downloads falling far short of offsetting the impact of declining CD sales, next generation subscription services need to succeed if recorded music sales are ever going to come out of their nose dive.  There is certainly lots of supply side activity, with services launched or announced in the last year from, Nokia, Spotify, TDC, Sky, Virgin Media to name but a few. And the incumbents have been busy reworking their offerings (cf Napster’s new 50%-price-cut-with-MP3s play).


Music subscription services have a lot of history but not a huge amount of success, so what gives the current new crop any chance of survival, let alone success?  The key will be hiding some or more of the cost to the consumer and adding real value.  The bottom line is that many consumers are simply unwilling to pay for music and even fewer are interested in paying a monthly fee for it.  So success lies in making the services free or ‘feel like free’ to the end user, subsidizing the costs through savings to, or increased revenue from other core products.  TDC, the Danish telco, has pioneered this approach with its free-to-consumer service that is available only to its customers.  (A cynic might argue that Spotify is doing the same, subsidizing its free offering with VC funding!) 


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Channel 4's pioneering deal with YouTube shows it can still innovate

It’s sometimes difficult to recall, with recent press coverage focusing on boardroom strife and funding shortages, how pioneering the UK’s Channel 4 has been since launching in 1982. So today’s news that it is the first broadcaster globally to offer full-length TV programmes via YouTube is welcome confirmation that innovation remains part of its corporate DNA.

Under the terms of the three-year deal Channel 4 will make recent shows - and 3,000 hours of archive content – available free of charge  to UK consumers, and will share the ad revenues with YouTube. Though the details of the revenue split have yet to be revealed, it might be assumed that YouTube are more pragmatic now than they were even a year ago, when their hard-nosed dealmaking was rebuffed by other broadcasters.

By offering its content on YouTube as well as on its own website, Channel 4 has extended the notion of blended distribution. Indeed, the nature of the non-exclusive deal, combined with the fact that Channel 4 does no own the rights to its hit shows, means that in future UK internet users will be able to access the same legal long-form TV shows via a number of sites, including MSN, Blinkbox, and Arqiva’s SeeSaw, not to mention the two shadows looming over this space - Hulu (whose link-up with ITV has been widely rumoured) and Project Canvas, backed by BBC, ITV, BT and Lovefilm.

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Sky Songs: First Take

Finally we get to see some fruits of the labour of the protracted negotiations between the UK music industry and the ISPs.  Sky’s long mooted service - Sky Songs - will go live on the 19th October with content from all the majors, powered by Omnifone  In doing so Sky brings three major assets to the table:

  • a scale of marketing clout and expertise that other music subscription services could only dream of
  • proven and deep understanding of packaging and marketing entertainment products
  • a large installed base of premium customers to target


At launch the service is to be marketed to all UK broadband customers rather than explicitly to Sky customers. This gives a wide addressable market, but it does mean that two other key assets are currently untapped:

  • bundling this offer with Sky TV packages
  • integration with Sky’s hardware


Sky does though, leave these as distinct possibilities on the road map, which is very wise as they could prove to be the secret sauce that could make Sky Songs a success.


Sky also do one other very smart thing that will stand them in good stead: they enable customers to ‘dip in an out’ rather than locking them in to a year’s commitment.  This is added to competitive pricing:

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