In a couple of days’ time the doors will close on a decadum horribilis for the music industry. Although recorded music revenues actually grew in 2001, the seeds of the forthcoming whirlwind were already well and truly sown. In fact one single event can be identified as the trigger: the launch of Napster in 1999.Of course other seeds had also taken root in the late nineties, including the launches of MP3.com, the PMP300 and the MPMan.But according so much importance to Napster is more than a useful construct for the historical narrative: Napster was more than just a metaphor for the transition from the distribution era to the consumption paradigm, it was the crucible of the music industry’s 20th century meltdown.
Today’s news that the latest hurdle has been cleared in the development of Project Canvas – approval (albeit provisional) from the BBC Trust – is good news for most interested parties, if not rivals such as BSkyB and Virgin Media who have been vigorously opposing it.
The minutiae of the behind-the-scenes politicking are not of interest beyond a small group of analysts and policy geeks, but the future of Project Canvas itself is a huge story for the media sector in the UK and beyond.
2009 saw some solid progress made in various digital content marketplaces but it is too early to start talking about the green shoots of media recovery.The Media Meltdown (the process by which media industries are disrupted and reshaped by digitization of content) will continue to claim scalps throughout 2010 as digital content revenues do little to offset the impact of plummeting physical media sales and as analogue dollars crumble into digital cents.But consumers are not falling out of love with media, rather they are growing tired of paying for its 20th-century product iterations (and those 21st century products that try to reinvent the old products in a digital context).A new framework for media product innovation is now required to align media industry content assets with 21st-century consumer behavior and demand.Forrester proposes what form this should take in a new report ‘Media Product Innovation: Building Products That Thrive In The Media Meltdown’.
The core asset that media companies own is of course the content itself, but Content is no longer king. Or, at least, its throne is no longer undisputed. Instead, content is busy fighting off the republican advances of the channel. ISPs and mobile operators use content to fill their pipes, technology companies to fill their devices, and brands to help sell their products and to meet their branding objectives. The hierarchy is clear.
We have just published a report examining the digital music adoption patterns of the different regions around the globe. While there are pockets of sunshine, the overall picture indicates that making money from digital music is tough everywhere. Europeans for instance are quite savvy in both online and mobile music activities but have yet to start buying digital downloads in meaningful numbers. In the US, which took the lead early on in online music activities and paying for downloads; adoption is starting to plateau even before hitting mass market. And across Asia, mobile is king but piracy is and will likely remain a big issue in all but a few of the countries.
I also happened to be in India, part of the time that I was writing this report. Here are a few observations on digital music adoption in India:
Lots happened in 2009 but it wasn’t a vintage year for digital music (in fact it was the year it well and truly lost the digital buzz to eReaders). All in all I’d give 2009 a 6 out of 10, with the launch of Spotify accounting for at least couple of those points and the following as the 5 key disappointments:
Comes With Music under-whelmed (as did Play Now plus)
ISP services didn’t get off the ground (including unlimited MP3’s nearly but not quite moment)
Apple’s new killer music format was….oh iTunes albums
imeem gave a master class in how not to make money out of social music
The big boys (MySpace, Apple) snapped up the innovative competition (Lala, iLike, imeem)
So will be 2010 be any different?Though I don’t think it will be the year digital music will really come of age (that’s at least a couple more years away) I do expect it on balance to be a stronger one than its predecessor.Leaving aside the few specific developments I’m not able to talk about here are a few of my predictions:
As the dust settles on Apple’s acquisition of Lalaand MySpace’s acquisition of imeem and iLike it is clear that 2009 is shaping up as the year that the social music marketplace consolidated.The trend was started back in 2007 when CBS snapped up Last.FM for $280 million (though you could make an argument that News Corp inadvertently kicked things off with its $580 million purchase of MySpace in 2005).
So the fact that there is a lot of money pouring into social music shows us this is a prosperous segment right? Wrong.Last.FM’s purchase price contrasts sharply with the reported $1 million that MySpace paid for imeem. imeem was no small fry (it has approximately 30 million users in the US). Instead imeem found itself straddled with the burden of insurmountable debts and a fundamental inability to make its business model work. And therein lies the rub: social music may have audience momentum but the business model is currently broken.
All of which might make it appear strange that Apple and MySpace would want to invest in this space. They are doing so because of two key reasons:
Information on teens' behavior, as we saw from the coverage of Morgan Stanley’s efforts to map the zeitgeist earlier this year via the musings of a 15-year-old intern, is in great demand.It’s not only useful to baffled parents, it’s also crucial for content providers, advertisers and marketers seeking to engage with teen audiences.
Based on a European wide survey of nearly 1,400 internet users aged 12-17 across seven major territories (UK, France, Germany, Italy, Spain, The Netherlands and Sweden), we captured a number of key consumer trends that help us identify the challenges and opportunities ahead, including the following:
TV is still the main media channel for teens. Reports of TV’s death have been greatly exaggerated. European teens still spend more time watching TV (10.3 hours per week on average) than they do using the internet for personal purposes (9.1 hours). But gaming – 11.7 hours per week if you combine time spent playing games on a PC and on a console – now consumes even more time than TV for European teens.
Social interaction online is an integral part of media consumption. European teens have embraced social media heartily – not only Facebook, which 44% visit at least weekly, but blogs, which 30% read at least weekly. And teens are twice as likely to comment on someone else’s blog as users aged 18+. For teens, the separation between ‘content’ and ‘social media’ is an increasingly irrelevant one – the latter is integrated into the former as part of a wider content experience online.
Apple has confirmed the acquisition of streaming music provider Lala.The move is significant (even though Apple appear to be trying to suggest otherwise) because it is one more piece in the gradually emerging puzzle that is Apple’s future music strategy, which for a few years now has remained relatively static.
Why is Apple’s music strategy in need of revision?
If the iTunes Music Store had evolved half as much as the iPod had over the last few years we’d have a cutting edge music service. Instead we have one that remains market-leading in terms of basic functionality (i.e. store to device synching) but behind the curve in terms of experience, discovery and community. Whilst the web threw up the likes of imeem, Spotify, Last.FM, MOG etc. the iTunes Music Store stuck to selling 99 cents downloads.Don’t get me wrong the iTunes store is a crucially important platform that accounts for the majority of the current paid download market, but it isn’t yet equipped to drive the digital music market to the next stage.In its current guise it is essentially a transition technology: with one foot in the distribution paradigm of selling units of stuff, and one in the consumption era of on-demand access.It has done a great job of helping consumers take baby steps into the digital age, but has pretty much reached the limits of its potential as a music service. (You’ll note my continued and fully intentional implied distinction between the music store and the App Store – more on that in a moment).
MySpace today launched its UK music offering, over a year after its US launch.However tempting it is to position this as a Spotify challenger (and the BBC and many others do) it simply isn’t. It isn’t, both out of intent (more on that later) and also out of poor execution (more on that later too).
Music matters to MySpace more than ever before. Why?Because it is has lost the race with Facebook for social networking supremacy, in fact Facebook is about to lap MySpace.But MySpace remains undisputed leader as the global social music destination (a position consolidated by the recent acquisitions of iLike and imeem).If you are a band, you’ll have an artist page because that’s where the online music audience coalesces for engaging with bands. Sure there are better, more innovative alternatives, but MySpace has the momentum and the scale.And if you’re an artist looking to reach audiences that is exactly what you want.Bebo and Facebook have both tried to challenge MySpace’s position here but have not had meaningful success (a recent report indicated that 77% of Facebook fan pages have less than 1,000 fans).