Nokia today announced the launch of the Indian implementation of Comes With Music. The fact it is called Ovi Music indicates the degree to which this is a highly bespoke implementation of Nokia’s unlimited music offering, specifically tailored for the local market. Nokia understand the dynamics of emerging markets more than any other global digital music player and they’re embarking on a first or early mover strategy across key emerging markets such as India, Russia and Mexico. This is Nokia’s 30th unlimited music market.
Nokia have done a lot to address local market dynamics, such as a 90% local language, 4 million track catalogue, pinless activation directly on mobile devices without a PC (due to low PC penetration) and reducing the Ovi client from 60MB to 3MB to address connectivity issues. The service will also have a new low end music phone (the X2) to drive its launch.
Even with those features though, the majority of the Indian market will not be addressable. Most mobile phone users don’t have any download capability (either PC or mobile) and rely upon filling up their phones with illegal content from dodgy stalls set up outside mobile phone shops. (Nokia’s focus on ‘clean meta data’ for Ovi Music in India is an intended differentiation point from these resellers).
Of course Nokia fully understand these dynamics and they’ve chosen to launch a service with a remit of addressing a smaller, higher spending, more tech savvy segment, leaving their AM radio enabled phones as a means of delivering a music experience to rural areas etc.
Rhapsody announced yesterday that its new Rhapsody 2.0 iPhone app allows users to download their playlists to their phone and listen to them even when an Internet connection is not available. With this announcement, Rhapsody has now fulfilled the three tenets of true cloud-based music services that I put forth in a report last year. Those were: 1) availability across platforms -- Rhapsody is available on phones, set-top boxes, home audio, and, of course, computers; 2) availability across brands -- Rhapsody is available on the iPhone, Android phones, and multiple home audio brands; and 3) availability when the cloud is not available. Rhapsody's execution on all these tenets is a work in progress, but at a price of $10 a month, the service has now vastly improved its value proposition. Rhapsody and its competitors (MOG and Thumbplay) are on their way to providing consumers with new, compelling reasons to rent -- not own -- music. The question is, will it catch on?
We expect the number of subscribers in the US to double in the next few years. But that's still not a very significant number considering the small base it is starting from. Subscriptions are hard to commit to -- but once you are committed, switching away or off is hard to do as well. Therefore, there is a short window of opportunity for Rhapsody and others to lock in some of that growth for themselves before Spotify launches Stateside or Apple launches its own version, thus changing the competitive environment. But these new services could also end up energizing the market, and the rising tide may perhaps lift all boats.
But what Rhapsody really needs now is to get a service provider to subsidize the service across platforms.
In the CPS team we are exploring new ways of delivering our ideas, as part of a strategy to open up our research processes. So if you'd like to hear me talk about how media companies should be building new revenue streams, please click on the video link below. And watch this space for updates on how to subscribe to future podcasts via iTunes. And as ever, I welcome any thoughts and feedback on both what we are saying and how we are saying it.
As promised, our newest Consumer Product Strategy panel survey launches today. We invite all readers to take this 3-minute survey to tell us about how your company uses social media, what kinds of policies and procedures are in place for sharing information from social media with product development teams, and how that information is used to affect product strategy. In return for your time, all respondents will recieve a copy of the research report containing the results of the survey.
Simplicity has been central to Spotify’s success to date. In fact the Spotify experience was so simple it looked positively archaic compared to more feature-rich and socially-rich services such as Last.FM and imeem. But that simplicity was Apple-like in its elegance and a key reason it has proven so popular. The barriers to entry were lowered so that it had mass-market appeal rather than being condemned to ending up as another niche hide-out for the tech savvy music aficionados.
Spotify was always going to flick the switch on a greater level of sophistication, but only when it needed to. Doing so now is a very cleverly timed move. Today’s announcement both raises the stakes for new entrants such as mFlow and beats Apple to the music cloud. To understand why, we need to take a quick look at what strategy the new functionality implies. The two most important groups of functionality are social and cloud.
Spotify becomes a social experience. Spotify has always had a keen sense of how to coexist in the broader ecosystem rather than try to do everything itself (cf integrating audio scrobbling). It has now taken that a step further with Facebook integration and relatively sophisticated sharing and interaction. Doing it in the context of Facebook simplifies the education process for users.
Downloads aren’t replacing the CD. Digital sales in 2009 boomed - growing by 48% - offsetting the impact of CD sales decline for the first time … just … (online digital revenue growth was 53m GBP compared to a CD decline of 48m GBP). But this isn’t a simple downloads versus CDs picture. In these days of plummeting CD sales, recorded music numbers encompass a pretty diverse portfolio of products and revenue streams, including DVDs, mobile, ad-supported streaming, etc.
The digital model is far from fixed yet. The download market will not save the music industry. It will be one small part of a multifaceted product portfolio. 48% digital growth may sound good but it is important to keep a sense of scale: download revenues are just 21% of CD sales and mobile revenues actually *declined by 14%*. The CD remains the bedrock of sales not because it is a robust product but because the competition is so weak.
Just a quick announcement: a new consumer product strategy survey will be launching tomorrow! The survey addresses how companies are using social media to influence product strategy: whether companies do so, what kind of processes they have in place, and the general attitude about using social media in this way. Participants will receive a copy of the research report sharing the results of the survey.
I'll post again once the link is live; in the meantime, if you'd like to receive a direct invitation or set up a time to chat with me about how your company uses social tools in this way (or why your company doesn't!), please shoot me a note at dwilliams at forrester dot com.
Let's start with a poll. To do so, first click on the title above to get to the full version of the blog. Ok? Now, the poll is over there on the right, under the picture of yours truly. Please vote, then continue....
Now that you've indicated how you feel about convenience, I'll tell you how we at Forrester feel about it. Regular readers of the CPS Role Blog in the past will recall that Forrester strongly believes that convenience is the key determinant of a product, service or channel's success. In fact, we've made convenience a cornerstone of our research for consumer product strategy professionals.
As part of our ongoing efforts to evangelize the importance of convenience in consumer product strategy, my colleague Ian Fogg and I have just published another report in our Convenience Quotient series. Code named "The Goldilocks Report," it offers an overview of how consumers are using their mobile phones and why early renditions of feature-laden phones failed. The report also applies the Convenience Quotient methodology to mobile handsets by defining a comprehensive set of benefits and barriers that exist for mobile handsets, in an effort to help consumer product strategists build "just right" mobile devices. One of the key takeaways from this report is that product strategy professionals can apply CQ across the product lifecycle: from product planning, to competitive analysis, to product positioning, to post-launch refinements, to product retirement. In each phase, convenience analysis can be used to make smart decisions about product strategy.
Regular readers will be familiar with the mantra that I and my colleagues repeat: we are leaving the distribution era of the 20th century where music revenues were based upon selling units and entering the consumption paradigm, where monetizing consumption will be key to future success.
I recently came across a case study that illustrates well just how far along we are in the transition from a consumer perspective, if not yet from a business model viewpoint.
Armin van Buuren is a leading dance music DJ and producer, but unless you are Dutch, or a dance music aficionado it is unlikely you’ll be too familiar with him. Hailing from the Netherlands van Buuren has been producing music and DJing since the mid-nineties. Throughout the noughties he went from strength to strength, in no small part due to a very savvy use of digital technology including a weekly radio show (A State of Trance) that is syndicated across multiple analog and digital stations and platforms and reaches a weekly global audience of 40 million.
This context is important because van Buuren understands the importance of building an engaged digital audience. Which brings us onto the case study: his track ‘In and Out of Love’ featuring vocalist Sharon den Adel. The official video currently has 50.5 million views on YouTube. There are an addition 3.3 million unofficial video views of the track, of which 0.5 million are remixes and live versions. So that's a net total of just under 54 million views.
Consider those numbers for a moment. The biggest ever selling global single was Elton John’s Candle in the Wind in 1997 with 37 million copies. The biggest that the noughties had to offer was Leona Lewis’ ‘Bleeding Love’ with 12 million. Even Lady Gaga only made 11 million with 'Poker Face'. Getting to number in the UK charts can be done with less than 25,000 if you catch the charts on a bad week (Orson did it with just 17,694 in 2003 with ‘No Tomorrow’).
If you’ve been following the coverage from the CPS team over the past 12 months you’ll be familiar with the concept of the Media Meltdown - where traditional business models based on scarcity and control of content are fundamentally undermined by the digitization of content. The challenge facing media companies is a grave one: how can they respond to this threat and compete in this challenging new environment?
With this post we are launching a major new project, the conclusion of which will be a new report identifying new paradigms for the content industries, based on adopting best practices from other industries and from historical precedents. But this time, given our focus at Forrester on the importance of social media and the Groundswell, we invite you to contribute to the research process. In this and a series of future postings, including a series of video podcasts, I want to share our thinking on these issues at it emerges from the process of iteration and evaluation – the kind of process which normally happens within the Forrester team. We have a big idea, but in order to develop it into a fully-realised and actionable piece of research, we would like your input.
We start with an observation that has stuck with me ever since I studied film history at university, a reality reinforced when I later worked in the movie industry. Films don’t make profit for cinema owners. Not directly, anyway. As content owners consider ways to force ungrateful consumers to pay for the content they consume, it’s worth revisiting a truism about the cinema, one of the 20th century’s most enduring media businesses. Movies get people into the cinemas, and generate ticket sales. But if you want to make a profit, sell them popcorn.