The labels are still kicking themselves for having let MTV build a business around their promotional videos. Once they’d realized their error, it was too late: MTV was too powerful and was making too valuable a contribution towards their business for them to simply turn off the tap. Some label execs stated they weren’t going to let Apple "do an MTV." Whether they like it or not, they did.
Apple’s dominance of the download market is a huge deal. I’d argue that EMI and WMG are actually downplaying the importance. It’s not in their interest to scare investors with the news that a company they often don’t get on with too well effectively controls the destiny of one of the only parts of their business which is still growing and which they expect to be their future.
Apple’s dominance is such that would-be new entrants have to think as a priority about what their "Apple strategy" should be. Should they be MP3 or build an iPhone app? Should they integrate themselves into the iTunes ecosystem or co-exist? Anyone who intends to be a key player in the digital music space is inherently competing with Apple. (See my colleague Ian Fogg’s fantastic report ‘Competing With Apple’ for more on this topic.)
In guidance for their latest earnings results, troubled major label EMI cited the dominance of Apple’s iTunes as a major concern for the digital music market. The exact words were:
"The substantial dependence on a limited number of online music stores, in particular the iTunes Store, for the online sale of music recordings, and the resultant significant influence that they can exert over the pricing structure for online music stores."
I have three things to say to EMI (and indeed the other three majors also):
I told you so.
It’s your fault.
Let me explain in a little more detail:
I told you so. We’ve been warning the labels about the overdependence on Apple for years. Not just because of the pricing and competitive concerns a dominant player brings but because of Apple’s motives. Apple is in the business of selling hardware. Music has been a useful tool to help them do that. But they’ll change tack as soon as it suits them. Heck, these are the guys who started out their music strategy with ‘Rip. Mix. Burn.’ Yet the more cantankerous the labels get (e.g., giving everyone else MP3 licenses before Apple), the more Apple will look elsewhere. cf the iPad, a device which should have had music embedded in its DNA to drive a new generation of music products but instead becomes a Holy Grail for book and magazine publishers.
In a prior post, I told you that 83% of companies use social media, but fewer than half of those have product teams that are currently using social media to influence product design, creation, or strategy. In that report, I also divulge that 72% of consumer product strategy (CPS) professionals claim that social media will enhance their existing capabilities of using customer input to shape product strategy. I've also posted about how social co-creation is an important opportunity for consumer product strategy (CPS) professionals -- and it's something that some, but not all, of those companies who are active with social media use. For those CPS pros who are not actively engaging in social co-creation, a common question is, "Do consumers want to co-create? And will they want to co-create with me?"
Cloud functionality is becoming increasingly important to music product strategy as illustrated by another product launch today: digital radio manufacturer PURE announced the launch of cloud-based music service ‘FlowSongs’, powered by the UK’s 7digital (now 50% owned by HMV). To be precise the service isn’t a pure cloud service but instead leverages the cloud to deliver a music download store. The service is integrated into PURE’s Web-connected digital radio devices. For an annual £2.99 subscription fee, users get to identify an unlimited number of songs (using Shazam’s music recognition technology) and can then buy tracks for £0.79 each. Tracks are downloaded to a supported PC but are streamed to the radio.
Integrating Shazam is a smart move. Shazam is a feature not a product, but along with volume, it’s one of the key features that every audio device should have. The service will certainly drive discovery-based purchases (Forrester's Technographics® data shows that 57% of consumers discover new music via radio, making it the No. 1 discovery channel). But those benefits aside, I’m not convinced this is a killer service, yet at least. There was an opportunity to make this a frictionless access-based subscription service whereby customers could instantaneously replay the songs on a device that they identify without having to invest in a download. The future is in access-based models, not the dead-end street of the download store.
I’ve just got back from 2 weeks of holiday during which time quite a lot happened in the digital music space. One thing that really caught my eye was UK dance act Faithless’ partnership with Italian car company Fiat for their single ‘Feelin’ Good’. Brands (Converse, Bacardi, etc.) commissioning artists to record tracks for ad campaigns is a growing trend, but what Faithless have done here is different. No money actually changed hands, and no Fiat slogans or messaging appear on the video. So how does it work? Fiat paid for the video and in return had a Fiat Punto featured in the video. The car actually gets pretty prominent positioning (including extended dashboard footage), but Fiat’s creative agency have worked hard to ensure that it has been done in a creative and non-intrusive manner. (Well, maybe not quite that non-intrusive, but the intent is there and it’s leagues above much other product placement.)
The three-minute video will air across an entire ad break during the reality TV show ‘Big Brother’ to an audience of c 1.5m.