So today Apple announced the long anticipated new ‘music format’ codenamed 'Cocktail', productized as ‘iTunes Albums’. There are some nice features (photos, exclusive videos, lyrics, customized artwork) that deliver a good user experience. It’s a quantum leap from the standard album download.But is it enough?I think it is a useful transitory step, but not the end game.I’d go as far to say I think it it pulls its punches.The bottom line is that music buyers are rapidly falling out of love with buying the album. Downloads from stores such as Apple’s iTunes are predominately single tracks, as are P2P downloads.Little wonder when you consider the fact that the first commercial album release made its way onto the shelves almost exactly 100 years ago in April 1909.Since then it hasn’t changed in any meaningful sense.Sure the actual mediahas changed, as has the number of tracks, but it remains essentially a bunch of linearly programmed tracks.
The BBC recently aired a story that focused on some Forrester statistics regarding the number of people in the UK engaged in illegal file sharing. I’d like to provide more context in order to clarify any confusion about how we arrived at our estimate that the number of illegal file sharers in the UK is 6.7 million.
There are two parts to this issue, so let me take them individually:
Forrester has just published a report which lays out a radical vision of the future of music products.In the report we suggest that a comprehensive programme a product innovation is necessary to save the music industry from the current Media Meltdown it finds itself in.The CD is dying, the 99 cent download model clearly isn’t enough (nor is live), and ad supported and subsidized models all have much distance to go.
The immense challenge is to persuade consumers that music is worth paying for again.The scarcity that music value was built upon was disappeared with the rise of Napster.Content scarcity can never be truly regained so value must be reestablished with the scarcity of convenient, compelling services operating within three broad music release windows.These release windows will stagger content releases, with premium services getting releases first and ad supported services last (see chart below).
I’ve spent the last couple of days with Nokia here in Stuttgart and have had some really interesting conversations.What is clear from these meetings, and from the official announcements at Nokia World, is that Nokia is wholeheartedly committed to its services strategy.They’re learning their way, but Nokia is a company that prides itself on renewal and they’re keen students of the lessons of their marketplace experiences.It is easy to see that Nokia’s Ovi strategy has much more focus and clear vision than 2 years ago and that focus will continue to sharpen.
Music is the spearhead of Nokia’s Ovi strategy, and Comes With Music is the key element of their music play.Regular readers will know that I’m a fan of CWM, and I consider it to be one of the best tools that the music industry has to fight piracy with.Unlike Spotify, CWM enables users to take their music with them on their portable device and to keep it forever.Those are strong assets for pulling kids off file sharing networks.But it’s no secret that CWM hasn’t set the world alight yet, even if it has had better uptake in emerging markets than developed markets.Some have used this as evidence of why the CWM model is flawed.I don’t agree.CWM’s slow start has been due to a combination of:
The news that Spotify’s mobile app is now available for the Android platform, coupled with an anticipated Autumn US launch, are both part of the music service’s inexorable rise and media interest.Spotify undoubtedly has momentum and potential in abundance.But, even without considering the issue of cash burn, it is also important to keep a sense of scale. Spotify has done a great job of acquiring a sizeable audience after a short period of time, but needs many more users before it can be considered on a par with some more established services that get a lot less attention (these days at any rate).
In the chart below I have mapped the number of users of Spotify and a number of other key free music services, each from launch.What is clear is that Spotify has made a solid start is growing at a stronger rate than Pandora was at the same stage.If Spotify ever reaches Pandora’s scale and business model viability, it will rightly be considered a success.
But it is also clear that other services like Last.FM and imeem grew more quickly.And just to put the absolute scale of Spotify into perspective, the Pandora iPhone app alone is mapping almost exactly in line with Spotify’s entire user base. (No coincidence of course that Spotify see the iPhone app as a crucially important ticket to further success).
For the last couple of months Forrester’s global media team has, in collaboration with a number of other Forrester analysts, been working on a series of research looking at the impact of the Media Meltdown and the implications for the future of media businesses. A number of key reports have already been published (see Nick Thomas and David Card’s reports) but there is also plenty ‘in the pipes’. One of these works in progress is a report laying out the product innovation that Forrester believes that music companies need to pursue to survive the Media Meltdown. What is becoming apparent is that many of the fundamental challenges and solutions apply far beyond the music business.
In fact it’s beginning to look like there is the makings of a product innovation blue print for all media companies in the digital age. We’re really excited with where some of these ideas are going and I want to share with you a few of these key concepts here. In return I’d really value your comments and feedback to help us continue to hone our thinking.
One of the core challenges facing any business that tries to sell content to consumers (in digital or physical form) is that content scarcity is gone. In the boom years of the distribution era content scarcity encouraged consumers to think distributors and retailers had a monopoly on the supply of content. In the digital age of ubiquitous availability and pervasive free, scarcity of content simply does not exist. Consequently consumers' willingness to pay for content fades by the minute.
Spotify’s much anticipated iPhone app has been submitted to Apple for approval and certainly looks the part…in fact it almost looks too much the part.This level of integration into the iPhone music playback experience may well be deemed by Apple to be too competitive to the core iPhone functionality. There is precedent, the Podcaster app was rejected, reportedly because it was too similar to iTunes functionality (it since developed a scaled back RSS Reader iPhone app).The Spotify app certainly seems to mimic core iPhone music playback functionality (e.g. utilizing standard iPhone / iPod Touch playback controls) and would therefore be likely to compete with iPhone iTunes music playback.
I'm currently on holiday in Taormina in Sicily for a couple of weeks and though I come here every year (my wife is Sicilian) I never cease to be amazed by just how different the profile of technology adoption is here compared to northern Europe.Just trying to get online over the last couple of weeks has been a case in point.
I had a few pressing work tasks which I needed to do during my stay so I ensured I was well stocked up with credit on my USB modem.Unfortunately the Italian network of my UK mobile operator didn’t seem to have read the script about discounted international data roaming fees and I managed to burn through 35 pounds of credit in 2 and a half days (which included 3 extended ‘help’ line calls – I use the term ‘help’ in the loosest possible sense - and getting a relative to buy more credit in the UK).The fact that the download speed made a 56k modem look like Fiber just added to the pain. Unlike my friends and family in northern Italy, the majority in Sicily don’t have home Internet connections so I have to resort to Internet cafés, the majority of which share one sub standard connection between a couple of dozen computers.However this year I needed to connect my laptop directly and my normal Internet café of choice wouldn’t let me plug in my laptop directly.Finally, I found one with Wi-Fi (just arrived this year) and got online.
This summer saw decade anniversaries of two of the most important events in the modern music business: June was the 10 year anniversary of Napster and yesterday (July 1st) was the 30 year anniversary of Sony’s Walkman (though for the pedants out there this is the anniversary of it coming to market, the product was actually first built in 1978).
Both, in their respective ways, fundamentally changed the shape and direction of the recorded music business but both are also transitory technologies.My colleague Moira Dorsey recently presented a concept at the Forrester Consumer Experience Forum on how new technology imitates old technology when it first arrives on the scene.She used the example of the history of the car to illustrate the point: emerging first as a steam powered horseless carriage in the late 18th century, taking its first major step forward with the Benz 4 stroke engine car in the late 19th century, finding something close to its true form in the 1920’s and eventually ending up with the likes of the S Class Mercedes Benz now.
Tuesday’s Digital Britain report covers a lot of ground and I’ll leave it to my colleagues to cover much of it, but I’ll focus here on the parts which refer most directly to the music industry.
The interim draft was a master class in nuanced, caveat-drenched civil servant speak that carefully avoided making a definitive call in any one direction.The final report thankfully takes a more direct approach but many music industry executives will feel that the tone is struck firmly in the favour of the ISPs.
The report starts off with reaffirmation of the interim report’s assertions that the current digital market place is struggling and needs a framework of support to protect and uphold Intellectual Property (IP) in the digital domain, stating:
“The content industry faces a significant challenge. At its heart the current model is not working.”
And goes onto recognize the difficulty of monetizing consumption and the need:
“to turn a strong user base into hard currency.”
It even takes a very strong line on IP violation:
“The Government believes piracy of intellectual property for profit is theft and will be pursued as such through the criminal law.”