Monetizing Social Music: Choosing The Right Product And Services Strategy

[Posted by Mark Mulligan]

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Forrester has just published a major new report on Social Music.  This is a crucial period for social music and ad supported content more broadly.  The dynamics I discussed in my previous post (What Happens When the Ad Money Doesn’t Go Round?) apply to social music more than most other digital content sectors.  The implications are also pivotal for the music business.

 

With CD sales continuing to fall off the proverbial cliff and the paid download market failing to take up the slack, social music destinations are prospering, utilizing the power of the Web to a degree that download stores never did.  Social music may not generate much revenue now, but all stakeholders (i.e. labels, publishers and the services themselves) most work in concert to ensure that monetization effectiveness significantly improves, but at sustainable rates for the businesses.  In doing so, social music it will become a key revenue stream that will help fill the gaping hole left by lost CD sales.

 

Forrester identified three tiers of social music fans in the US and Europe:

 

• the sophisticated users of the likes of imeem, Last.FM and Pandora
• those who visit artist pages on social networks such as MySpace and Bebo
• those who view music video on sites like YouTube

 

Social music fans are savvy, engaged, and love music.  Our research reveals that preconceived ideas about them being freeloaders are wide of the mark.  They are in fact much more likely to buy music than most other consumers (across all formats and channels).  This is an opportunity which is being actively monetized by many of the services.

 

In the report we also provided detailed analysis of the competitive landscape and map the growth of key destinations over the last few years.  A current snapshot of the installed base of some of the key player is:

 

• YouTube:  344 million
• Facebook:  175 million
• MySpace: 139 million
• Imeem:  25 million
• Pandora:  24 million
• Bebo: 22 million
• Last.fm:  20 million

 

YouTube and MySpace are the heavyweights of social music (Facebook has scale but the role of music is more limited).  YouTube and MySpace have both built their music positioning upon a foundation of free music.  YouTube’s current spats with various license holders illustrates that content owners feel they should be better compensated for the increased engagement these sites are seeing.  The outcome of the PRS dispute with YouTube will be pivotal as it will set the rules of engagement for the mid term future of social music,

 

The report delves into the above issues and many more in extensive detail.  Forrester clients can find it here.

 

If you are press and would like more detail please email PRESS AT FORRESTER DOT COM

 

Comments

[rich]

Perhaps out of scope for the paper, but does it address how social music companies should be differentiating from each other? They have to be laser focused on the user experience, obviously - but with shared playlists, streams, social networking, iPhone apps etc. being fairly common/commoditzed, how much room is there long term for more than 2-3 social music players, especially given the scale they may need to pay hefty licensing costs?

[David M Hodgkinson]

:-) Get in touch mark! Saw your details on the news the other night and thought it's been a few years. Bumped into your dad the other week whilst he was playing in the band at ingleton.

ttfn

Oggy

[BobMarche]

Thanks for the useful info. It's so interesting