Taking Digital Music To The Mainstream: The Music Product Features For The Living Room

[Posted by Mark Mulligan]

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What is interesting in the current scramble for the killer online music business model is that there is an implicit assumption that the only place people would want to go from the CD is online or mobile.  The iPod heralded a new paradigm in music consumption, but it has done little to counter the impact of the CD's terminal decline and may even have helped accelerate it.

 

As things currently stand, the mass market music consumer isn’t being catered to with any form of new product and the fight for these consumers’ living room is being lost.  It wasn't too long ago that the home hi-fi system was the flagship piece of living-room technology but over the past decade, living-room tech spending has shifted firmly to the TV while the aging home hi-fi system is either gathering dust or has been replaced by a docking station. (The latter of which is an awkward attempt to make a personal device a household device, and besides, the majority of households don’t even have one).

 

The time has come for new music products and experiences that cater for the mass market and that - for the non-tech savvy majority - bring the home music experience into the 21^st century.  In our latest report ‘Taking Digital Music To The Mainstream: The Music Product Features For The Living Room’ Forrester puts forward a vision of what we think is needed. 

 

We propose that the new mass market music experience must be explicitly part of a new hardware experience that is contemporary but highly competitively priced.  Our conceptual technology is a hard drive, midi-sized music hi-fi that with a detachable touch screen display / remote control. We argue that the new hardware must:

 

• Deliver a compelling experience even if not connected: it’s just too risky to assume that mainstream consumers will have the inclination or know-how to connect a music product to a home network, even if they have one.
• Include extensive music at point of purchase: this is, we think, the crucial element.  Mainstream consumers don’t have the appetite for another format replacement cycle, so we suggest the device should effectively replace their entire CD collection and add more, all for the cost of the device.  (And yes, we know this is light years away from where current licensing values are). And in case you didn’t notice – we just invented a new music consumption paradigm here, and a new role for retail.
• Provide the tools for baby steps into the digital world: for those consumers that do connect we propose a convenient range of digital discovery and acquisition applications to encourage consumers towards the digital arena.
• Leverage telcos: we want these devices to be affordable, but to really go mass market they probably need subsidizing by a telco e.g. a Sky Songs broadband package would include the device bundled with the router.

 

Of course there are many other ways this challenge can be met, but met it must be. Unless the music industry enters the battle for the living room, it will soon lose it — and with it the mainstream music consumer.

If you are a Forrester client and would like to discuss the report in more detail then please schedule a call with our client inquiry team.

If you are press and would like more information on the report please email Press AT Forrester DOT COM

New Roku boxes make the simple complex

by James McQuivey, Ph.D.
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Today Roku launched two new players to complement the original $99 Roku player. Perhaps somewhat obviously, the two new players come in at $79 and $129, allowing Roku to test whether there's price elasticity in this market. 

I'm not sure this was a necessary move. The cheaper box (called Roku SD), simply removes HD playback from the original Roku Player (now called Roku HD). The $129 version offers wireless-n wi-fi streaming to deliver dramatically better video quality. I don't personally need that since I hook up my Roku player -- which is in constant demand in my home -- via ethernet. (Yes, being a nerd has its advantages including a fully self-wired home that has over 24 ethernet ports in it.) So while I can see the value of the more expensive box for wi-fi users who have wireless-n routers (do you know if you do? betcha don't know), I think muddying the waters with 3 boxes instead of a maximum of 2 just feels like unnecessary complexity. A bit like Amazon announcing it would sell two versions of the Kindle in the US, one that's domestic only and one that can roam abroad, a decision doesn't appear likely to last very long.

What I'm really interested in seeing is what Roku's communication team promised when it assured me that all three boxes "will be compatible with our new upcoming Roku Channel Store" which is promised to launch very soon. I'm very eager to see this store and have been pushing on Roku for any information about its contents because that's where this gets interesting. You see, even though I'm big on connected TVs, from what I'm seeing, most are not going to deliver much in the way of content other than Netflix (as Roku does) and some VOD from Blockbuster or Amazon (also as Roku does). Roku can keep the connected TV threat at bay simply by providing some rocking content. I have my heart set on a Pandora experience, one that's visually-enhanced, please, to provide some cool screen action during playback -- take some cues from the Zune desktop experience, simply fabulous. But there are other good content options available, including a Hulu subscription I would gladly pay for. By the way, in case you were wondering why Hulu was thinking about charging, this is why. Once they charge you, they can put their shows on all these devices. I expect Roku to be first in line to sign the partnership agreement. 

Music Product Manifesto: The Product Features That Will Save Recorded Music

[Posted by Mark Mulligan]

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Forrester has just published the above title reported, the first in our new ‘Media Product Innovation’ series.  Following on from the strategy laid out in ‘Music Release Windows: The Product Innovation That The Music Business Can’t Do Without’ this report proposes some tactical implementations of that strategy.

 

As we’re now 100 years on from the first commercial album release with recorded music sales plummeting, the time has come for a radical overhaul of the recorded music product range. We believe that future music products will need to adopt a platform-agnostic world view that encompasses powerful and social interactivity to empower consumers to create their own unique experiences.

It is time to build music products around consumer needs, not business needs

 

That might sound like a truism, but so much of current digital music innovation falls short of this crucially important value.  This is why Forrester proposes a Music Product Manifesto of six basic consumer music rights that digital products should embrace.  These are spelt out in detail in the report, but include principles such as:

 

• The right to great consumer experiences first (and business models second).
• The right to unique music experiences.
• The right to share in the creation process.

 

I mentioned earlier that the report has a strong tactical focus, and it does, so strong in fact that we actually scope out our ‘show home’ of the future music product (see below).

As you can see this looks a lot like a mobile application.  This is because we believe that powerful interactivity is going to be key to successful future music product innovation.  To such an extent that the consumer is empowered to make the experience their own and to bring their connected friends into that unique experience.  And yes, a touch screen  netbook would be the perfect form factor for such a product...

 

I hope I’ve been able to give you enough of a flavour of our vision here.  If you are a Forrester client you can read the entire report here.  If you are press and are interested in writing up a story you can contact our press team at PRESS AT FORRESTER DOT COM.

 

And of course, I’d love to hear your thoughts directly here on this blog.

Apple's App Store vs Apple Music Store: The Race is On

[Posted by Mark Mulligan]

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Apple today announced that 2 billion Apps have been downloaded from its App store in just over a year.  The App store has taken just 5 quarters to hit the same milestone that the music store took 14 quarters to reach (see chart below).

 

Granted we’re not comparing like for like here.  Many (most?) of those App downloads will be free, and the iTunes platform is mature now, whilst it was nascent during the emergence of the music store.  Indeed, the App Store’s success is built upon the prior success of the music store.

 

But even with those caveats aside, it is worth considering that whilst all iPods and iPhones support music store downloads, only 24 percent of all devices sold support Apps (i.e. the iPhone and the Touch).  Put a different way, to date the total number of iTunes tracks per sold supported device is just over 39, whereas the total number of iTunes Apps per sold supported device is 40. 

 

So in just over a year the App store has reached the same maturity of adoption among its addressable device audience as the music store took 6 years to reach.

 

This doesn’t mean that music downloads are dead: at 8.5 billion downloads to date Apple music store is more than 4 times as successful as the App store in absolute terms.  But in the context of potential, momentum and addressable audience adoption, the App Store is setting the pace.

Is Apple Playing a Subtle But Smart Platform Strategy?

[Posted by Mark Mulligan]

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I have to admit to being a bit under whelmed by Apple’s announcements today.  I’d been hoping for something a bit grander from a music perspective.  I’ve spoken about the iTunes Album launch and explained my thinking that it falls short of what it could have been.  But on the other hand there is an argument that Apple’s relatively modest tweaking might be part of a bolder strategy: that of establishing iTunes as a platform that explicitly coexists with the big name social platforms, namely YouTube and Facebook.

 

Apple is all of course all about selling devices.  But part of that strategy is building compelling user experiences that establish and reinforce the value of usage scenarios of their portfolio of devices.  This is the context into which to consider approving the Spotify app, enabling posting of iTunes song information into Facebook and Nano captured video into YoutTube.  From that perspective Apple is playing a smart game that builds the social context of their devices as explicit extensions of the value proposition of the iPod an iPhone ranges. 

Take it one step further and you could even build an argument that Apple are building a range of devices that are flexible enough to mould around the degree of social engagement the user wants.  Interestingly this strategy echoes much of Nokia’s current positioning and also establishes a scenario in which iTunes builds as a media platform coexisting with the large established social platforms. Social context becomes what defines and reinforces the position of iTunes and Apple devices.  Sounds a lot like Nokia’s World view?  I think so.  Perhaps finally Apple are taking some of Nokia’s vision rather than vice versa?

iTunes Albums: A Decent Start, But Not the End Game

[Posted by Mark Mulligan]

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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. 

 

Music fans are dissecting the album because they can. Tagging photos and lyrics to albums will be welcome new to existing album buyers but isn't enough to persuade the single track generation to convert to album buying. Now has come the time to embrace the potential that throwing off the straight jacket of the album format allows (see my previous post for more on this).  iTunes Albums bring much added value to album, but it is essentially a face lift rather than the new product that it required.  Of course this is a first release, so in future iterations I’d like to see much more interactivity and for iTunes Album and iTunes Pass to come together to become the delivery channel for releases as a continual artist-fan relationship rather than just a platform for the stop start album release schedule. 

Music Release Windows: The Product Innovation That The Music Business Can’t Do Without

[Posted by Mark Mulligan]

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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). 

 

 

But we believe that even more needs doing in addition to this, most pertinently a radical overhaul of the core music product.  The album has been with us for exactly 100 years and though formats have changed, the core product (i.e. a collection of linear songs) has remained largely unchanged. We propose that the straight jacket of album format can now be shaken off and in its place releases can become part of a continual artist-fan relationship with artists delivering a steady stream of creative output.

 

So where does all the extra content come from?  Well much of it is already here.  Artists have been creating a much wider range of creative assets for some time now (back stage footage, covers, remixes, mobile apps etc) and record labels now have access to this content via 360 deals.  We argue that this content should no longer be seen as a way of selling albums and gigs, but as an end in itself.

 

This is an MTV Moment in the digital age for the record labels.  They only realized that music videos were a value commodity in their own right rather than just a promotional tool by the time MTV had established a successful business.  Now it is time for them to learn the same lessons about added value content.

 

Finally, we also propose that music product innovation should be built around the 4 Cs of Digital Content: Content, Convenience, Cost and Community.  The more eagle eyed of you will have noticed that this idea has changed a little since my previous post on the 3 Cs of Digital Content.  Why?  Well we listened to your comments!  We’d always assumed that Community was an integral element of digital content services, but we took the advice on board that it needed to be more than a sub text.

 

If you are press and would like more information on this report then please email PRESS AT FORRESTER DOT COM.  If you are a Forrester client and would like to discuss it further then please get in touch with our Inquiry team.

Nokia’s Music Strategy – Some Thoughts

[Posted by Mark Mulligan]

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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:

 

• At launch, unclear positioning and marketing that undersold the value proposition.
• Too disruptive to mobile operators to encourage many operators to support CWM
• Weak consumer understanding of the value proposition

 

To Nokia’s credit, all of those are now being addressed.  There is now a stronger story for operators, as evidence by the fact that 20 operators now carry CWM across 9 markets.  If enough meat is in the game for operators (i.e. strong revenue sharing) CWM is actually a strong value proposition for operators: they get to have music differentiation, data plan adoption, subscriber retention, music revenue, but no hefty upfront investments in their own (often poorly differentiated) music services.

 

It’s interesting to compare the positioning of Spotify with CWM.  Spotify spent little on above the line marketing, but the marketplace has clear understanding that it is an unlimited free music service.  Nokia invested heavily on marketing but the marketplace understanding is much less clear.  Few understand that CWM is also a free unlimited music service.  (OK, the cost is hidden in the device cost, but it feels like free to consumers).

 

Nokia played it too safe when launching CWM – they should have been bolder and called a spade a spade.  Of course there were a number of good reasons why they didn't, but now the time is right for a bolder play.  Consumers (and the media) still think there’s a catch with CWM.  There isn’t.  Nokia need to simplify and clarify the CWM message: it is unlimited, free, portable music that you own for ever.

 

There are a couple of interesting dynamics that Nokia will need to face up too over the coming years.  Outside of the UK CWM has a stronger story to tell, with a solid start in emerging markets such as Mexico. This raises the intriguing possibility of Nokia becoming the dominant digital music provider for emerging markets even if they are less successful in developed markets.  The other issue is that the music industry is increasingly heading towards supporting household music services (e.g. Sky, Virgin Media) which raises questions about where Nokia’s individual-focused music strategy fits.  Should Nokia make a play for household solutions?  Should they hone their offering to explicitly coexist with household services?  Or should they just carry on without change? Each alternative has its respective merits and risks.

 

All in all I am confident that Nokia will continue to make solid progress over the coming years. The launch of new great new CWM exclusive music handsets such as the X6 and X3 will be strong drivers of adoption.  But it’s not realistic to expect rapid success.  CWM is an entirely new value proposition.  It will take time for consumers and channel partners alike to become comfortable and familiar with it.  Back in September last year I wrote a report stating that the CWM has great value, but that it will take time to take hold.  That advice remains as true one year on.

 

Digeo announces Moxi Mate, a whole-home DVR play

by James McQuivey, Ph.D.

via www.moxi.com

Today Digeo went live with its Moxi Mate, the companion to its Moxi HD DVR, designed to provide whole-home DVR functionality. I sat down with Greg Gudorf, CEO of Digeo, a few weeks back and he previewed the box for me. A couple of my reactions were: 1) the quality of box-to-box streaming is phenomenal; 2) they even designed it so you can turn the panel lights off at night, assuming it will be a bedroom accessory.

The real secret power of this, however, comes with the free inclusion of PlayOn software, which allows your PC to stream online video from Netflix, Hulu, YouTube (and really any other online media content you want including music and photos) to your Moxi Mate box. This is a clever end run around the problem of trying to get the rights to integrate Hulu content into the box directly. (As we saw with Boxee, this is not something Hulu is excited to enable as it threatens their relationships with content owners.)

Love the device. But the fight over how media content will get around the home has only just begun, let the games begin!

New Convenience Quotient doc just published

[Posted by Doug Williams]

If you haven't seen it yet, I encourage you to check out Paul Jackson's latest report entitled, "The Convenience Quotient of Portable Computing."  Here's the abstract:

We're finally seeing consumers embrace computing on the go — whether it's experimentation with Net access and application downloads on the iPhone or trying out inexpensive netbooks, the past 18 months have seen an explosion in activity and functionality. As is always the case with new consumer product opportunities though, mistakes have been and will continue to be made; a Convenience Quotient analysis of portable computing platforms shows how the various feasible options stack up. Tellingly, laptops still just squeeze out the competition overall, but smartphones and the next generation of netbooks threatened to steal the crown — particularly when focusing on specific consumer scenarios like high mobility or engagement with social media.

 
It's an intriguing report, but don't just take my word for it: James Kendrick over at jkOnTheRun posted a nice piece about this report as well, and other media outlets have been banging on our door.

Clients: Paul would welcome the opportunity to discuss this report with you -- just follow the normal process for setting up an inquiry.

Also: We've got other CQ docs in the works, and we'll be sure to let you know when they publish. CQ isn't just for tech products, either.  My forthcoming CQ document applies the methodology to customer service, by examining the consumer benefits and barriers associated with various modes of resolving a customer service issue (live phone, email, online chat, etc.).

Do you have questions about Convenience Quotient, or need help understanding how it could be useful for developing your own product strategy?  If so, please reach out to me, James McQuivey or J.P. Gownder.  We'd be happy to help you figure it out.