Take part in Forrester's digital music executive survey!

[Posted by Mark Mulligan]

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Forrester is currently running an executive survey assessing the ‘state of the nation’ of digital music.  We are surveying right across the value chain, from labels, through artists to digital services and companies such as telcos and brands that are working with music. We’re looking at what’s working and what’s not, competing against free and changing business models. If you are involved in some part of the digital music value chain then we’d love to hear your opinions. 

 

All results will treated as strictly confidential and results will only ever be presented a aggregate level.

 

You can take the survey here:

https://deploy.ztelligence.com/start/index.jsp?PIN=15VMGXK5XCSPX

 

The Forrester EMEA Marketing Forum is Just Around the Corner

[Posted by Mark Mulligan]

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Forrester’s Marketing Forum EMEA is fast approaching — November 17-18, 2009, in London. I'll be presenting at this event on the topic of 'How Media Will Never be the Same Again'.  The presentation will kick of the Consumer Product Strategy afternoon session focused on series of research we're building that deals with the interplay of media, technology and brands.  We call it the Media Meltdown.  My colleagues Nick Thomas will also be presenting on how the Media Meltdown makes media companies of us all and finally another colleague Ian Fogg will be presenting on how technology companies both shaped and are react to the Media Meltdown.  Before Nick and Ian I'm thrilled to announce that Nokia's Tim Grinsditch will be giving an industry key note to the session which will focus on Nokia's music strategy.  It is a great agenda and I look forward to seeing some of you there

Elsewhere in the event, other leading Forrester analysts will present on leapfrogging competitors out of the recession, enriching online engagement with customers, and which product and service innovations to be ready for. This event provides a platform where marketing and Customer Experience professionals can share innovative best practices, network with peers, benefit from keynotes and track sessions, and pose direct questions to top Forrester analysts during One-On-One Meetings.

 

We have great speakers this year, with keynotes from:

 

Guest Keynote Speakers

·        Bernhard Glock, Former Vice President Global Media Purchases & President World Advertising Federation, P&G

·        Diederick van Thiel, Chief Consumer Marketing Officer, ING Group

·        Conny Kalcher, Vice President Consumer Experiences, LEGO

·        Malcolm Duckett, VP Marketing, Magiq

·        Mike Cripps, Customer Experience Manager, Service Operations, Capital One Financial Services Inc.

·        Kamel Ouadi, Global Digital Media Director, Louis Vuitton

·        Alexandra Wheeler, Director Of Digital Strategy, Starbucks

 

Forrester Keynote Speakers

·        Moira Dorsey, Vice President, Research Director

·        Mary Beth Kemp, Vice President, Principal Analyst

Here are some great ways to maximize your experience:

·        Check this blog for our in-depth updates on keynotes and track sessions.

·        Follow us on Twitter as we plan and launch the Event.

·        Tag your photos and tweets with #FMFE09 to contribute to the conversation.

·        RSVP on our Facebook Event page, and network with attendees.

Take the conversation offline:

On Tuesday November 17, 2009, Forrester hosts a London Tweetup. Tweetups are low-key social events where Twitterers can network and meet the people they tweet with. Anyone can attend; it is an informal atmosphere that allows casual conversations.

 

This tweetup is for anyone who's attending the Forum or lives in the London area. There is no charge for attending the Tweetup, so come meet and mingle with @forrester, @jgownder, @bsimm, @Mark_Mulligan, Alexander Hesse, Peter O'Neill, and others.

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

Why EMI's Launch of Abbey Road Live is a Peek into the Future

[Posted by Mark Mulligan]

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EMI have announced the launch of Abbey Road Live, a service that records high quality audio and video footage of live concerts and produces take away CDs, DVDs and USB sticks for concert goers.  Though this may not be as big a headline grabbing story as MSN Music’s attempt to take on Spotify, it is illustrative of an arguably much more important trend. 

 

Forrester clients and other regular readers of this blog will know that we’ve spent much of this year developing our big idea about Media Meltdown and the associated series of research documents.  (For those not up to speed see this blog post and this report and this report.)  The overly boiled down summary is that traditional media companies are having to reinvent themselves as consumers’ willingness to pay for content nosedives.  Hence 360 deals etc.

 

But why I like this EMI announcement is that it isn’t just about revenue diversification, it’s about recognizing which of its assets consumers still attach core value to an building around that.  For the music industry, live is one are where consumers still clearly attach a massive amount of value: a ticket for a U2 gig for example can work out more than ten times more expensive per minute than buying the entire back catalogue on CD.  

 

So in the context of the Media Meltdown, where online availability of content has washed away true scarcity for good, media companies need to coalesce around where consumers retain value (see chart below).

The reason that these events have value is because they are unique – their value comes from the personal experience in the here and now. The EMI Abbey Road Live venture explicitly builds upon this theme by giving consumers the ability to extend that unique experience into their homes and MP3 players.  

 

Rebuilding the media industries won’t exactly be an easy task, but what is clear is that there are vital assets that can form the basis of new, important revenue streams.  It is not so much a case of media businesses dying as of media companies building new media businesses around their core media assets.

 

This is a topic I’ll be talking about in much more length at Forrester’s forthcoming EMEA Marketing Forum in London.

 

I’ll be presenting on the 17^th November at 2.00pm on the following topic:

The Digital Transition Of Media: How Media Will Never Be The Same Again

I hope too see you there.

Will Apple soon also partner with TV service providers?

[posted by Laurence Meyer]

The time may soon come when TV service providers are also going to compete for the rights for exclusive distribution to the Apple Tablet...

There are long running rumors that Apple will soon launch a new device that will look like the iPhone but with a much bigger screen and with great capacity: the so called Apple Tablet. Whether Apple launches such a device or not, there appears to be a market opportunity for a mid sized touch screen, media focused device.  It seems that there are also lively debates around where consumers would actually fit such a new device into their daily life.

  

Well, it seems to me that an Apple Tablet-like device could constitute a very nice device for “portable TV” consumption.

Of course, one could argue that this tablet is also the perfect fit for e-book or e-news reading, as the rumor that popular brands of newspapers, magazines and book edition have been recently approached by Apple suggests.

But I can’t help myself thinking that it could be in Apple’s interest to develop partnerships with TV service providers in order to kick-off the Apple Tablet market. On their side TV service providers, and especially non-telco TV service providers, would be offered a nice alternative to DVB-H or 2.5G or 3G Mobile TV, as they could be in full control of it.  By positioning Apple Tablet as the perfect device for a completely renewed and personalized portable TV and video experience, Apple and TV service providers would for sure give pay-TV subscribers a good reason to buy the afore named tablet.

The partnership would have to be a little bit different from what it has been with mobile phone operators, as, for such partnership to produce results, a specific portable TV offering would have to be developed and associated with the Apple Tablet. The key attributes of this portable TV proposition, that would complement the fixed TV proposition of TV service providers, would consist in the device convenience and design, as well as  “editorialized video podcasting”, that would enable viewers to watch TV content while "on the move" and that would also deliver content based on the users' profiles.

We laid out in more details why and how this kind of new portable TV offerings could appeal to consumers in a report which was published in April this year and which title is“Portable TV, Not Mobile TV: Service Providers Should Brand And Sell Their Own Portable TV Devices”. Clients can access it here.

 

 

What Google Could Bring to Digital Music

[Posted by Mark Mulligan]

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There are numerous reports that Google is about to launch a music service.  Whether the rumours have foundation or not I think it is worth reflecting on what role Google could play in digital music and their various assets.  Here are some initial thoughts:

 

• Google is already a major player in the online music space via YouTube (in Europe, the home of Spotify, more people watch music video online than listen to streaming music)
• Google shouldn’t (and probably won’t) try to be an ‘iTunes killer’.  The bottom line is that the iTunes / iPod / iPhone ecosystem is successful within that niche, but it is just that, a niche.  The 99 cents download model isn’t a mass market proposition
• Google has its Android asset to leverage, potentially ensuring it is a truly cross platform music play
• Google is in a unique position to target music demand at the earliest possible stage i.e. when consumers start searching for music

 

The last point is where I think Google’s core value proposition for the music industry comes in.  Apple can do little about iPod owners downloading from BitTorrent (and our survey data shows they are very likely to do so).  But Google on the other hand can.  Just imagine if when a consumer searches for a song, alongside all of those Torrent results is a heavily integrated Google music offering.

 

Whether or not there is any substance in the current rumours, Google could play a major role in online music.  What will be at front of mind for them though will be learning their lessons from YouTube, i.e. not hemorrhaging cash and not getting bogged down in rights holder spats.  If they have the appetite for it Google could bring something new and incremental to the digital music equation.

Spotify: Comes With Music's Latest Threat

[Posted by Mark Mulligan]

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As I referenced at the end of my previous post, Spotify – the European streaming music service – has struck a deal with UK mobile operator 3, bundling the cost of their premium subscription into the phone tariff.  I’ve done a few press calls on the story today and the recurring question has been “where does this leave Nokia’s Comes With Music”.

 

Although the business model and value proposition are very different in many respects (thus suggesting risk of direct competition is low), there are also many similarities. Both offer unlimited music free to the end consumer, and now both are mobile. The distinctions between streaming and downloading is becoming increasingly irrelevant to end users (though rights bodies will continue to obsess about the distinction). The differences the consumer feels are of course what matters.  Given that CWM and Spotify have comparable catalogue, the key differences between fully subsidized mobile offerings will be:

 

1. Ownership of the music
2. Amount of music you can play ‘offline’
3. The device / service experience

 

The latter is what will really count.  Ultimately what people want from a mobile music experience is something that works well as an extension of their device (compared to a PC centred experience where demands and expectations are higher).  In effect mobile music services have to work well as a feature of the handset. So Spotify and CWM both need to achieve deep handset and operator integration (e.g. permanent home screen buttons etc.) to make the experience feel like an integral feature of the phone experience. If either achieve that, and create a compelling business case for operators, they’ll stand a good chance of success with multiple partners, by being a feature rather than a service.

Music Subscriptions wherefore art thou?

[Posted by Mark Mulligan]

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With paid music downloads falling far short of offsetting the impact of declining CD sales, next generation subscription services need to succeed if recorded music sales are ever going to come out of their nose dive.  There is certainly lots of supply side activity, with services launched or announced in the last year from, Nokia, Spotify, TDC, Sky, Virgin Media to name but a few. And the incumbents have been busy reworking their offerings (cf Napster’s new 50%-price-cut-with-MP3s play).

 

Music subscription services have a lot of history but not a huge amount of success, so what gives the current new crop any chance of survival, let alone success?  The key will be hiding some or more of the cost to the consumer and adding real value.  The bottom line is that many consumers are simply unwilling to pay for music and even fewer are interested in paying a monthly fee for it.  So success lies in making the services free or ‘feel like free’ to the end user, subsidizing the costs through savings to, or increased revenue from other core products.  TDC, the Danish telco, has pioneered this approach with its free-to-consumer service that is available only to its customers.  (A cynic might argue that Spotify is doing the same, subsidizing its free offering with VC funding!) 

 

TDC Play has enjoyed strong adoption (100 million downloads in 15 months, not bad for a country of just 5 million, and yes, that does translate to 20 tracks for every single Dane).  Crucially though, TDC reports that Play is delivering strong benefits to their core business, which in the end is what the service is all about.

 

But not everyone is having so much success giving music away to consumers (you’d think it would be a straightforward enough task right?).  Reports have  emerged that Nokia has acquired just 100,000 Comes With Music subscribers across 9 international territories, one year after UK launch.  I remain a firm believer in the Comes With Music business model and value proposition (free unlimited music on your phone and PC that you keep for ever, the entire cost hidden in the handset and tariff).  But there is not question that 100,000 subscribers after one year is nowhere near enough return for Nokia. Nokia needs to up its game, (and indeed is doing so) because if they don’t someone else will.

 

Mobile is becoming an increasingly important element of the next gen subscription services. Spotify are using mobility as they key driver for their paid offering and are even playing the subsidized game as well with a partnership with 3 in the UK.

 

There is no lack of service innovation, but there needs to be some consistency in the experimentation. For example, what value does Sky Songs deliver for 7.99 GBP for unlimited streams and some MP3s that Napster doesn’t for 5 GBP? 

 

Continued product innovation will of course be key to feels-like-free subscriptions becoming a success, but unless this is done within a consistent framework, consumers will remain largely disinterested except for the occasional service that gets its positioning right (e.g. TDC).  Whilst that would be good news for a few companies, it could be little short of catastrophic for the music industry.

Why mobile could reinvent social computing

[Posted by Thomas Husson]

You can also follow me on Twitter at Thomas_Husson

Many innovative start-ups have pioneered mobile social networking in the last few years: BuzzCity, Peperoni, Fring, Nimbuzz, eBuddy, Zyb, Plazes, Loopt, Foursquare and many others demonstrated the potential of the market.

 

In the last few months, a bunch of announcements clearly showed that the convergence between mobile and social computing is gaining traction and attracting the largest stakeholders:

 

·         In September 2009, Facebook announced it had passed the 65,000,000 mobile users' monthly mobile audience mark (which represents more than 20% of a global online audience of 300M users). Bebo, Friendster, MySpace, Orkut also are among the top mobile Web destinations in countries where they have significant online audiences. Twitter partnered with Vodafone and O2 in the UK while offering a mobile VoIP offering with Jajah.

·         Operators such as Vodafone with its “360” initiative and to a lesser extent Orange with “Social Life” are going one step further than just offering access to social networking sites.

·         Handset manufacturers are trying to integrate online social experiences in their devices: INQ gained lot of attention with its INQ 1 (see below a pic from a recent trip in Italy) by winning the “handset of the year” award at MWC, while Nokia recently announced a deeper integration of Facebook in the N97, not to mention the Motoblur product.

 

In the UK, 40% of 16/25 years old are either accessing (17%) or interested in accessing social networking (23%) via their mobile phones. Of course, mobile social computing is primarily a youth activity today. However, it has a strong potential to unlock.   

 

Most of the digital revolution has taken place on the PC so far, with the emergence of email, instant messaging, blogs, photo- and video-sharing sites, and social networks. The ubiquitous nature of mobile phones has changed the way we live and communicate. Letters, diaries, address books, and memories have gone digital, while communication with friends, relatives, and colleagues has never involved such a mix of our personal and professional lives. However, mobile phones are not only communication tools. Mobile phones have unique characteristics that will enhance and modify existing PC-based Social Web experiences.

 

Indeed, mobile social activity is more than just accessing social networking sites while on the go. Mobile phones have the potential to become the hub of Social Computing activities and to be more than just a complement to the PC experience. Mobile phones will increasingly become the glue that holds the social graph together, offering creative tools and immediacy, presence, location, and context when interacting with the real world. The “always on” mobile connected handset frees the Social Web from the chains of the PC and thrusts it into the real world.

 

As Social Computing is still primarily about social communication, traditional telecom and online players will start fighting to tap into consumers’ social address books. It is too early to say who will win the race: stakeholders have different assets, and uncertainties around business models still exist. In fact, stakeholders have no other choice but to collaborate, as no single player can really own a person’s social graph. They need to balance business opportunities with the need to respect consumers’ privacy concerns by providing them with the tools to manage their digital identities.

 

Despite massive communication audiences, traditional online giants have failed so far to turn their communication audiences into social audiences — a lesson that traditional telecom stakeholders should bear in mind! Moving away from personal information management (PIM) to fun, exciting social experiences is not an easy game.

 

If you want to know more about this topic, Forrester Research just published a new report: “Why mobile could reinvent social computing”. Clients can access it here.

 

I had some interesting discussions with my colleagues serving Interactive Marketers and there are still lots of unknown and open issues around the convergence between mobile and social computing. I’d be curious to know your thoughts on this nascent and exciting topic. If you want to share your ideas, feel free to comment below.

Sky Songs: First Take

[Posted by Mark Mulligan]

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Finally we get to see some fruits of the labour of the protracted negotiations between the UK music industry and the ISPs.  Sky’s long mooted service - Sky Songs - will go live on the 19^th October with content from all the majors, powered by Omnifone  In doing so Sky brings three major assets to the table:

• a scale of marketing clout and expertise that other music subscription services could only dream of
• proven and deep understanding of packaging and marketing entertainment products
• a large installed base of premium customers to target

 

At launch the service is to be marketed to all UK broadband customers rather than explicitly to Sky customers. This gives a wide addressable market, but it does mean that two other key assets are currently untapped:

• bundling this offer with Sky TV packages
• integration with Sky’s hardware

 

Sky does though, leave these as distinct possibilities on the road map, which is very wise as they could prove to be the secret sauce that could make Sky Songs a success.

 

Sky also do one other very smart thing that will stand them in good stead: they enable customers to ‘dip in an out’ rather than locking them in to a year’s commitment.  This is added to competitive pricing:

 

• pay £6.49 and download either a £6.49 album or 10 songs, and receive unlimited access to listen to over four million songs online for one month; or
• pay £7.99 and download either a £7.99 album or 15 songs, and receive unlimited access to listen to over four million songs online for one month.

 

I can’t emphasize enough how important the ‘dipping in and out’ should prove for Sky Songs.  UK and other European consumers have proven largely unwilling to pay premium subscriptions services and even in the US no premium music subscription service has broken the 1 million subscribers mark.  Napster’s recent price slashing is indicative of the challenges facing the incumbents.  The bottom line is that most music buyers don’t spend the amount of money that a monthly subscription fee is equivalent to, however good value for money it might be.  The annual cost of Sky Songs would be £79 or £96. By way of comparison per capita annual music spend in the UK is just £2 whilst the average spend per UK music buyer is closer to £6.  And the unlimited streaming part isn’t that much added value anymore: Spotify’s UK success has made free streaming table stakes, not a premium add-on.

 

All of which is why Sky’s decision to allow customers to effectively use the service as a good value a la carte album purchase with free streaming is so smart.  But I hope they’re similarly smart to market it that way as they educate the customer base.  Sky almost single handedly educated the UK market about the concept of TV subscriptions, now they need to do the same for music subscriptions. 

 

Music subscriptions looked like a dead man walking in 2008, but over the last couple of years the space has had new life breathed into it with a series of next generation iterations, including:

• Nokia’s Comes With Music
• Spotify Premium
• Virgin Media’s Unlimited MP3 service
• Datz Music Lounge
• Music Station
• Sky Songs

 

All of these differ markedly from each other, and that is exactly the point.  The days of the 9.99 rental streams as the future of subscriptions are gone.  The mantra of one size does not fit all applies keenly to the music subscription space.

 

This isn’t to say Sky Songs will be an instant run away success – it will probably spend a while fine tuning its proposition and positioning – but once it starts leveraging all of its assets it stand as good a chance as anyone of making the model work.  Perhaps most importantly, it heralds a crucial shift in the role of ISPs from fat pipes for illegal downloading to conduits for premium revenue.  The outflow of industry value down the ISPs pipes might finally be changing course to a partial inflow of value.

 

Forrester has recently published a report on ISP music services.  Clients can read it here.