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.

When do you opt for your cell phone rather than your computer?

by Julie Ask

My answer to this question was, "never" until a couple of years ago. Sure, I was more likely to make a phone call on my cell phone than on my computer, but that is to be expected - it has traditionally been designed to be a voice communication device.

Opting for my cell phone rather than my laptop first started for me a couple of years ago. I began using SMS as a substitute for email. Then I started using email on my Blackberry because it would boot faster than my computer. Next came Google SMS - for me it was soooo much faster to get a phone number for a business through Google's SMS service than to call (ok, which costs money) or look online. Then, I got an iPhone and started downloading all kinds of applications. Some I barely use, but .... there are quite a few that I use rather than comparable experiences on the PC. These include Facebook (I'm more likely to be doing something interesting when I'm out and about), Scrabble (tallies the score for you), and maps (stopped printing all those maps out) among others.

For all of these services whereby I opt for my phone rather than my PC, I do so because the experience on the cell phone is more convenient. That means the benefits outweigh the inhibitors to use. When it comes to mobile services, there is convenience when there is value to the immediacy of the information or service, tasks are simple to execute and there is context - like my location.

We lay out this framework in our newly released report, "The Convenience Quotient of Mobile Services: A Facebook Case Study."

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.

Amazon Kindle launches globally, sort of

By Ian Fogg (bio, recent research or follow me on twitter)

Today, Amazon have launched a new Kindle that they are marketing internationally. Prior Kindle models were limited to use in the US. Key details:

• Big promotion in the centre of the front page of Amazon sites in the UK, France, Germany and Japan.
• Only for sale on Amazon.com and priced in USD at $279 (i.e. a $20 mark-up over existing Kindle2). Promotions above have links to Amazon's US site to buy.
• Books are also for sale only via Amazon.com and are also priced in USD (at least for now).
• This is the first Kindle that uses a GSM-standard mobile phone radio -- rather than CDMA -- for wireless downloading of books, sync of reading position with other Kindles and the iPhone Kindle app (i.e. to drive Amazon's Whispersync consumer cloud service).
• Uses AT&T's mobile network and AT&T's global mobile roaming partners for Whispersync.
• When outside the US, Kindle owners pay an additional charge for each book downloaded, currently USD1.99 per download. I imagine this also includes downloading PDFs via the email to Kindle conversion process and downloading small items like blogs or newspapers.

I'm frankly astonished that Amazon is marketing the above product internationally so strongly. Instead, it looks like a great fit for US residents who want to own a Kindle that works both in the US and when they travel abroad. Or, Amazon could have chosen a much softer and lower key international promotion on their various global sites.

For European or Japanese residents there are multiple barriers to adoption and use of this Kindle, which will cause serious issues for Amazon's famed customer service reputation: As everything is currently priced in dollars, consumers outside the US will likely hit additional credit card fees when they buy; import of the Kindle will likely incur significant customs charges; and the per download roaming fee will rapidly add up to a significant sum given it hits on every newspaper or book download.

So, why have Amazon chosen to market this product so significantly on their various non-US websites today, ahead of the launch of international Kindle stores priced in local currencies?

I suspect this indicates that Amazon has failed to secure the international mobile operator partners it needs to offer Whispersync without per use fees, and by making such a big deal of this launch internationally Amazon hopes this will put pressure back on those partners to come back to the table. But if so, then why has the Kindle iPhone app not also been launched on those countries' Apple App Store's for use on the iPhone? The iPhone version wouldn't have those same data roaming costs when a consumer is in their home country of the UK, France etc. as iPhones are sold with inclusive mobile data. Other thoughts? Please comment below.

Vodafone 360 is a Major Strategic Play for Handsets & Mobile Internet

By Ian Fogg (bio, recent research or follow me on twitter)

Vodafone has just launched a major new initiative called Vodafone 360 (release, with the new 360.com website to follow). Key points:

• Integration with social networks for an online address book and content sharing.
• Combination mobile handset + 360.com cloud service strategy.
• Single sign-on for customers or non-Vodafone customers. 360.com website available to both.
• Deep handset integration: two new Linux LIMO handsets with "full fat" experience (made by Samsung). Lesser version pre-loaded onto a number of Symbian Series 60 handsets, downloads and other versions available for around 100 handsets.
• Also includes an App store, new mobile web portal, music service, and maps service.

I'm working on a quicktake report. But this is such a major initiative with wide ranging scope, that I'm extremely curious in what others think? Specifically:

• How well positioned are operators to implement a social strategy with such deep handset integration, compared with handset makers, or the Internet social networks themselves?
• Was Nokia's OVI initiative a lightning rod that distracted many from other handset maker initiatives in this space? (Like Motorola's Motoblur, HTC Sense, Google & Android, Microsoft Myphone, or Apple's MobileMe?)
• Is 360 a better umbrella name than "Vodafone Live!" ?
• Thoughts on how well 360 fits with Vodafone's new corporate tag line, "Power to you" ?

Comment below! I'm here and will reply as appropriate.

Palm's Need to Communicate Its Differentiation

By Ian Fogg (bio, recent research or follow me on twitter)

Background - Today Palm announces the first major operator partner for its European strategy with an O2 partnership.

Back in January, when Palm unveiled the Palm Pre and its new Web OS platform, Palm's innovation was clearly differentiated and ahead of the competition. Palm had pulled a rabbit from the hat. The Pre integrated social networks with its 'Synergy' interface in an extremely modern overall touch user interface. The hardware was different too: The Pre offered wire-free charging with the add-on Touchstone and managed to combine both a capacitive (multi)touch screen with a QWERTY keyboard in a phone the same size as the iPhone.

Nine months is a long time in mobile.

Now, most of the key Internet phone makers have launched social network integration (most notably Motorola with Motoblur on the Cliq/Dext; HTC's Sense UI on Android and Windows Mobile; and INQ Mobile's various models; and others about to announce plus operators). Offering a capacitive touch screen is now table stakes for a high end Internet phone.

Palm's product strategy was smart when put in place several years ago. Unfortunately, others thought the same way. This is a key challenge for developing a product strategy that takes several years to move from inception to launch. How do you stay ahead of the game when you're stuck behind the fog of the product strategy war? (It's a great reason to use research firms to develop that strategy).

Now, Palm does retain differentiation, but mostly in how the Palm Pre does what it does. Palm has to work hard to communicate that its execution is different.

Today's announcement of an exclusive deal with O2 in various European countries will help. As a small firm, with a new launch product, Palm will benefit from the co-marketing support to evangelize its product differentiation.

Palm's other key challenge is how to maintain the r&d spend needed to ensure its next products are more innovative than its much larger competitors, while shipping significantly less handsets than any of them every quarter.

For more insights into why so many firms are integrating social computing and social networking into mobile handsets, see this report: How Mobile Handsets Will Deliver 24x7 Social Computing.

For analysis of the Internet phone category and how Palm compares with the other handset makers please read this key report: The "Smartphone" Is Dead: Long Live Smart Phones And Smart Gadgets

Wireless Net Neutrality ... Does it Make Any Sense?

US as Traffic Cop in Web Fight (see WSJ article)

(by Julie Ask)

Ok, so there is a bit of wait and see until Monday when the FCC Chairman makes the anticipated announcement, but here's a first take:

Who, I ask, is on the side of the consumer?  This WSJ article discusses how Obama is taking the side of Silicon Valley. Republicans seem to be taking the side of the carriers. WHO is on my side as a consumer?

Most consumers are NOT demanding the ability to stream unlimited video to their cell phones. In fact, very few are even looking for video capability in their next handset purchase. If you are a Forrester client, come ask me/us for the data - we can show you. Consumers are more interested in their battery lasting all day than streaming video ... which will kill it.

What consumers WANT from their wireless service providers is high quality, reliable voice services. Really, it is. We ask consumers year in and year out what it is they want in a wireless service provider. Quality of service and value always come out on top.

The carriers ... they've raised money in the stock and bond markets based on the assumption that they could generate revenue from selling wireless services - voice, SMS, data, etc. Why should Skype be able to undermine their ability to sell voice services? Why? The wireless service providers have taken all of the risks - they've raised the capital, they've built the networks, they carry the cost of customer service, etc. Wireless VoIP likely makes sense for some international calling given the roaming fees .... doesn't mean it has to happen on my cell phone over a non-Wi-Fi wireless network. There are probably more consumers who are shareholders in these companie with expectations of strong returns than consumers wanting wireless VoIP ... which by the way doesn't have consistently high QoS.

So, streaming video and other bandwidth hogging applications. Let me say it again ... quality of VOICE service. I DON'T WANT to be on a wireless network with a bunch of people trying to stream video. This is for the same reasons I don't count on using Wi-Fi in a Starbuck's or Panera Bread shop - I don't want to be on a congested network with QoS issues. Sometimes it's great, but you never know. It doesn't take many consumers streaming video within a cellular network to use up a lot of capacity, create congestion, and compromise the quality of the experience for the rest of us.

Wireless services providers can't simply flip switches and keep dialing up the capacity. There are backhaul issues from the towers. There are laws of physics. I live in SF. I tried to Tweet from my iPhone at an Apple event just a couple of weeks ago - even that was frustrating given how many of us are on the AT&T network with iPhones out here - and that's with rules. You want to download a movie or fat file? Guess what, do it over Wi-Fi or your landline.

Video can be a good service on cell phones. MediaFLO has invested hundreds of millions in a broadcast network. There is Wi-Fi ... how many places does one go these days where there is no Wi-Fi network available? Don't get me wrong - I like watching movies and TV shows on my iPhone.  I live watching YouTube clips. That said, the wireless network is a bit of a shared resource. My interest in watching YouTube shouldn't trump the ability of paying consumers' ability to make phone calls. The carriers have a right to generate returns on their investment.

Yes, they could raise prices on data services .... but to what point? AT&T and Verizon each have upwards of 70 million or so customers. It's not clear to me that either one wants to hand over 35 to 40 million of them to Sprint and T-Mobile even if ARPU doubles.

Let's see what the FCC says on Monday ...

Nokia Breaks with the Past: N900 Linux Maemo Phone Announced

By Ian Fogg (bio, recent research or follow me on twitter)

The new N900 is a departure from Nokia's regular evolutionary extensions to the Nokia handset portfolio that build on previous models. It's the first big reaction to the many new entrants that have arrived in the high end Internet phone market over the last two years (Google's Android, Apple, Palm's Pre etc.).

While the Nokia N97 that launched earlier this year used a variant of the same software used in every high end Nokia Internet phone for over five years -- Symbian Series 60 -- the N900 does not. For the first time, Nokia is launching a high end Internet phone using Linux. And note, The N900 is using Maemo, and not Android.

Nokia isn't positioning the N900 as a "smartphone". This is smart. Read why here: The "Smartphone" Is Dead: Long Live Smart Phones And Smart Gadgets.

This is a significant strategic play for Nokia as I warned clients was coming last year. I've seen the N900 and held it in my hands. It's impressive. But is it enough to help Nokia re-gain mindshare? Comment below! Or, contact me via the Forrester inquiry team (clients) or press office (media).

Updated - We've published a report analysing this:
Nokia Begins The Fight Back With The N900

Sony's Big Announcement: Open Content, Strong eReader Lineup For Holiday Season

[by Sarah Rotman Epps]

At a press conference this morning at the New York Public Library, Sony announced:

 

• The much-anticipated debut of its wireless Reader, the Daily. At long last, Sony announced what the market has been waiting for--a wireless Reader device, which will run on AT&T's 3G cellular network. (AT&T will also power the network for the Plastic Logic eReader when it comes out next year.) Like its brethren, the Sony Pocket and Touch Readers, the Daily has Sony's hallmark high-quality design, and frankly, makes the Kindle look like an oversized calculator. Its touch-operated 7" screen has a vertical orientation evocative of a newspaper column. Sony didn't announce its content partners, but many of our newspaper and magazine clients have told us they are in conversations with Sony and we expect additional announcements later this year. The device will ship in time for the holidays and will sell for $399.
• Our take: The new screen size is an elegant solution to the problem of how to optimize for newspaper and magazine content without building an oversized, ungainly device. (The Daily is slightly smaller than the Kindle 2, and with its built-in cover weighs the same as the Kindle 2.) Unlike the Kindle, the Daily is a touchscreen. Even with the higher price, this is an attractive product for consumers who value Sony's design and touchscreen along with wireless access.
• Better integration of free public library eBooks into its store. Sony has partnered with Overdrive to integrate public library access into the Sony eBookstore. From the "Library Finder" feature in Sony's store, users type in their zip code and are directed to the eBook borrowing page of their local library, where they can check out an eBook (in PDF or ePub format) for 21 days. Eventually, Sony's Reader devices will also include this integrated library search and borrowing function, but for now library books will need to be sideloaded into the device.
• Our take: This is not just good PR and a public service, but also a smart business decision for Sony. Sony is telling consumers, "you don't need to buy our content--or buy any content--to get value from our devices." Enabling consumers to access free eBooks via the public library network and Google's public domain collection (which now tops 1 million volumes)--and letting consumers buy ePub books from other sources and read them on Sony's devices--greatly expands the value proposition of its devices. And by going open, Sony helps compensate for its biggest weakness: its lackluster eBookstore, which pales in comparison with Amazon.com.

 

Overall, these and previous moves put Sony in a strong position to compete against Amazon this holiday season. Sony's well-designed product lineup--which offers value-seeking consumers the Pocket Reader at $199, those willing to trade up for more features the Touch at $299, and wireless junkies the Daily at $399--will measure up well against the ugly duckling Kindle 2 and Kindle DX. It helps that Sony's products will have distribution in more than 8,600 stores, including Best Buy, Wal-Mart, Costco, Target, and others; the Kindle is available in just the 1,200 Targets (in addition to Amazon.com, of course).

 

With the right products and the right distribution, now it's up to Sony's marketing team to persuade consumers that a Reader is the perfect holiday gift, superior to the popular Amazon Kindle. With a campaign that includes TV, online, print, and in-store efforts from September to January, Sony is putting serious resources behind this product push.

 

Stay tuned for Forrester's updated holiday outlook for the eReader market--it will be an exciting holiday season, that's for sure.

 

And then there's next year...

 

Follow me on Twitter at www.twitter.com/srepps.

What role will mobile play in the future of social networks?

[Posted by Thomas Husson]

You can also follow me on Twitter at Thomas_Husson

I published my first report on mobile social networks 2 years ago (see here) at a time when Facebook audience was "only" around 50 million unique monthly visitors. At that time MySpace was a paid-for and exclusive experience on Vodafone-Live and Bebo was about to launching a mobile version. Needless to say lots has happened in the last 2 years.

Numerous acquisitions and parternships took place between the likes of Facebook, MySpace, Bebo, Twitter, Hyves and with handset manufacturers / mobile operators. Several mobile-only communities (AirG, peperonity, itsmy.com, buzzcity...) have gained traction and there is plenty of innovation in that space. INQ generated lots of media coverage and interest by lauching its so-called "Facebook phone" and plans to launch new devices. I am not sure what the latest Facebook mobile stats are but not that long ago rougly 10% of the worldwide installed base of FB users had registered to the mobile version. Even more significantly, the GSMA announced a few months ago that UK mobile consumers who access Facebook via their mobile phone spend, on average, 24 minutes on the site daily, just shy of the 27.5 minutes that PC-based Internet users spend daily on Facebook; mobile users of Facebook average 3.3 visits per day versus 2.3 visits per day from PC users.

It is not clear yet who is best positioned to tap into consumers’ social address books but it is quite clear mobile phones offer a great potential as they are not only communication devices but increasingly consumption and creation tools.

I have plenty of questions and would be curious to know your thoughts. Feel free to contribute to the questions below my letting your own comments below:

- Is it just a question of who will control the social address book? I tend to believe it is (see a former post on this here)

- By easy sharing and integration, can mobile phones become the hub of social networking? - Is it key to control the core technologies (APIs and web services that use them)?

- Is there a future for mobile-only communities? Aren't itsmy.com and others overhyped in Europe?

- How will mobile be part of the social graph?

- What are the most innovative ways to connect people and to enhance social networks?

- Aside from increasing data demand and traffic, how can social networks help mobile operators?

- How can mobile operators and handset manufacturers control or facilitate mobile social network ecosystems?

- What types of business models will emerge around mobile social computing?

 

I am planning some new European research on this theme to try to answer these questions and plan to interview lots of stakeholders. If you want to discuss this or if you want to set up a briefing, please contact me at thusson AT forrester DOT com.