With Spotify announcing it’s tie up with Virgin Media, and the much impending promise of launching in the US, apparently predicitng 50M paying subscribers, I thought it would be great to do a review of the challenges ahead, from the time I wrote my last post, and gain an undertanding of how the music industry landscape is all set to change.
Needless to say that there are numerous battlefronts (especially from the content creation end of things and companies like Soundcloud and RJDJ are spearheading this space) there are also others which are integrating location services with venue management and ticketing, but lets focus on commercial music ecosystem for now. The other developments will certainly be the key for long term sustainable growth of music, but there are more pervasive, immediate problems to resolve.
Spotify took up arms against piracy and it seems to have done a reasonably good job. Look at how South Korea has transitioned into a well functioning legal digital music ecosystem while Spain is suffering (The Spanish top 50 did not feature a single local artist). What Spotify also did was kill the idea of Nokia music and certainly shot down the idea of Sky Music – ISP music providers were busy battling with consolidating repertoires and picking fights with Apple and Amazon.
However, the freemium model is unsustainable – perhaps not for We7, but then it’s at a compromise for user experience, and based on historical evidence, better UX wins! Hands down!
My sense is that the over-arching trend will be ubiquitous music and the focus on discovery as opposed to search. Sure, search is what separated the winners from the losers (iTunes said you dont have to download albums any more, only the song you want) – but the next paradigm shift has been cloud (and Spotify has been one of the forerunners of that) – but what’s the next big step?
1. The Consumption Battlefronts –
The idea is to carve out every listening hour/minute that you can out of a music listeners life. To top that off – give them more that they can discover, both socially, and through recommendation algorithms. Lets see which are the fronts are already waging wars –
a. The Web / Streaming media –
They are all here – Grooveshark, Spotify, Rdio, Pandora, We7 etc. This is the holy grail for streaming music models and nothing will go away. Each one has their own business model, however, the battle is an ongoing one and will ultimately depend on the user experience and the price points.
What wins? – This is the hook. Free services will inevitably gain market share faster. However, the eventual winner (making money) will be the one that is cross platform.
b. Wireless hand-held personal media consumption devices – (Tablets/ Mobile)
People serious about their music would not mind paying from here on.The stronger the eco-system that a service can create around this, and the more seamless the experience between the feature rich web experience and this, the more competitive that service will be.
For now, lets just leave aside the wireless/3G argument – because streaming music consumption both zaps power and data packets.Streaming music over cellular networks is more of a cost consideration than a performance issue.
While there will inevitably be diversity in platforms for services, I dont think being simply ‘mobile-compatible’ is the way to go for the streaming services. There has to be an app to provide a rich experience. So while honeycomb/android platforms will allow for sites like We7 to provide a service (and iPad will not), yet, you will most certainly need to take advantage of the platform to provide a better user experience.
What wins? – In my humble opinion – offline sync with Spotify is just amazing. For me, this feature itself was good enough for me to dispel with my iTunes player from my iPhone and replace it with Spotify.
c. Car Audio!
Yes, Radio will always play an important part (someone is talking at the other end, while you are trying hard to stay awake), but for the long drive along the coast – you surely want to have an uninterrupted playlist!
Pandora led the way in this (after satellite radio did not pay off) and is reaping the benefits of first mover advantage. However, focussing purely on car audio is a subtle position to take – if your phone already has an app in it (that both streams and plays downloaded songs) and you could connect your phone to the car audio system – a native music streaming service in your car audio system hardly makes sense right?
Integrated Car Audio systems are unlikely to gain anything from maintaining exclusive relationships with music service providers. The market is pretty fragmented and competitive – the most open ended integrator (plays iTunes, Rdio, Pandora and Spotify ) will win.
d. IPTV apps
Now this is the big fish! Integrated home entertainment and communications. A whole lot of things are competing in this space – Tivo, Boxee, Roku, the works! The US consumer market is already heating up but the UK is still to adopt this. This will create a whole new wave of allegiances amongst telecom giants and manufacturers. Ultimately it will be up to the development ecosystems and the applications to pick the winning battles – i.e. market penetration of the hardware will largely depend on the telecom operator – packaged deals will be the order of the day.
The question is – for a household then, would you give away 2 Spotify accounts for £10 over a year long contract so that dad and son can listen to their own music on the TV and while on the move?
2. The Social Experience Battlefronts –
If you are a true music aficionado, then you will want your music in more ways than one. There will beabsolutely nothing that beats the joy of visiting an old record store, a chat with the store owner about why the particular record you are clutching with dear life, was the best work of Charlie Parker ever.
Then coming back home and playing the gritty vinyl tracks on your Hi Fi with the hiss and noise to go with.
If it’s a rare Blue Note recording – would you rather hear it while sitting sweating in a bus travelling through the city – or would you rather be in the cool of your shelter, with a nice glass of scotch and listening to a rusty cackling voice through your extra large wooden speakers, appreciating the lovely square extra large album artwork? (psst…. the Spotify guys have found a way to get somewhat into this space too, but it would be interesting to know what the statistics say about usage in this space)
It is good to see that iTunes has tapped into a white space to monetize too – The iTunes festival (I won 2 sets of free tickets!!) is nothing more than what bootlegging used to be – except in a digital, more modernistic stance. Good stuff.
What wins? – The music wins! Some things are meant to be special and stay special – there is no recommended way of listening to this. The only way is the way you like it best.
3. The Cost Battlefronts a.k.a (Wireless v/s 3G/4G) –
So streaming music it is. While it’s fine to have this within the known realm of music consumption – i.e. your workplace, or your home – what happens when you are mobile and on the move?
There has already been a lot of hue and cry over data consumption over cellular networks, especially over the UK / EU area and there continues to be stories published about people returning from 3-4 days vacations and being presented with a massive telephone bill.
The IFPI report indicates that in a study conducted by Ovum the digital music services could earn UK ISPs alone up to £100Million by 2013
So, what?- stop listening to music when you are on your vacation? or in the tube? There HAS to be a local cache that you can tap into for your portable devices. Period.
Rdio, MOG, Rhapsody have covered this base, but Pandora and Last FM are out of this game.
4. The Content Battlefronts –
By far the most interesting space. Commercially produced music will always operate under a structure that has way too many middlemen who have been and will continue to dominate the ecosystem to in every which way they can. I was reading an interesting article that talks about fair and equitable revenue sharing but the reality is that the ecosystem needs a disruptive shake up.
Commercial music is not going to go away and has a number of barriers to overcome before true catalog consolidation takes place. This is a space where infrastructure, disposable incomes, astute pricing and packaging, market share and penetration – everything comes into play.
However, to give true power to the people, more platforms need to come that eliminate the middlemen from the ecosystem and instead brings musicians closer to their fans.
For now, I’m just happy that content monopolies are being disrupted and it is becoming a level playing field for musicians.