ratpie

Category: markets

  • Spotify Royalties: More Expectations and Numbers in Digital Music

    Spotify has released some very helpful information about what it expects to pay music owners for albums in different parts of the sales curve over a typical month. It’s being widely discussed. Less than helpfully, while we have a fair idea about the top end (what they call a ‘Global Hit Album’), it is far less clear what they mean by ‘Niche Indie’.

    Yet, to my mind the layer of the market that is just bubbling under the viability level is critical to the health and diversity of the music industry in the future. It does not take much imagination to see why – music at the top of the market is driven by large teams of producers and product managers, trying to take as much of the risk away as possible. (This was pretty much the conclusion of some great research done by Tijl de Bie at Bristol University looking at chart music over the years and finding that measures of diversity have been shrinking.) The new, the young, and the marginal are sources of innovation and regeneration in music as in so many other cultural fields.

    To try to understand better what Spotify meant by ‘Niche Indie Album’ we made some assumptions and did a bit of math. Take the following with more than a pinch of salt!

    Inspired by Will Page & Eric Garland’s paper of a few years back, when Page was at PRS, we had previously compared our own streaming service data and found similar patterns. A tiny minority of the inventory generates a large amount of the revenue, and when plotted shows the typical tall head / skinny tail curve. Page is now at Spotify; we have been given a few numbers to work with, and can fit them on a curve that we hope is not too far from the one he looks at every day, we suspect.

    Here’s how it pans out on the monthly sales chart. A ‘Breakthrough Indie Album’ ($76,000) would be number 10; a ‘Classic Rock Album’ ($17,000) at number 42; a ‘Niche Indie Album’ ($3300) would be at number 220.

    There’s no need to go into great detail about all the problems with extrapolating from what isn’t really data in the first place (Spotify streams tracks not albums, they don’t tell us whether this is peak revenue or ‘just passing through’, and nor do they tell us the provenance of ‘Indie’). We will just have to hope that we get more and better data in the future.

    For an extra bit of fun we extended our investigation down the tail until we got to what we might call a ‘Spotify Pays My DIY Distribution Fees Album’ at $3 per month. It hits the sales curve at approximately number 240,000. This, if you think about it is an amazing achievement; a decade ago it was pretty much impossible to get 100,000 albums on sale, let alone generating enough revenue to cover the cost of shipping them to the stores.

    It would be interesting to see some typical album sales curves over time, and to understand better what an album means to Spotify, and to other digital music services. Revenue patterns as well as amounts are changing dramatically, and artists and labels need good information about how to approach their time, effort, investment and careers. The public clearly loves good recorded music; better information can help the music industry create more of it, and better, especially in the vital but risky zone just outside the top 200 hits.

  • Record Companies Should Give Up a Hard Won Right. Here’s Why.

    When the recording industry was young there was a genuine concern that it might be strangled at birth by owners of popular songs, who might naturally wish to protect their sheet music sales and public performance fees from competition from the new no-effort and high quality music experience offered by the phonogram. As it was, a sensible deal was struck to allow recordings to be made on payment of a low fee. This payment for the right to make copies of the songs embodied in recordings – the ‘mechanicals’ – became the biggest revenue stream for many of the writers and publishers, and the success of the recordings drove even more revenue through more public performance, and through broadcasting of the very recordings that some had feared would harm the pre-recording music business. This automatic right to perform and record songs became one of the foundations of the industry.

    Times change. Great songs still are at the heart of the business; that is fairly uncontroversial. But low production costs and almost no barriers to entry in the digital market have brought a flood of badly performed and badly produced imitations of popular recordings. Artist names and song titles are often created to trick the public that they are getting the real thing. These records might generously be called ‘tributes’, but the tribute is to the earning power not the performance or the art involved in the recording. As a class these records are one of three main drivers of the ballooning inventory that is adding so much cost to the digital music business (the others being PD and ‘generic’ music). The cost in consumer displeasure is harder to quantify, but they add risk to the retail experience and that means a worse business for everyone not playing the ‘full vocal Karaoke’ game.

    One response to this problem is certainly for music services to get much better at weeding out the genuinely interesting cover versions from the chancers and soundalikes. This is happening already, but is clearly a difficult, expensive and time consuming activity. They will too need to lose their fear of seeing uncompetitive if they have only the 10 million tracks people will enjoy rather than the 25 million that producers want them to carry.

    But there is another approach, far more radical, and I would argue far more in tune with the times. Record companies should willingly give up their automatic right to make copies of the embodied song when they sell records. The right to perform need not be touched; the right to record for private and personal use can remain too. But making copies of the composition for the sale or performance of sound recordings would benefit greatly from reverting to exclusivity and private negotiation.

    The question for the owner of the song would then become not how many copies can be tricked out of an undefended public, but whether a particular recording adds real value to the song itself, now and in the future. Record companies too will perhaps pay more, but for an exclusivity in their own asset, the recording, that should pay them back many times over in the market.

    The contention here is that every horrendous cover of Born in the USA is a cost borne ultimately by the owners of the copyrights therein, and unfairly benefits free-riders on the value created by the writers and producers of the song and original recording. Digital markets sometimes need new approaches to copyright; in this instance what might seem a retrograde or undemocratic move would serve the public and the music industry better than the current free for all.

     

  • Perverse Incentives for Music Producers

    Digital music could be a world of opportunity for many talented creators and producers who were squeezed out of the old world of manufacture and inventory limitations. One click to listen, one click to buy, and any number of new ways to connect creators and their market mean discovery, information, and transactions are virtually costless.

    Music is indeed everywhere in the digital world, and a great number of services have been developed to help musicians turn their craft into a business and hopefully a career. One of the most striking features of the last decade of digital music is the growth in the inventory available. Here’s what one music platform says about the choice on offer:

    Choose from over 25 million high quality tracks in our store; download, sync and play your music on the go. (7digital)

    Just 10 years ago Apple launched the iTunes store:

    The iTunes Music Store features over 200,000 songs from music companies including BMG, EMI, Sony Music Entertainment, Universal and Warner. (Apple press release)

    So where has all this music come from, and what kind of music is it? And, for those contemplating adding their own recordings to the world’s 24/7 jukebox, what can the people who make all that music expect out of the market?

    One thing is totally clear; most new music is not coming from the global businesses that used to be called the Major Labels, now down to three after the sale of EMI to Universal Music. Competition authorities were interested in the deal because it would strengthen Universal Music’s ability to control innovation in retail by withholding critical catalogues, not because there would be a shortage of music. Anecdotally the remaining Major labels, UMG, Sony, and Warner, have between 1 and 1.5 million tracks each in the market, and are adding thousands but not millions per year.

    Other large sources of music include aggregators of distribution rights, such as The Orchard, now connected to Sony. In 2008 The Orchard, then a public company, filed reports claiming rights in a million tracks. These days it claims:

    The Orchard is a global leader in music and video entertainment, representing over 3.1 million music tracks

    So that is 2 million new tracks in 5 years, coming from many small independent labels and artists. An artist focused service, Tunecore, has some similarly impressive numbers, claiming recently “more than 849,000 artist and label account holders”. Even if many only release one track that is a lot of music. The company recently rather dispiritingly started a blog post with “TuneCore Artists are releasing tons of new music every day.”

    Orchard rival, IODA, which it bought in 2012, claimed 2.1 million tracks, having started at zero in 2003. A number of smaller companies bring catalogues from the hundreds of thousands to the low millions, and much of this new music is now produced by self-funded artists.

    Few of those artists have access to professional recording studios, so unsurprisingly orchestras don’t feature strongly, and nor do choirs. Typical new music is predominantly wholly electronic, with perhaps a vocal or single line of instrumental solo. Some also seems relatively anonymous. A difficult question these days seems to be ‘what do you put in the artist field?’ This lot put KoolSax:

    http://www.amazon.co.uk/s/ref=ntt_srch_drd_B007OMGY6Q?ie=UTF8&field-keywords=KoolSax&index=digital-music&search-type=ss

    The release schedule seems to be more about getting as much as possible out of as little as possible rather than a reflection of an artistic journey. A great deal of creativity is going into titling the compilation albums.

    So what kind of market awaits those KoolSax tracks? The IFPI puts the digital market at $5.6b for 2012, and growing at about 10% per year. So let’s say $6b to make the sums easier, and divide it by the 25 million tracks to find that the mean revenue per track is going to be $240 for the year. That looks almost worth switching a computer on for, but of course markets don’t work like that.

    I recently looked at a set of streaming data and found that only 10% of tracks were streamed once or more over a six month period. That would suggest a median value of zero, and indeed a 9:1 probability of earning nothing over the six month period for any track selected at random. Extrapolate (a dangerous hobby for sure) and that gives us a global ‘earning’ catalogue of approximately 2.5 million tracks this year. Our new mean revenue, once we have discarded the dead weight repertoire, is of course now $2400, or $200 per month.

    So that is what the market seems to be saying. As a creator you have a 1 in 10 chance of a pop at $200 per month. Creativity in titling your tracks and your compilations seems to be as important as the music itself. The music had better be cheap to make, and you should find multiple ways to sell the same track or set of stems. You might end up in the belly of a huge distribution beast to whom you are economically insignificant.

    Most people when asked how they compare to their peers claim to be better than average. Today’s music market looks like it rewards the second quartile no better than the third or fourth.

  • Music Industry Grasps Wrong End of Carrot

    A UK Parliamentary report is out today, 26 September 2013, that represents a fierce fight back by the creative industries, led by music, against a rogues gallery of pirates, ISPs, and technology and digital advertising and media companies.

    No doubt it will be greeted with a few cheers, and a pint or two in the pubs around the trade associations. It manages however spectacularly to miss the mark on a number of points; more of a Maoist Great Leap Forward than a Stakhanovite revolution in creative industries thinking.

    The committee had a clear brief, to discover how Government could better support the creative economy. Several other Govt sponsored groups are looking at this very subject, from the Technology Strategy Board to a new academic initiative called CREATe. Some very obvious themes consistently emerge when experts manage to get behind the curtain.

    The first to appear is usually sclerotic licensing, driven by internal industry competition rather than a desire to maximise the size and dynamism of the sector. This ‘beggar my neighbour’ approach sees groups who should be cooperating, record labels, music publishers, artists, for instance, openly at war with each other. Only this year a prominent manager issued a call for peace at the BPI AGM. Why did he need to? Why do the various music sector lobbyists always reserve the right to lobby independently from their collective voice? No amount of public money or effort has shifted this problem one iota, and nor would anyone sane expect it to while there is so much to gain for those at the top of the licensing tree.

    The latest initiative, the Copyright Hub, is welcomed by the committee, but even such a confused and ineffectual vessel apparently needs a shot across its bows. Membership should be voluntary says the report. Hargreaves wisely suggested a bit of push might be required as well as pull to get enough engagement to deliver a meaningful benefit to downstream users of music licences. That, for this committee, would clearly be an outrage. Similarly the EU’s ambition for a digital single market gets short shrift. Again, apparently, there is no problem. Licences are available. Of course they are, but only under the strictest secrecy, so we shall just have to take their word for it. Given the short term of licences in the market and the devastating effects of withdrawal of the major content companies, no rational licensee will turn whistleblower.

    So what could Government do to help? Perhaps it would be too drastic to compel some information about licences into the open for analysis, so that creators and new entrants to the creative industries could see what they are getting into. But it most definitely should not just take the licensor’s word for it that ‘everything is hunky dory just look at Netflix and Spotify guv’. And if there is one party that the committee should feel a very strong responsibility to it is the 20 year old who will have to decide whether to get a job with MegaContent Corp, or try to bust the market right open with a new venture. And I hope it is completely obvious that Government should always prefer the innovator and market entrant to the incumbent, no matter how many dinners and gig tickets it might have to forgo.

    Back to the exemplar expert, peering behind the curtain, who sees soon enough that the stage machinery is rusty, frayed, creaking. The creative industries have failed to keep their collective infrastructure in synch with the digital age. Standardisation is happening in a patchy way, but is very much too little and too late. Even now the music industry has no consistent way to identify an artist globally, and governance of the sound recording identifier scheme is woeful. Supply chain data that should have been developed in the 1990s is creeping towards normality, but sales reporting is still ad hoc and fundamentally broken. Even the moral right to be identified as the creator of a work has been lost in digital incompetence.

    This is very important but seems to have been completely invisible to the committee, who presumably made sure that they did not talk to anyone who has to grapple with the problems, rather than who benefits from the misallocation of resources that is the inevitable result. How could the Government help? Small amounts of cash for training and conferences and workshops would be transformative. Currently the cost of the dysfunction and the overhaul is being disproportionately born by the small and the innovative while the larger players drag their feet. In particular collecting societies should be shamed into using international standards as part of their code of conduct.

    Metadata and supply chain reform and reconstruction is also the pachyderm house guest of the committee’s table thumper, copyright infringement. And here is the spectacular fail. It would be reasonable and justified for the committee to recommend that the small minority of mostly well off young men that Ofcom tells us are the diehard infringers should be hit with a Soviet style re-education campaign. Make them polish Billy Bragg’s boots for a month, or do community service in a music recording workshop for 14 year olds. But to introduce new systemic monitoring and notification infrastructure is to give too much of a franchise to enforcement at a time when the creative industries should be trying every thing they can think of to make it unnecessary.

    In a world where there are tens of thousands of legitimate ways to book a hotel room in Bognor, 60% of search result links to hear or download a pop song is a music industry failure and requires first a music industry response specifically targeted at making legitimate music ubiquitous. Broad licensing, freedom for retailers to advertise their services, and industry approved whitelists all would help. Perhaps the target 70% of revenue that the music industry seeks from licensees is not a rich enough margin to encourage the variety of music services that consumers need. Instead of asking these sorts of questions the committee seems to have taken a Mandelsonian shortest path between ear and mouth approach to industry lobbying.

    So, evidence of crowding out on Google search results should be taken as a sign that there are not enough retailers competing for the public’s attention, and that those there are have their hands tied either economically or contractually on how they can advertise. The Government should ask the simple question to the creative industries and their business partners, ‘can you tell Google definitively what you have to offer and where it can be found?’ If the answer is no, then it’s back to the workshop for another round of supply chain reform. Stopping people from finding pirates should always come a distant second to helping people find legitimate and remunerative ways to enjoy content.

    The committee criticised Hargreaves for bringing forward flimsy evidence to support his recommendations, but did not care to inoculate itself against the same charge. And it missed its chance to become the promoter of open and fair markets for creators, underpinned by IP law just as today’s are, preferring to become a booster for incumbents and a protector of their interests.

    Help train the young and retrain the workforce, encourage and enable cooperation where appropriate, arbitrate if necessary on things of common utility such as standards; if the Government would do that the creative industries would look after themselves with the enthusiastic support of citizens and consumers. That it was so much at the music industry’s prompting that the Culture, Media and Sport Committee came out 100% stick shows that music is still a reluctant passenger in the digital economy, clinging firmly to the wrong end of the carrot.

  • Copyright, Human Rights, Development, Privilege

    Two things in particular I have been enjoying surprising people with recently. The first is that copyright is part of the Universal Declaration of Human Rights. All right it is near the end, so fewer people will have had the stamina to read through and find it. But it’s clear and unambiguous at Article 27.

    Article 27.

    (1) Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.
    (2) Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.

    http://www.un.org/en/documents/udhr/index.shtml#a27

    The second surprising fact is that the UN maintains a ‘best practice’ set of music industry  contracts. Here’s their justification:

    First and foremost, the fight against music piracy involves the use of contracts drafted in compliance with good professional practices. In order for music contracts to achieve their desired effect and be used on a widespread basis, artists, themselves, must be convinced of contracts’ usefulness. Therefore, UNESCO, trusted by artists from around the world due to its ceaseless efforts to promote creativity, cultural industries and cultural diversity, believed it important to produce this guidebook in order to assist artists and music professionals in overcoming their distrust of current music contracts and to provide them with information about their rights and good professional practices.

    download it from here: http://portal.unesco.org/culture/en/ev.php-URL_ID=40107&URL_DO=DO_TOPIC&URL_SECTION=201.html

    One of the oddest interactions in the story of UK Government fiddling with copyright came when Professor Hargreaves was challenged at a Parliamentary hearing on the assumption of the value of an exception for private copying.

    The exception, covering the transfer of music to portable players for instance, had been valued in a report at £2billion, which does indeed seem a lot for what appeared to MP John Whittingdale as a technical tweak to stop normal and everyday behaviour remaining infringing. Hargreaves pointed to general confusion and ignorance about what copyright allows and forbids, and makes a fairly bland comment, ‘well it might increase confidence in the market’.

    See it here at about 10m 50s http://www.parliamentlive.tv/Main/Player.aspx?meetingId=12191

    Perhaps John Whittingdale is too busy to spend the hours required rummaging around in the human rights and development literature. Perhaps he, along with many others, imagines that the UK and other developed markets are beyond the kind of concerns that our taxes promote for less fortunate societies. Perhaps he has just forgotten what it was that created our prosperity in the first place. Categorise this fault as looking down the wrong end of the telescope.

    Whatever, I wish that Professor Hargreaves had had the courage under fire to point out to the politicians that all participants need confidence in our markets if they are to invest in creating value; and that music, an intangible and fragile market, needs more confidence than most in an age of non-excludability.

    The billions of decisions that collectively make up the market are diffuse and complicated, so we can be sure that we will never really know how much confidence there is in the market, or whether more might deliver that extra £2b for the UK. Turn the telescope around however and look at the whole world in sufficient detail, and confidence seems to be one of the most important ingredients in the markets that support musicians and culture.

  • Collectives versus Pools in Pursuit of Copyright Efficiency

    YouTube’s generous approach to on-demand video streaming, while historically the cause of some friction with copyright owners, is also this year a great blessing to anyone interested in the regulation of copyright business. For it has provided a platform to view and review a length discussion between some of the key figures about Europe’s policy on collective copyright management.

    Watch here a Midem panel dominated by Maria Martin-Prat:

    https://www.youtube.com/watch?v=tRoSvXAohss

    Simultaneously, large owners of rights in songs have been withdrawing from collective management. Just before Midem news broke that Sony/ATV had struck a private deal with Pandora. The man with the big cigar was reported to have said that it was ‘hopefully the first of many’. And not to be outdone, there are some signs that even where there are compulsory licences available, labels and services are finding a private path more advantageous. For instance, MRI is assisting satellite broadcaster Sirius XM to deal direct at rates lower than SoundExchange offers. The 50% SoundExchange deducts at source for performer payments might have something to do with this, as labels rarely pay out half of public performance, especially where there are unrecouped advances.

    The costs of finding rights owners, and the costs of doing the deals, are rightly considered great impediments to the development of exciting and popular digital music services. The number of successfully licensed services might suggest that other problems are equally critical; licensing efficiency does however deserve the attention it is getting from regulators and law makers in the main copyright territories.

    Is the emphasis on better regulated collectivisation the right way to consider the problem however? It seems that even the very well informed and cautious European bureaucrats risk taking an idealistic view of the collective, as well as an over-optimistic one of how much regulation can achieve to create better governance and behaviour. ‘Rocked by scandals’ is a very emotive phrase, but has been widely used in the last few years about the world of collective rights management as artists in particular find their voices. Even the Pirate Party’s MEP points out how unambitious the current EU reform proposal is by modern standards of business and administration.

    Generalising from some of the changes that are affecting the market during the digital transition suggests that other approaches might be equally valid, and might even be easier to achieve. For instance, once the larger copyright owners develop the capabilities in house that they previously outsourced to collecting societies, simple organisational inertia will maintain them even in preference to a cheaper option. Add to that the ever growing catalogue that has never made it into a collecting society, as digital production and distribution technology breaks down barriers to market. In some markets collecting societies actually know about only the top 25% of the extant catalogue, and are reluctant to bear the costs of dealing with the rest.

    Classes of rights are being brought together, particularly by new entrants, in ways that collective administration certainly has not anticipated, and seems still quite radically opposed to. Cooperation between performer and performance rights societies seems still reluctant and rudimentary at best, despite the need for each of their customers to obtain complementary licences. This is pushing rights owners who would ordinarily be collectively minded to find other more transparent and faster routes into the previously blanketed world.

    These realities are behind the tendency for Karaoke machines, Juke boxes, and piped music to come as a bundle of service and rights. The internet scales this up to a huge degree, to the point where it is now imaginable for a specialist music service to carry only what it can license ‘all rights’ directly. It might not be the most comprehensive or exciting service in the world, but it will certainly have a value.

    And, at the other end of the scale, a phenomenon that is very visible in territories with one dominant record label, a select catalogue provided into a heavily branded service. Without wishing to promote one particular supplier, here’s Universal Music’s ‘one stop shop’:

    http://u-bee.biz

    with its own surprisingly corporate promotional video:

    http://www.youtube.com/watch?v=F7m3GWJjJuU

    Short of forced collectivisation there’s not much regulators can do to deter rights owners from putting together bundles to suit different customers in different markets. Maybe they should embrace it instead? Just as patent pools enable rights owners to bring complementary technology together to enable markets that would not otherwise exist, perhaps copyright pools could do the same for music. So instead of the owners of each class of rights sitting in their separatist stockades waiting to be regulated, pooling and bundling could create the efficiency that regulators want, with transparency provided through terms of engagement open to all participants.

    To me at least this seems much more progressive, and business friendly. How to get there? Well, a command driven economy is as fragile thing as an unregulated one, as we have discovered over the last few decades.

  • Yet Another Private Internet

    Lobbyists sometimes try to simplify issues, for policy makers and for grassroots and other supporters, and one of the most potent ideas surrounding Internet policy is that what you don’t like will ‘break the Internet’.

    Here’s John Naughton neatly encapsulating this approach for the UK’s Guardian newspaper in a comment on SOPA/PIPA early in 2012:

    …the most worrying aspect of these bills is that they would distort the architecture of the internet in ways that would cripple its capacity for enabling innovation

    Read the whole thing here under the headline ‘Sopa and Pipa: don’t let big business break the internet’: http://www.guardian.co.uk/technology/2012/jan/08/online-piracy-challenge-sopa-pipa

    The attraction of this is easy to understand. For any highly technical question with complete uncertainty about the outcome of any policy decision, all the attention-deprived Government official or politician has to do is ask, ‘will it break the Internet?’ If there is sufficient noise in the ‘ayes’, risk that they may be right will ensure inaction.

    While this is going on in public, privately companies are breaking the internet in all sorts of useful and interesting ways. For a small business I am a large buyer of datacentre services and connectivity, operating a highly connected music platform hosted at Interxion in London. For many reasons we own and manage our hardware – but I can now, should I so wish, buy private connectivity within the datacentre to Amazon’s Web Services. Here’s what they say about it:

    Using AWS Direct Connect, you can establish private connectivity between AWS and your datacenter, office, or colocation environment, which in many cases can reduce your network costs, increase bandwidth throughput, and provide a more consistent network experience than Internet-based connections.

    A quick survey shows that Amazon has been rolling out private connectivity via high quality datacentres around the world. You can bet also that the peering points which connect consumer access providers to the Internet also benefit from these direct connections, alongside connections to Google, to Akamai, Limelight, and other providers of media and application delivery services.

    The chances are increasingly slim these days, if you stick to fairly popular sites and services, that your bits will ever touch the Internet. In fact the real Internet is already significantly more expensive, more congested, less reliable and less consistent than all these private platforms.

    Why is this important? Well, perhaps monopolies built on private networks should be regulated as private businesses, rather than as users of a miraculously unlimited and unfettered Internet commons. So when Google in Germany launches a campaign saying ‘Defend Your Network’ (Verteidige Dein Netz), it is important to understand that Google no longer uses our public Netz, it has its own, private Netz.

    Google’s property rights in its network should of course be respected, and robustly defended, in all the territories it operates in. Help them if you wish, but not in the name of the extraordinary communal efforts that enabled them to achieve their scale, and which they have now left behind.

  • Leapfrog or Lag? Music Tech in Developing Markets

    We have been conditioned to think that developing nations are somehow privileged to have the opportunity to skip whole generations of technologies, moving straight to what we in developed economies are embracing because of its promise for the future.

    Here’s the Economist, writing in 2008:

    The mobile phone is also a wonderful example of a “leapfrog” technology: it has enabled developing countries to skip the fixed-line technology of the 20th century and move straight to the mobile technology of the 21st. Surely other technologies can do the same?

    The full article is here, and despite the common sense conclusion, that sometimes new technologies are dependent on a whole set of building blocks that might not be present, it reflects a prejudice against the past that only the rich can afford.

    Another example, from an arbitrary blog:

    The internet is growing in India, and most of it is on the mobile phone.  Many, perhaps most of the world, will access the internet only on their phones.  They are skipping the PC and not even blinking or thinking twice.

    So how important is the mobile OS market?  It will rule the digital world sooner than you think. (the rest here)

    On a visit to Vietnam in 2008 I too was struck by the way that the mobile phone had become the ubiquitous and essential tool for business, and for all the normal traffic of life. But there was something else too. Computer shops came in two types, one familiar from poorer shopping streets in developed countries, with components and a few low end desktops and laptops, second hand and repairs. The other type presented top end tower systems in perspex cases, objects of aspiration and desire.

    Market research site iSuppli sees this same pattern in China, with the PC being the aspirational home media centre for emerging middle class households.

    …the PC appears to be winning as the main source of evening entertainment in China’s households—for playing games, reading, watching videos, listening to music, communicating and emailing, as well as shopping.

    The fact that we are excited about our smartphones and tablets, and are devoting less attention to our two year old home PCs, should not lead us to assume that a broadband connection and a PC would not therefore seem like the apogee of well equipped home life in countries where it has so far been unattainable for the vast majority of families.

    So perhaps when you have had a fully connected and well equipped home for ten years the next frontier might be mobility. Ordinary families in developing economies might prefer to catch up with the rich, rather than go without the benefits of the last decade of connected home computing.

    For music this means preserving what we have learned about music on the PC, about downloads and home media servers, and about a more social and versatile approach to delivering music. It might well mean multiple modes of acquisition, including peer-to-peer, for much longer than seems likely in developed countries. Synching with cheap and portable MP3 players would be much more important than music through the cloud to smartphones and tablets.

    In fact, while the CD remains a mass market music product, we see in some developing markets all the conditions that fed the growth of Napster, but on a far larger scale. The disutility of a music subscription service, tethered inconveniently and expensively to an account and a limited number of devices, seems to be less exciting a vision of the future than the idea of ‘leapfrogging’ suggests. I suspect, given a choice, many of us would happily leapfrog right back to 1999. Maybe in China, Latin America, Malaysia, Vietnam, and many other countries there will be more of an incentive to embrace and develop with the market rather than fight it this time around.

  • Networks or Services – Who is Music’s Better Partner?

    When I formed the idea for a new business bundling broadband with music, in 2003, my thinking was guided by two simple principles. The first was that customers already saw music and broadband as a natural bundle. And the second was that making ISP networks able to manage and account for music services was a difficult but achievable stretch, and once completed would be a much stronger partnership and more effective competitor for unlicensed music than would over-the-top services.

    November 2012 saw Google tightly integrating its storage locker service to its email product, so that up to 10GB of files can be quickly and simply shared with friends, family, and colleagues, as email attachments. One simple and obvious use would be an email revival of the tape trees that <irony> nearly saw off the recorded music business in the 1980s </irony>. So what the right hand giveth with the very innovative and exciting new music service in Google Play, the left hand might not exactly take away, but it certainly helps music fans level the music distribution playing field a bit.

    The commentary on Google’s move is about competition between services, how Dropbox and Box might struggle against such convenient integration, and how email is a natural sharing medium. It illustrates how fierce that competition is, and how much churn there is as one service displaces another. This is also true in music, both licensed and unlicensed.

    But let’s imagine for a while that we can move the business end of music copyright out of the services market and onto the networks. For an ISP, music is currently just data. Charging for it as music, and using the ability to build library management and playlists, and offer a coherent delivery path to consumer electronics, all this would add up to a considerable win. For services of course, authorised music is just a more expensive form of unauthorised music. Licences buy the right to innovate around the identity of the consumer and a knowledge of what they listen to, but the benefit seems not to be there for many businesses, or at least not significant enough to go through the licensing pain and cost.

    My 2003 startup – Playlouder MSP – now operates a white label service enabling networks to offer music tightly integrated into their customer management and billing systems. Record companies have not yet been bold enough to offer true network licences, preferring the comfort of a managed service environment. Meantime competition rages over the attention and data that network users create, without really discovering the services they might actually directly pay for. ISPs and other network owners are music’s ideal partner in the quest to turn data back into music, while services push back by selling music by the GigaByte.

  • Floating on a Sea of Demand for Music

    Tin Cheuk Leung at the Chinese University of Hong Kong published in 2009 a paper entitled, ‘Should the Music Industry Sue Its Own Customers? Impacts of Music Piracy and Policy Suggestions.’ The updated version is available here.

    Parts of Leung’s paper need special training to understand (which I do not have) but some of it is easy to grasp. Lots of music makes an iPod more valuable to its owner. People want much more music than they can buy. Demand moves between channels as the cost per track changes, but being a simple pirate is quite rare – most of us buy, beg, and borrow in differing proportions.

    I am pulling out just one of many interesting sets of numbers where Professor Leung tries to model worlds with either no piracy, or free music. Killing piracy he suggests would reduce overall consumption of tracks by 68%, where making music essentially free would increase consumption by 527%.

    More music translates into more iPod owners, and demonstrates how the cost of a transitioning market falls on content creators, through leakage as well as through the need to get the new means of consumption into as many hands as possible.

    Knowledge of the shape of the music industry however highlights another aspect to the complex picture of music demand. Diversity and opportunity in music would seem to come from a middle class market, with hardware manufacturers benefitting from the explosion in consumption free music would bring, and the biggest music companies benefitting from total anti-piracy.

    Somewhere between what we have now and making music free there is a sweet spot which can deliver more good music to more people, while at the same time sustaining the skills and infrastructure which will create opportunities for the musicians coming into the market in the future. We owe it to music makers and music lovers to try to work towards that destination.