The web is wonderful. It has done the most remarkable things for music. I haven’t read one of his novels, but I couldn’t say it better than Nick Hornby when it comes to what the web has done for music and for music fans.
But, as Hornby alludes to in his piece, has the web been good for the music business? In the new vanguard – the wild west of web commerce – look at how many music related ventures have come and gone, with barely a trace left to learn from. At the start of this year, MusicAlly listed no less than 200 music start-ups from 2008 (not an exhaustive list) and I can’t bring myself to skim that list now to see which of those are still in the game. Nor do I want to get into any kind of music-web investment thesis here. If you want to read a good one though, see Bruce Warila’s wonderfully concise thoughts on the subject recently on Hypebot, MTT or his site, Ricewall.
Back in my IFPI days an early PR line on digital music’s success was the number of digital services in play, which reached close to 1000 worldwide before the IFPI decided it maybe wasn’t a good idea to keep up with the stat. At one point, for every new service launched, at least one other entered the great elephant’s graveyard of dead digital music stores. You could almost hear a Jay Z rap in your head along the lines, ‘1000 digital music stores but ain’t a profitable one’. Yet still they come. Every week I get e-mails from newly launched services and read about maybe two or three, weekly.
I don’t blame them for giving it a go, but wish them more luck than anything – oh and to have a quick read or two of Bruce’s thesis.
But my point here is this: why is the universal assumption now that all new ventures involving recorded music have to be digital? I know it’s a dumb question. But then it’s not that dumb. Any investor or entrepreneur will know that a contrary strategy is always worth a look.
Prevailing market trends point to online, mobile and gaming platforms for sure – particularly with apps invigorating the mobile sector – a true breakthrough there. However, the assumption that music – or any content for that matter – will migrate from physical to digital in a steady linear fashion (at whatever speed), is just plain wrong.
At this stage, the majority of music consumers will not let the CD go, especially but not exclusively, the older demographic. From recent UK research by Speakerbox - 85% of music buyers buy CD, with BPI data confirming that just 10% of buyers now buy digital. Recent work I have been involved with confirms something I first measured at IFPI and long suspected before that – many music buyers try digital (primarily through iTunes) and don’t actually like it, much. So they go back to CD, albeit reluctantly.
When music (and other content – for example news) is consumed online, the experience changes. Online ‘dwell times’ are often measured in minutes per month, whereas music listening is in hours per day. The digital experience of consumption switches to a more fleeting, contextual experience (strange then when so many services strive or claim to be ‘immersive’) – very different from playing back a CD. With mobile, the impact of apps may now drive more consumption this way – a constant pecking away at a smattering of content, rather than a settled, focused listen on something you carefully chose to invest in first. On the other hand – breakthroughs in metadata based apps like Cocktail & CMS may yet make digital more genuinely engaging – that’s an analysis for another time.
What’s remarkable is that there have been so few successful ventures in music that – rather than get in painfully ahead of their time and then painfully run out of operating cash – have transformed consumer benefits on the basis of consumer habits now. The alternative in movies is LoveFilm, a phenomenally successful young business that obliterated the inconveniences of movie rental, but was smart enough to do so leveraging the standard format of now – the physical DVD. LoveFilm can get to digital movies later, there’s no point running if consumers are walking.
However, when you do look, the recent track record of consumer-facing non-digital (maybe non-virtual is a better description) music ventures, is awful. The lack of no new physical format successor, the demise of music retailing thanks to online competition and the general erosion in the value of music and low motivation to pay, just seem to kill any good idea in its tracks.
Let’s briefly look at some, first, format based innovations:
Slot Music. Sandisk’s commendable but ultimately surely doomed, effort, to somehow embrace digital but still keep the inanimate object element intact. You can see what they were thinking: free DRM, nicely restrict the content to bite size chunks, keep the album intact, provide consumers with a little extra utility – some good features. But it isn’t the answer, because it’s just not clear enough who it’s for.
Similar, USB albums. Launched by Labels with Universal giving it a fair go, USB’s certainly have novelty value. It’s a standard format for PCs, so no issues there. But it just about stops there.
Warner’s various attempts at new CD formats didn’t work either – too niche and marginal of benefit.
Now some non-digital music ventures:
Starbucks Hear Music. This looked clever to me at the time. Why not leverage 14000+ prime retail spaces and a high-value, high-footfall user base to sell them music – something that also fits perfectly within the ambience of the coffee house concept as well. Starbuck’s understanding of its own customers’ needs and the whole ‘third space’ between home & work concept also boded well. But then it got a few things wrong. Why the CD burning booths? Why make a move into A&R? Especially when you could make a better retail margin than most music retailers by adding a buck to the cover price? Then the recession came and that was that. It’s a shame – I still think coffee & music works – that’s what my blog is kind of inspired by after all!
Musik 35. This was a curiosity from Germany, a music market in need of inspiration if ever there was one. I liked it and took great interest in it on launch, some 7-8 years back. The concept was aesthetically inspired, but hopelessly out of time. The idea – a small boutique CD store stocking 35 titles at a time – no more, no less – ‘curated’ and carefully aimed at discerning music consumers in busy places – airports and train stations etc. The trouble was of course, that nobody, discerning or otherwise, carries a portable CD player these days, so why try to sell them something they can’t consume there & then? But the boutique, filter idea, was cool.
Music Zone ‘Bugs’. Just like Musik 35, Music Zone (a fleetingly successful UK ‘discount’ music retailer, a bit like Fopp – and with similar subsequent operating difficulties) wanted to introduce ‘pod-like’ CD booths in busy travel hubs. MZ didn’t even get the concept off the ground before its main business went bust.
In the US, both Nordstrum and Downtown Locker Room began retailing a selective set of CD titles, sometimes exclusively and with special packaging. It made a rumble then petered out.
Finally, for a while, the recording industry pondered Kiosks. To my mind, CD-burning or iPod filling Kiosk’s where a hopeless folly. The last thing a consumer needs when filtering their music, is time pressure and the last thing a retailer needs is a consumer taking all the time in the world to spend $10. Hopelessly incompatible.
These are just some of the failures and you can see their problem was being limited largely by format, combined with a good dose of strategic and operational errors.
There are, still successes:
Hot Topic. This was (I hope still is) a phenomenally successful US-based merchandise chain based around ‘emo’ & ‘goth’ – two pretty evergreen, high value genres (shock market insight – young consumers will spend money on, and around, music!). Its secret was targeting that cultural group, with a neatly executed concept. And of course, though music centered, Hot Topic sold mainly merch. The company’s attempts to expand into the digital music space have looked less impressive.
Rough Trade. A flagship record store in a thriving area of East End London, plus a moderately successful, against-the-grain mail-order CD club (The Album Club). It’s a heritage brand that for the time being prevails and appeals to a good segment of ‘real’ music fans.
Amoeba Music still goes strong as it mops up the detritus of what’s left of US CD retailing, though you have to wonder how long it can maintain its vibrancy. Meanwhile in the UK, the last man standing HMV Records seems to be getting the smarts, investing in a network of live venues and most recently acquiring solid digital music business 7 Digital. But mainly, HMV has done well by selling more & more stuff that isn’t CDs.
Overall it’s a very mixed picture and to my mind, it’s a great shame recorded music is losing its place in the physical world, because it seems to be as much about lackluster performance as it is about inexorable market trends.
I think physical music could still do well where it can be aimed at pockets of high-value culture – like Hot Topic and Rough Trade. Combining a physical indie music store with graphic novels perhaps? Or maybe someone else can have a go at Music & Coffee, but execute the concept better than Starbucks did. Could Kerrang! Do a similar thing to Hot Topic aimed at the hard rock sector – another high value segment there for the taking in the UK?
The marketing criteria would seem to be a product range relating to but not exclusively, recorded music, a clear cultural segment to aim at and good branding & execution. Any other ideas?