This except from this week's Billboard magazine (cover date June 22, 2013) entitled "Easy Does It" is an in-depth look at the best ways for digital music services to exponentially increase market share. Also in this issue: Apple's business model for its just-launched iTunes Radio; Pandora's terrestrial radio purchase; the declining value of certified gold singles; Pandora chief revenue officer John Trimble's day; Questions Answered with RIAA chairman/CEO Cary Sherman; the Billboard cover story on Miley Cyrus (who's sold some 14 million albums), our renowned charts and much more. Pick up this issue of Billboard here and subscribe to Billboard here.
What if you could double the market for Internet radio, or triple the number of subscribers for on-demand services?
The answer may be simpler than you think—that is, the answer may be all about simplicity. As Steve Jobs frequently said, consumers want simplicity, and building a simple product is more difficult than building a complicated one. That’s one reason iTunes has more than 500 million active accounts (though not all are music buyers) while on-demand subscription had just 20 million paying customers globally at the end of 2012, according to IFPI.
After keeping mainstream consumers at arm’s length for years, digital music services have started simplifying their product to reach the broader market. New features and approaches at both Internet radio and on-demand services reveal concerted efforts to make digital music more accessible, more informative and just plain easier.
In marketing terms, current subscribers still count as “innovators” and “early adopters,” the 15% of a market that uses a product in its formative stage. Innovators, accounting for 2.5% of the market, will pay a higher price than later adopters and provide feedback that helps companies release products more suitable for the mass market. Early adopters, the next consumer group in the bell curve, account for 13.5%.
The upside is the huge potential sizes of the markets. Assuming today’s subscription market of 20 million comprises innovators and early adopters, that’s 15% of an entire market of 125 million. It could be much larger. If one assumes that current subscribers are all innovators, or 2.5% of the total market, the implied size of the global market is 800 million.
Internet radio has room to grow, too. In the United States, Web radio has 120 million listeners, compared with 243 million for terrestrial radio, according to Arbitron. Markets are relatively immature outside of the States. And terrestrial radio still dominates in time spent listening. Potentially, these markets are large enough to return the recorded-music industry to growth not seen since the ’90s.
There are huge challenges to reach this potential. The rest of the market—the early majority, the late majority and the laggards that represent the vast majority of consumers—requires services that are easier to use, less expensive and more contextual than those now on the market. In other words, what worked for more serious music consumers in mostly Western countries won’t work for everyone else.
Digital services have effectively been turning away first-time digital consumers, says Scott Ambrose Reilly, CEO of North America at X5 Music Group and a former Amazon executive. He worries that crossover hits like the O Brother, Where Art Thou? and Buena Vista Social Club soundtracks won’t happen because the occasional CD buyer lacks the friction-free digital experience on par with a mainstream brick-and-mortar retailer. “If you haven’t engaged with digital yet, your first step is pretty brutal right now—except for YouTube,” he says.
Digital services can focus on three areas to tap into the larger market: create cleaner user interfaces and better user experiences, improve how users discover music, and provide services and bundles with better value.
1. KEEP IT CLEAN
If services are to reach mainstream customers, they’ll need an updated product design that’s easy to understand, sign up for and use.
Rhapsody’s desktop application, an outdated relic of subscription music’s first era, is currently being redesigned, senior VP of product Paul Springer says. He believes Rhapsody’s challenge is to communicate that it has features for both heavy and mainstream consumers: thousands of radio stations, custom stations for every listener, a radio station for every artist and, coming soon, adaptive recommendations based on the “thumbs up” and “thumbs down” ratings made popular by Pandora. “The dumbing down of the services is a good introductory opportunity for the casual listener to migrate from broadcast over to full on-demand.”
Both Springer and Rdio senior VP of product Malte Sigurdsson say the “onboarding process,” those steps just after a person registers an account, is important to improving the user experience. Rdio, which bases discovery on social connections, has improved its onboarding by recommending other users and tastemakers for new users to follow. Its “heavy rotation” screen acts as a user’s home page and shows the most popular albums in a user’s social network.
Services are also changing their products for better situational usage. A listening environment like the automobile requires a more “lean-back” listening experience on a smaller mobile device screen. So Rhapsody is working on a “care” mode, the result of the company’s internal hackathon, that will emphasize voice search, offer programmed stations “that mimic SiriusXM offerings” and make it easier to save a song to a personal catalog, Springer says.
Songza has changed its user interface so a listener can get from point A to point B in less time. CEO Elias Roman estimates the time spent getting to a playlist has dropped to less than five seconds from more than 30 seconds through the years. Customer research told Songza that people wanted faster navigation. The result was a button on the new iPhone app. Press and hold the button of a top-level activity—such as “working out”—for two seconds and Songza will begin streaming a playlist rather than offer a selection of playlists to choose from.
Slacker, both an Internet radio and on-demand service, launched a redesigned interface in February that improves discovery. The new product is easier to navigate and more attractive, and retains the ability to fine-tune programmed and custom channels. Fine-tuning a channel is simpler because it’s now a more visual process. When a user changes a variable like “related artists,” a word cloud made up of artist names shows the changes to the station in real time.
Slacker CEO Jim Cady says the trick is designing a user experience that caters to both early and late adopters and allows listeners to shift between passive and hands-on listening. Slacker’s on-demand subscribers spend 83% of their listening time with radio, he says. “That’s going to continue to be the case more and more because the recommendation engines are getting better.”
The numbers suggest Slacker’s redesign, which coincided with a marketing and publicity campaign, brought in new listeners and resulted in more listening. The service has added 6 million listeners—3.5 million on mobile devices—and 100,000 new subscribers, and average time spent listening is up 25% from before the redesign.
Illustration by Ryan Thacker
2. CREATE DISCOVERY WITHOUT EXPLORATION
At or near the top of most services’ “to do” lists has been music discovery, or how a person finds either favorite tunes or completely new, unknown music. Facilitating music discovery is how a service makes sense of a catalog that can grow to 20 million tracks. Not only have approaches to music discovery varied, they’ve been better-suited for the early adopters willing to invest time and effort in a music service.