The Cloud music panel at Rethink Music conference, L-R: Jon Vanhala, Sami Valkonen, Brad Navin, David Hyman, Jon Potter, Don Gorder (Photo: Phil Farnsworth)
The recent introduction of Amazon’s Cloud Player — and similar offerings from Google and Apple reportedly in the works — suggests a shift in the way consumers will interact with music: It will be stored in a centralized location users can access remotely.
At least that’s the way it’s supposed to work. The cloud approach to music has yet to gain significant traction in the market, and subscription music services have proven less appealing than similar film and television delivery platforms.
Part of that is because no clear cut market leader has emerged, like Netflix. “It’s almost dizzying to think of how many different types of services are out there,” said Don Gorder, chair of the Music Business Department at Berklee College of Music, introducing the panel titled “Models – Access and ‘In the Cloud'” at the Rethink Music Festival on Tuesday afternoon. That makes it hard for services like these to actually become profitable.
(Check out our reports on Tuesday’s Rethink morning panels and ways audiences can become patrons rather than consumers.)
“We’re not quite there yet,” he said of the cloud revolution — but it’s coming. The rest of the panel included Jon Potter, CEO of RPG Strategies, David Hyman, founder and CEO of MOG, Brad Navin, CEO of the Orchard, Sami Valkonen, of the international music licensing arm of Android/Google and Jon Vanhala, senior vice president of Digital Business Development at Island Def Jam.
“What is it going to take to draw people into these services? The uptake has not been as dramatic as we might all like it to be,” Gorder offered.
“I think the timing is really good,” Hyman said, referring to the explosion of networking mobility that’s arrived with smart phones. Previous services like Rhapsody were challenged by the fact that they were relegated to the home.
“Smart phones are making these services take off,” Hyman said. “Music is all about portability, and unlike other media, it’s consumed outside of the home.” Look at the success of satellite radio in the car for an example of why cloud and subscription services can work.
It’s simply a matter of turning music consumers onto the new model, Vanhala, said. “There may be more consumers of music ever in the history of the planet. How do we turn those into paying customers?”
The answer, the panel all agreed, was that they need to focus on giving consumers what they want, when they want it, but to also nudge them in a direction they may not be ready for.
“On iTtunes $10 gets you 7 songs. On MOG $10 gets you every song ever made.” Hyman said. “A lot of people aren’t aware of these services yet,” or they aren’t ready for the shift, he said. With a service like Spotify in Europe, it presents a paradigm shift of non-ownership, just accessibility.
“Giving people a taste of that is a key component. That’s where there’s been a lot of challenges in the industry,” he continued. There hasn’t been a great free service to get people comfortable with that model; the label side too, is struggling with issues of “how much free is okay?”
“It’s not how do you compete with free anymore, it’s about how do you make money off free,” said Vanhala. “If we can make experiences that make people’s lives better with music, we have to focus on that side. Technology advance goes along with streamlining business processes. There are still people who haven’t tried digital music services at all.”
Complicating matters are licensing issues for cloud and subscription services. It’s extraordinarily challenging to get the four major labels to agree on anything, Potter said, unless it’s something that locks the consumer down more.
“We need to collectively accelerate the transformation of the relationship with the labels,” Valkomen said. “Every day there is money left on the table… I don’t think the music industry is any state that it can leave money on the table.”
“I don’t think consumers will let us not head in the right direction,” Potter said.
Hyman agreed. “Consumer desire is too great. 160 million iTunes users globally are going to transfer to cloud based services over the next five years. It’s a massive market, and there’s going to be more than one player. It will be a really big market. The record labels have gotten so much better in last three years, it’s shocking…There’s a real sense of partnership and spirit.”
“I don’t know if it’s a spirit of joining, or if you have to join or you’re gonna get blown by,” Navin said. “You can’t stop technology.”
The success of Pandora is a testament to that. In a short interview conducted by Allen Bargfrede, Assistant Professor of Music Business at Berklee, Joe Kennedy, CEO of Pandora, touch edon the lessons the internet radio platform can impart for the online music model going forward. Much of that revolves around their ability to monetize music through their ad-supported model, Kennedy suggested.
“We think of advertising as a product in the same way as we think of the user experiences as a product.”
But their music genome project, by which they suggest songs based on listeners’ preferences, represented another big leap forward he said. It’s a luxury that terrestrial radio stations never enjoyed.
“It’s closely related to the topic of discovery. We are committed to servicing the whole range of the incredible diversity of music that’s out there. Without paying attention to whether it’s a big commercial market or not.” While they’re more than happy to play Lady Gaga or Lil Wayne, he said, there’s room for people who want African, or Indian music, or jazz, what he called “the entire wonderful spectrum of music.”
Now it’s just a matter of figuring out how to get more listeners to tap into it. Whether or not there’s a clear cut plan for that, no one at Rethink seemed willing to say, but with so much money up for grabs, particularly as Pandora’s advertisement model has shown, you can be sure the market is about to get a lot more crowded in the near future.