The transition of recorded music from a physical object to an intangible one is the core of the challenge that has faced our business since the turn of the millennium. Here, Mark Mulligan — a long-term music-industry analyst and co-founder of MIDiA, a media industry-focused consultancy firm — posits a remarkable solution for the business’ future, one very different from the one posed by Tom Silverman in last week’s editorial, “Building the $100 Billion Music Business”: a return to recorded music as a physical, ownable object. Billboard.biz welcome responsible commentary: contact email@example.com with ideas.
2013 is going to be a great year for digital music. Streaming services will consolidate upon an encouraging 2012, and Apple and Deezer’s global roll out strategies will help start growth flowing from emerging digital markets. But it won’t be enough. In fact, even if every music service out there excelled in 2013 it still wouldn’t be enough. Why? Because music is isn’t fighting the fight for its heartlands. While new services are busy extending the horizons of the music industry into new devices and platforms, the home front has been left undefended. The history of music consumption is in the home and in the car, and yet neither are even close to the epicenter of digital music strategy, a failing that will come back to bite the music industry unless remedial action is taken, and fast.
It is easy to characterize home listening as the consumption paradigm of the past, to make the case that listening on the go, on connected devices is the consumption mode of the modern era. It is, of course, but it is only part of the mix. It also views the music consumption world through the lens of the digitally-savvy music consumer when in actual fact the CD remains the single most important music revenue format in the world. Music is disappearing out of the living room and unless that trend is bucked it will take a big chunk of the music market without it. As valuable as the digital aficionados who are currently paying for digital downloads and streams are, a music market that is built entirely around them will be a considerably smaller one than we have now.
Music used to be a central part of entertainment in the living room. Until the 1990s, people used to replace their Hi-Fis simply because the manufacturer changed the color. Now, though the entertainment technology spend has shifted to the TV, which has got progressively bigger and more expensive, with an ever larger pile of boxes underneath it (which for some reason are still called ‘set-top’ boxes even though no TV now is wide enough to balance much more than a pen on top of it). Apart from the ultra-high end, the Hi-Fi market is now a sad little backwater of consumer electronics. Where once a shiny new Hi-Fi once sat as the pride of the living room, now sits either a dusty old midi system, a docking station or –worse still — an empty space because the stereo has gone into the bin or into storage.
When the CD Player Goes, the Music Goes
When the CD player is gone, music’s foothold in the living room is gone too. And the CD isn’t just disappearing from the living room: car manufacturers like Ford are planning for near-term futures where new cars no longer include CD players; tablets – the most dynamic part of the PC market – and ultrabook laptops don’t have CD players. Bit by bit the CD is disappearing and it is taking music buyers with it. Since 2008 more than 10 million people stopped buying music entirely in the U.S. and UK alone. That’s 10 million people who opted for not buying music anymore rather than go digital. Granted, a decent number of those music buyers were probably very low value (economically speaking) and would have phased out of the buying population whatever the macro music situation. But the rest are music buyers who have been lost before their time.
Taking Digital Music to the Mainstream
So what is the solution? In my view, it is to win back the living room, to establish a digital beachhead in the living room with which the mass market can be engaged. And to do that the following product strategy needs putting in place: a digital music player with speakers — for the moment let’s call it the “Play Box” — that connects over Wi-Fi and that gives the user unlimited, immediate access to a seamlessly integrated streaming music service. Success will depend entirely on the right execution, so the Play Box must:
• Be affordable: this is for the mass market, so it cannot be more than $250
• Be value for money: include at least 12 months of free music
• Be easy to use: a seamless user journey (i.e. plug in and play) is crucial
• Be cool: even the mass market want cool tech, so a touch screen is a must
The core of this proposition is a physical “play” button for streaming music. And once streaming music has been turned into a tangible box, suddenly the esoteric challenge of nudging people from ownership to access becomes a readily understandable concept with clear, real-world benefits: all the music in the world, no monthly fee, no fuss, no dusty CD racks cluttering up the living room.
Of course, this fight for the living room can continue to be easily sidestepped, but the long-term damage would be irreparable. And sure, there are a few attempts to solve the problem, such as the fantastic Sonos, while some Apple fans use Airport Express to pump digital music out of their old Hi-Fis. But those are solutions for the tech-savvy. This opportunity is for the mass-market consumer — and it is one any one of the current streaming music services could, and should seize with vigor. But they will need rights-holder support, because wholesale rates will need discounting to ensure that a year’s worth of music can be delivered within the cost of a $250 box. That might not be a story that rights holders want to hear, but they know as well as anyone that $9.99 a month is not a mass market value proposition, however good the service.
The bitter pill to swallow is this: The way to win over mass-market consumers is to make them feel that music is free even when it isn’t. Put a Play Box in his living room and not only can you start making meaningful money out of them, you can even start thinking about upselling them to other products. That is the value of the living room. But give up the fight now and it will be the TV, movie and gaming companies alone who will be at the party.