Networked economics comes to the music industry

August 7th, 2009

Richard Wray writes,

It has finally sunk in that there will not be one single replacement for the ongoing drop in “physical” music sales – in other words, the perpetual decline in CD buying. Instead, a host of new services will help plug the gap alongside sales of individual digital tracks and albums.

Networked economics is different to analogue economics, in the same way that advertising is also different in the networked society. Where and how we place value on ‘things’ is important; how we package, bundle, filter, point to, link to, enable, are all key components to success.

Industry after industry tends to eat itself before it can move forward. Rather than thinking the unthinkable about the veracity and durability of existing business models, and then moving on. There is great resistance to evolution, like Hollywood and the music industry trying to sue everyone, whom they suspect of stealing their content. Whereas a Dutch government survey discovered that sharing drives economic success. I wonder what the bill for lawyers fees is in the music industry? Perhaps that money in most cases would have been better spent on R&D? Just a thought.

Richard Wray goes on to mention Spotify, that has already 2 million users/subscribers in the UK, and apparently double that number in Europe. They have achieved this in less than 6 months. Its success has spurred Microsoft into action.

Following in the wake of Last.fm and We7, Spotify has made it easy for people to get the music they want to hear when they want to hear it, helping to lure people away from illegal file-sharing websites.

And Spotify are working on a mobile enabled service, now this gets interesting. As Nokia’s Comes with Music, must be feeling a little queasy. Why? Because Comes with Music is a shadow of what a music service should be. And in Australia, the handsets that Comes with Music are selling successfully, but few are turning on the service? (Spotify raises a warchest)

music executives hope it will prove to be rather more successful than the attempt by Nokia, the world’s largest mobile phone manufacturer, to introduce its own unlimited download service, Comes With Music, last year. Amid widespread confusion about the service – caused by a marketing campaign one music executive criticised by saying “you had to be a real music anorak to understand what they were wittering on about” – it has underperformed the industry’s expectations.

It is in fact very simple why it has underperformed, I always said Comes with Music, would be a success in spite of itself. But, for music executives they must understand Nokia, wants to shift handsets, not music, therefore, its movtivation to produce a world class music service is low. The commercial offering is testament to that, a ‘thin value offering.’ Not that Nokia would admit this. Whereas, Spotify or Last.FM are highly motivated. Steve Jobs approached Nokia when working on the iTunes service, he was shown the door, the rest they say is history – perhaps the iPhone was Jobs response to that encounter.

Last.FM or Spotify have understood that “FREE” is not the kicker, its the quality of the service, that ‘enables’ its users in a rich variety of ways. Playlists, recomendations, presonalisation, discovery, contextualisation, location, sharing are again part of this new vocabulary.

We then move onto ISP’s, and the green shoots of unlimited download music services. Virgin has signed a deal with Universal, and Sky is working on its own masculine offering. It is the ‘mammoth customer bases and marketing muscle, combined with the existence of long term billing relationships that is key in this particular area of the evolution of music, writes Richard Wray. The Isle of Man is considering implementing a plan that allows people to download unlimited music in return for a basic tax to ISP’s of £1.00 per month, in an effort to find a way to solve illegal music piracy.

Back to the digital elixiar of commerce, I would have thought studying Cyworld in Korea might have been a good idea for music exec’s, in understanding how to make music work within the context of digital economics.

The model is hybrid, networked and connected. It must be about being; life enabling, life simplifying and navigational. The model is specialised and it must do one thing; motivate its users of the service to advocate. I wonder how much advocacy Comes with Music gets?

Bookmarks: