OMM_TO #2 Talk: Access vs. Ownership: Paying Attention To Consumer Behavior

Preface: Greg Nisbet of Mediazoic prepared this talk for OpenMusic Media Toronto #2 held on Wednesday, December 9th. The focus of the discussion that evening was about music access versus ownership and Greg gave us something ponder on beyond the usual tech angle.

—
By Greg Nisbet

The Pilot Tavern in Toronto played host to the second OpenMusicMedia meetup in Toronto on Wednesday. Given the recent acquisition of digital music service LaLa by Apple, and the launch of music video service Vevo, a hot topic of debate in the digital music space is one of “access vs. ownership”.

“Music services such as Spotify, MOG, Last.fm, and Grooveshark are increasing in popularity due to their ease in delivering music content as a seamless experience across both desktop and mobile devices” said Josh Newman, the Toronto event’s co-organizer, “Does this spell the end for iTunes and the whole notion of actually needing to own content?”

Below is a slightly expanded version of the talk I prepared in answer to that question.

Before we start, I want to do a quick survey about music listening habits of those in the room.

1. Does your iTunes have more than 3000 songs?
2. Do you listen to music on your cell phone?
3. Where do you listen to most of your music: home stereo system, computer, mobile device?
4. Where do you get most of your new music recommendations?

So, we have a group that stores a lot of music digitally, listens to music on cell phones and computers, and uses internet streaming services to discover new music. Which means that most people in this room are completely atypical of the general population. According to a study recently released by the Council of Research Excellence, almost 80% of US adults listen to broadcast radio on a daily basis, as opposed to a little over 10% of people to mp3 players, and only about 1% to music on mobile phones.

I was asked to speak about music access vs. ownership, and I am going to do that, a little.

I’m only going to talk about it a little because, in my opinion, access vs. ownership is the wrong question. The simple answer of course is both – both are important, but neither is the way forward for the music business. I have written before that the compulsion to collect is a human behaviour that will not disappear. So, the urges to collect vinyl, CDs, or files will hang on for a while, and even as they may respectively fade, the variety of access sources will have given birth to the urge to collect not files but sources of music, becoming another collectible, another thing to hoard and manage.

The much-discussed way forward for the music business is of course incredibly complex, consisting of whatever group of models people can extract revenue from, including access, ownership, curation, advertising, subscriptions, merch, live shows and whatever else people will pay for. Indeed, there are many people out there who will tell you there is absolutely nothing wrong with the music business, that there is more great music being made and more great music being found than ever before. What people mean when they talk about music’s decline is that the income is not as concentrated. For artists, my sense is that it is just about as easy to break as an artist now than it was 30 years ago. You have more opportunities, and you have more competition. This certainly isn’t my area of expertise, so I’m going to focus on the other two entities in the artist/company/fan triangle.

For companies, it’s still about the two things it’s always been about – how you execute and who you know. There’s a reason why there are only four major record labels – as the industry formed and grew, only four music companies managed to execute on a grand level. Their models may be changing, but these companies aren’t going away any time soon. Let’s put their woes into perspective. For Universal for example, the largest of the major labels, profits in the first half of 2009 were down 23.1 percent to $302.4 million. So, they aren’t losing money, they are still making a tidy profit, just not as tidy as before. Unless you are a Vivendi shareholder, this is hardly cause for concern. The major labels folks are still the ones who hang out with the tv execs, movie moguls, most of the world’s most successful musicians, and even the new kids on the media money block like Google and Apple execs. They will continue to find ways to work together and extract money from it however they can. Whether it’s YouTube with label-backed Vevo or Apple with label-sponsored LaLa, we can continue to expect to see successful models converge toward each other and the less successful model consumed or crushed.

Much is made about the ascendance of “access” models such as Spotify, Pandora, MOG, Last.fm, Grooveshark and Rhapsody, and, for the ones that rely more on advertising than subscriptions, that hype is balanced by the sober second thinkers who justifiably point to the difficulty of sustaining decent CPM rates in a very crowded online advertising space. Certainly, if you’re going to have an advertising model and hope to keep “big music” at bay, you’re going to need tremendous resilience, and you’re going to have to be very good at selling advertising, because you’re going up against current media masters like Google and CBS (owners of last.fm), who are tapped into the truly gargantuan flows of ad buying.

I don’t think it should surprise anyone that, in the same way that many smaller edgier music labels eventually ended up under the umbrellas of big labels, smaller ad-based services are going to end up under these types of big media umbrellas.

For consumers, for fans, it comes down to behaviour. I’ve previously mentioned my sense that the key question for someone building or marketing a great product isn’t “what do my customers want”, it’s “what are my customers doing”. I see most of the “access” models out there right now as not much different from the “ownership” models – both are akin in traditional terms to the record store. Even if you go back to when record stores were flourishing, it was radio that pointed most of record stores’ customers in their direction, and more people ever listened to radio than went into record stores. So, many of the folks online may love their “all you can eat” access models, but until those models can figure out a way to integrate into what the masses already do both online and offline, they are still a long way away from crossing over into the kind of mass market nirvana in which Google or Apple reside. I think what some of these services are doing with mobile is quite interesting, and is certainly an attempt to do that, but we won’t see any real results any time soon, as it will still be a while before most people are really into music on their phones.

The means of delivery, then, are to me less interesting than the trends, the human habits, that cut across media. Taken from that perspective, the tools of the future for music are the tools that cross media. The genius of the iPod or of Google is partly in the execution of course, but it’s really in understanding the human behaviour that drives it. So, Google understood that there was going to be a huge pile of digital stuff, and that people have a real need to sift through it, and so they focused on a super-simple interface to capitalize on and then monetize that behaviour. And Apple understood that people wanted stuff from all over the place all in one place (iPod, iTunes, iPhone, even integration of Windows into Macs) and they built software and devices allowing them to do that. Microcosms of the cross-media shift already exist anywhere from last.fm on the Xbox to the success of music as a soundtrack to movies and television commercials but, for the most part, they are still microcosms.

The behaviour I’m most interested in for my business is the natural human compulsion to look for curators, human filters and processors. Sure, anybody can find great stuff if they really want to, more on the Internet than ever before, provided they have the time, the resources, and the knowledge, but most people don’t, so they need someone they trust to curate it for them. Maybe they’ve had a long day, they’re busy with their own projects, they’re consuming other media, whatever – most people just aren’t that into hunting for stuff, unless it’s to pursue their real passion. Think of publishing. If everybody really wanted to go out and find great content, libraries would be full. Anybody know the trick to getting a hit in the publishing world – what’s the best thing you can do to start earning a real living as an author? Getting signed by a publisher? Self-publishing on Amazon? These things help, and are important steps, but there’s only one true secret of success. Get on Oprah.

Music access models without good curation tools are like libraries. Music’s great curators have historically been radio and record labels. For the majority of people, those are still the great curators, but that is where I see most of the change taking place going forward. If the decline of radio and major label profits is pretty much as simple as having more media through which music fans can consume the product, then the opportunity lies in enabling music curators in those media. The vacuum that exists for the next great curation model, if there is one, is one that leverages not algorithms but existing trust relationships with curators in existing media channels, not specific to music, that music fans are already using.

Following a recent article in Variety, there was some speculation in the blogosphere wondering if Oprah would ever recommend music the way she recommends books. Oprah is a book lover, and we know now that her run on television is almost over, so there’s not chance of that ever happening, but I think if we re-phrase the question, there might be some more interesting answers, and it’s that re-phrased question I will leave you with here. When you answer it, think not only of Oprah but of the incredible variety of macro and micro celebrities that cut across all niches in all media.

What if, at the beginning, Oprah had gotten into recommending music instead of books?

—-
Greg Nisbet is a storyteller, music lover, and entrepreneur who has worked in jobs as varied as busker, actor, safari guide, private school principal, and mergers and acquisitions broker. He is the founder of an Internet media start-up called Mediazoic. He also enjoys sharing his ideas on the use of technology and social media in presentations, workshops, and carefully chosen consulting contracts.