Here's an interesting article from Wired on mobile phone and MP3 player convergence.
5 Ways the Cellphone Will Change How You Listen to Music
Why carry two devices when you can carry just one? Just as heterogeneous component hifi stereos in the '70s gave way to same-OEM systems (as OEMs integrated the benefits of competitive manufacturer's expertise into their own systems), ubiquitous electronic devices will converge into one (camera, MP3 player, telephone, datebook, messenger, etc.)
We are moving away from an era where one company's MP3 player was obviously better than a phone company's MP3 player, and a phone company's phone was much better than an MP3 player company's phone. With the introduction of the iPhone and market penetration of other smart phones, the quality of all on-board features is improving to the point where it's redundant to carry separate devices for separate purposes.
Non-DRM music can also be mixed and matched from any music service to any phone, though even that functional separation will be a niche market. Integrated verticals like iTunes Music will continue to dominate the iPhone platform, and would dominate other mobile platforms if Apple were willing to support them. The difficulty here will be building a non-Apple brand with enough penetration that you're likely to have a friend who can show you how her service works. Without friend-to-friend training, any other service will fail.
Wednesday, January 21, 2009
Tuesday, January 20, 2009
File under: I can't believe we're still talking about this
Here's an article about some discussions at this year's MIDEM.
Music industry urged to embrace the Internet
Some quotes:
"In 2008, some 95 percent of the music downloaded from the Internet, or more than 40 billion files, was illegal, leaving the overall music market down around 7 percent on 2007... Consumers will only move to legal sites from illegal ones if the proposition is better and easier to use, critics say."
Music labels still don't get it. They had an army of techies and venture capital who wanted to make music over the Internet work 8 years ago. The labels squandered this opportunity, and are still digging in their heels.
The labels failed to learn what the shareware industry learned early on: it's better to make money from 3% of a huge market then 100% from a microscopic market. Labels are losing 95% of the money and customers that they could have reached. They still reject new technologies and business models, preferring to protect their special markets business and what I call "stupid VC" money. Huge advances are much more attractive to execs who will retire in a few years than investing in the future of the business. Meanwhile, the leaks around the edges remain a flood.
Music industry urged to embrace the Internet
Some quotes:
"In 2008, some 95 percent of the music downloaded from the Internet, or more than 40 billion files, was illegal, leaving the overall music market down around 7 percent on 2007... Consumers will only move to legal sites from illegal ones if the proposition is better and easier to use, critics say."
Music labels still don't get it. They had an army of techies and venture capital who wanted to make music over the Internet work 8 years ago. The labels squandered this opportunity, and are still digging in their heels.
The labels failed to learn what the shareware industry learned early on: it's better to make money from 3% of a huge market then 100% from a microscopic market. Labels are losing 95% of the money and customers that they could have reached. They still reject new technologies and business models, preferring to protect their special markets business and what I call "stupid VC" money. Huge advances are much more attractive to execs who will retire in a few years than investing in the future of the business. Meanwhile, the leaks around the edges remain a flood.
Friday, January 9, 2009
The Bright Future of Location-Based Mobile Search
The "next big thing"® is location-based mobile search and advertising.
I came to that conclusion not because companies are fighting to win mobile search markets, but after a mental exercise about what people actually buy on a regular basis versus what is typically advertised to them. The food court at the mall is generally busier than the rest of the mall. Same goes for the food at airports or county fairs. Sure you buy books at Amazon once in a while, perhaps a song on iTunes, or book show tickets or travel online, but I'm willing to bet not nearly as often as you buy gas as the corner filling station, or at my age, even dry cleaning services. And what about "that vast array of attorneys, lawyers, dentists, shoe shops, restaurants, and other close-to-home businesses"? The vast number of Yellow Pages-style small advertisers represents a huge location-based market opportunity.
So why don't you see advertising online for products you are actually likely to buy in the next week or month? I think you don't mainly for two reasons: because online advertising relies on large inventories (sold by the thousands to generate a click or two), and because local shop owners or managers lack knowledge of online advertising technologies and the ability to design ads.
Google revolutionized and democratized online advertising with its AdWords text advertising. No longer did you have to know how to run PhotoShop or Illustrator. All you had to have was a web site and a few words. Now a somewhat savvy shop owner could begin advertising without hiring an Ogilvy & Mather.
But your web browser still wasn't very good at knowing where you were. Even IP address to geographical location services aren't accurate enough (one IP location database pegs me 10 driving miles away from my actual location according to Google Maps' directions). Without mobile access, who wants to drive home and log on to the Internet while they're out with friends just to find a good pizza place on the spur of the moment?
Smart phones like the iPhone and Blackberry are solving both the mobile problem, and improving on finding your true location, either with GPS or cell tower location. Combine that with Google Maps local search and you begin to have a solution.
Now add on features that make location based services about more than just advertising (you wouldn't watch TV just for the ads...) Any location-based service must have a reason other than advertising to use it. The application must also blur the line between content and advertising (think of service locators like Yelp or City Search.) Prospects will actually ask for your ads! You won't have to push them on users. One recent feature announcement is Google's Latitude, which lets you stalk your friends by their location (and which makes barely believable claims to have signed up a million users in a week). Get people hooked on location-based services so you build up an audience make the effort worth while for advertisers!
As dumb phones reach market saturation, as more people upgrade to smartphones, as mobile browsing becomes less frustrating, and as Internet access on mobiles is seen as a necessity rather than a luxury, add democratized campaign setup so local shop owners can easily advertise to folks in the neighborhood or traveling through and you have the "next big thing"®!
I came to that conclusion not because companies are fighting to win mobile search markets, but after a mental exercise about what people actually buy on a regular basis versus what is typically advertised to them. The food court at the mall is generally busier than the rest of the mall. Same goes for the food at airports or county fairs. Sure you buy books at Amazon once in a while, perhaps a song on iTunes, or book show tickets or travel online, but I'm willing to bet not nearly as often as you buy gas as the corner filling station, or at my age, even dry cleaning services. And what about "that vast array of attorneys, lawyers, dentists, shoe shops, restaurants, and other close-to-home businesses"? The vast number of Yellow Pages-style small advertisers represents a huge location-based market opportunity.
So why don't you see advertising online for products you are actually likely to buy in the next week or month? I think you don't mainly for two reasons: because online advertising relies on large inventories (sold by the thousands to generate a click or two), and because local shop owners or managers lack knowledge of online advertising technologies and the ability to design ads.
Google revolutionized and democratized online advertising with its AdWords text advertising. No longer did you have to know how to run PhotoShop or Illustrator. All you had to have was a web site and a few words. Now a somewhat savvy shop owner could begin advertising without hiring an Ogilvy & Mather.
But your web browser still wasn't very good at knowing where you were. Even IP address to geographical location services aren't accurate enough (one IP location database pegs me 10 driving miles away from my actual location according to Google Maps' directions). Without mobile access, who wants to drive home and log on to the Internet while they're out with friends just to find a good pizza place on the spur of the moment?
Smart phones like the iPhone and Blackberry are solving both the mobile problem, and improving on finding your true location, either with GPS or cell tower location. Combine that with Google Maps local search and you begin to have a solution.
Now add on features that make location based services about more than just advertising (you wouldn't watch TV just for the ads...) Any location-based service must have a reason other than advertising to use it. The application must also blur the line between content and advertising (think of service locators like Yelp or City Search.) Prospects will actually ask for your ads! You won't have to push them on users. One recent feature announcement is Google's Latitude, which lets you stalk your friends by their location (and which makes barely believable claims to have signed up a million users in a week). Get people hooked on location-based services so you build up an audience make the effort worth while for advertisers!
As dumb phones reach market saturation, as more people upgrade to smartphones, as mobile browsing becomes less frustrating, and as Internet access on mobiles is seen as a necessity rather than a luxury, add democratized campaign setup so local shop owners can easily advertise to folks in the neighborhood or traveling through and you have the "next big thing"®!
Wednesday, January 7, 2009
AT&T iPhone exclusive will eventually end
AT&T has a limited window to be sure they have a compelling reason to stick with them after their iPhone exclusive goes away.
In my opinion, Apple's iPhone App Store has changed the paradigm for telcos who love to lock down their deck. (I will admit to really wanting the silly iBeer app.) Customers will demand the ability to install their own apps at will. Windows Mobile has long supported applications, but the hardware it ran on was never as sexy as the iPhone, and Microsoft or the carriers lacked a centralized app repository. As of this writing, Blackberry still hasn't launched its promised app store. Google has just announced that it will begin selling applications in its Android Market.
AT&T and all the mobile carries also need to reduce the number of manufacturers and models they carry, or at least rationalize how they're presented to non-technical customers. Right now, AT&T's smartphone page alone lists a daunting 33 devices (including colors and memory options) from 8 manufacturers (Apple, Pantech, Blackberry, LG, Motorola, Samsung, Palm, and HTC).
Apple's genius with the iPod was that even though there is a family of iPod models and colors, consumers can still refer to each model as just an iPod. This makes choosing an MP3 player easy, and you are likely to have a friend who has shown you and trained you on his iPod. (Apple is muffing it a bit by splitting hairs between the iPhone and the iPod Touch.)
Finally, just as mobile phones are expected to have cameras, they will also be expected to have music. The mobile music nut must still be cracked! A compelling music service needs to be in AT&T's plans, whether that's iTunes on more than just the iPhone, or some other single branded service, like Rhapsody or Napster. A carrier may try to build its own branded music service, but the investment may not pay back. Users want to share music with friends, even if the friend doesn't use the same mobile carrier. Unless that problem can be solved, it will kill any carrier-based music offering.
In my opinion, Apple's iPhone App Store has changed the paradigm for telcos who love to lock down their deck. (I will admit to really wanting the silly iBeer app.) Customers will demand the ability to install their own apps at will. Windows Mobile has long supported applications, but the hardware it ran on was never as sexy as the iPhone, and Microsoft or the carriers lacked a centralized app repository. As of this writing, Blackberry still hasn't launched its promised app store. Google has just announced that it will begin selling applications in its Android Market.
AT&T and all the mobile carries also need to reduce the number of manufacturers and models they carry, or at least rationalize how they're presented to non-technical customers. Right now, AT&T's smartphone page alone lists a daunting 33 devices (including colors and memory options) from 8 manufacturers (Apple, Pantech, Blackberry, LG, Motorola, Samsung, Palm, and HTC).
Apple's genius with the iPod was that even though there is a family of iPod models and colors, consumers can still refer to each model as just an iPod. This makes choosing an MP3 player easy, and you are likely to have a friend who has shown you and trained you on his iPod. (Apple is muffing it a bit by splitting hairs between the iPhone and the iPod Touch.)
Finally, just as mobile phones are expected to have cameras, they will also be expected to have music. The mobile music nut must still be cracked! A compelling music service needs to be in AT&T's plans, whether that's iTunes on more than just the iPhone, or some other single branded service, like Rhapsody or Napster. A carrier may try to build its own branded music service, but the investment may not pay back. Users want to share music with friends, even if the friend doesn't use the same mobile carrier. Unless that problem can be solved, it will kill any carrier-based music offering.
Apple gets to drop DRM, goes variable pricing, and gets OTA rights
Apple finally worked out deals with all the major music labels so they could offer iTunes Music without customer-unfriendly DRM (though their files will still be encoded in Apple's flavor of the unfamiliar AAC codec). In return, Apple agreed to two new price points: 69 cents and $1.29 in addition to 99 cents. The labels have long wanted variable pricing in iTunes.
But the big news here is OTA (Over The Air) rights, which allows music to be sent over cellular networks at the same price as IP/WiFi transmission. That's huge for mobile music! The labels were salivating at the prospect of extending their overpriced ring tone business into overpriced full downloads, and for many years have priced OTA rights out of the market. Luckily for the rest of us, consumers are not that stupid. If you can buy a song on your computer for 99 cents (or steal it for free), why in the world would you buy it on your phone for $2 or $3?
Labels also finally recognized the reality of the use cases around mobile music: if I buy a song on my PC, do I also get it on my phone (or vice versa)? If I buy it on my phone, why can't I move it to my PC?
So unifying full download prices across all delivery methods finally makes some sense.
Now music publishers must recognize reality and allow multiple fulfillments of the same song to the same person. No more 30 cent mechanical license taxes for more copies of the same song delivered to the same person in a different file format, on a different device, or for upgrades from the DRM version to the non-DRM version.
But the big news here is OTA (Over The Air) rights, which allows music to be sent over cellular networks at the same price as IP/WiFi transmission. That's huge for mobile music! The labels were salivating at the prospect of extending their overpriced ring tone business into overpriced full downloads, and for many years have priced OTA rights out of the market. Luckily for the rest of us, consumers are not that stupid. If you can buy a song on your computer for 99 cents (or steal it for free), why in the world would you buy it on your phone for $2 or $3?
Labels also finally recognized the reality of the use cases around mobile music: if I buy a song on my PC, do I also get it on my phone (or vice versa)? If I buy it on my phone, why can't I move it to my PC?
So unifying full download prices across all delivery methods finally makes some sense.
Now music publishers must recognize reality and allow multiple fulfillments of the same song to the same person. No more 30 cent mechanical license taxes for more copies of the same song delivered to the same person in a different file format, on a different device, or for upgrades from the DRM version to the non-DRM version.
Wednesday, December 10, 2008
DRM's missed opportunity: Digital resales
Here's a story via Digital Music News about a new service, Bopaboo*, that lets people sell their "used" MP3s.
Artists and music labels have long hated used record and CD stores because the labels don't participate in the resale revenue. Part of the DRM strategy was keeping the first sale rights, and preventing any second sale. A few services like the defunct WeedShare and PassAlong attempted to emulate digital redistribution, but weren't true second sale enablers.
But the missed opportunity for the labels and for DRM providers was allowing a service to act as a second sale clearinghouse, where the labels could have participated in a share of the resale revenue. (Though I'm sure their margin demands would have killed any market even if labels welcomed the concept.) This provides an opportunity for the service to benefit from a captive market for second sales since the service holds the secret DRM keys that are needed to revoke the license. No other service could revoke the license.
Through license revocation, DRM can guarantee that a digital track is no longer playable for a seller. A service that made a DRM first sale could revoke the license from the seller, and grant a license to the buyer. Most labels even included a set number of burns for a first sale. The selling service could keep track of how many burns were used, and issue the new license with only the remaining burns available. If no burns were left, a non-burn license could be delivered - the buyer could play the song on his computer or a portable player, but couldn't burn it to CD.
The number of burns remaining would surely affect the market value for the second sale. Imagine a DRM service with a product page similar to Amazon's physical product pages that include a price for "new" from Amazon, or "used" from any number of sellers:
The Cinematics - Race to the City
New: $0.99 (5 burns)
Used: 4 burns left, $0.80 (4 available)
Used: 3 burns left, $0.65 (1 available)
Used: 2 burns left, $0.50 (2 available)
Used: 1 burns left, $0.35 (6 available)
Used: 0 burns left, $0.25 (12 available)
Labels could still participate at some percentage of the second sale value.
The seller could have burnt a song to CD once, then rip it back to her computer to keep. But nothing, even with DRM, is preventing her from doing that now and sharing the copy freely. Why not incent her to make a little of her investment back rather than giving the file to strangers for free? If she gives it away free, she's destroyed her own opportunity to sell it.
Of course all this so far still depends on DRM being more user friendly! And any owner who had lost her download or DRM database couldn't resell the song because revocation would be impossible. But she can't resell a CD she lost either.
Even without DRM, a second sale service could guarantee the destruction of the MP3 file on the seller's computer before delivering it to the buyer. Again, the seller could have made any number of copies elsewhere. Again, nothing's preventing that today, with no option for any second sale revenue to the labels.
* Domain name scarcity is destroying natural language!
Artists and music labels have long hated used record and CD stores because the labels don't participate in the resale revenue. Part of the DRM strategy was keeping the first sale rights, and preventing any second sale. A few services like the defunct WeedShare and PassAlong attempted to emulate digital redistribution, but weren't true second sale enablers.
But the missed opportunity for the labels and for DRM providers was allowing a service to act as a second sale clearinghouse, where the labels could have participated in a share of the resale revenue. (Though I'm sure their margin demands would have killed any market even if labels welcomed the concept.) This provides an opportunity for the service to benefit from a captive market for second sales since the service holds the secret DRM keys that are needed to revoke the license. No other service could revoke the license.
Through license revocation, DRM can guarantee that a digital track is no longer playable for a seller. A service that made a DRM first sale could revoke the license from the seller, and grant a license to the buyer. Most labels even included a set number of burns for a first sale. The selling service could keep track of how many burns were used, and issue the new license with only the remaining burns available. If no burns were left, a non-burn license could be delivered - the buyer could play the song on his computer or a portable player, but couldn't burn it to CD.
The number of burns remaining would surely affect the market value for the second sale. Imagine a DRM service with a product page similar to Amazon's physical product pages that include a price for "new" from Amazon, or "used" from any number of sellers:
The Cinematics - Race to the City
New: $0.99 (5 burns)
Used: 4 burns left, $0.80 (4 available)
Used: 3 burns left, $0.65 (1 available)
Used: 2 burns left, $0.50 (2 available)
Used: 1 burns left, $0.35 (6 available)
Used: 0 burns left, $0.25 (12 available)
Labels could still participate at some percentage of the second sale value.
The seller could have burnt a song to CD once, then rip it back to her computer to keep. But nothing, even with DRM, is preventing her from doing that now and sharing the copy freely. Why not incent her to make a little of her investment back rather than giving the file to strangers for free? If she gives it away free, she's destroyed her own opportunity to sell it.
Of course all this so far still depends on DRM being more user friendly! And any owner who had lost her download or DRM database couldn't resell the song because revocation would be impossible. But she can't resell a CD she lost either.
Even without DRM, a second sale service could guarantee the destruction of the MP3 file on the seller's computer before delivering it to the buyer. Again, the seller could have made any number of copies elsewhere. Again, nothing's preventing that today, with no option for any second sale revenue to the labels.
* Domain name scarcity is destroying natural language!
Friday, December 5, 2008
Competing Against Free
It's not hard to understand that the most difficult problem the music industry faces today is the pervasive availability of free music. Now, when I say free, I mean stolen, but that is merely a semantic difference that is immaterial to how people are finding, playing, and acquiring music today. So I will call it "free" for the rest of this post.
Many people I talk to think free music went away when Napster went legitimate, or when the RIAA started suing their customer base. But free music is still as easy if not easier to either stream or download from the internet. Some sites only let you stream music, while others let you download. Many services are run in countries far from the music industry's influence. Other services skirt the illegal sharing problem by acting as hubs that link to music on other servers.
Here are just a few sites that let you play or download free music:
SkreemR.com - An MP3 search engine. SkreemR scans the web for MP3 links and adds them to its search index. Type a song or artist name and get a list of MP3 download links. Sure they also link to places like Amazon or ThumbPlay where you can buy MP3s or ring tones, but you can also stream and download the song for free. The finally-out-of-beta Songbird player (shown below) makes it even easier to download: it integrates a SkreemR search right in the player and converts free MP3 search results into a list complete with download buttons. You get free music to download to your PC or take with you on your portable MP3 player.
Songza - An MP3 search engine. Songza only lets you stream the results in an embedded player on their site, often in the form of a video from YouTube, but sometimes from MP3 audio source. As long as you don't mind playing music from your PC, you get all the free streams you want.
SeeqPod - An MP3 search engine that also powers other music experiences. SeeqPod only lets you stream results in an elaborate embedded playlist manager on their site. Warner filed suit against SeeqPod in January 2008. EMI filed suit in February, 2009.
Blip.fm - An addictive Twitter-like micro-blogging service with free music streams. Blip.fm lets you search for songs, and play them for yourself and the site's social network. Songs are served either from a web server where the MP3 was found, or from Amazon's AWS hosting service. Blip lets its users upload music. Though they tell users to only upload original content, they serve plenty of copyrighted music from AWS. They're ripe for being shut down by Amazon.
Project Playlist - An MP3 search engine with Facebook application. Project Playlist only lets you stream results, and add songs to a playlist on the site. You can find other people's playlists and play them. The RIAA filed a lawsuit against Project Playlist in April 2008. They claim that since they don't host MP3 files, they aren't liable for theft. EMI, in what gives the appearance of blackmail, dropped its suit after Project Playlist agreed to license their catalog.
Sideload.com - Organizes links to MP3s on other people's web sites into a streaming, locker, and mobile sideloading site. EMI filed a lawsuit in January 2009.
Note that several sites play music for free legally, either because they've negotiated on-demand playback rights from the labels (e.g. CBS Last.fm, Lala.com), or they play non- or minimally-interactive radio style playlists under US compulsory license laws (e.g. Pandora).
Though some of the illegal free music sites have no business model, or have a model that would collapse if any royalties were actually paid, the preponderance of these extra-legal sites is evidence that content owners would benefit from a simple, legal way to let innovative services access streams for a reasonable price. Without such a service, music will continue to be played, but no artists or labels will be paid for the usage.
Many people I talk to think free music went away when Napster went legitimate, or when the RIAA started suing their customer base. But free music is still as easy if not easier to either stream or download from the internet. Some sites only let you stream music, while others let you download. Many services are run in countries far from the music industry's influence. Other services skirt the illegal sharing problem by acting as hubs that link to music on other servers.
Here are just a few sites that let you play or download free music:
SkreemR.com - An MP3 search engine. SkreemR scans the web for MP3 links and adds them to its search index. Type a song or artist name and get a list of MP3 download links. Sure they also link to places like Amazon or ThumbPlay where you can buy MP3s or ring tones, but you can also stream and download the song for free. The finally-out-of-beta Songbird player (shown below) makes it even easier to download: it integrates a SkreemR search right in the player and converts free MP3 search results into a list complete with download buttons. You get free music to download to your PC or take with you on your portable MP3 player.
Songza - An MP3 search engine. Songza only lets you stream the results in an embedded player on their site, often in the form of a video from YouTube, but sometimes from MP3 audio source. As long as you don't mind playing music from your PC, you get all the free streams you want.
SeeqPod - An MP3 search engine that also powers other music experiences. SeeqPod only lets you stream results in an elaborate embedded playlist manager on their site. Warner filed suit against SeeqPod in January 2008. EMI filed suit in February, 2009.
Blip.fm - An addictive Twitter-like micro-blogging service with free music streams. Blip.fm lets you search for songs, and play them for yourself and the site's social network. Songs are served either from a web server where the MP3 was found, or from Amazon's AWS hosting service. Blip lets its users upload music. Though they tell users to only upload original content, they serve plenty of copyrighted music from AWS. They're ripe for being shut down by Amazon.
Project Playlist - An MP3 search engine with Facebook application. Project Playlist only lets you stream results, and add songs to a playlist on the site. You can find other people's playlists and play them. The RIAA filed a lawsuit against Project Playlist in April 2008. They claim that since they don't host MP3 files, they aren't liable for theft. EMI, in what gives the appearance of blackmail, dropped its suit after Project Playlist agreed to license their catalog.
Sideload.com - Organizes links to MP3s on other people's web sites into a streaming, locker, and mobile sideloading site. EMI filed a lawsuit in January 2009.
Note that several sites play music for free legally, either because they've negotiated on-demand playback rights from the labels (e.g. CBS Last.fm, Lala.com), or they play non- or minimally-interactive radio style playlists under US compulsory license laws (e.g. Pandora).
Though some of the illegal free music sites have no business model, or have a model that would collapse if any royalties were actually paid, the preponderance of these extra-legal sites is evidence that content owners would benefit from a simple, legal way to let innovative services access streams for a reasonable price. Without such a service, music will continue to be played, but no artists or labels will be paid for the usage.
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