It comes as no surprise to anyone in the creative or tech industries that consumers are now accustomed to a “want it now” instant-access world. Technology offers them a global landscape where they use their mobile devices to discover, purchase and stream whatever they feel like enjoying - in the moment and on the go. Not unexpectedly, many music-streaming services have formed - or are forming - partnerships with mobile operators to meet increasing consumer expectation for access to music at the touch of their fingertips, anytime and anywhere.
At The MMIX (Mobile. Music. Innovation. eXperience) discussion and event forum inaugurated at the recent Mobile World Congress 2015 in Barcelona, one of the key themes for heatedly debated whether this move towards streaming services is a benefit or hindrance to the future survival of the music industry.
“‘Freemium’ is killing the music business” argued Ministry of Sound CEO Lohan Presencer, explaining that the reality of larger streaming services is that 75% of their user base are accessing music for free. “I just can’t see how that is sustainable or supportable”, said Presencer.
Fellow panelist Gerrit Schumann, European Vice President of Deezer, countered that “A lot of people are not willing to pay for music, but they are engaged with it.” Going on to explain they attract a lot of people who don’t but CDs anymore who “go in the ‘Freemium’ funnel, or they get a free trial. It’s easy, it’s on mobile, and they start paying for music again. It’s that simple.”
Rdio’s Head of Business Development, Chris Burton warned that Rdio’s four “very difficult” years as a subscription-only business suggested that if the music industry turned away from ‘Freemium’ it would be “extremely difficult” to increase revenues.
Maintaining that “online music is a consumption medium and giving it away for free just kills the industry”, Presencer argued ‘Freemium’ was a means of growing a user base to enable a service to IPO or sell to “put money back in the pockets of your investors” instead of investing in future talent. “Our artists and investment – our creative community – is contracting daily as a result of the free services that are…giving music away” reasoned Presencer before outlining the difference between label and streaming service businesses; “you are not the ones who are investing in developing talent. You are not the ones who are signing artists.”
Presencer’s industries-wide challenge is “to come up with clever alternative payment mechanisms that allow people to snack, that allow them to pay as they go, that allow them to pay through micro-payments” requiring consideration and collaboration between all members of the music on mobile value chain.
As artist Will.i.am pointed out at an earlier MMIX session, “the music industry IS hardware, people just forget about it. Mobile is the newest step in the music and hardware journey.” Adding a prescient echo of Presencer’s challenge to “figure new ways to communicate” with people who “live with multiple screens all on the go.”
The proliferation of increasingly mobile and smart devices is proving to be game changing for the entertainment industry – one way or another. However, the current trend to drive music streaming from niche to mobile enabled mass-market can no longer be thought of as the future of music. It is the now of music.
As mobile operators roll out 4G (and 5G) they’ll find themselves seeking new, enticing ways to promote its benefits to customers in their pursuit of revenue. Meeting consumer desire for digital entertainment presents tremendous opportunities for evolution and innovation. As facilitators of mass consumer connection, the networks are increasingly in a position where they can help define the future of mobile music and entertainment. Operators are increasingly in a position where they can influence new value chain models that enable the whole entertainment ecosystem to reap the benefits of enabling consumers to enjoy deeper access to the music they love.
The music industry is at a crossroads. If the only place it can grow and thrive is on mobile, the biggest challenge is for all parties of the value chain to engage - not just with the creative possibilities - but also the commercial mechanisms that connect those technologies to the entertainment sector’s most important assets – consumers AND the artists that feed them.
As the pace of change accelerates, commercial innovation is the only way to secure investment and increased value creation for existing and emerging music talent, but such innovation will only succeed if attention is paid to the changing behaviours of those who are expected to pay for it…