It’s been a busy week for cloud-based music services, with a number of big brands entering the ring. In the UK, Carphone Warehouse launched its Music Anywhere locker service, which offers users the ability to have music from their existing collections streamed directly to their smartphones. In the US, the Skype founders publicly launched their Rdio streaming service, which allows subscribers ($9.99 per month) to steam unlimited music to mobile and PC, combined with a number of social and recommendation features. Meanwhile, news emerged via MP3tunes founder Michael Robertson that some of Apple’s long-awaited cloud-based services are actually already available to users of its iDisk online storage service, who can now stream their music collections to multiple devices including iPhones and iPads.
‘Cloud’ is very much a buzzword of 2010, but it’s also inherently a little confusing. All that ‘cloud’ really means is ‘internet’ and it therefore encompasses a wide range of music services. One thing that does link them all however is the principal that music is streamed to a customer from the internet when they play it, rather than being accessed from a local hard drive. The move to the internet makes total sense, of course. If music collections are stored centrally, they can be accessed on a wide range of devices and locations, which inherently makes sense for the consumer. There are currently some big legal grey areas around cloud music, especially with locker services. Some labels have sought to shut down any service that stores music on servers without a specific license – mp3tunes being a case in point. The granting of licenses to Music Anywhere suggests however, that labels are now more inclined to look at the potential upside of locker services, rather than trying to shut them down.
There is no doubt that cloud services are the future model for tech-savvy, demanding, forward-looking iPhone/Android owning consumers. The success of Spotify, as one example, shows that this customer group demands flexible, high quality, multi-device use and is more than happy to pay a premium for it. One thing which occurs to us however, is that there are far more people who don’t fall into this customer group than do. What about that massive number of people who probably don’t own a smartphone and even if they do, probably would not want to commit to a new subscription for a music service? We’re concerned that this group is getting sidelined as our obsession with technology grows. This group also includes a huge number of people who don’t currently engage with legal digital music services. Surely this is the group that the music industry should place most emphasis on?
We feel that there is still a real need for new mass-market digital music services. Specifically, we believe that there is a need for new subscription offerings which can attract those who don’t currently spend much on legal music. These offerings need to be simple to use, easy to understand and they need to be good value. If we’re going to attract large amounts of digital music ‘avoiders’, these services probably also need to make use of existing billing relationships. That’s to say, a household is far more likely to spend an extra £5 a month to some one they already have a contract with – BT, Sky or Virgin Media being possible examples – than they are to sign up for any new monthly bill.
We’re not convinced that the raft of new services we see arriving really takes care of these needs and these people. It’s highly regrettable that Virgin Media’s proposed revolutionary unlimited music service has yet to be licensed. We may have Sky Songs, but as far as we can see there is still a large gap in the market here. Why is this? It can only be as a result of licensing.
Licensing is the debating topic that probably prompts more argument in this industry than any other. It tends to highlight rifts between the traditionally conservative major labels and more experimentally-minded independents. It’s still a subject which desperately needs to be discussed and re-examined. The UK may have many licensed digital music services, but it doesn’t have the range of services that this industry needs and attractively-priced, mass market stores are still missing, especially in the subscription space. A lot of it seems to be about price, with an entrenched view holding firm in some sectors that there needs to be a clear minimum price for digital music. We’d argue that if that price is so high that many people won’t pay for it, doesn’t it obviously need to come down? If we’re still failing to convert so many people to legal digital services, price must be a key factor. We’ve both seen and undertaken research that clearly showed that lowering prices for à la carte album downloads attracted so many additional customers that they led to greater overall revenues for labels. We’d also dispute claims that lowering prices for certain kinds of services will kill the high-end market. Isn’t it quite clear that we need a new kind of attractively-priced subscription offering in the market? So what exactly are we, as a wider industry, waiting for?
David Balfour
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