January 31, 2011
Further to his much-discussed MidemNet 2011 session, Forrester's Mulligan recaps how the industry can escape from its current impasse
January 22, I presented my vision to MIDEM of what is wrong with digital music now, why it is wrong and what needs to change. I built upon the foundations of the Digital Natives research Forrester published last week (click here for an overview) and presented on the following key themes:
Digital music is at an impasse
Digital music is at an impasse. Digital music has not achieved any of its three key objectives:
1 – to offset the impact of declining CD sales
2 – to generate a format replacement cycle and
3 – to compete effectively with piracy.
Current music products do not meet consumer demand and the divergence between emerging consumer behaviour and legitimate music products is widening at an alarming rate. And consumers are voting with their feet: Forrester’s latest consumer data shows digital music activity adoption is flat across ALL activity types compared to 1 year previously (in fact the data shows a slight decline).
Also all music activity is niche, except for video. Just 10% of Europeans and 18% of US consumers pay for digital music. Only music video has more than 20% adoption (and only in Europe at that): YouTube is digital music’s killer app.
The transition generation isn’t the future
12-15 year olds are behaving markedly differently from the 16-24’s. In fact, when you look closely at the activities where 16-24’s over-index, you can see that their activity coalesces around recreating analogue behaviours in a digital context. The 16-24’s started out in the analogue era. They are the transition generation with transitional behaviours.
The 12-15 year olds, though, don’t have analog baggage. All they’ve known is digital. Online video and mobile are their killer apps. These Digital Natives see music as the pervasive soundtrack to their interactive, immersive, social environments. Ownership matters less. Place of origin matters less. But context and experience are everything. The Digital Natives are hugely disruptive, but their disruption needs harnessing.
Current music products are transitional too
The reason this all matters so much is that current digital music product strategy is built around the transition generation with transition products to meet their transitional needs and expectations. Neither the 99 cent download and the 9.99 streaming subscription are the future. They are transition products. They were useful for bridging the gap between analogue and digital, to get us on the first step of the digital path, but now it’s time to start the journey in earnest. We’d be naïve to argue that we’re anything close to the end game yet. But the problem is that consumer demand has already outpaced product evolution, again.
Experience is the product
Music products used to determine consumers’ behaviour. Now the relationship is reversed. In the analogue era music was sold in units and linearly programmed. With the arrival of the Internet, music fans suddenly had access to everything they wanted and more.
The digital natives have only ever known a world with on-demand access based music experiences. The demand needle has moved on to rich immersive experiences in which they can watch, share and connect. And the experience part is crucial. In a post-content-scarcity world where all content is available, experience is now everything. Experience IS the product. With the contagion of free infecting everything the content itself is no longer king. Experience now has the throne.
Future music products need SPARC
To harness the potential of the Digital Natives and to meet emerging consumer demand, digital music products must have Sparc. That is to say, they must be:
• Social: put the crowd in the cloud
• Participative: make them interactive and immersive
• Accessible: ownership still matters but access matters more
• Relevant: ensure they co-exist and joint the dots in the fragmented digital environment
• Connected: 174 million Europeans have two or more connected devices. Music fans are connected and expect their music experiences to be also.
Music products must harness disruption, that isn’t in question. What is, is whether they do so quickly enough to prevent another massive chunk of the marketplace disappearing for good?
MIDEMBlog regular Mark Mulligan is VP & Research Director for Forrester Research. Based in London, he is one of digital music’s most prominent experts. You can watch his full MidemNet session here, and our video interview with him here. More soon!
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