After more than ten years in the music industry, Holger Christoph is today VP of digital sales at Universal Music Germany. We spoke to him about the past and future of the music industry in the digital era, about Universal Music’s experience in that field, as well as about his personal background and how he uses digital music services himself.
midemblog: Is digital a blessing, or a curse for the music business?
Holger Christoph: For the consumer and the artist, it is definitely a blessing because it brings a democracy of consumption and boosts direct relationships. Labels also benefit from the opportunities, be it a worldwide reach including countries we didn’t have a physical business in the past, more market and consumer insight by detailed data from usage reports, quicker time to market, etc. but as the competition for awareness gets tougher, the marketing mix and the distribution landscape get more complex to manage.
> At what point did Universal Music realise that the digital business is becoming a major thing?
I would not say there is a certain date when you realise that an important change is happening. Sure, you can always state a launch date of a service or a device, but it takes time until the mainstream adapts to new developments and until it becomes commercially relevant. It takes longer than most experts project. Personally if I had to pick a date I would mark the German launch of iTunes in June 2004 as the serious start of the digital music business in Germany; although Universal Music Germany launched the first major €0,99-per-track à la carte download store with popfile in August 2002 – half a year before Apple introduced the same concept in the US. Nevertheless, it took almost ten years for digital to account for approximately 30% of the overall music revenue in Germany. Hurdles were a low broadband and credit card penetration in Germany, inconvenience of the services and a general lack of acceptance from the consumers. I can clearly say that we moved a lot in the last ten years and the positive developments are unstoppable.
> Which digital music services are key to Universal Music? Why?
Revenue-wise, iTunes is the biggest fish in the pond. But Amazon MP3 has amazing growth rates in Germany as well and Spotify is already the third biggest digital retailer here. They’ve shown tremendous growth since their launch in March 2012. Interestingly, Germany has a really competitive ad-funded video streaming market due to the absence of YouTube – because of their issues with (national collecting society) GEMA. So we are able to compensate some of that vacuum. We are also working very closely with our smaller partners because the startup of today could be the market leader of tomorrow.
> Which digital business lessons did you have to learn the hard way?
A bitter pill is the fact that, even 4 years down the line, we can’t monetise on YouTube in Germany because Google and GEMA still disagree on the right licensing conditions. My fear is that this negotiation has become more philosophical than commercial. Removing DRM was certainly a hard lesson to learn for the industry, but consumers want freedom, and legal offers have to be better than piracy sites.
> What is next – for Universal Music? – for the music industry? – for the digital music business?
We see streaming subscriptions and cloud access as the next step in the evolution of the digital music business. Amazon has just announced that they will make CD purchases (past and future purchases) available in their cloud as an “auto rip”. That’s a real differentiator compared with other digital and physical retailers. There is also big potential in smart TVs, home streaming devices, mobile and in-car entertainment. There’s a lot of work to be done. Recommendations need to get better, companies need to find smart ways to deal with big data to learn more about their customers, how can the longtail be managed more effectively, what’s the optimal release format and frequency in a streaming dominated age, optimise the marketing mix, etc…
> How are you personally taking advantage of digital music services these days?
Personally I am always looking for new music, new artists and wanted to discover as much as possible. Since 2006 I am a passionate and heavy Last.fm user. I scrobble everything on iTunes, Spotify, iPhone/iPad, via my Sonos, etc.. My personal metadata history is the basis for a powerful recommendation engine and the major source for most of my new music discoveries. Last.fm is also great as a personalised concert calendar. I also like swarm.fm‘s Spotify app to keep track of all new releases. They are utilising everything I hear on Spotify, all the artists I have liked on Facebook and all of my friends activity. One thing I basically do for fun is to edit a playlist for our Digster playlist service, which is called “Best Songs of 20XX”. I started to create these playlists in iTunes almost ten years ago but only now on Spotify I suddenly have thousands of followers who trust my taste as a filter. I am convinced that editorial filters, tastemakers and clever recommendation engines will play an important role moving forwards. It will be interesting to see how successful the new Spotify update which is rolling out since beginning of this year will be under these aspects. The recent announcements by Beats for their Daisy project also focus on these aspects because users expect more than just a search function.
> How did you get into the music industry?
Let me tell you an anecdote from my internship at BMG (which later merged with Sony and has nothing to do with the new BMG Rights Management company of today). One of my tasks was to collect masters from the archive, rip them and compile the tracks so the compilation product managers could play around with the running order. Some albums had to be ordered from manufacturing or an external archive, so it usually took two to three days until one had collected all 40 tracks from the various sources. I speeded things up by simply downloading the tracks from Napster. It was funny to see the questioning faces when I returned with all 40 tracks after an hour or so. Compared with my 56k dial-up modem at home the download speed at BMG was mind-blowing, but compared with now, it was still ridiculously slow. At the end of my studies I was writing my diploma thesis about the “crisis in the music industry“, which looked into key issues and tried to provide some solutions. Once finished, I got my first job in the music business in 2003. Ten years later I am not only witnessing but am an active part of a stunning transition of a whole industry where digital is an integral part of all of our activities.
For more from labels on midemblog, be sure to check out our “Who needs labels?” interview series.