Archive for July, 2009

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5 Reasons to Pay for Spotify

July 28, 2009

SpotifyI was recently singled out at a music industry event for being the only person of over 100 attendees to pay for Spotify Premium.

“So you’re the one” was called out. There were suppressed sniggers. One or two people actually booed me – which I still don’t quite get.

But what really hit home was the general consensus that I was naive for paying for something that is available for free elsewhere.

So why do I pay? Here are my five reasons for paying for Spotify:

  1. It’s excellent value.  This may not be true for everyone, but through buying CDs, second-hand vinyl and digital music on iTunes, I have spent between £10 and £30 per month on music since I was 18.  Spotify is, to a slightly above-average music user, a bargain.  And as the library grows, it gets better value every week.
  2. Adverts lead to censorship.  I don’t argue against adverts because of the quality of their content (though people tell me Spotify ads are particularly special in this regard).  Rather, I am opposed to the censorial impact advertisers can have.  It is something that has been well-documented, brilliantly summed up by Naomi Klein in No Logo.  For example, if a brand does not like swearing, and Spotify wants to carry that brand’s adverts, it will have to ban songs containing swearing.  Censorship is always just a dollar payment away.
  3. You can’t lose it.  Contrary to some people’s views, music you don’t own is more secure than music sitting on a shelf in your home.  I’ve lost a least 100 songs that I purchased on iTunes in the past two years – once through a computer failure, once through a relationship failure (the songs went with the laptop, TV and sofa).  It’s nothing new – think of all the fights there have ever been over who owned which bits of the vinyl collection.
  4. It’s going mobile.  It is likely that it will be available shortly on the iPhone and other 3G devices, for Premium users only.  If the user interface on the mobile devices is as good as it is on the computer (with the caveat that content discovery could be improved), it will be a huge winner.
  5. The economic sustainability argument.  The music ecosystem requires people to pay for it.  If everyone pays, the music industry and writers profit and there is downward pressure on the price for the service.  If nobody pays, the market fails.  In between, there is an equilibrium.

So, on the grounds that I really like the service, and I would like to pay as little as possible for it, I have to declare a big and blatant self-interest in urging others to join me and enjoy Spotify ad-free.

Update | 13.45 | 28 July  Official UK music industry figures suggest that I am actually quite a heavy music buyer.  According to a story in The Times today:

…Spotify [asks] customers to pay £120 a year for the service, when, on average, music buyers spent half that amount on music purchases last year, according to research for the BPI, the record industry trade association.

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Apple Tablet and Higher Music Margins

July 27, 2009

Very interesting story in today’s FT about Apple working with the four major record labels and launching a tablet computer.  It’s interesting because it suggests Apple’s famously tight-lipped new product development process may have sprung a leak.  But it’s far more interesting because it is another reminder that Apple is operating on a level above most others when it comes to making money from information – in this case, music.

Newspapers are struggling with the concept of charging for content, with a few good exceptions, such as the FT and New York Times.  By contrast, Apple – having already cracked the making money part – is struggling with the far more noble challenge of driving up margins for online content.

The music industry appears to have struck a good working relationship with Apple, whereby they collectively work to improve their money-making potential.  Even if Apple were to take a larger slice of the fee for delivering higher-value interactive music packages (including album art and sleeve notes), everyone wins because the pie itself is getting bigger.

And to turn that on its head – since Apple is investing in new hardware, surely it has earned the right to a greater slice of the income for its efforts.  This sort of relationship between a technology developer and the music industry highlights what could be achieved in newspapers – if only the papers themselves would start collaborating over paid-for (or even ad-funded) delivery of portable e-news.

Watch out Kindle, or Apple may use its experience in the music trade to beat you to the punch with its new 10-inch tablet, which would be perfect for catching up with the latest news.

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David Potter: there’s value in investigative journalism

July 17, 2009

OK. Here’s the argument:

  1. News is spread highly effectively by people talking (known in the trade as “word-of-mouth”, or WOM, which – preposterously – can be used as a word, to rhyme with “bomb”).
  2. WOM is accelerated by social media, such as Facebook, Twitter or social bookmarking. Social media creates WOM on steroids.
  3. Consequently, the intrinsic value of news diminishes. Newspapers begin to worry about charging for their content (currently, hardly any charge for their web content – though some are experimenting).
  4. Long-term prognosis for newspapers: unsustainable.

Which is why an announcement today in the UK’s Press Gazette could be very exciting, heralding a new niche for newspaper journalists.

The Potter Foundation, run by Psion founder David Potter, has invested £2m in the Bureau of Investigative Journalism, a not-for-profit start-up designed to support investigative, public interest journalism.

In theory, if demand could be created for purely investigative journalism, there could yet be money in them-thar pages. Or screens. Or Kindles. Or whatever device you choose to mention.

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Spotify or Soundcloud: future of music payment

July 16, 2009

Tonight, I was at a great event organised by Chinwag called “Music – who Pays the Piper?”, that examined future revenue generation in the music industry.  It was refreshing that the panel members were unanimous on one thing – music can’t be free.  Or, in other words, artists should be paid for creating something valuable.

But what was most inspiring was the range of ideas put forward about how music creation might be rewarded.  This is a very rough summary of some of the ideas put forward by the panel – Dave Haynes, UK Manager at Soundcloud; Dom Hodge, Associate Director at Frukt Music; Helienne Lidvall, journalist and blogger at The Guardian and a songwriter; Jon Mitchell, Sales Director at Spotify and Richard Jacobs, Head of Radio at MediaCom.

Dave Haynes: the age of the CD is over.  A premium will be put on originality – remixes and music created collaboratively will become more valuable – in fact, music can already be developed entirely in the cloud, enabling collaborative creation of the music itself.  This collaborative creation is where value can be added to the music – what happens then is not important – ad-funding, fan-payments or brand sponsorship – Dave does not really care!

Dom Hodge: one of the most important recent changes to the music industry has been the new emphasis on access, rather than ownership (e.g. the streaming model used by Spotify).  A solution to the stifling of innovation in the music industry would be for the major labels to acquire equity stakes in successful start-ups, rather than to shut them down – an intriguing idea. Fans will pay for music.

Helienne (pronounced as Korean): the obvious revenue generator is touring – but not everyone can make money this way.  The industry rule of thumb is that the break-even point is when you can fill the Shepherd’s Bush Empire (capacity 2,000). Other ways of making money don’t necessarily work: Helienne has received millions of plays on YouTube but been paid only about £30 royalties.  From online sales, record labels make about ten times as much as song-writers.  She argued against flat-rate fees for music.  Brand advertisers will end up funding music.

Jon: Spotify has reached 2m users within five months, but it is still a long way from making money.  The entire room was asked “who has not used Spotify?” – nobody put their hand up to that.  But when asked who pays for Spotify Premium, only one person in the room raised their hand – me.  Jon said artists must be compensated, and alluded to innovations and growth in the ad-funded Spotify service.  He also mentioned that – in the very long term – individuals should have access to Spotify too.  Ads will eventually pay for music.

Richard: brand relationships in the music industry are becoming more important and this is going to continue.  Media buyers such as MediaCom are hearing from countless new music streaming sites every week attempting to pick up ad revenue – but the vast majority are not worth looking at.  Fragmentation is nobody’s friend, and Richard advocated a collaborative approach to media selling among streaming services.  He emphasised that the biggest consideration is the connection between brands and the music site – and in that sense, media buyers are increasingly becoming the financial gatekeepers of the music industry – if the song doesn’t fit the brand perfectly, then it is Richard’s job to pull out of the deal.  He felt an ad- and sponsorship-funded music industry was inevitable.

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Bold step as New York Times charges for content

July 10, 2009

NYT BuildingGreat news that the New York Times is to start consider charging for content.  Somebody has to be the first to go, and after Murdoch’s recent revelation that he is considering this for The Times and The Sun in the UK, it sounds like a monumental shift is taking place.

The price mentioned by the NYT  is low.  At $5 per month to begin with, it is around ten pence per day in sterling terms.  Who could deny that is good value?  The big question is just how elastic demand for quality newspaper content will be.  In other words, how much will this price – albeit a very low one – negatively impact demand?

It sounds reasonable to argue the quality of reader will be superior under a payment model.  It will not include people landing on the page unintentionally, for example.  It will also likely drive up the readers’ “propensity to buy”, since it will be possible to be more targeted with ads (using reader information) and readers will be generally more affluent – all good stuff for advertisers.  This is an experiment well worth undertaking, and the economic knowledge gained might be so valuable as to outweigh the cost of being the first mover.  Let’s hope so.

One concern is with Journalism Online, the organisation that has established itself with the laudable aim of creating a single pay platform for all online newspapers.  This is a very powerful idea, but surely the best way to deliver it would be through a non-for-profit body owned collectively by the newspapers themselves, and perhaps representing also the interests of readers.

That said, until such a group is formed (happy to be corrected if this has already been done), Journalism Online is showing the way, and for that, they ought to be congratulated.

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Gladwell vs. Anderson – my kind of fight

July 1, 2009

I like Malcolm Gladwell, but never more than this week, after reading his critique of Chris Anderson’s new book Free: the future of a radical price.  These two journalistic heavyweights have had a public debate that I will try and sum up in two lines:

Anderson: there is one iron law of the information economy – in the end, all information will be free

Gladwell: if there is a law of the internet age, it is that there are no iron laws – and the notion that everything can be free is wrong

In a book review in The New Yorker, Gladwell eloquently and satisfyingly pulls apart Anderson’s arguments.  So far, Anderson seems unable to fight back.  His response, posted this week at wired.com, is weak.

Reading Gladwell’s article and Anderson’s response is worth doing, if only to see how one-sided this argument is.  But I wanted to draw out a slightly different conclusion from Anderson’s argument – and one that perhaps hints at the solution to the problems caused by the free web.

I can’t read Free, as I am not a book reviewer [and it’s not published until next week].  However, back in 2007, Anderson wrote a precursor to his book – an article in The World in 2008 (published by The Economist), entitled “Freeconomics: there really is such a thing as a free lunch” [subscription required].

I was pretty inspired, as I liked Anderson’s general theorising in his 2006 book The Long Tail and figured, here’s a guy not afraid to look at things in a new way.  But the difficulty was, as I read, it became clear his article was full of non-sequiturs.  Here’s one:

“The cost of storing or transmitting a kilobyte of data really is now too cheap to meter” therefore the transmission of data is/will be free

Contrary to Anderson’s conclusion, it struck me that the anomaly here is not the falling cost of data transmission, but our present inability to measure tiny quantities of value, or cash.  You could call it the problem of quantum finance.  To follow a quantum physics parallel, the idea is that every cash payment really consists of tiny financial quanta.  That is not so weird, as that is how money works – we call them cents, or pence – but the problem is that we need smaller units.  We need financial quanta.

Today, we only have the means to measure financial quanta when they stack up into great amounts (like dollars or pounds).  But if we can develop a system for measuring financial quanta practically, that is when the economy of information will begin to function properly.