Monday, July 28, 2008

Into The Wild

I'll be in the Minnesota wilderness with my son this week - far from the digital world.

Friday, July 25, 2008

Cellphones and Music In The News


Several mobile music items in the news recently that are worth noting.

Cellphones and music are surely a marriage made in heaven - a marriage that will soon spawn lots of ad-supported babies:

  • The Pandora ad-supported app is the 4th most popular iPhone application and users are spending an hour listening to it.

  • Mobile commerce in Japan exceeds $100 billion. "Of six content categories defined by the government, that for high-fidelity music was the largest at $10.2 billion. The market grew a healthy 42 percent during the year as more handsets gained music players and users bought and downloaded more music to their phones. With that market growing, sales of simpler ring tones declined."

  • eMarketer has a new report on mobile music that contains some good insight:
    "Given consumers' reluctance to pay for music on their phones, marketers are finding new opportunities to partner directly with carriers, labels and even music artists themselves," says John du Pre Gauntt, eMarketer senior analyst and author of the new report, "Mobile Music: Ads to the Rescue." "Direct deals between brands and bands are no longer anomalies, but are part of a growing trend by both parties to bypass intermediaries and go directly to customers."


    "Mobile works better as a marketing and customer relationship platform than it does as a retail sales platform," Mr. Gauntt says. "Bands and artists are increasingly using mobile to form direct relationships with their fans, which are then monetized through other means, such as tickets to live shows,merchandise and fan clubs."

Thursday, July 24, 2008

New iLike Advertising Sidebar



iLike has introduced a new advertising platform that I like a lot.

Ads are delivered to listeners by means of a sidebar to iTunes or Windows Media Player. The sidebar displays concert information and music purchase links, which are related to the music that is running on the player. The ads change when the music changes.

The chief reason that I like this approach is because it uses music played from memory to drive the advertising. Having said that, this sidebar has two big weaknesses.

The first weakness is that the ads are all visual. Effective ads need to be in the format of the medium that carrries them. In the case of music that format is audio.

The second weakness is that there isn't much of a value proposition for the user in the current implementation. The ads are driving off the music already in their collection.

These weaknesses can be fixed, so I judge the iLike sidebar as another important step toward the success of ad-supported downloaded music.

Monday, July 21, 2008

Tuesday Tidbits


Another Way To Fight Piracy - Paul Westerberg just released an album entitled 49, which is "a 44-minute single MP3 file of a dozen-plus songs." I don't think he went with this format to make it more difficult to pirate the music but I think it does. Sure someone can use torrents, but bigger files take longer to download and that extra time may dissuade the less than determined pirate.



Good Article About China - This blog post is about iTunes in China and piracy but it has some great data about MP3 player sales there. For example, did you know that only 8.75 million players were sold in China in 2007? What a tremendous opportunity!



Sky Launches Music Subscription Service - Why? See also this post from David Card.

Friday, July 18, 2008

Using Music Choice As A Targeting Variable




Kudos to last.fm for the ad targeting initiative described in the Financial Times article below. Basically, the site is using the music that is being played as a means of selecting the ads to present.

I believe that a detailed and accurate psychographic and demographic profile can be built from an individual's music selections alone (I did a lot of reasearch in this area and will blog about it soon) .

Just another factor that makes recorded music a powerful advertising medium.

From

July 17, 2008

Revamped Last.fm boasts 'smartest' ads on the web

Interactive advertising will be at the heart of the next generation of web marketing, says the social music site


A new type of web advertising that interacts with the site on which it appears is to make its debut on Last.fm, the social music site.

Last.fm, which announces a major relaunch today, will start showing advertising that can tap into the community features of the site, making adverts more engaging, the site said.

An example of the new "smart" adverts displays an image of a mobile phone handset which changes according to what the Last.fm user is doing. For instance, if someone is listening to Bon Jovi, the phone would appear to start playing a Bon Jovi track, showing off its MP3 player.

Hotel chains will be able to tap into a Last.fm user's list of favourite artists and display adverts for hotels in cities where those artists have upcoming gigs. Train companies, similarly, will be able to advertise services running to other music-based events that may be of interest to the user.

"It's really about using the functionality of the site to help the brand come up with an ad that is more immersive, and entertaining," Spencer Hyman, the chief operating officer of Last.fm, said.

He cited a recent example of a partnership with Motorola, where the company sponsored a new feature on the site which allowed a user to get a customised print-out of a festival programme, showing bands they were likely to enjoy based on their music collection.

Last.fm's technology enables the site to recommend music to its users by analysing what they have in their collections and how often they play songs. That information is then compared with similar data from other users who listen to the same music, via a process the site calls "scrobbling".

The site interacts with iTunes, Apple's music software, and updates its recommendations every time a user listens to music using the program. It also employs a team of "music scientists", who constantly mine the data produced by the site to match particular genres of music with certain demographics.

Advertising that targets groups or individuals by monitoring their web behaviour has attracted criticism from privacy campaigners. Phorm, which conducted trials of targeted advertising earlier this year, was accused of invading people's privacy by tracking every website that they visited.

The Information Commissioner's Office ruled that Phorm did not breach pricacy because it did not collect information that would identify individual users, but the system may now face a challenge from Europe. Viviane Reding, the EU communications commissioner, said yesterday that she was concerned about the British Government's lack of action.

"It is very clear in EU directives that unless someone specifically gives authorisation [for web tracking] then you don't have the right to do that," Ms Reding said, according to the Dow Jones Newswire.

Mr Hyman said that web advertising had always been able to target customers because of the information sites had about their users, citing Google, which tailors adverts according to what a person is searching for.

Last.fm, too, had run targeted ads, he said, giving the example of a British bank which wanted to target Polish builders. The site was able to deliver adverts to people who listened to Polish music or who were in the UK but using the Polish language version of the site.

Increasingly, however, the success of web adverts would depend on making them more engaging, Mr Hyman said. "The reason TV ads have been so effective is because there has been a whole creative industry behind them," he said, suggesting the web had been slow to catch up.

Among the features of the newly relaunched Last.fm is a "recent activity" list which alerts users to what their friends have been listening to, a bit like the news feed on Facebook and the ability to share recommendations more easily.

Last.fm, which is based in London, has more than 1.5 million users in Europe, according to Nielsen Online, 10 per cent of which are in the UK. The site was bought by CBS, the US television network, for $280 million in May last year.

Copyright 2008 Times Newspapers Ltd.

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Thursday, July 17, 2008

My Eyeballs (And Eardrums) For Your Content


People understand the basic value proposition of free content for exposure to advertising. This is the case for video. Why would music be any different?

Advertising Age

Most Say Ads a 'Reasonable' Cost of Free Online Video

Survey: Viewers Most Amenable to Ads in TV Shows, Movies But Not Amateur Video

NEW YORK (AdAge.com) -- Good news for the growing number of ad-supported video services popping up online: The majority of digital video consumers will find the inclusion of advertising a "reasonable" expectation for accessing free online video content.
The new survey showed at least three in four digital video consumers said they would find it 'reasonable' for advertising to appear in the free digital distribution of full-length TV shows and movies.
The new survey showed at least three in four digital video consumers said they would find it 'reasonable' for advertising to appear in the free digital distribution of full-length TV shows and movies.


That's according to a new survey of U.S. internet users age 12 and older conducted by market-research company Ipsos MediaCT in February 2008.

Give and take
"Nobody is going to tell you they love advertising," said Adam Wright, director of Ipsos Media CT. "But the [survey] confirmed the notion that people get the give and take. That can be reassuring for many of the people who are trying to crack the code [of ad-subsidized video models]."

The percentage of internet users who found advertising a reasonable price of admission for free video content varies by content but, in general, respondents were more likely to embrace advertising in long-form professional content. At least three in four digital video consumers said they would find it "reasonable" for advertising to appear in the free digital distribution of full-length TV shows and movies, while about two out of three said the inclusion of advertising would be reasonable with free access to music videos, short news or sports clips.

"If it's premium content, people are willing to sit through ads. It's something that consumers already expect," said Mr. Wright.

Bad news for amateur content
But it's a different story when it comes to amateur digital content, where viewers are much less likely to accept advertising as a price of admission. Just over half of the respondents in the survey who have downloaded or streamed a video online say they would find it "not reasonable" to have advertising embedded within free amateur or homemade video offerings.

That finding could raise an important question for video-sharing websites like You Tube that are diversifying content to include longer, professionally produced material. According to Mr. Wright, these providers will have to "carefully consider" ad-subsidized models since their current audience has grown accustomed to free streams without any advertising.

One way to approach advertising for different types of content is to use different kinds of advertising, Mr. Wright said. For instance, an amateur video might use a 15 second pre-roll or a pop-up ad, depending on consumer reaction.

Said Mr. Wright, "You have to get into what are consumers are OK with and what they aren't, and [ask] when do you start to reach a negative impact?"

_________________________________________

Here's a selection of responses from the Ipsos MediaCT survey:

How reasonable is it to have advertising in the following free video content?

Full-length TV show:
82% Very reasonable/somewhat reasonable
18% Not very reasonable/not at all reasonable


Full-length movies:
75% Very reasonable/somewhat reasonable
25% Not very reasonable/not at all reasonable


Music videos:
68% Very reasonable/somewhat reasonable
32% Not very reasonable/not at all reasonable


Short news or sports clips:
63% Very reasonable/somewhat reasonable
37% Not very reasonable/not at all reasonable


Movie/TV trailers or previews:
62% Very reasonable/somewhat reasonable
38% Not very reasonable/not at all reasonable


Amateur or homemade video clips:
48% Very reasonable/somewhat reasonable
52% Not very reasonable/not at all reasonable


Wednesday, July 16, 2008

P&G Launches Label


I totally missed the announcement of TAG Records, which occured in April, and was brought to my attention by this post indicating that Q will be the first artist signed to the label.

According to AdAge:

Jermaine Dupri has partnered with the Procter & Gamble-owned Tag Body Spray to form TAG records, which is part of the Tag brand's initiative to cultivate relationships with the urban community through the development of programs that provide opportunities for aspiring hip-hop talent. Dupri will serve as president of the new company, which will distribute through Island Def Jam Records. Dupri said in an interview on MTV.com that, in the face of declining sales and technological advancements, this deal will provide him and the label with promotional support that's unprecedented in today's market.

I think this type of corporate sponsorship is great for ad-supported music and, therefore, great for the recorded music industry. I hope we see a lot more of it.


Tuesday, July 15, 2008

Tuesday Tidbits



Devices Used to Listen to Music - I don't really understand the how people are using TV to listen to music (music videos, the music only channels on cable?) still this is interesting data from Parks Associates.




Fallacy of the Concert Savior Revisited - Pollstar magazine reports that: "...the combined gross from the top 100 tours during the first six months of this year held steady at $1.05 billion, identical to the figure for the same period last year. " To those many pundits who write that artists should give away their music and make their money by touring I would say look at the relative market sizes. Touring is a $2 billion annual business, while sales of recorded music, at its peak, was a $15 billion business.

Like the selling of recorded music, trends bode poorly for the future of touring: "A 5.6% drop in overall ticket sales, or about 1 million fewer than last year, was offset by an increase in average ticket prices of about 5.9%, to $62.07. "The industry's continuing trend of growth based on selling fewer but more expensive tickets," Bongiovanni said, "is not a sustainable path for a business that should be constantly adding new customers."

New Ad-Supported Recorded Music Companies? - Two companies allegedly offering ad-supported recorded music have issued press releases recently. Both trade on the P2P and social-networking buzz. Don't know anything about the companies other than what is in the press releases but what is in the press relases doesn't make me bullish on their futures.

  • Divvycast, LLC, is using ad-supported track distribution on the peer-to-peer networks to solve the pressing problems facing the record industry. The record industry, battered by the troubles of the last few years, is responding, bringing revenues to artists and giving advertisers access to highly attractive target markets.

  • Cloudtrade, a mobile social media networking company, makes good on a promise to continuously add free, full-track music downloads from top tier content partners on their mobile sharing platform. In exchange for free MP3 downloads, Cloudtrade asks users to interact with advertisers on their mobile platform. Whereas online properties cannot seem to generate enough ad revenues to offer free full-track, DRM-Free, non-tethered, non-subscription, or non-streaming downloads, Cloudtrade is confident that on the mobile phone, they can realize enough revenues to pay artists and labels a royalty on downloads.

Monday, July 14, 2008

Another New Ad Medium Without A Value Proposition



As a proponent of a new advertising medium I am interested in other new advertising media.

Advertising in video games has attracted a lot of attention and money (namely Microsoft's purchase of Massive). However, I am not confident of the long-term viability of this medium because I don't see the benefit to the player. So far at least, ads in video games don't offer the traditional ad-supported media value proposition of free content in exchange for exposure to advertising. (Neither does in-theater advertising.)

Mediaweek has a long article about advergaming but does not mention the lack of a consumer value proposition. The article focuses on advertiser interest in the medium. Advertiser interest, of course, follows consumer interest.

Game On: Will Mainstream Ads Play WIth Social Gaming?

The audience for gaming is broadening as casual and communal become the medium’s new hallmarks. Will mainstream advertisers plug and play?

July 14, 2008

-By Mike Shields

mw/photos/stylus/32681-rockband.jpg

Gamer fan favorite, Rock Band

If you do just a few Google searches, you’ll find references all over the place: A regular Rock Band night at the Ground Kontrol bar in Portland, Ore.; A YouTube clip of two dudes flailing away at Guitar Hero at the Hyperion Tavern in L.A.; Nintendo Wii Bowling leagues forming in Kansas City and Greeley, Colo. Two media executives from Brooklyn are even hosting a large Wii Tennis Tournament, the brilliantly titled Wiimbledon.

However, while hipster-types are embracing the concept of publicly embarrassing themselves by playing a fake guitar, banging a plastic set of drums, or wielding an imaginary bowling ball, by most accounts they are not the core demo playing these games. More often you hear parents talking about playing Guitar Hero, and its descendant Rock Band, with their kids. Or Boomers playing these classic rock-oriented titles to recapture their ’60s selves. People even break out the Wii at dinner parties.

This new genre of gaming—call it social gaming, group games, casual console games—are at the center of a broadening trend, one that advertisers are only gradually embracing. Gaming is no longer just the domain of the pasty-faced nerd, if it ever really was. Now it’s mom, dad, grandma, almost everybody.

“Gaming has always been unfairly represented,” says Greg LoPiccolo, vp, product designer, Harmonix, the company that kicked off the Guitar Hero craze and now produces the multi-instrument game Rock Band. “[The old stereotype] was not even that accurate. It’s clearly been headed toward more of a social experience.”

In fact, while three or four years ago games played on consoles like PlayStation and Xbox tended toward solitary pursuits (games where you blow away everyone and everything to get to the next level), it’s not as though people have never hung out together to play video games. Think of the scene from Swingers when Vince Vaughn’s character and company hilariously taunt each other while playing Sega NHL Hockey. Nowadays, as Web connections are built into many new consoles, even shooting games like Halo 3 are becoming communal.

Social gaming in different forms has been around for a while, explains Dario Raciti, Gaming Leader, OMD Digital. “Where it’s new is the opportunity to engage a broader-than-ever audience on consoles,” says Raciti. “Consoles have never had much penetration with females or older audiences&hellipaudiences that don’t really play Madden.”

Those audiences may not normally be inclined to pick up a controller with nine buttons to play John Madden Football for two hours, but are far more inclined to swing a fake drum stick, or attempt a virtual backhand using a TV remote-like Wii controller. As this new breed of games has added easier-to-handle peripheral controls, it has let more women and older players join the party. “It’s safe to say that in the last couple of years there’s been a change in the focus in development of games,” says LoPiccolo. “I think it’s going to accelerate.”



Will that acceleration impact the ad business? “That’s definitely a trend that the industry has taken note of,” says Matt Story, director of Play, the gaming-specialist group within Publicis’ Denuo. But so far, only a handful of brands are active in this new gaming category.
Guitar Hero II, released in November 2006, was generally ad free, but Guitar Hero III featured Pontiac, Red Bull, Axe and other brands. And last November, the game joined Massive’s dynamic in-game advertising network, providing brands the ability to insert live ads in the game (provided it’s played with a Web connection). Similarly, last November’s launch of Rock Band was also ad-free, though Rock Band 2—some details of which are to be revealed at the E3 Media and Business Summit this week—just might carry ads. Meanwhile, Nintendo has been a conspicuous holdout in the in-game advertising space.

Raciti says music titles in particular have attracted a lot of advertiser interest. “Advertisers like huge-selling games,” he says. “Plus, these games offer a very safe environment. They’re not a shooting game.”

His client Nissan, along with several other brands, has explored using Guitar Hero to subsidize song downloads for users, a tactic he believes is more impactful than straight advertising. Still, he theorizes that these games’ group-gathering nature could lead brands to attempt to advertise to spectators rather than the game players themselves. “That’s an interesting concept,” he says. “Can you appeal to those spectators with different kinds of messaging?”

Jay Sampson, vp of global sales at Microsoft’s Massive, said that because of that very type of thinking, Guitar Hero has been his company’s top selling title for the past several months, with brands such as McDonald’s, Subway, Toyota, Ford, Chevrolet and Paramount’s Iron Man all running campaigns during the second quarter of this year.

When Massive sells advertisers audience guarantees, it estimates each placement reaches around 1.4 users, which is “very conservative,” according to Sampson. With Guitar Hero, “smart marketers know that behind that game is more than one consumer.”

However, according to Justin Townsend, CEO of Massive’s rival, IGA Worldwide, the lack of established standards for the average reach of video game ads, much like the magazine industry’s readers-per-copy measure, makes it tougher to sell. “At the end of the day, it’s all about reach,” he notes. “It’s hard to prove the pass-along factor.”

In fact, despite some buyers’ enthusiasm, the group/casual gaming phenomenon hasn’t convinced everyone. “It’s not a big topic of conversation for us,” says Dave Martin, director, interactive media at El Segundo, Calif.-based agency ignited, which handles brands such as Universal Pictures (The Incredible Hulk) that typically go after gamers. “The demo that is playing Rock Band is not necessarily what we would normally consider a gamer,” he says. “You have soccer moms playing Rock Band, but that isn’t necessarily the most efficient way to reach soccer moms.”



One major factor driving skepticism about this category as a viable ad medium is the Nintendo Wii—one of the hottest selling consoles recently—despite its more simplistic, universally ad-appropriate games like Wii Sports. Nintendo simply doesn’t appear interested in embracing advertising just yet. Observers believe that a combination of a protective corporate nature and the fact that it’s got bigger fish to fry these days has led Nintendo to stand pat for now. Officials at Nintendo declined to comment for this story. “Until now Nintendo has been very guarded, for very good reasons,” says Play’s Story. “They view themselves first as an entertainment company rather than a media company.”

Wii’s lack of ad strategy isn’t all that strange, given the recent history of its rivals Sony and Xbox. “The Wii’s been a phenomenon,” says Sampson. “But it’s a first-generation console. It took PlayStation and Xbox several years to get [an ad strategy]. [Nintendo is] saying, ‘I’ll focus on this juggernaut. Then I’ll figure out alternative revenue streams’.”

Some buyers predict that revenue will be impossible to turn down long term. “It’s very hard for a company to leave money on the table,” says Misha Cornes, Organic’s group director of strategy. “And we really can’t help ourselves as marketers.”

Horizon Media has already figured out one way to crack the Wii, working with the firm Engage In-Game Advertising on a deal with third-party developer THQ to insert ads for its client Geico in the upcoming Wii game Big Beach Sports. Donald Williams, vp digital strategy for Horizon Media, explains that the multiplayer reach of Wii games was a major motivator:
“The pass-along for these games is ridiculous.”

One would think the communal rock-out of the various Guitar Hero, Rock Band and Wii nights at bars nationwide are something marketers might have a hard time resisting as well. Though brands have been inquiring, many digital buyers say that such events are often either too local, or too small in scale to attract national brands. Plus, event marketing doesn’t usually fall into most digital agencies’ domains.

One event that did score several advertisers was the aforementioned Wiimbledon, which attracted 256 teams to Brooklyn’s Barcade back in June. The tournament—hosted by Lane Buschel, vp of public relations firm Morris King and Steven Bryant, a blogger for Mediaweek’s sister pub The Hollywood Reporter—landed deals from Prince Tennis, 2K Games, Brunswick and the Brooklyn Cyclones minor league baseball team, among others.

Still, to get big advertisers in on Guitar Hero night at whatever locale is doubtful, “unless somebody like MTV organized it,” says Raciti. The folks at MTV and its Harmonix subsidiary won’t say if they’ve got any plans of this sort, only that “it has occurred to us,” says LoPiccolo.

So, for agencies hoping to get their brands out in front of the many Guitar Hero wannabe-rock-stars out there, for now (with apologies to Aerosmith, who are featured in the next version of Guitar Hero), “Dream On.”

Friday, July 11, 2008

Ad-Supported Pandora iPhone App


The iPhone app store launched yesterday. One of the applications in the store is an ad-supported mobile version of Pandora.
Wired's Listening Post blog has this description of how the advertising will work:

"The App itself will be free, listening will be free, it will be supported through audio advertising like radio has been for time immemorial," said Conrad. However, don't expect thunderous ads for monster truck shows and other usual terrestrial radio ad staples. "They'll be NPR-style -- 'This station brought to you by (the sponsor)… on the order of six an hour, two in a row every 20 minutes.'"

That doesn't sound too bad: Ads will only play 0.88 percent of the time, which Conrad correctly describes as "dramatically less than terrestrial radio" and "somewhat less than NPR." Besides, you can pay the $36/year subscription and have all ads removed from Pandora.

The only information I have is in this brief description, but so far it sounds like an excellent implementation. The live read format is the way to go. Limiting pods to two consecutive ads is also smart.

I think that six ads per hour is light. There is a lot of room between six ads per hour and the number of ads per hour on commercial radio. Pandora needs to increase the load if this app is to achieve viability.

I am not sure where the ads will play only ".88 percent of time" comes from (the writer or Pandora) but unless Pandora is getting a billion dollar CPM, this ratio will never work. This must be a mistake.

All-in-all a good start for Pandora.

Thursday, July 10, 2008

Ad-Supported Streaming Music


Today's assignment is to read the post (and comments) by Lucas Gonze on Silicon Alley Insider entitled: Why Ad-Supported Music Won't Work: Blame The Labels.

Gonze limits his discussion to ad-supported streaming music. As a reader of this blog you know that I am not big on ad-supported streaming music. I believe the future lies in ad-supported downloaded music.

Wednesday, July 09, 2008

How About An Open Source MP3 Player?


Google's Android is an open source cellphone OS. Nokia is taking over Symbian, the smartphone OS, and plans to make it open source. Apple even offers an iPhone SDK to independent developers. (BTW - Silicon Alley Insider is reporting today that some iPhone apps may be ad-supported.)

Where is the iPod SDK? The Zune SDK? Or even better; a completely open source portable MP3 player.

There is rockbox, an OS which can be installed on early generations of the iPod and a few other obscure MP3 players. It is too limited to have any real market impact. In 2004, after failing to sell many players, Neuros Audio opened the firmware and hardware of their MP3 player. This effort went nowhere and the player has been discontinued.

Giving third parties access to the firmware of popular portable MP3 players would unleash tremendous creativity resulting in useful and fun applications. This would increase the desirability of, and the time people spend, with their MP3 players.

Such an environment would be good for the recorded music industry and, I believe, help new business models like ad-supported music get off the ground. Perhaps this will happen when DRM is universally dropped and Apple and Microsoft realize there is no longer any money to be made from selling digital music.

Closing question for Apple: Didn't you release an iPhone SDK to spur sales of the device and new revenue streams? Why doesn't the same logic apply for the iPod?

Tuesday, July 08, 2008

Tuesday Tidbits



EMI Chooses Physical Goods Marketer To Sell Digital Music - Everyone must know by now that Guy Hands has chosen "Elio Leoni-Sceti, 42, who was executive vice president of Reckitt Benckiser, maker of skin care product Clearasil, French's mustard, Nurofen pain reliever..." to run EMI's recorded music division. I applaud Hands's effort to look outside the music industry for new ideas.

However, as long as the ideas remain within the box of selling music (instead of selling the time spent listening to the music), I don't hold out much hope for EMI.

Does Content Context Matter? - Interesting editorial printed in the Chicago Tribune discusses how ads from mainstream advertisers appear next to toxic content on the Internet. The issue of content context for advertising is relevant to ad-supported recorded music. Fortunately, the tagging of digital music files makes it possible to control where ads appear in a recorded music stream.

Another Reason to Ignore Projections - See the chart from eMarketer below. Mobile music grows to $7.3 billion in 2011? If you believe that I have a CD manufacturer for you to invest in.



Wednesday, July 02, 2008

Metamorphosis


A basic tenet of this blog is that the recorded music industry must metamorphose from a consumer paid business into an ad-supported business.

Last year AOL evolved from it's caterpillar subscription business to a butterfly like ad-supported business. I came accross this post by AOL Sr. Vice President, Mike Rich on RBR, which discusses lessons learned from the change.

Can somebody send this to Guy Hands?


Reaching Consumers & Monetizing Web Content

image Mike Rich

A little over a year ago, AOL embarked on what by any standard was a fundamental transformation of its business model. Instead of a traditional subscriber-based business, AOL was shifting to be an ad-supported Web business. This shift required entirely new ways of thinking about how we do business, who our competitors were, how we thought about programming, even how we would treat our brand.

We had to ask tough questions. What would appeal to consumers – drawing them in, drawing them back, and keeping them engaged? How could we create experiences that we could easily and effectively monetize, without jeopardizing the user experience? How could we reach an increasingly fragmented audience that was less and less reliant on portals to guide them online?

Our struggles were in many ways unique to AOL. But the lessons we learned along the way are, I think, are instructive to traditional television & recorded music industries as well as radio broadcasting. Among them:

Stay 100% focused on the consumer. That’s easy to say, difficult to achieve. But once AOL made the move to free Web content, we fully embraced this concept. After all, if we didn’t, consumers would quickly go to sites that did. One example: We listened to our audience and extended AOL Television from an editorially and listings focused to an all-encompassing video experience that lets users access a myriad of full episodes – from the Simpsons to Lost to CSI – while providing a place for fans to communicate.

Don’t make them come to you. We’re constantly looking for ways to syndicate our content through widgets, gadgets and desktop applications so consumers can more easily access it wherever they are. We recently launched a widget for our popular TVs Top 5 franchise, letting fans watch the previous night’s best TV moments directly from their webpage or blog. Our Spinner MP3 of the Day widget feeds a new editor-selected MP3 to music fans each day. We’ve launched Facebook applications for AOL Music and Moviefone. Our AOL Radio application for the iPhone recently won an Apple design award. This is what we call internal as the "Start here finish anywhere, start anywhere finish here" strategy.

Rethink everything. To appeal to today’s consumers, we literally threw out our old way of programming, rethinking our channels from the ground up. For example, we made them more blog-like, which lets us constantly update content and highlight third-party coverage that is relevant to our audiences and also allows them to comment and connect with other people on the site.

Don’t be wedded to your brand. At the same time, we also realized that in some cases, the AOL brand wasn’t going to help us attract and retain certain audiences. In the music area, for example, we built on our success with Spinner.com (our indie/rock music site) and launched several new lifestyle-focused music sites or "passion points" including PopEater (for pop music fans), The Boombox (for hip hop/ R&B fans) and The Boot (for country music fans). These are now some of the most heavily trafficked music destinations online. They give music fans a place to discover music and connect with other fans, let emerging artists and labels find huge engaged audiences, and advertisers the ability to reach specific audiences.

Remember that a rising tide lifts all boats. Our view is simple: by working closely with content creators and respecting their property rights, we can all benefit by the growth of online media consumption. To make our Television programming the best online, for example, we continually work with broadcasters and as a result provide consumers the most comprehensive array of branded content on the Web. AOL is the only network that carries content from all four major broadcast networks and an impressive collection of cable networks. It benefits us – we get great content – but it benefits broadcasters as well. They get increased exposure for their programming, and new opportunities to monetize their content, in an on-demand and interactive environment. Better still, we’re providing a legal outlet for fans to consume media without the risk of violating copyright law.

Embrace change. This is arguably one of the most dynamic industries in history. The Internet lets new experience and new technologies spread almost instantaneously to hundreds of millions of consumers. Consumer trends now change on a dime. Keeping up with this is more than a full time job. But more than that is required. At AOL we’ve learned to embrace change. Long gone are the days of annual software releases. We now have the ability to quickly launch new experiences, promote them, and monetize them. If something isn’t working, we fix it or drop it. It’s meant something of a cultural shift at AOL, but the entire company now recognizes this ethos.

The result? Our programming channels have been experiencing steady and strong growth. In May, our page views were up an incredible 78% from the year before. AOL Television alone attracted 12.8 million unique visitors in May, an all-time high. AOL Music reported an impressive 603 million page views. Several of our channels are now in the No. 1 spot in their respective categories, either in terms of unique visitors, page views or both, according to comScore Media Metrics.

While the particulars of AOL’s experience may not apply directly to more traditional media. I’m confident that the tough lessons AOL has had to learn over the past year will lead to success for anyone who embraces them.

--By Mike Rich, Sr. Vice President, AOL. He heads up AOL Music, AOL Television, Moviefone, Asylum, Black Voices and Urlesque.

Tuesday, July 01, 2008

Tuesday Tidbits


Rhapsody Offers DRM-Free Downloads - Big news so far this week is that Rhapsody is offering its full catalog as DRM-free downloads. Big deal. DRM is a non-issue in growing recorded music revenues. Recent evidence seems to support this.

Verizon Vanity - Verizon is working with Rhapsody on the DRM-free downloads and their subscription service. For the privilige of downloading a DRM-free track OTA to your phone Verizon will charge you $1.99. Very 2006.

Some Spiralfrog Stats - The Note has a short article on Spiralfrog in which CEO Joe Mohen gives a few interesting stats:

  • 6 million monthly visitors to site.
  • Over 50% of searches satisfied. (Wonder how many of those 6 million visitors return?)
  • CPMs as high as $30 for banners. BS. Maybe they got that once. CPMs for ads in ad-supported music will command a premium but banner ads are not ads in ad-supported music.
Is Music The World's Oldest Profession? - AdAge's Songs for Soap posted this nugget: Former Moldy Peaches member Adam Green on selling his songs for movies and commercials: "My general philosophy about it is something Serge Gainsbourg once said, which is, 'I'm willing to be a whore so long as I get an orgasm.'"

I love the quote but don't understand the 'artistic' notion that selling a song for advertising is less worthy than selling a CD or concert ticket. What is the difference?