Wednesday, November 26, 2008

More TSL Growth Data


As you read the Marketing Week article below keep our blog motto - Don't Sell the Music, Sell the Time Spent Listening to the Music - in mind.

Talkin' 'bout i-generation

13-Nov-08

Richard Fero

As the bar keeps getting raised as to what marketers have to do to get consumers to listen, many brands are using music as a means of engaging with their audiences - from sponsorship of live venues, to association with music-focused media brands.

Bauer Media has been conducting periodical research, known as Project Phoenix, into the music market. The latest data in a UK survey of 16- to 44-year-olds, shows 75% identified themselves as being passionate about music, and music was ahead of all the other interests and hobbies surveyed.

In addition, new methods of listening to music have meant that time spent listening is growing, with 44% saying they listen to more music than a year ago, and only 10% listening to less than last year.

Furthermore, the huge variety of methods by which people can listen to music means the public has more opportunity to listen to a much wider variety of tunes than previous generations. The research indicates that eclectic tastes are no longer the preserve of the music-obsessed few. In fact, those least passionate about music were interested in nearly as many genres of music (15 out of a possible 26), as those most passionate about music (18 out of 26).

It seems that consumers are energised about music, and this also came through in research into the state of the live music scene. The survey was conducted at the height of concerns about the health of live music, given that Glastonbury had a harder struggle to sell tickets this year than previously, and a general feeling that an oversupply of live music was dissipating some of the excitement.

However, the research shows that those surveyed found the live scene was more exhilarating than ever. In fact, events like music festivals are playing an important role in terms of a "rites of passage" for young people in much the same way as a back-packing holiday does - it is an experience that many don't want to miss out on, even those who aren't overly passionate about music. This is also reflected in the size of the live audience - 59% of the 16- to 34-year-olds surveyed had been to a gig or concert in the last year, and nearly a third (28% of 16- to 34-year-olds) go to a gig or concert at least once every three months.

Live concerts are seen as the best and most authentic way to experience music, and the importance of the live experience has become even greater in the context of a world where music content has become ubiquitous. Findings reveal that as single/album release dates have become far less significant, it's now festival or gig dates that are the heartbeat of the music calendar in the minds of consumers. This raises important questions for marketers about the best timing for associations and sponsorships.

Perhaps the most surprising finding was related to attitudes towards consumer brands getting involved in music. In previous music research, Project Phoenix found that most respondents were ambivalent about brand involvement, as long as they didn't get in the way too much, while consumers who were most passionate about music were worried about artists "selling out".

The latest qualitative research finds consumers are now much more positive about brand involvement, and what was most intriguing was that it seemed to be those who were most passionate about music who were the warmest towards brands getting in on the music act.

When these results were further explored, it was found that they were borne out by the data, with those most passionate about music the most accepting of brand involvement. This is driven by the fact that it's these consumers who are the first to recognise the struggles of the music industry, and are therefore willing to see advertisers get involved to support various areas of the music business. Examples of advertiser involvement in music that received endorsement from respondents were Carling's sponsorship of the Academy venues in London, a sponsorship recently taken over by O2. Also seen as credible are O2's rebrand of the Dome and the Wireless festival. Respondents felt that the advertisers in these cases were actually putting something into the scene, rather than making it a simple badging exercise.

This finding also reflects research findings in other sectors that consumers in general have become more pragmatic about advertiser involvement, although brands still have to toe a careful line. Consumers were quick to spot those music associations that did not feel authentic, lacked credibility and compromised the artist's integrity. People are most willing to accept associations between brands and music if they feel the sponsors are investing in the music scene in a "real way".

Overall, the findings are encouraging for any brand thinking of using music as a way of getting closer to consumers, especially those in younger age groups.

Monday, November 24, 2008

Value of Music on P2P


This report values the music traded on P2P networks in the US at $69 billion. This seems high to me, but the value of music consumed is several times greater than recorded music sales.

Michael Arrington at TechCrunch believes that this statistic proves that the industry should give away the music and earn their money off 360 degree contracts. He is wrong.

The only way to capture this value is to sell the time spent listening to recorded music.

Friday, November 21, 2008

P and G Blows Smoke on Facebook

Great description of media that are appropriate for carrying advertising in this AdAge article from Ted McConnell, general manager-interactive marketing and innovation at Procter & Gamble Co.

His description applies to downloaded music.

Advertising Age

P&G Digital Guru Not Sure Marketers Belong on Facebook

Advertisers Shouldn't 'Hijack' Conversations, but Applications Hold Promise

CINCINNATI (AdAge.com) -- Social networks may never find the ad dollars they're hunting for because they don't really have a right to them, said Ted McConnell, general manager-interactive marketing and innovation at Procter & Gamble Co., at a Nov. 15 forum on digital media.

In a talk to the Digital Non-Conference, a program by Cincinnati's Digital Hub Initiative presented by the Ad Club of Cincinnati and attended by about 190 people, Mr. McConnell pointed to the drumbeat of complaints about social networks being unable to monetize their sites.

"I have a reaction to that as a consumer advocate and an advertiser," he said. "What in heaven's name made you think you could monetize the real estate in which somebody is breaking up with their girlfriend?"

'Who said this is media?'
He went on to apply a similar standard to the broader world of consumer-generated media. "I think when we call it 'consumer-generated media,' we're being predatory," he said. "Who said this is media? Media is something you can buy and sell. Media contains inventory. Media contains blank spaces. Consumers weren't trying to generate media. They were trying to talk to somebody. So it just seems a bit arrogant. ... We hijack their own conversations, their own thoughts and feelings, and try to monetize it."

While it's not a company policy, but rather a personal preference, Mr. McConnell said, "I really don't want to buy any more banner ads on Facebook."

That's not to say he believes P&G should end all involvement with Facebook. He cited Facebook applications as a potentially valuable vehicle for advertisers, one in which they can create an environment that's favorable for their brands and consumers alike.

Uncomfortable about targeting
But while he appreciates the power of targeting afforded by Facebook, Mr. McConnell said, it also makes him uncomfortable.

He said a subordinate of his did an experiment in which he set out to use Facebook to find a 22- to 27-year-old female P&G employee living in Cincinnati "who likes sex and Cocoa Puffs -- that was literally the target ID he asked for Facebook to find." And he found such a person.

"So the targeting is fantastic," Mr. McConnell said. "You can do really amazing things. But I'm not so sure I want to be targeted like that. ... I don't think everything every consumer says to someone else and writes down is somehow monetizable by the media industry."

Inventory explosion
More broadly, Mr. McConnell said he believes marketer dollars will continue to flow online, but that won't necessarily be a boon to online publishers, because online display inventory continues to grow faster than the dollars going after it.

He cited research by Morgan Stanley showing cost-per-thousand rates on banner ads falling from $3 to $1 on average during this decade. And despite rapid growth of internet audiences in markets such as Brazil and China, he said, advertisers are able to pay CPMs of about 5 cents because of the even more rapid explosion of inventory there.

"Fragmentation thwarts artificial scarcity," he said, noting that CPMs for rich media have held up somewhat better. Search CPMs are growing largely because of Google's quality-scoring system, he said.

Despite the growth of online classified-advertising alternatives, Mr. McConnell said, classified revenue for offline publishers continues to dwarf online classified spending, leaving plenty of remaining revenue for newspapers and room for growth for online alternatives.

But the divergence of fortune for pay-per-click and other performance-based models vs. CPM-based models will only intensify as the economy worsens, Mr. McConnell predicted. "'Spray and pray' is a little harder to do when you're under economic pressure," he said. "So performance-based advertising will gain share over CPM."

Wednesday, November 19, 2008

Ad-Supported Music at Piper Jaffray Global Internet Summit


Article below reprinted from MediaPost. My comments in blue.

Long Live Ad-Supported Digital Music Models
by Laurie Sullivan, Thursday, Nov 13, 2008 7:32 AM ET
Online music moguls took the stage at the Piper Jaffray Global Internet Summit 2008 in Laguna Beach, Calif. to debate business models for digital content. All agreed that an ad-supported free music model makes the most sense, Correct but the biggest challenge for distribution channels has been to make money.

For starters, the cost--about 1 cent per track per stream--doesn't allow sites like MySpace Music to sell ads at a CPM rate high enough to justify the spending, according to David Hyman, CEO and founder of MOG, a Berkeley, Calif. music-blogging platform that gives advertisers the ability to connect with consumers through their love of music. "The average CPM for MySpace is $1 or less--that's a tenth of a penny per track per stream," he said. "They're shooting too high, getting a piece of a very small pie vs. bringing the pricing down to the point where lots of companies can jump in."

Hyman said music labels are likely making money on less than 1% of all online music that gets downloaded or streamed because many young people who typically want the music cannot afford to purchase it. Right, but they also don't want to stream it. Streaming is a low value proposition to the listener so CPM's will never be high. Bringing the prices down or offering ad-supported free services would generate more business for the labels.

Indeed, an ad-supported digital music download model would solve piracy and digital rights management issues, and revenue issues but the model first needs to separate the value of the advertising from the song, said Joe Rogness, co-founder of San Francisco-based IndieZone, a music marketplace. "It would allow the price of the music and advertising costs to fluctuate," he said. Rogness is showing that he misunderstands true ad-supported music, where the value of the music and the advertising are linked - the more popular the music the higher the value of the advertising associated with it. Isn't that how the mother of all ad mediums -TV- works?

Panelists agreed that the traditional definition of digital rights management (DRM), the technology prohibiting the unauthorized copying of digital music, has made matters worse. Rogness said that while "DRM is dead," the industry needs to protect the rights of content owners by compensating them when music moves from one individual to another. Every song or digital asset needs to carry a contract that give a monetary sum back to the owner, whether it comes from the person listening to the music or the brand supporting the distribution with ads. Easier to enforce this contract with a small number of advertisers than a multitude of listeners.

Richard Gottehrer, founder and chief creative at The Orchard Enterprises, said Nokia launched two devices in the United Kingdom filled with music. The phone maker negotiated the deal with the recording labels to give away the music with the purchase of the device. Consumers purchase the product and service, and they get music free. See sales promotion.

Monday, November 17, 2008

I Want My Pizza Hut Download With Ads


Pizza Hut is offering 75 free downloads from emusic with any order placed online.

There is nothing new about this type of promotion, Pepsi and iTunes have done it before and on a bigger scale.

I like this type of promotion but I still believe that the free tracks should include a short "brought to you by Pizza Hut" audio lead-in.

This turns the tracks into ad specialties (the term for all the free pens and stuff you get at trade shows). If you believe this study, ad specialties are the most effective advertising medium.

Don't know if I buy that but ad specialties are the ads that keep advertising.

Friday, November 14, 2008

We7 On Streaming Suicide Watch


You need to read this interview with We7 CEO Steve Purdham at Music Ally. Good comments on ad-supported streaming music.

I believe more than ever that a blow-out in this space is on the horizon. Too many players and not enough substance to the offering to allow for real differentiation.

Now that they have dropped their focus on ad-supported downloads, We7 will die in this storm.

Predicted survivors? imeem and myspace music.

Wednesday, November 12, 2008

Datz Music Lounge


I am a little late on this one. A couple of weeks ago Datz Music Lounge announced that it would be offering unlimited permanenet downloads in the UK for 99 GBP per year (approximately $155). Read more about the service here.

Datz offers a tremendous value proposition but it will never take off - just like subscription services will never be more than niche. The problem is a misunderstanding of consumer psychology.

Consumers will not accept the high out-of-pocket price for entry. Except for the music elite it is very difficult for the mass of music listeners to come up with $155.

Bottom line - cash trumps value.

Monday, November 10, 2008

360 Deals Are Giving Up Not Growth

The influential blogger Michael Arrington wrote a post yesterday in support of Edgar Bronfman's edict that all new Warner artists sign 360 deals.

Bronfman also said that 360 deals give labels the ability to give away music for promotional purposes to spur event and merchandise sales. And that, for me, is the key. Bronfman, an outsider to the music world until recently, sees the writing on the wall - music downloads will eventually be free, and will serve as little more than marketing collateral to other revenue streams. 360 deals give labels a place in the new music economy, and there’s nothing wrong with their attempt to keep their businesses alive over the long run.

360 deals are a desperate reaction to cataclysmic change and those who support them are short-sighted. These deals do nothing to grow the industry - they only cut a small pie differently.

All of the ancillary revenues around recorded music - ticket sales and merchandise - will never even be close to recorded music sales at their peak. Giving away music to grow this revenue stream is giving up.

Growth can only be found in selling the time spent listening to recorded music.