Thursday, April 28, 2005

Custom CDs at Wal-Mart

Walmart has announced it is offering custom CDs. Example news coverage here. Snipets:

The cost to download music from the site is 88 cents per song or typically $9.44 an album, Colella said. The cost for a customized CD of three songs is $4.62 plus 88 cents for each additional song. Shipping costs $1.97.

Analyst Phil Leigh of Tampa, Fla., founder of Inside Digital Media Inc., said other companies have been-there, done-that.

"I think they (Wal-Mart) are going to be disappointed. The price isn't that attractive. It was tried before" by a few startup companies in the dot-com boom and was not successful, Leigh said. Also, other companies, like Apple iTunes, offer downloadable music that provides consumers "instant gratification."

"There's no real cost advantage to what Wal-Mart is offering here," Leigh said.

Starbucks offers customized CDs at its coffee shops but the advantage there is that customers can get their CDs while they sip their favorite cup of java.

Leigh predicted Wal-Mart would have trouble overcoming the desire for an immediate return on the money paid. He also said the pool of people without CD burners or broadband Internet access was shrinking. In addition, those without a CD burner most likely are in lower-income brackets.

"You're addressing a market that is typically not a high-discretionary income market," Leigh said.

Snipets from the press release:

Wal-Mart announces the launch of its new online custom CD service, now available to customers nationwide at http://www.walmart.com/music .  The new easy-to-use, no- download-required music service allows customers to conveniently select individual songs from a deep music catalog that Walmart.com then places on a personalized, physical CD sent to their address -- all at a great Wal-Mart value of only $4.62 for the first three songs and only 88 cents per additional song.

A unique, innovative offering unmatched by any other online music provider, the new online custom CD service presents another convenient music solution for customers to select and arrange their music choices and personalize a CD for themselves, their family or friends.  Also, custom CDs offer even more ease and flexibility for customers as they don't require the use of a CD burner.

At only $4.62 per custom CD (includes physical CD, three songs and packaging), plus 88 cents for each additional song, customers can easily select tunes from an extensive, multi-genre catalog, personalize the CD title and packaging from a variety of images, and ship it to their address.  Also, customers can choose from an extensive music catalog of new releases, top songs and albums, artists of the month, and Wal-Mart exclusives.

"We recognize music is not only important, but incredibly personal to our customers.  At Walmart.com, our new online custom CD service delivers a convenient entertainment solution for customers to easily experience and enjoy music in a personalized format.  Also, the service is readily accessible to customers without a CD burner or who prefer not to download music," said Kevin Swint, Walmart.com's director of media categories.

Thursday, April 28, 2005 in Music Industry, Future of | Permalink | Comments (0) | TrackBack

Friday, April 01, 2005

The Future of Music - Part 5 - Scenario Planning

This week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

A major purpose of scenario planning is to empower people, organizations, and industries to  evaluate a diverse set of possible futures, decide which future they prefer, and to identify those key milestones or Events that lead logically to the desired outcome. In short, scenario planning provides a structured framework for strategy determination and implementation.

Participants can then monitor the environment using War Rooms and similar techniques to identify counter and confirming Events and trends. More importantly, participants can also organize and utilize available resources to pursue the Events that are key to the desired outcome.

We've considered four alternative futures for the music industry:

The Music Utility

10,000 Maniac MTV Channels

The Return of the Artist, and

The Empires Strike Back.

In a Future of Music scenario planning meeting, participants vote on the likelihood and desirability of each Endstate coming to pass. They also select those Events that must or must not happen if each Endstate is to become a reality. Comparing Event sequences (scenarios) will indicate those events that are Common to multiple Endstates and those that are Unique to a particular Endstate. Generally speaking, Common Events are more likely to occur since more stakeholders have an interest in those Events.

When done as a public workshop, participants typically enhance their understanding of industry dynamics and key Events. They can use this information in their organization to help set strategy and organize action.

When done for a specific organization, The Future of Music will help that organization set goals and strategies for achieving them and to assign resources to strategy implementation.

Finally, the Endstates discussed this week for the Music industry are, of course, not the only possibilities.

Here are some pointers to addition thoughts from Gerd Leonhard and David Kusek:

Check out the interview on IT Conversations here.

Gerd's blog is here.

The web site for the Future of Music book is here.

The Future of Music Coalition can be found here.

Friday, April 01, 2005 in Music Industry, Future of, Scenario Planning, The Future of.... | Permalink | Comments (0) | TrackBack

Thursday, March 31, 2005

The Future of Music - Part 4 - The Empires Strike Back

This week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

I've been considering Endates that are alternative visions to the one proposed by Leonhard and Kusek, Music Like Water, which I call The Music Utility. The second installment of this series outlined the 10,000 Mainiac MTV Channels Endstate, an oversimplification of which is that music videos become far more important than simple audio. Yesterday's third installment, The Return of the Artists,  suggested that change in industry structure in which Artists and their agents are the most important players is the future of the industry. Today, naturally, The Empires Strike Back.

Music is global. Although the United States continues to be the clear leader in the innovation of new popular genres, the global network combined with increased global migration and travel mean that when away from home, an individual can take her or his culture with them by listening to music-casts originating back in their home country.

In this world, the majors continue to play critically important roles in marketing and distributing music in all important and a majority of secondary markets. Virtually no major artist distributes music without the involvement of the majors at every stage between the final mix and provisioning online and "bricks and mortar" outlets.

The Majors have increased their hold on the music industry through further consolidation and vertical integration. The majors have acquired nearly all the important independent labels. The independent labels have continued to pioneer new artists and new music genres. All but one of last year's GRAMMY's were won by artists under contract to a major label or a recently acquired formerly independent label. More than 85% of the items in Billboard's listings are owned by the Majors.

Nearly all the important online music distribution services have been acquired by the majors. Of the 8 largest US-based online distributors, only Apple's iTunes and Microsoft's music stores remain independent. Lastly, each of the 2 major US satellite radio services has been acquired by a major music company.

 

Thursday, March 31, 2005 in Music Industry, Future of, The Future of.... | Permalink | Comments (0) | TrackBack

Wednesday, March 30, 2005

The Future of Music - Part 3 - The Return of the Artist

This week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

I've been considering Endstates that are alternative visions to the one proposed by Leonhard and Kusek, Music Like Water, which I call, the Music Utility. The second installment of this series outlined the 10,000 Maniac MTV Channels Endstate, an oversimplification of which is that music videos become far more important than simple audio.

The Music Utility Endstate is mainly about the evolution of the supporting technology infrastructure and business models, principally wireless and audio-enabled devices and subscription based streaming music rather than file downloads. In the Kusek and Leonhard version, Music Like Water, artists have much more power and leverage compared with other actors in the industry, such as the major music labels.

The Music Utility Endstate does not depend, in my view, on this fundamental change in the structure of the music industry. The majors, viewed as dinosaurs by some) could very well morph their service and business models and by doing so, avoid extinction. More on this point tomorrow.

What about artists?

The Return of the Artist Endstate entails a fundamental shift in industry structure and therefore, of the power and economic relationships among the players. In this world, the majors are disintermediated, a perhaps fancy term for what otherwise might be stated as "cut out of the loop."

Kusek and Leonhard make exactly these points in the book, that in their view, artists are empowered and gain a larger share of the pie. The drivers for this change include wide availability of inexpensive and high quality tools for making and editing digital recordings. Another driver is the death rattle of optical media as the primary way in which high quality music is distributed to consumers.

More central to the Return of the Artist Endstate is increasingly direct relationship between artists and their audiences. Regardless of whether the distribution of music is streaming or file based, artists market direct to consumers. Within and across genres there is intense competition for attention. Artists employ marketing and public relations companies to create awareness, to create "buzz".

Online distribution companies compete to distribute the music of those artists seen has having the most buzz or who are high in future buzzability. Artists typically get nearly half of retail revenue; they are expected to pay production and marketing costs out of their share.

The major music companies are focused on music videos and on collections of music from their catalogs published on DVD.

Wednesday, March 30, 2005 in Music Industry, Future of, Scenario Planning, The Future of.... | Permalink | Comments (0) | TrackBack

Tuesday, March 29, 2005

Music Listening Declining Says Barry Ritholtz

Coincidentally with The Future of Music week here, economist and music fan Barry Ritholtz documents on his Big Picture blog a decline in the number of hours per person spent listening to music. Check it out.

Tuesday, March 29, 2005 in Music Industry, Future of | Permalink | Comments (0) | TrackBack

The Future of Music - Part 2 - 10,000 Maniac MTV Channels

The theme of this week is the music industry. As noted yesterday, the impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

The central organizing vision of the book is a future for the music industry that they refer to as "Music Like Water." Some of the essential elements of this Endstate are that for a fixed fee, consumers get access to a virtually unlimited music library. One important difference between this future and the present time is that Kusek and Leonhard expect that streaming music will be far more important than music distribution based on files and downloading.

Here I want to begin suggesting some other Endstates for the music industry. Today's Endstate might be called "10,000 Maniac MTV Channels". The hallmark of this Endstate is that music video is far more important than plain old music. A majority of music is experienced through video. Watching is more important than simply listening. And MVideo tastes change rapidly; attention spans are extremely short.

Cell phones supporting high quality audio and video are old news. Trendsetting consumer experiences includes phones integrated with clothing and eyeglasses to provide high quality video and audio on demand and regardless of location. Mobile mobs are the range in Tokyo, London, and San Francisco. Organized by instant messaging, fans of particular band will assemble on virtually a moment's notice to watch the same video and dance to the same tune in public locations such as malls, squares, outside clubs, etc.

Inexpensive HD video production technologies including animation and editing tools are used by artists and their production companies to produce an integrated video/music experience. GRAMMY awards focus on the integrated video/music experience. Almost no one wins a GRAMMY any more simply for the music.

Artists and their production companies battle the Majors for position in the most popular vid-casting services, services whose popularity changes weekly. The only certainty is the uncertainty of fads and fleeting fame. Everyone now gets 1/3 Warhol (5 minutes) of fame, down from 1 Warhol (15 minutes) in the late 1990s.

 

Tuesday, March 29, 2005 in Music Industry, Future of, Scenario Planning, The Future of.... | Permalink | Comments (0) | TrackBack

Monday, March 28, 2005

The Future of Music - Part 1

As noted in today's Event of the Day, this week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution. This book should be required reading for anyone interested in the music business.

Scenario planning entails defining 4-6 disparate visions of the future of an industry, a company, strategic business unit, or global challenge issue, such as global warming. The Future of Music book defines one vision of the future that the authors call "Music Like Water," by which they mean that streaming music is available everywhere, much like water. They envision the evolution of business models, distribution channels, industry structure, and network and computing technologies such that music is available all the time in virtually all places on all devices. In The Music Like Water future, musicians are more empowered than today because the quintessential relationship is between the artist and the fan or consumer, which is to say that music is an experience rather than a physical product or a file to be download. The music experience is king (or queen).

Part of the support they offer for Music Like Water future is a discussion of 10 key truths about the music industry that reinforce the notion of music as experience and the primacy of the artist:

  1. Music matters more than ever: the music market is alive vibrant.
  2. Yes, there is a thriving music industry; this despite plaintive cries to the contrary.

  3. The record business is not the same as the music business.
  4. By this Kusek and Leonhard mean that the business of manufacturing, distributing, marketing, and selling CDs--music publishing--is only a limited part of the business. "Music and event merchandising, concerts and touring, and live entertainment in general account for $25 billion globally, while music publishing is a $12 billion business, approximately" [p. 21].

  5. The artists are the brands, and entertainment is the main attraction.
  6. In Kusek and Leonhard's view, the primacy of the artist stands in contrast to the primacy of the labels and distribution companies.

  7. Artists and their managers will shape the future.
  8. "Going forward, managers are likely to play a much bigger role as the central pivot point for business decisions, from publishing to marketing to touring and merchandising. Managers will lead the charge because their fame and fortune is directly linked to that of their artists" [p. 24]. I don't find this to be compelling point however true it may turn out to be in the future. I can easily imagine a utility future in which the aggregators and distributors rather than artists and their managers are the pivot points.

  9. Publishing income is a crucial income stream.
  10. This point is actually about royalties, specifically, that copyright laws need to be fixed to get artists a fair share of the revenue from the digital distribution of music. It should be noted that Kusek and Leonhard are not anti-copyright per se, this despite their being at least skeptical, if not largely negative, regarding the use of technologies to enforce copyright.

  11. Radio is no longer the primary way people discover new music.
  12. A key point here is that digital music services and the net generally provide a variety of means for fans and artists to discover each other, which leads to the next point.

  13. Digital niche marketing outperforms mass marketing.
  14. In music, as elsewhere, microsegmentation, "markets-of-one" and similar marketing and distribution strategies are increasingly important.

  15. Customers demand--and get--increasing convenience and value.
  16. iPodding and podcasting. 'nuf said.

  17. The current pricing model goes out the window.
  18. Subscription rather than by the file(track) or CD will prevail. Music subscriptions will be inexpensive. In fact, Kusek and Leonhard argue that a substantial portion (50%-60%) of revenue may come from advertising, merchandising, sponsorships, tie-ins, and the like.

  19. Music is mobile, and new models will embrace a more liquid view of music.
  20. A combination of more capable devices combined with ubiquitous wireless (near-)broadband will mean that music consumers will be able to get the music they want when they want it and where they want it. I'm not so sure that this translates to inexpensive given the capital costs of the advanced cellular build-out. However, as noted in the previous point, complementary sources of income may help to keep the price of music low(er).

Bottom line: Kusek and Leonhard have written an important book that outlines and argues on behalf of the Music Like Water future, a future that I'll refer to as the Music Utility. I'll suggest some alternative visions or Endstates in subsequent articles.

Monday, March 28, 2005 in Music Industry, Future of, Scenario Planning, The Future of.... | Permalink | Comments (0) | TrackBack

Event Of The Day-3/28/05-Streaming Music Exceeds Music File Downloads

Streamingmusicexceeds
Streaming Music Exceeds Music File Downloads

This week's theme is the future of the music industry. Today's Event of the Day is taken from The Future of Music: Manifesto for the Digital Music Revolution by David Kusek and Gerd Leonhard. This book should be required reading for anyone interested in the music industry.

Their vision for the music industry is "Music Like Water." I call this the Music Utility Endstate. In this world, everyone can have access to the highest quality streaming audio for a reasonable (subscription) fee. There are other Endstates that deserve consideration. I'll mention others in a separate posting.

Monday, March 28, 2005 in Event Of The Day, Music Industry, Future of | Permalink | Comments (0) | TrackBack

Monday, March 21, 2005

Event Of The Day-3/21/05-US Music CD Sales Drop

Music_cd_sales_decline
US Music CD Sales Drop 50% Since 2005

The music industry is undergoing enormous structural change. The large elephants may be at risk if they can't adapt fast enough to switch to portable music players, music delivered to cell phones and other personal devices. Although the time horizon is 3 years, the storm has been gathering for some time. It seems that all the enablers are in place that will rapidly accelerate the pace of change in the industry. Important questions include who will  be the winners and losers in the new world ahead should it come to pass.

Monday, March 21, 2005 in Event Of The Day, Music Industry, Future of | Permalink | Comments (0) | TrackBack