The panel "How To Work With The Fab Four" moderated by Ted Cohen served as the centrepiece of Midemâs Visionary Monday afternoon session. The panel comprised Charles Caldas, CEO of Merlin; Zahavah Levine, director of content partnerships for Android at Google; Craig Pape, director of music content acquisition at Amazon; and Rob Wells, president of Universal Music Groupâs global digital business.
First question: Is there room for new digital service players, or does the industry need a year to take a breather?
âFrom a holistic viewpoint.. thereâs more than enough room for additional players and entrants,â said Wells.
âOver the next 12-24 months weâll see potentially genres of music that are currently underserved â classical and jazzâ¦ weâll see more fracture of that. There may be urban and hip-hop streaming or a la carte servicesâ¦ That goes against what some of the pundits and commentators are saying. Itâs incorrect and inaccurate to assume that thereâs too much choice for consumers in the marketplace.â
Caldas agreed, saying weâll see more diversification both territorially and by genre. And he suggested digital evolution is moving in the opposite direction to whatâs happened with retail, where small local stores are being squeezed out by large supermarkets. âWeâve started with the megastores, and weâre seeing increased specialisation [in digital music]â he said.
Over to Levine, whoâs working on the Google Music service. What issues does she deal with when dealing with rightsholders?
âWe have got 250m activated Android devices globally now, with 700,000 new devices being activated every day,â she said, neatly sidestepping the question. âThis has been a population that has been under-served: there hasnât been an easy convenient music service for Android usersâ¦ Android users have purchased less according to NPD Group than iTunes users, and weâre going to fix that.â
How important is the idea of the cloud to Googleâs service? It currently comprises an a la carte store, which can be accessed from any internet connection or Android device, and also a music locker for people to upload up to 20,000 tracks from their music collection to.
âMost Google services are cloud-based servicesâ¦ the ability to log on from anywhere and not to have to worry about plugging in cables and moving songs around and keeping your collection togetherâ¦ The vast majority of people from Google Music are purchasing from their mobile devices. They need to know when they purchase that itâs going to go safely into their cloud lockerâ¦ Cloud storage is key.â
How scary were cloud services for UMG and Merlin?
âIn the interests of how best to serve the consumers, not scary in the slightest,â said Wells. âUniversal hasnât yet licensed the Google scan-and-match service, but itâs just working it through.â
Caldas said âweâd love to see these cloud services be smarter â more intuitive, more user-friendly, more recommendation basedâ¦ looking at peopleâs collections, building more purchase and subscription abilities into how the cloud works. AT the moment itâs a box, and you put things in the box. Iâd like to see the box come to life.â
Levine said Google shares that vision. âAnybody can use our download store, but our users that have uploaded their collections to the cloud are purchasing at much higher ratesâ¦ a much higher percentage of those people are purchasing, and when they do purchase, they purchase a lot moreâ¦ We know what theyâre listening to, so we can make very smart recommendations.â
What about this idea that cloud lockers are blessing pirates â a musical amnesty programme. What were he concerns about this?
âThere was obviously internal debate about whether these services would turn into Laundromat for illegal content,â said Wells, who said UMG got beyond that. âItâs something we know consumers wanted to do, and weâre tracking the files that go in there as wellâ¦ From an industry perspective, these things are an exceptionally good next step.â
How about cannibalisation â new services that may be impacting on download sales? âThere is a lot of debate constantly, and itâs great debate â itâs healthy debate, not just in the boardroomsâ¦ We tend to fix the issues on a market-by-market strategic basis. The fact that there is now debate, we are far further along the strategic road than weâve ever been.â
Are the other labels, publishers and collecting societies all at the same point in this thinking? Wells posed the question to Google and Amazon with a glint in his eye.
Levine: âWe have a great product vision, and then we have to convince a lot of other players to buy in to that same exact visionâ¦ And unfortunately that process ends up compromising products sometimes, because not everyone has the same visionâ¦ The large majority of the industry is on board with our vision, and the early results will help bring the best on board quickly.â
Cohen harked back to a previous Midem keynote with Googleâs David Eun, who he famously asked âWhy are you trying to fuck the record companies?â And Eun said he wanted partnerships rather than to screw the labels. Are we there yet, at the partnership point?
âItâs complicated,â said Levine. âWeâve made incredible progressâ¦ The IFPI report just came out, and 50% of revenues in the United States are digital music revenues. Thatâs huge, and because the industry and the services sector have worked togetherâ¦ At the same time, I do think itâs still harder than it should be.â
Wells chipped in. âAre Google still trying to fuck the major record companies? I think the fact that they are now into a licensed legitimate music service is a great hopeâ¦ Itâs probably inaccurate to call it a Google Music service, itâs an Android music service. And the fact that it hasnât yet infected other parts of Google is disappointing at this stage, but I havenât given up hope.â
Wells said he hoped other parts of Google beyond the Android division will realise the benefit of having an in-house licensed music service.
How about the indies? âIt gets better every year,â said Caldas. âFor us itâs not any more really a question of indie versus major, poor versus rich, itâs about value.â He added that Merlin is at the table in negotiations sooner than it used to be, and is generally getting more respect. âThe deals weâve concluded yes, the deals we havenât, no.â
He talked about the leaps of faith required to license some new services, including Spotify. âThat service has added new value to the market, and thatâs all we can ask for.â
What about Apple â will that company inevitably enter subscriptions, and how will the game change then? âSteveâs in the cloud and he wants you there with him!â suggested Cohen, before asking if it will marginalise rivals or be a rising halo for everyone.
Wells: âApple arenât famous for releasing bad products, and if they were ever to move into the subscription space, the product they would launch would be well thought throughâ¦ I think it will be a success. And hopefully if it is a success, that rising tide will lift all boats. If they were to move into this space, Universal would be very supportiveâ¦ but weâll wait and see. Thereâs no news at the moment, itâs all speculation.â
How hard is it for a new service that isnât enormously well-funded to get in front of UMG to talk about licensing? Wells claimed the label is pragmatic about licensing, and that the delay only comes if the service is âbrand newâ¦ it takes a bit of time to get our heads around itâ¦ This isnât about âhow much money do you have, write me a chequeâ,â he said.
Caldas was asked about the takeaway lessons from Beyond Oblivionâs fall. âTo some extent, theyâre getting dragged through the mud at the moment because itâs easyâ¦ what the truth of those details are is anyoneâs guess,â he said.
âUltimately, they failed because they didnât quite get the device manufacturers to buy into their vision, which was what was going to make that particular model workâ¦ We feel too often services are shaped by the demands of the biggest rightsholders. Some have been much better at holding their line and creating the product that they want to create.â
Back to Wells, who was asked if major labels have too much influence on new servicesâ models. âWe know what works and what doesnât work. We know the impact of a tweak to a frontpage, to a profile on streaming services. We get intelligence out of these platforms,â he said.
Cohen moved the conversation on to curation, and its growing importance for cloud and streaming services. How are Google and Amazon addressing this?
âComing up with the right mix of technology to make smart recommendations, and having the right editorial voice to surprise and delight customers is important,â said Pape, who noted that cloud services now have a lot more data not just on what people have in their collections, but what theyâre listening to a lot right now.
Wells: âItâs very importantâ¦ in a world of infinite choice, where do you start? Weâve only just scratched the service of curation on these services, and no oneâs yet built a platform where you can gamify that.â
Levine agreed with both. âSocial is a key element in music discovery, and choosing among 15m tracks whatâs going to appeal to people,â she said, referring to Googleâs feature allowing Google Music purchasers to send links to tracks to friends on the Google+ social network for them to listen to a full stream.
What has surprised UMG about the Facebook open graph that launched recently? âThere was a trend â some of these services, the funnel was slowing down a bit, but with the Facebook integration weâve seen the funnel open again.â But he warned that people need to look beyond Facebook in other parts of the world â China for example, where Baidu has launched Ting.
What about an interoperable music format that plays nice with all ecosystems â Apple, Amazon and Android for example? âIt works on the web,â said Levine, pointing to the Google Music HTML5 app. âBut they [Apple] donât play nice for the download app.â
Do people really need to buy music any more, in a streaming and cloud environment? Are we moving completely to access-based models?
âIn a world of full access streaming services, physical product actually becomes more important,â said Wells. âBecause itâs high-end product. People will continue to buy physical, but it will be more expensive, more collectable, something that will sit on shelves. The digital world doesnât cannibalise that.â