This guest post by Mark Mulligan, a respected independent music analyst who publishes the Music Industry Blog, includes the full text and main graphics of the speech he delivered at Midem's Visionary Monday earlier this week.
Today I want to talk to you about a concept called Agile Music, a framework for understanding how artist creativity, industry business models and music products must all undergo a programme of radical, transformational change. I'm going to start by outlining the catalysts for this change.
This time last year on this very stage I argued that the digital music market was at an impasse, that momentum was seeping out of the space at an alarming rate. Unfortunately 2011 lived up to the pessimistic billing. The market further consolidated around the Triple A of Apple, Amazon and Android and digital revenue growth remained stuck in single digit rates.
The simple fact is that the digital music market should be hitting hockey stick growth curves by now. And don't think that hockey stick growth curves only exist in the crazy minds of industry analysts, take a look at this chart: hockey stick growth rates are what the music industry itself used to be used be based on.
This chart also reveals a crucial fact: each time an analogue music format went into decline its successor was already firmly in the ascendency. The same is patently not true of the digital products and their failure to generate a genuine format succession cycle is dragging the whole market down.
So we had a year once again defined by declining revenues. And though streaming (especially Spotify) had a fantastic year, we saw the emergence of the debate over whether access based streaming services cannibalize ownership. The third key trend of 2011 was the emergence of new ecosystems to challenge the dominance of Apple's iTunes. Ecosystems from Facebook, Spotify, Amazon, Android.
2011 also saw the first real stirrings of three key trends which will shape 2012: firstly, Social listening: a niche activity thrust into the mainstream by Facebook's subtly brilliant content dashboard strategy. Open innovation, supercharged by age of the API and connected consumption, powered by increasingly ubiquitous connectivity. These three trends are also the fundamentals of Agile Music.
And so, onto Agile Music itself. The access / ownership debate is in fact just one part of a much wider transition in content consumption. In the analogue era media consumption was characterized by ownership of linearly programmed physical formats that we leant back to consume. In the digital age we lean forward, interact and value access.
A new generation of music formats is needed that are built for the digital age rather the current ones which essentially squeeze the analogue square into the digital circle.
But just in the same way that HD TV and 3D movies need new content, this new wave of products needs to be built upon an entirely new approach to artist creativity.
Analogue-era music formats shaped artist creativity. In the 50's artists recorded singles, in the 70's 8 song albums, in the 90's 14 song CDs. In the 21st century, well for some reason they're still recording 14 song albums. When of course there is no music format reason for them to do so anymore.
The other big change is that artists now have at their disposal a much wider range of creative inputs into their music, such as fan forums, social networks, fan remix apps. Inputs that should be harnessed in a structured manner rather than the ad hoc approach which currently dominates. And don't mistake these inputs for just being marketing opportunities, or tactics for boosting 'engagement metrics'. They are genuine windows of creativity that artists and their labels simply cannot afford to ignore.
This fan input comes in three key forms, what I call the three Cs of fan-fuelled creativity: Customize, Create and Contribute. The degree of fan participation ranges from modest on the left, to deep on the right, because of course all fans are not the same.
These three levels of fan engagement need embedding into the creative process, which you've probably realized by now, means a much deeper level of participation for the average artist. I'm not suggesting that everyone has to become Imogen Heap, but the needle certainly needs shifting further along the dial from where it currently sits.
Agile Music means embracing fan fuelled creativity; it means breaking free of the straight jacket of the 14 track album and releasing music when it is ready; it also means releasing some of it before it is ready, to let fans help shape the music . Agile Music means allowing music fans to customize their music experiences, and for those music experiences to be dynamic and ever changing, free of the stasis of physical media formats.
But a vibrant future for music products and revenues can only occur with networked collaboration right across the music industry's various value chains. Artist, labels, developers, technology companies, telcos all need to pull together to create a generation of music formats that will be a genuine successor to the CD. This collaboration is needed, and it is needed now, because what I am proposing here is merely verbalizing what consumers already expect.
And this is why the future of music products must be built upon a consumer centric Music Format Bill Of Rights, which can be defined by four key principles: Dynamic: they must always change and update with new content (the format stasis of the download and the CD need consigning to the history books); Interactive: empower consumers to participate in their music experiences; Social: music has always been social, now it is massively social and music products must place this at their core; Curated: the curation of dynamically updated music content will not only be part of the key value, it will become part of the creative construct itself.
Now the irony of these principles spelling that most physical of terms DISC is intentional, but make no mistake, these are the basic building blocks that any new music product must contain if it is to have any long term viability.
And to whet your appetite here's a glimpse of what a DISC product should look like. It looks a lot like an app experience and for good reason. The future of music products will be app-like experiences. DISC products will leverage the potential of apps to deliver rich, curated streams of artist content incorporating everything from photos, interviews, games, outtakes, remix apps through to core music audio and video itself. But the central value of DISC products will come from how they are out together. It won't matter whether kids upload elements up to Rapidshare or Torrents, the value will lie in the uniquely curated context of the product, just as our favourite magazines and websites deliver a value as a whole which is much greater than the sum of their individual parts.
And not only do DISC products compete with piracy, they mitigate the access / ownership debate. Because DISC products will be artist specific. Music fans will buy DISC products for each of their favourite artists and then use streaming services for the rest, thus solidifying a complementary and additive role for streaming. A fan will pay to get everything their favourite artist does for the next 18 months, delivered directly to all of their devices (and I do mean to all of their devices because we are in the per person age, not the per device age, and it is time for licensing practices to embrace this reality).
So to conclude:
- The paradigm shift in consumer behaviour is not just here to stay
- No single part of the music value chain can fix this on their own, and artists must play a more active role
- Music fans already expect D.I.S.C. experiences. Don't meet those expectations, exceed them
Now I know that a lot of this is easy enough for me to lay out here on stage but complex to implement. However the stakes are high enough to justify the sizeable effort. The next generation of music formats needs to be dictated by the objective of meeting consumer needs, not business affairs teams' T&Cs. It must be defined by consumer experiences not by business models. The 'cart' of commercial terms, rights complexities and stakeholder concerns must follow the 'horse' of user experience, not lead it.
