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How Music Consumer Research Has Changed

Russ_CrupnickBy Kyle Bylin, author of Promised Land: Youth Culture, Disruptive Startups, and the Social Music Revolution.

Studying people’s music buying habits used to be simple. You handed a person a stack of postcards and told them to send you one the next time they bought an album. They wrote down what they purchased, why they purchased it, where they purchased it, how much they paid for it, and sent that postcard back to you.

Russ Crupnick, managing partner of research group MusicWatch Inc., says the rise of file-sharing clients and streaming music services has made it harder to track where people getting their music and whether they are paying anything at all. The number of things that people are doing has increased each passing year.

You have to ask people a myriad of questions to cover all the bases.

Are you listening to AM/FM radio or SiriusXM? Are you playing songs on Pandora or Spotify? Are you looking up music videos on YouTube or VEVO? Are you buying songs on iTunes, Google Play, or Amazon? Are you ripping the audio from a video clip on YouTube and downloading it to your computer as a MP3 file?

If you type “YouTube to MP3” into Google’s search engine, it lists dozens of websites that allow you to enter a video link and download a MP3 file. In a few clicks, Taylor Swift’s song “Blank Space” can be playing in iTunes. “The average stream ripper is taking the equivalent of about two albums per year,” says Crupnick.

What follows is an excerpt of a podcast interview with Russ Crupnick.

To start off, tell me about how MusicWatch came to be and what it is.

Russ Crupnick: Well, I think most of your listeners might be familiar with MusicWatch from its incarnation as an NPD Group service. We started NPD’s entertainment practice tracking music right about the same time Napster started and, over the years, expanded that into a variety of entertainment research services. We went from originally looking at just CDs to tracking digital music and then expanding into streaming. About a year ago, NPD decided to exit that business, and we at MusicWatch just picked it up and have kept it going.

Who are some of the primary clients you serve?

Russ Crupnick: We work with record labels, we work with trade associations, we work with technology companies and streaming companies. We’ve worked with distributors over the years. I think we work with anyone who has an appetite for understanding the music consumer overall and what their activities are, anyone who has an appetite for understanding what their share is, or what their loyalty is compared to the competition and how the market is growing. Back in the day, I often explained it to people who didn’t know much about consumer research that Nielsen’s SoundScan tracks what comes across the register. We try to understand the consumer that actually made that transaction originally at the store. Obviously, it’s much more complex now.

What are some of those specific studies that you specialize in, that you conduct, and present to those clients?

Russ Crupnick: We’ve always done artist profiling, so if somebody would like to understand awareness, likeability, demographics, and music engagement habits of their particular artist, we’re one of the resources they might use. We’ve done a variety of strategic studies for well over a decade that help understand consumption patterns. Back in the day, it really was all about acquiring, ownership, consumption, and where people were doing it—such as buying CDs at Tower Records. That evolved into understanding the whole ecosystem of digital downloads. I think it was about 2006–2007 that we started to look at streaming. Now, obviously, that’s going to be most of our focus. In terms of streaming, we’re the research company that I believe has been doing share of music listening, in terms of how people are spending their time in terms of hours, probably the longest of anyone. We look at customer satisfaction, we look at growth rates, we look at cross usage, loyalty, and demographics. Pretty much all you need to know to get a basic understanding of what’s going on in the streaming environment.

What has it been like watching the music industry change, as well as the music consumer change, since the emergence of Napster and the rise of the MP3?

Russ Crupnick: Well, one way to answer that, as a researcher, it used to be really simple. Sort of a predecessor to what we’re doing now was we would give people a deck of postcards and say, “Every time you bought a CD or even a cassette, please fill it in and tell us that you bought it at Tower, Nobody Beats the Wiz, Walmart, or BestBuy. Tell us why you bought it, what you paid for it, and send that back to us.” It was very simple. We could understand ‘N Sync buyers and where they were shopping and who they were. The whole thing was just a whole lot more simple. I think now what’s fascinating to me, and equally difficult from the research standpoint, is the degree of complexity, the number of things that consumers are doing. When you took a look at fans 20 years ago, they bought a lot of CDs, they went to a lot of shows, and maybe they had a T-shirt or two. Now the same fans, we have to understand their purchase patterns, because as I’m sure we’ll get into, there are people who actually are still buying to own. We need to understand their listening habits, we need to understand their streaming preferences, the social component of their use of social media, and so on. The degree of complexity, both in terms of what we offer as an industry to the consumer, what the consumer is doing and trying to follow all of that is just increased by magnitudes.

When you do these surveys, you have to cover so much ground—what are the different sources of music consumed? Is it CDs? Is it vinyl? Is it MP3? Is it AM/FM radio? Is it Internet radio? Is it streaming music?—and then all the different mobile apps and file sharing services they use. There really is so much to take into consideration when you’re looking at this.

Russ Crupnick: Right, I mean just your example of file sharing. I guess if you go back to the early days, it was, “I’m trading CDs with a friend”—and that’s assuming I had a CD burner in my computer. Do you remember when you used to actually had to go out and buy a CD burner? There was peer to peer. Now there are probably a couple of dozen ways or flavors of how you can, let’s say, share music. I’ll leave piracy out of it. But just like every other, let’s call them “formats,” there are just so many more options. The interesting thing is, it used to be that 90% of people bought CDs. I could walk down the street and basically say pretty much anybody that you passed by was a CD buyer. Now what’s happened is there’s just so much more fragmentation in terms of all of these behaviors. Are you social with your music? I don’t mean just kind of seeing things on Facebook, but are you actively engaging? Are you a stream ripper? We’ve gone from vanilla, chocolate, and strawberry to the Howard Johnson 28 flavors of ice cream or more.

Something that I found fascinating during the whole Taylor Swift and Spotify debacle is that, online, you have this enormous conversation about what it meant that the largest music streaming service was no longer carrying the music of one of today’s biggest pop artists, including her newest album. While all this was happening in the blogosphere on the Internet, I was on Facebook and saw a photo of my 22-year-old cousin, holding the brand new Taylor Swift album, excited as hell to finally have that music and be able to listen to it. I just thought about it for a minute: “What do I know?” I’m reading a bunch of blogs on the Internet about what’s happening. Here’s a real person who’s really excited about Taylor Swift, she went and bought the CD and doesn’t seem upset at all.

Russ Crupnick: No, I think one of the real misconceptions—and I want to preface this by saying some of my colleagues have said “stop talking about these things because you sound like a Luddite, and tech companies won’t want to talk with us”—but I think one of the real misconceptions is: A) that people don’t buy things anymore and B) that teens, especially younger people, don’t buy music. You bring up Taylor Swift, just a couple of years ago, when you had a lot of very youth-oriented releases, Beiber, Lady Gaga, the earlier days of Taylor Swift, I’m talking maybe 2010–2011, there were a bunch of releases that were targeted to the younger audience. CD sales among teenagers went up by something like 20%. There is still, even in the streaming world, an ownership ethos that exists. Is it what it was a decade ago? Absolutely not, but it’s still there. I would argue that it’s still very strong, it has to be the right content—and an example of that at the other end of the tale is Adele. We saw tremendous uptake in both CD purchasing and adoption of digital downloads when 21 was released because you had a lot of older consumers who said, “Hey, I like that, I want to have it, I want to own it, I want to listen to it repeatedly.” So they went out and bought it.

Absolutely, and I think you’re also seeing that with the Frozen soundtrack. It had a lot of sales as well.

Russ Crupnick: Yeah, that’s another great example.

You mentioned the fact that teenagers buying music, especially physical forms of music, is a misconception that people sometimes lose themselves on. What are some of the other big misconceptions today about how people consume music?

Russ Crupnick: Well, let me just say, I think probably more people get it right than wrong. There is no question that when you look at listening habits, there is an increasing shift to streaming. As I mentioned, we’ve been looking at share of music listening for over five years. If I went back five years ago, over half of the music listening was coming from AM/FM and CDs. If I take a look at that, in a recent study that we did in the fall, AM/FM is down to about 21% of our listening hours, and CD is down to about 10%. I don’t think there’s any question that this movement to streaming is something that everybody is getting right. The one thing just the counter to that is, if you read the blogs you would think “everybody is streaming.” The reality is, that—and we look at the Internet population for this—there are still roughly 100 million people in the Internet population who aren’t regular streamers. There’s a big population that is, but there’s an equally big population that’s not.

You mentioned my write-up about piracy before. For some reason piracy—we don’t talk about that much anymore, certainly not in the way we did in the Napster days when there was a lot of litigation, but, as I wrote about in the recent blog, there’s a lot of piracy and it’s not trivial. I was just looking yesterday at some stream ripping numbers. That’s the people who are going onto something like YouTube and ripping the audio track. The average stream ripper is taking the equivalent of about two albums per year. I think to dismiss—let’s call it “sharing” rather than piracy—would be something that we miss. Maybe the third thing is ownership. We’re just tabulating our latest annual study, and my guess is this year we’ll probably see about 80 million people who’ve bought music, be it a CD or a digital download. Now that, yes, is much less than in years past, but even so, tell me what streaming service wouldn’t like to have an audience of 80 million active listeners? This ownership thing is waning, but it’s still something that we can’t take our eyes off. Those are a couple of the trends that we can talk about and that your listeners should probably be thinking about.

One thing, you brought up that I thought was really interesting is that music piracy really doesn’t dominate the conversation the way it once did. When I started blogging around 2008–2009, that was such a strong part of the media narrative, and my small part in that conversation, I felt, was that I was one of the few 20-somethings who were blogging about the experience of growing up with music piracy, trying to make sense of how it came to be a part of my life, and how it changed the way of how I listen to and discover music. After so many years of that being such a dominant part of the narrative, it has really died down, and that’s why I found your blog post to be so timely, because this really isn’t something that has gone away, and, like you say, there are so many more mobile and online “ways to pirate music” whether you call it stream ripping or the various music downloader services on Andriod and iOS. So, what inspired you to write that blog post and say, “Hey, this is still important”?

Russ Crupnick: I guess it’s sort of an accident of timing, having gotten involved in the music industry just as Napster was hitting its stride and being very involved in the tracking and trying to understand how people were using their peer to peer services for illegal music downloading. I guess you could say it has always been one of my hobbies and, to your point, the reality is that peer to peer—what you and I essentially grew up with as piracy—has diminished substantially. I think, without quoting the stats, we could look at year-over-year trends and the number of files that are downloaded from peer to peer, they’re declining at double-digit rates. But what we see is other forms of sharing cropping up, and I do think what intrigued me is, I’m not sure that folks necessarily understand or are clear in terms of a legally sanctioned, reputable way to get music versus one that is not. We all knew, 15 years ago, that if we had the only CD burner and we burned 10 copies and gave them to our friends—or worse still, we sold them—we knew that probably wasn’t sanctioned behavior. But I think, to your point, I could go on an App Store and type in “music downloads” or “songs” and get something from a very legitimate place, put it on my phone or use that app on a computer, and maybe I’m not 100% sure that I find Taylor Swift’s song that I can’t get on Spotify, but I can get it in some of these places, and there’s no kind of “Good Housekeeping warning,” if you will.

For many years, Grooveshark has been a shining example of that. I’ve encountered several people when I ask them, “How do you listen to music,” and they say, “Well, I use Grooveshark.” I find it really interesting because after some conversing I sort of say, “Well, the situation around Grooveshark is kind of complicated. They don’t exactly pay all their royalties. They’re not necessarily a legal music service.” And you can just kind of see their eyes glaze over because they’re using it, it’s there, it’s solving whatever problem they need to be solved. It looks like a legal music service.

Russ Crupnick: I think one thing that we’ve always got to keep in mind is, 90% of the people—and I mean this as a hard number because we do research into it—90% of the people aren’t tuned in to what all of these nuances necessarily are, so either their eyes are glazing over or they’re simply not aware or they’ve never been educated—or probably a few of them don’t care. But I think we have to understand the audience that some of these messages go out to. I actually think that that not only impacts messaging—leave piracy aside for a second, although I welcome coming back to it—I think that understanding who the real music consumer is and who most of the music fans are is very helpful, not only with regard to piracy but helpful with regard to understanding how to position music services. The majority of people aren’t necessarily interested. They’re interested in listening to music more than being very, very social about their music. To me, this conversation also drifts into understanding how, eventually, do you get people to pay for subscriptions? The assumption that just because you drop the price, for example, that everybody’s going to come and subscribe misses the point about who the average music consumer is. I guess what I’m trying to do is tie together piracy, how you position services, and how you monetize music. I think it’s really important to understand that there is a subgroup of consumers who are really tuned into these things, but the average person on the street probably isn’t.

You brought up two very interesting points there. The first is something I believe we’ve talked about before, this idea that you’re not sure people understand who the customers are and what drives them. The second thing is this commonly held belief that if the price of subscription music were lowered, it would broaden the appeal of the service because it would make it more affordable for people who only spend roughly $50 to $60 a year on music. First, let’s just touch on that first statement: Does the music industry know or understand who their customer is?

Russ Crupnick: At one level, yes, I think that they do. I think that they have a very good understanding of who their customer is, and I’m going to say “the music industry” broadly. I think that they understand, through a lot of research that they do with companies like ours and other kinds of research, understanding what’s happening in the spheres of social media, so to say that the music industry is not educated about the consumer would probably be a misstatement. What I think happens, sometimes, I have this conversation and I put it this way to a streaming company: Sometimes the engineers get to run things, and you start thinking, “Well, if we could just engineer this, or if we could just create this kind of a capability, that consumers would come flocking toward it.” There’s a long history in the music business— at least in the past few years—of that not necessarily being successful. It goes all the way back to “we did tests on all kinds of connected on CDs, CDs that would be hybrids with digital.” Consumers weren’t interested in that. From a physical standpoint, I think there is this hope that if we could just engineer our way of this, sometimes consumers are just looking for a simple solution and just want to listen to music they like.

The way I’ve always described this is by using the fanatic fallacy, which is that startup founders and music technologists mispredict how vast the chasm is between them and regular people and that, even if they build a solution that fits their needs, that doesn’t mean they’ve solved a problem that the wider market cares about.

Russ Crupnick: I mean, I’ll give you two examples: A few years ago, the industry put a lot of effort into high definition discs. The actual title of them escapes me, but it was essentially a higher sound quality disc. It didn’t appeal at all; it appealed to virtually nobody. We’ve talked a lot about some of the streaming services that are all based on sound quality, and those haven’t gotten traction because most consumers have said, “Hey, I think the sound quality on what I’m listening is pretty good already.” You said it much more eloquently than I did. I do think there is sometimes that disconnect between engineering and product development, and the consumer.

The sort of “death pool” of music startups can sometimes be a testament to that.

Russ Crupnick: Yes, I don’t know how many meetings I’ve had at CES, with folks who, again, don’t seem to have a grasp of where the market really is, or they’re kind of targeting that top 1%, and I don’t think there’s a business there.

There was a blog post that came out a few months ago where a user–researcher at a leading tech company essentially said, “Look, San Francisco is not a good place to research your customers because the customers here are unlike the customers in the rest of the country, and you’re only biasing yourselves further by believing that ‘well, everyone in San Francisco wanted my product, therefore the rest of the world must want it.’” I think, beyond technological solutions, music can be a tricky bag because those who are passionate about music and the specific things that they want from their experience, don’t necessarily translate into things that are valuable to casual listeners, people who are still listening to a variety of broadcast radio, who still have some owned music and, for the most part, either looking up a song on YouTube or a custom station on Pandora is amazing to them—it is the future of music, it’s there.

Russ Crupnick: Yeah, I think at some point, I have a comment and a story for you, quick story. My comment to that is sometimes I wonder if the music industry has to decide if you want to cater to that top 10%. Now, they’re really important; that top 10% probably accounts for half of the music spent in terms of subscriptions, CDs, and downloads. Do you want to cater to them, or do you want a business like what the business used to be, where a Luddite label may come in, where you had 90% of people participating? I think probably most people would agree, leaving broadcast radio aside, I’d much rather see an industry where 90% of people are monetized, and then you can segment from there, but I do worry that increasingly or often, the casual listener is forgotten. I’m not an advertising expert, but here’s what interests me also about that casual user: Twenty years ago, you could make the argument, “Why should we target the casual user? They don’t buy CDs or they buy one per year.” As a marketing guy, I’d say that’s brilliant, you wouldn’t target them, it’s going to be very expensive.

If you go into a streaming world, my ears as a casual user, my attention as a casual user has the potential to be just as valuable as a super-über fan, an engaged person because there are a lot of streamers over the age of 45. They have mortgages, they have insurance, they need car tires, they go out to eat. It’s about advertising more than it is about selling them goods; so, to some extent, the casual fan’s ear—the value of that ear—can be just as good, if not better, than the value of a super-engaged fan. Not with concerts, not with merchandise, not with necessarily subscriptions or downloads, but certainly from an advertising perspective, it could be very highly valuable.

Another thing we touched on about who the music consumer is and what they want: First, we were talking about the San Francisco market and how that became biased toward technology adoption. Muve Music, used to be a subsidiary of Cricket Wireless, they were recently acquired by Deezer, but at their height, they had something like two million subscribers in the US, and when I talked to my friends in Los Angeles, about, “Wow, the largest music subscription service in the United States is something I’ve never seen or seen anyone use.” I always think about it for a second and explain to people, “Well, that’s because we’re a higher class demographic.” Like, if we went to other neighborhoods in Los Angeles, possibly poorer neighborhoods, more racially diverse, we might find people who are actually using Muve Music as part of their music experience, and that that audience of people is significantly larger and broader than we are, who are consuming music on Spotify and Pandora and Rdio.

Russ Crupnick: This was the story and I’ll try to make it quick. I did a focus group for the Music Business Association a few years ago—some people are more familiar with it as NARM. We purposefully did it in Chicago, we did it in New Jersey, but then we went to Tulsa, Oklahoma. Two things stuck out: One of the focus groups I moderated was maybe 40-something-year-olds. Of that focus group of eight people, three or four were ministers or had very strong religious beliefs and, surprising to me, they even thought that legal downloading—the iTunes model—should be discouraged because it might lead to stealing music. So, any digital activity might lead to piracy which, given their religious convictions, they clearly were against.

I then did a group of college students at University of Oklahoma nearby, and I was asking them about spending patterns and so on and so forth. All of these kids had jobs at Walmart or McDonald’s. They weren’t like my kids, who, bless my kids, we were able to help them with college, they had a car, we could help them with gas, we made sure that they had iPods and iPads, and Macs and so on. These kids, when you asked them about buying music, for them it was a decision between, “Do I put gas in my car to get to my class tonight, or do I spend $10 on that album?” For me, both of those stories kind of illustrate how different consumers can be.

I always tell people, if you really want to understand consumers, you really have to go to Tulsa, Oklahoma. I do think—without getting way off my sweet spot—we see this in the research. The values, the wants, the needs, where they shop, their ability to pay for things, all, all very, very different. Again, it brings around that circle of how important it is to understand different consumer groups because, look, from a streaming perspective, we’ve got half the customers right now. You could argue whether they’re using the right services or spending enough time—or spending enough money on subscriptions—those are different arguments. We’ve got half of them right now. The next half are not going to be so easy because their listening hours, their music hours are less, their level of engagement is less, but for streaming to reach its full potential, we’re going to have to figure out as an industry, how do you get that focus group that was half ministers who, at the time, thought digital had the potential to lead to some bad behaviors, how do you convince them to start using some of the services, the great services that are out there?

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Kyle Bylin is a user researcher at SoundHound and author of Promised Land: Youth Culture, Disruptive Startups, and the Social Music Revolution.