Digital NARM – Day #1 Overview
As you might expect, yesterday’s panelists at Digital NARM expressed concerns about the present and future state of digital music. But despite these challenges, there seemed to be quite a bit of optimism for the industry’s future. Some of the key challenges discussed:
Pricing – 
Everyone on the “Digital Landscape” panel agreed that consumers are sensitive to price. David Pakman and Rob Wetstone of eMusic stated that music prices are facing downward pressure in both the online and mobile spaces as the prices of other entertainment like video games and DVDs declines. Greg Scholl of The Orchard was adamant that music is currently priced too high at $0.99/track, and that the industry will have to experiment to determine what the appropriate price point is.
Everyone on the “Digital Landscape” panel agreed that consumers are sensitive to price. David Pakman and Rob Wetstone of eMusic stated that music prices are facing downward pressure in both the online and mobile spaces as the prices of other entertainment like video games and DVDs declines. Greg Scholl of The Orchard was adamant that music is currently priced too high at $0.99/track, and that the industry will have to experiment to determine what the appropriate price point is.
Finding sustainable business models –
Brad Duea (Napster) explained that the a-la-carte download model doesn’t provide much margin for sellers and isn’t economically attractive to many buyers. Simon Renshaw of (Strategic Artist Management) and others suggested that subscription is the model of the future. However, Pat Rains (Patrick Rains & Associates) noted that we haven’t seen a subscription model yet that works financially for all parties.
Brad Duea (Napster) explained that the a-la-carte download model doesn’t provide much margin for sellers and isn’t economically attractive to many buyers. Simon Renshaw of (Strategic Artist Management) and others suggested that subscription is the model of the future. However, Pat Rains (Patrick Rains & Associates) noted that we haven’t seen a subscription model yet that works financially for all parties.
Steve Jang spoke a bit about Imeem’s attempts to monetize attention and share ad revenue with artists and labels. But according to Duea, Napster’s…
ad-supported Free service is not yet economically attractive from a business standpoint, despite interest from consumers and advertisers.
Scholl, Pakman and Bill Carr (Amazon)
all stressed that the industry must experiment with new models, see
what consumers like, and then figure out the economics from there – and
that it doesn’t work when content owners demand certain economic terms
before the experiment begins.
Music discovery –
Discovery
remains a challenge for consumers and retailers, particularly in mobile
where search capabilities have been limited by handset designs. In the
online space, there remains debate about which recommendation algorithms are most
effective, and at what point promotional activities like free streams
cannibalize sales (if at all). Matt Adell
(Napster) also cautioned that different consumers prefer different
amounts of discovery, and that it is possible to overwhelm certain
users with too much recommendation.
remains a challenge for consumers and retailers, particularly in mobile
where search capabilities have been limited by handset designs. In the
online space, there remains debate about which recommendation algorithms are most
effective, and at what point promotional activities like free streams
cannibalize sales (if at all). Matt Adell
(Napster) also cautioned that different consumers prefer different
amounts of discovery, and that it is possible to overwhelm certain
users with too much recommendation.
SOME BRIGHT SPOTS FOR THE FUTURE
The market will grow – 
Greg
Scholl sees a lot of latent demand for digital music that is not being
stimulated at the present. He believes music companies are still
learning how to market to niche audiences, and once they do, revenues
will go up. Trevor Madigan (Nokia)
also pointed out that much of the world is still without the
infrastructure (broadband, PCs, credit card penetration, etc.) to
support digital music. As these populations come online, the market
will expand.
Greg
Scholl sees a lot of latent demand for digital music that is not being
stimulated at the present. He believes music companies are still
learning how to market to niche audiences, and once they do, revenues
will go up. Trevor Madigan (Nokia)
also pointed out that much of the world is still without the
infrastructure (broadband, PCs, credit card penetration, etc.) to
support digital music. As these populations come online, the market
will expand.
Music discovery will improve –
The
“Mobile Movement” panelists stated that mobile search will dramatically
improve in the near future and that social networking applications for
handsets are on their way. According to Jonas Woost, Last.fm’s experience with full-length streams is one example of how improvements in discovery can drive sales.
“Mobile Movement” panelists stated that mobile search will dramatically
improve in the near future and that social networking applications for
handsets are on their way. According to Jonas Woost, Last.fm’s experience with full-length streams is one example of how improvements in discovery can drive sales.
New products and services can drive revenue up – 
Kevin Arnold (IODA) expressed confidence that people will pay for a convenient, valuable music-acquisition experience. Ted Suh (9 squared)
reported that while ringtone sales have declined, ringtones bundled
with digital tracks have seen an increase in sales. And David Pakman
identified content like bootleg live recordings, which are currently
being consumed in large quantities, could be brought into legitimate
distribution chains and monetized if ownership rights and other issues
can be sorted out.
Kevin Arnold (IODA) expressed confidence that people will pay for a convenient, valuable music-acquisition experience. Ted Suh (9 squared)
reported that while ringtone sales have declined, ringtones bundled
with digital tracks have seen an increase in sales. And David Pakman
identified content like bootleg live recordings, which are currently
being consumed in large quantities, could be brought into legitimate
distribution chains and monetized if ownership rights and other issues
can be sorted out.
What do you think
about the panelists’ comments? What do you think the future holds for
digital music? – Laurence Trifon
about the panelists’ comments? What do you think the future holds for
digital music? – Laurence Trifon
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as they drink their $5 cup of coffee, emusic thinks that 99 cents for a song is too much – i think its hard to believe that a lower price would equal more sales; what research do they have that reflects this? any lower and there won’t be any pie to get a piece of
emusic sucks. bunch of bankers try to cash in on music.
Jeez. We’ve been saying this stuff for years. We had dozens of VC meetings back in 2005 where we gave this same speech. Why won’t anybody listen?