Friday afternoon, I spoke with David Hyman, who is the founder and CEO of MOG, a cloud-based music service. In this interview, David and I talk about the impact of YouTube on music and why free-trials on subscription music services need to be longer.
What follows is a edited version of our AIM conversation.
Hypebot: Afternoon Dave, thank you for taking time out of your day to talk to me.
David Hyman: Greetings!
Hypebot: Well, let's start off gentle and we'll move into other things.
Eliot Van Buskirk, at Evolver.fm, ran an interesting story a few weeks back. In it, he made interesting points about YouTube. In many ways, it's been great for music, but may paradoxically be hurting it too. Do you think YouTube – with all its free music and consumer mind-share -- is bad for MOG in anyway?
David Hyman: I don't think we're losing subscribers to YouTube. I find that experience to be about the hits. You cannot listen to a succession of songs. There's no passive programming. No playlists. No radio. No album. It's a one at a time thing. There were no music videos made before 1985 and well, there was a lot of GOOD MUSIC made before 1985. Post 1985, it was relegated to a few tracks per album if any. If you want the hits, you can go to radio or YouTube.
I don't' believe that's who our subscribers are.
So, the other point raised by Buskirk in the essay though is that it also leads many app developers to integrate YouTube API, rather than trying to partner with existing services like MOG. Is the availability of the YouTube API hurting MOG in on the innovation and integration end?
David Hyman: No. I can't think of an engaging website using the YouTube API to provide a great listening experience. Name one! :)
Look... YouTube doesn't help. But I don't think it's hurting that much – if at all.
Just my gut.
I don't lose sleep at night worrying about our projections because of YouTube.
Hypebot: Well, what about SoundHound? Rather than recommending thirty second streams from MOG, their app sends users to YouTube.
David Hyman: Fair point. SoundHound wants MOG in there too! It will happen soon. We can pay out SoundHound an affiliate fee.
What does YouTube pay SoundHound?
Hypebot: Great point. Moving onward.
One of the things that I've been thinking extensively about is free-trials.
Do you think that they are too short?
David Hyman: Good question! I'm not sure we have enough data yet.
I'll say that Netflix does a really good job of building a good business from a free trial of comparable duration.
Are movies different?
Maybe! I think what it comes down to is... To provide more than what we provide, it would incur significant costs from the labels.
And they'll still restrict the amount of free we can provide.
The fees associated with providing free beyond the type of free trial we have are cost prohibitive. The labels want pretty high rates on a per track per stream basis. The modeling we've done is telling us that we could not offset the costs with conversion and advertising. Could we be wrong? Possibly.
The rates are very high. Trust me. If I could give more and make the model work, I would. We spend a good deal of time every single day on the subject
Hypebot: That's my understanding too. The costs are too prohibitive, no matter how nice it would be.
David Hyman: We figure out how to give free in a restricted fashion in a more robust way that works!
My concern is... that once it's not just "free" and it's restricted free, then it's a "free trial" and that loses the vitality of real "free".
David Hyman: The rates the way they are, you cannot provide real free.
Hypebot: I imagine that restricted free, would ultimately be a radio feature or limited streaming. The benefits that I see in such an arrangement, is that it gives casual music fans time to exert effort and build a collection of music. The more songs that they "Love" – each getting stored in their collection – the easier it is for them to take ownership of those songs and see value in paying for access.
David Hyman: Don't disagree.
Hypebot: From my perspective, movies certainly are different from music.
I would argue that people don't take ownership of the movies that they stream on Netflix, because they aren't supposed to.
Music isn't movies; it's more like the couch that you rented. Once it's in your house, you fail to understand how you will start to take ownership of it -- looking at it as your couch. Once the trial is over, you won't want to part ways with it.
In reality, you thought you rented it, but really you bought it.
David Hyman: Fair point. I will say this... And take it with a grain of salt it's just a data point... We a/b tested credit card up front versus no credit card up. Front credit card up front before the trial, in many ways was more successful in driving conversions as far as net yield. We now think it might be depended on where they come in from. It could be better without in some instances.
And also is dependent on platform – mobile, web, etc.
Hypebot: I think your right in that theory.
I can't recall the studies now. But we certainly fail to consider how where we are from impacts our decision making processes. So, how do we take away the burden of ownership without removing the cognitive benefits?
David Hyman: People need access at all music consumption touch points – embedded in car, TV flat screen, mobile, and gaming systems. Everywhere.
I think the benefits of ownership are already dead.
It's mostly a problem of lack of education.
Hypebot: Great points.
Another thing to bring up is that all this talk of getting users to "take ownership of their music" – which mostly comes from me – is almost nonsense.
An entire generation fans is coming of age who have no idea what it's like to own music, in any tangible form. They've also never had to exert effort to get it.
David Hyman: Yeah, like my daughter for one. She's 7. She's got MOG on an iPod in an Altec Lansing Docking Station in her room. She's hooked.
She cannot differentiate a download from a stream.
Sorry, but I've gotta run now!
Hypebot: No problem. Again, thank you for taking the time to chat.