Monday, April 24, 2017

Cost of entry to streaming market is stifling innovation, says digital consultant | UNLIMITED | CMU

Music Applications

The high cost of entering the streaming market means there isn’t enough innovation and experimentation, reckons CrossBorderWorks founder Vickie Nauman. This means potentially profitable new avenues that could further grow the streaming music business are not being explored.

As part of this year’s Global Creators Summit at Canadian Music Week in Toronto, CMU Insights presented a series of sessions on the streaming market. Based on the ‘Dissecting The Digital Dollar’ reports CMU Insights produced for the UK Music Managers Forum, representatives from the digital market, collecting societies, artist management and entertainment law spoke. The audience heard a detailed breakdown of how streaming services are licensed, conversations about ensuring that the streaming business works for all parties, and a discussion about ongoing transparency issues.

In an interview with CMU Business Editor Chris Cooke, former head of 7digital’s US business, now a consultant on digital music who heads up CrossBorderWorks, Nauman spoke about the need for more diversification in the streaming market. Right now, she said, there is a lack of experimentation within streaming, caused largely by the way services are licensed. If that can be overcome, she said, there are a wealth of opportunities yet to be tapped by existing and new digital music platforms.

“I feel like we’ve been debating for at least ten years: is streaming a business model or is it a delivery mechanism?” she said. “I believe it’s a delivery mechanism, and the first business model has been [full catalogue] subscription services”.

But what other business models could now be built around the streaming experience? What products could be created that might appeal to those yet to sign up to a $10 a month subscription, and who are never likely to? Nauman believes there are opportunities to create bitesize products that might persuade those currently streaming for free to spend a little money. Which means the next round of streaming music innovation probably won’t be full catalogue experiences.

There is also the issue that few start-ups can afford to consider full catalogue set-ups. She explained: “If you want to launch a subscription service, and you need the rights from labels and publishers, and you need a rights management company, you need metadata, you maybe need a backend provider, you need software developers to do the frontend, and it takes about four to six years to build all that, it’s a minimum of $50 million. There are not a lot of companies that have $50 million to just put into music. You don’t experiment when you have to lay out $50 million”.

“When I ran 7digital’s US business, when I started out I was really of the mindset that we should support lots and lots of start-ups, and we should really try to foster innovation with full catalogue music”, she went on. “At the end of it, I kind of walked away from that experience questioning whether or not that is manageable for start-ups”.

However, if labels would consider licensing smaller pay-as-you-go products, then new start-ups could afford to enter the market, and in doing so they could help turn the free streamers into paying customers.

“If we think about the bitesize options, maybe they’re subscription-based, maybe they’re not”, Nauman said. “Maybe we could do one-off purchases of VR or AR or AI, or some other thing we can’t quite contemplate today. Maybe the people who are using free services won’t go to a $9.99 subscription, but they might buy these little bitesized experiences”.

“I think that we need to support start-ups and we need to support innovation, but we probably shouldn’t be looking to start-ups to work with a full catalogue of 40 million songs where you have to do thousands and thousands of deals and it’s just too complex”, she concluded. “I go back to the bitesize idea around a smaller catalogue that’s more manageable that maybe start-ups would be able to bring to life a particular genre or a band or something like that, rather than requiring them to organise the entire globe’s music”.


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