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The Future of Music: The Shift to a Service Model

The Future of Music: The Shift to a Service Model. Aram Sinnreich Plug.In Music Forum July 24, 2000. An Industry in Flux:. Online music is now a mainstream phenomenon – and a boon to labels despite their lack of participation. Label/3 rd party service provider shift in division of labor.

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The Future of Music: The Shift to a Service Model

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  1. The Future of Music:The Shift to a Service Model Aram Sinnreich Plug.In Music Forum July 24, 2000

  2. An Industry in Flux: • Online music is now a mainstream phenomenon – and a boon to labels despite their lack of participation • Label/3rd party service provider shift in division of labor • Subscription revenues will eclipsea la carte downloads by 2005

  3. Napster Users 45% More Likely To Have Increased Music Purchases Non-Napster Users Napster Users +45% - + Likeliness of Increasing Music Purchases Source: Jupiter Consumer Survey n=2,258

  4. Informed Users are Bigger BuyersAll Online Music Behavior Nets Positive Source: Jupiter Consumer Survey n=2,258; 1,948

  5. Swapping software Rights tracking Meta data DigitizedMusicLibrary DRM Remote Locker SalesAudits Streaming server Transaction processing Digitized Music Database Will Be Central to Service Strategy Media/Commerce Services Label Services Pub. 7/00

  6. Third Party Service Landscape Paves Way for Subscriptions • Consumer value: transparency, ubiquity, volume discounts • Label value: consumer relationship, data, increased sales volume, control of IP • Media/commerce value: ability to create product formats designed for individual sites or users • Overall value: de facto platforms, lower technology hurdle Pub. 7/00

  7. Subscriptions Outpace a la Carte Downloads by 2005 Jupiter Internet Music Model (7/00)

  8. Online Music Market Will Grow to $5.4 billion in 2005 Jupiter Internet Music Model (7/00)

  9. Consumers Receptive to Multiple Subscription Formats For what kinds of subscription services would you be willing to pay? Source: Jupiter/NFO, n=1,948

  10. File Quality, Virus Protection are Clear Drivers of Payment How important are the following features in convincing you to pay for a music subscription service? Level of Importance Source: Jupiter Consumer Survey n=2,258

  11. Consumers Understand Fair Use, But Portability is Key What Constraints Would You Accept to Keep the Download Price for a Song Under $0.99? Source: Jupiter/NFO, n=2,258

  12. Shift to Service Model Has Far-Reaching Repercussions • Record labels diversify revenue strategies, focus on consumer data • Label distribution arms must re-org to handle service relationships • Eventual disappearance of physical distribution formats – album release is replaced by other marketing events • Consumer concept of “ownership” begins to change – CD goes the way of VHS Pub. 7/00

  13. Thank You. Aram Sinnreich aram@jup.com

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