21/03/11

Innovation in music: key trends and the growth of digital

Paul | digital content, Featured, Innovation, Start-ups, Web

Last week, we looked at the latest innovations within the gaming industry. And there were plenty of innovations to speak of. This week, we’re shifting the focus to innovation within the music industry. Now, that doesn’t mean we’ll be looking at the latest experimental dubstep-country-rap collective blazing a trail into mainstream music – though that would make for an interesting piece in itself. No, we’ll be putting music under the microscope from an industry standpoint, looking at where we currently are in terms of trends and platforms. In other words, ‘what’s hot and what’s not’ across the music industry and who the key players are. Remember CDs? No? Well blame Shawn Fanning. Mr. Fanning was the Napster developer who took on the might of the music industry – he dropped out of Boston’s Northeast University in 1999 to focus his efforts on one of the first peer-to-peer file sharing platforms. A year later, he was on the front cover of Time Magazine. Without going into much detail (this is a decade ago now, after all…), Napster eventually lost a court battle but the digital downloading war raged on. Now, it seems, the music industry is on its knees, changed forever by Napster. Gauging the popularity of music used to be so straight forward – the number of physical singles or albums sold by a specific artist compared to other artists would determine who was top dog. Now, with downloading and streaming permeating cyberspace, it’s not quite so straight-forward. CD album sales were down 12.4% in the UK alone last year, whilst digital album sales were up a whopping 30.6%. And all this before we even consider music-streaming websites. With broadband speeds increasing all the time, it’s likely we’ll see far less downloading and much more streaming in the years ahead. In fact, the streaming revolution has been going on for years, you just might have missed it over the cacophonous crackle of the mighty iTunes.

iTunes: the elephant in the room…

On that note, it would be rude to ignore Apple’s efforts in dragging the music industry into the 21st century. Just as Napster (version 1.0) was winding up due to a court order in 2001, iTunes came to the fore and, in conjunction with its groundbreaking iPod device, it genuinely (and legally) dragged the digital music movement forward by the scruff of its neck. So whilst Napster essentially did all the groundwork and secured a lot of free PR for the digital music revolution, Apple found a way to properly monetise the technology. An unintentional collaborative tag-team of sorts.

Last.fm: social streaming

In 2002, Last.fm was founded in the UK. The platform builds a detailed profile of each user’s musical taste through monitoring their listening habits across multiple platforms, including web-based radio stations, Spotify (see below), desktop and portable music players. This information is aggregated and displayed on each user’s profile page. The site offers a number of social networking features and can recommend and play artists similar to the user’s favourites. It’s a great way of discovering new music and for networking with other people of a similar musical persuasion. Last.fm follows the fast-growing ‘freemium’ model. In the US, UK and Germany, the service is largely free and users can pay €3 per month for a premium service. In all other countries, a free thirty-track trial is offered after which a subscription is required. And Xbox Live Gold members also get the service for free. Today, Last.fm has over forty million users in almost two hundred countries.

Spotify: iTunes in the Cloud

If you live in the UK, Sweden, Spain, Norway, Finland, France or the Netherlands, you’ve likely encountered Spotify at some point. Since 2008, Spotify has been streaming music to the masses in the aforementioned countries, with word-of-mouth and ‘invite-only’ key tools in its meteoric growth. Similar to Last.fm, Spotify follows a freemium model. ‘Spotify Open’ is free for all, but has advertising included and is restricted to five hours per week up to a maximum of 20 hours a month. And ‘Spotify Free’ has advertising too, but no listening restrictions, and is available by invitation only. Then there is ‘Spotify Unlimited’ and ‘Spotify Premium’, available for €4.99 and €9.99 per month respectively. Neither version has advertising, but the more expensive option allows you to listen to music offline, offers mobile device compatibility (for smartphones, tablets etc), has better sound quality and also exclusive content. Today, Spotify has over ten million members, 10% of whom pay some sort of subscription. And crucially, Spotify will be launched in the US shortly, so you can expect to hear a lot more about Spotify in the months ahead. This will likely lead to more major developments, such as the inclusion of music videos.

Warner Music Group (WMG): forward-thinking record labels

The digital music revolution isn’t all about small startups spoiling the party for big labels. The mighty Warner Music Group (WMG) has shown that some record labels are up for the fight and, maybe a little belatedly, are helping to shape the future of music as we know it. Atlantic Records is one of the two major labels that constitute WMG and it was the first big label to achieve more revenue from digital downloads than physical formats. WMG is beginning to focus on what’s known as a ‘360 deal’, which is a full-service contract for artists covering everything relating to revenue generated by an artist, such as touring revenue, merchandise, web services and a lot more. If only WMG had offered such a deal to its former prize asset Madonna, who jumped ship to join Live Nation on a 360 deal in 2007. So, all this and more coming up this week, with each day focussing on a specific area of the music industry in the digital age. Do stay tuned…