fixing subscription model music services.

I've already written at length about what I think Microsoft should do with the Zune. Go read it. It's surprisingly comment free for something I consider a solid piece of speculative strategy. This time, I'm talking about the issues that are keeping subscription based music services unpopular.

People don't like the idea of a subscription model music service, for many reasons. The foremost among them is the idea that they are renting the music, and that other services are offering them the ability to own it. This is undeniably correct in the sense that the music goes away. It's incorrect in the sense that most digital music retailers, including the behemoth iTunes Music Store, would disagree that they are offering to exchange ownership of digital music for money, and would instead say they are selling you a license to use a certain copy of a song a certain number of ways, on a certain number of devices. This is important, because ownership by definition includes actual control over the product. In either case, the user doesn't have it.

At least a subscription based service doesn't lie to you. And, truthfully, it offers you a better deal by leaps and bounds. That is more or less unimportant, however. The issue is public perception. And people care about the fact that the music will go away if they stop paying.

The solution to this is offering a buy-out option for users, something in the vein of a lease to own deal. However, you can't set a standard fee for this buy-out option, because 1) if the price is too high, it may as well not exist. The same price as an individual download is too high, if the user is already paying a sub fee, and 2) if the price is too low, people will sign up and download insane amounts of music in one month, paying the cost at the end of the month, because it will be cheaper than individual downloads.

If, however, the cost of buying out tracks downloaded on a subscription basis decreased over the length of the subscription, there is both a sense of security that you CAN own your music if you decide the service isn't your thing anymore, and a solid reason to stick out the subscription long enough for it to become habit. If, for the first month, buy-out costs the same as an individual download, this is reasonable. Anything less, and the retailer will get screwed. But if the price per song for buy-out decreases over time, then it becomes a good deal. Six months into a subscription, and the buy-out cost could be half the price of a download, approx 50 cents. A year in, 25. Eighteen months, 7 cents, etc.

Obviously, the price drop over time would have to be calculated to take into account the revenue generated by the service per user, as well as the amount of downloading that takes place for the average user. But it offers all of the benefits of a subscription model service, while dealing (at least somewhat) with one of the major drawbacks.

If you wanted to get really difficult, you could offer whole or partial rebates of the subscription cost for the first few months, if a user bought out all songs. This also removes some of the fear that a subscription model service will be forcing you to pay twice for the same music. If you decide to buy-out at full price, getting 2 months subscription fees off of your total purchase means no net loss for testing the service.

And if you have a good product, getting people to test the service is more valuable than anything.

kindle-ing.

I've been reading a lot about Kindle, Amazon's exciting new e-reader type device, and the same thing comes to mind every time a new e-book type device hits the market. Who cares?

I've read several books in electronic format. On a PDA, or on my laptop or (on one occasion) on the screen of an ipod nano, broken into chapters. The major reason any of these things happened? They only required a device I already owned, that did something else useful.

Am I going to pay 400 bucks to read blogs (only some blogs) in black and white on something that looks more or less like a speak and spell spray-painted white? Not when, for the same price, I can get something (still unforgivably restricted but) able to do substantially more (ipod touch anyone?)

I get that the idea of an e-reader is attractive. I understand the appeal. But if something is supposed to supplant the physical book, it should probably be a cross-over device. If carrying the book is too much hassle for someone, carrying a heavier electronic version is probably unlikely. [EDIT: I was wrong, it's actually pretty light]

The display technology has a lot of applications, but not in multi-media. It's more or less only functional for print.

No one wants to carry a device that can only deal with print, when you consider the other options available.

music is already free

Dear Music Industry,

There's something you need to understand, and you don't seem to be getting it. Someone has to tell you, and they have to say it in no uncertain terms.

Stop arguing that music cannot be free. Stop it. It doesn't matter what your justification is, whether it's that the Radiohead model (as it is apparently now known) devalues music for other, less wealthy bands, or whether it's just plain thievery, and nothing else should matter, it's irrelevant.

I'll say it slowly, because I'm obviously not talking to the smart kids: MUSIC. IS. ALREADY. FREE.

We can't go back in time. Bandwidth and Compression made Apple a force in it's industry again. These technological changes made file sharing reasonable. And it made free plausible, not as a business model, but as a reality that cannot be ignored.

It doesn't matter if you can't work your old business model in a world where music is free. It doesn't matter if you feel it devalues your work. It doesn't matter if you think this paradigm only rewards the ultra rich, or those with a dedicated fan base who will spend money without needing to, or whether it just plain bothers you.

Music is already free. The genie is not going back in the bottle, because the holy triumvirate of bittorrent, bandwidth, and compression all have legitimate uses. And not in the NRA style 'guns are for protection, too' legitimate use, but there are entire business models that are only viable due to these innovations.

Music is free. You can't change that, you have to work with it. Radiohead decided that might be an idea - ACCEPTING REALITY - and hoping that, considering it would leak anyway, a portion of fans would be willing to give them a couple of bucks for something that, within minutes of release, WAS FREE ANYWAY.

I'm sorry that a lot of people, Music Industry, are caught in a transitional period where old ways are failing and new ways are undefined. I'm sorry that old revenue streams are falling by the wayside. I'm sorry that so many of you equate changing sources of money with doom.

But it doesn't matter if I'm sorry.

Because music is already free, and you can't change that will anything, even an endless parade of frivolous lawsuits.

With more than a modicum of disappointment,

The Broken Gentleman

watching the sky fall

Does anyone else feel like we're living in the ends times of content ownership as a business model? I've blogged before on my stance on content ownership (and copyright ownership) as a failing-to-failed business model in music, as demonstrated by the good folks in the music industry. Content ownership is only directly useful to content creators - for anyone else it's just a bunch of unnecessary hassle that complicates content management. Fighting over who owns the music is less useful than offering a service that creators are willing to pay for, whether in percentage or in a flat fee.

The WGA strike though, makes this feel like the entertainment apocalypse. Never before have traditional content channels seemed any less useful.

Cost of entry costs what these days? Well, that depends on how you define it. Cost of a decent camera, actors, etc, can scale based on what you want to achieve. But the cost of eyeballs is higher, and infinitely relative. You can either buy them with quality (which is immaterial and transient) or you can buy eyeballs from people who have them (advertising). One is free, technically, and the other is ludicrously expensive. Such is life.

The current structure of the entertainment system is based on a lot of things, arguably chiefly among them star power. But the reason networks and studios developed a power base, is the cost of entry, both in terms of creating content, and distributing it.

The issue is, that system has been running on intertia. And now we've torn down the financial support, and the distribution channel. This strike is both about payment for new content channels, and impetus to improve them.

This is what people do when the world is burning down, they fight over scraps. DVD revenue scraps, online distribution scraps, whatever. The same thing will happen when the actors renegotiate. Then the directors.

It's the same thing that happened in the music industry - when the world is run by guys nearing retirement, there's a lot less risk in looting than in learning how to deal with a new world.

The only real advantages that the film and tv industry have is the experience. Physical albums failed as an art form, but the music still had value. So they were separated. And the industry bigwigs blamed piracy, which is a rational reaction to removing the value from a product. Think about TV, and Movies watched on DVD, or in theatres. Is your experience that much better than it is through illegal content channels? Is that difference something that would be fixed by better speakers, a larger screen or projector, and higher quality digital files?

Although you will never have a home theatre that is better than a movie, you could get one that is better experientially when you include the bullshit of the excessive cost, the ads, the fifteen minutes of crap before the film actually begins. Same deal with DVDs. The extras are nice, so is the image quality. But the often unskippable ads beforehand? I'd rather just take it.

If you want to make money in this situation, you need to offer an experience that beats free as a price. You can't do that by putting restrictions on things.

And you can't make money by pissing off the people who supply the transient and immaterial source of interest, the quality. Because buying eyeballs is popular enough that you need a better hook than omnipresence.

how to stick it to apple.

So. This is how Microsoft could take over the digital music market, and create a whole new revenue stream in the process:

Before any of this starts, I love Apple to the point where it makes my significant other jealous from time to time. Steve Jobs is one of my heroes, slightly outranked by Fake Steve Jobs. I've bought three iPods, and am planning on a fourth already. My Macbook is necessary in the same way food and oxygen are.

But the approach they've taken to music is hilariously dependent on the labels they are fighting with over control. Luckily, I think Apple considers iTunes a means to the end of selling iPods the world over. This is, mainly, what it does in a manner that is above reproach.

Microsoft has several major advantages that have gone unused, or underused. 1) They are selling a player that has the ability to trade music built in to every unit. 2) Every major music label is looking for a credible place to turn that isn't Apple, and that is more willing to negotiate terms. 3) Microsoft is sitting on a massive user-base who trusts (or at least tolerates) their products. 4) Microsoft is Microsoft.

The music sharing functions on the Zune are crippled by DRM. This is inarguable, and definitely had to be thrust upon the company by the music industry partners they needed to launch the accompanying music service. Still, this is the game changing tool that is needed. Music is social. Music is supposed to be shared, and learned about through social connection, and that requires sharing. There was a time when that meant inviting someone over and playing it for them, but now it involves copies.

This is the main issue that isn't discussed. Music is not what it was. This is no longer a market defined by selling slabs of plastic. It's about offering context and convenience, because the competition is the now normalized act of online piracy. This is the basis of subscription models, which, if memory serves, is what Gates and Co are trying to push.

The first thing Microsoft would have to do is unlock the sharing function. Make it so that any song traded from Zune to Zune is traded permanently. This, obviously, will be a hard sell to anyone in the music industry. So, there's a simple solution. Make one of the requirements of the sharing function is that anyone who is not signed up with the Zune marketplace, or social, or whatever it's called this week, gets files wrapped in timed-delete DRM. Everyone subscribed, go nuts. Free and easy trading to anyone with a subscription, because in a sub-based service, they're getting the music anyways.

However, this is all useless unless you get people to try the damn thing, first. Which is why you need to bundle a year's subscription to every new Zune unit.

Unfettered sharing is a useful thing. So, it has the potential to become addictive. Let it do so. This will require concessions to the labels (as everything does) so offer them, at first, a percentage of the price of each new Zune. That might not be enough, but there are still two things up your sleeve at this point.

Firstly, you're Microsoft. The biggest, strongest, most willing to take a loss in the short term, most likely to break into a market already won and take over company in memory. Honestly, the major battle-cry here should be 'Apple dominates the market, and has defined the category? Well, we've never won in THAT situation before...' Play hardball. Make concessions, but make it clear that this is a no-holds-barred fight for control of the market, and not siding with you is like deciding in advance not to succeed. Artists with clout are already leaving labels and creating their own distribution channels. If a major one takes off, and a label has locked itself out of it for no good reason, well, you end up in the situation the music labels are now, with execs approaching senility wondering if that Fanning boy can still get them a dominant position in the market, like he was talking about back in the day.

Be Microsoft. Make it work, because crossing you is generally idiotic.

Secondly, and most importantly, offer them a whole new revenue stream.

In allowing open sharing between any Zune subscriber, which, at first, means any Zune user, you gain access to data. In something as simple as getting users to give you an email address, and A/S/L info, you gain access to a horrendous amount of information. Not only do you get demographic breakdown of who likes what music, and how it spreads among ages and locations, but you get something truly unprecedented. By tracking sharing, you get an epidemiology of music, information on who the influencers are, who shares music, who is the first in an area or social circle to discover it, and how many people they send it to. You get real time information on the popularity of an artist - not through plays, which though useful are misleading, but through exposure, who is downloading, who is sharing, and who is re-sharing.

This information alone is worth losing money for a few years for. Not just to target advertising, but from a logistics perspective. Imagine the ability to plan a tour to maximize attendance, and therefore profit, at every stop - every single show in a place where the artist is at the peak of popularity. Imagine creating a market for selling this information to touring bands, imagine offering it to managers, to labels, etc, for either money or cooperation. This works for indie acts, as well. They more than anyone need a good turnout at shows, just to make money - price it on a sliding scale, and this information suddenly gets indie acts working with majors on a regular basis, for survival.

Imagine targeting advertising for an artist, or similar artists, to areas where they are right near a breaking point. Imagine trackable word of mouth.

This is ignoring completely random ideas, such as taking the influencers identified for this information, and slipping them preview tracks for new albums or artists. If they like, it, it gets distributed and re-distributed. Completely organic buzz and anticipation, kicked off from a concrete, calculated standpoint.

I've worked out further uses, and further details to make the plan work smoothly, but it's a moot point, as I don't run the Zune division of Microsoft. Other companies could technically do the same thing, but they either lack the software influence, the compatible hardware, or the influence to do it in a game-changing way. This is a method of offering something superior in user experience to a generation used to free music with minor hassle. They need something to play it on. And if Microsoft has taught us anything from the Xbox, it's that taking a loss in the short term, or even the shorter long term, is worth having serious sway in the market.

This is one way to do it.

state of the blog

I have ideas.

But my ideas are mainly, of late, designed in a way that makes them impossible for me to implement. Last month I had a concept for the Microsoft Zune, with a few minor modifications, and one major throwdown / risk, to actually differentiate itself from the music market. This was a good idea, arguably a great one (if great idea is equivalent to one that can't be picked apart by anyone I know) but useless to me, because it require a kind of control that I will never have, and the ability to shift an entire division out of it's business model (I'll outline the idea later, possibly tonight).

That I'm spending my time and intellect (such as it is) acting in a theoretical strategic consulting position is troubling - I like the ideas, I like slogging through and tightening them up, but I can't make any of them into anything for myself. I'm creating permanently fictional concepts. This is, except for the mental exertion, a waste of my time.

I also don't seem to have any truly independent ideas, lately. Everything is in service of adapting old structures to new, and new structures to society (and vice versa).

So, hopefully, a new phase, soon. I'll keep commenting, and offering vague (and not fully fleshed out) solutions to what I see as problems, but I'll also refrain from wasting too much time making them complete. What that time will be spent on, I hope, is treading a new path, or two. Or seventy.

I'm also going to try to remain more on my current path, publicity. Persona Management. And, hilarious though it may be, back to artificialism, as more than just a theory, but possibly as an approach - the truth of intentional falsehood, and the power of being a constructed person in a reputedly transparent world.

[Standard apology for radio silence.]

My good friend at Ghost Razor got me thinking about advertising and social networks. Well, he, the Microsoft-cash-certified 15 billion facebook valuation, and the fact that targeted advertising hasn’t really shown me much other than location targeting, and google style text ads that are based on the content of your screen / email / profile, etc.

The short version of this is there is a complete lack of creative work in these ads – text ads are boring. And text targeted ads result in some hilarious missteps, as well. Google is home of the brilliant proprietary algorithm, but I still get ads that suggest things based on sarcasm.

The response I’ve been seeing from advertising pros seem to be the most phoned in things in recent memory. I keep reading commentary about how targeted ads need ‘authenticity’ or how the essential missing ingredient is ‘engaging content’. For anyone who hasn’t been watching, this is the solution that is generally proposed by adver/creatives for anything in the universe. And it makes sense, because it’s important that spots be somewhat authentic, engaging, because these are code words for ‘not-insulting’ and ‘not boring’. Bravo.

There is place for creative content in targeted ads, and it just requires two major things – more work per account, and a better tool for profiling than just looking for keywords and spitting out the content that best fits.

My immediate reaction to being posed this problem was to think of profiling. Not in terms of looking for certain keywords and responding with certain ads, although that has a place. My interest is more in creating a dozen or so profiles for users that fit within the target market for your product, and then finding the interests, keywords, and relationships that identify these groups. This would require not only tracking the interests and usage of one person, but more important to track how interests spread between friends in the network – this could help in tracking the alpha consumers who are the holy grail. More importantly, it allows separation of users based on personality type, interest type in your product, related interests, etc.

Targeted advertising should be more than just sending people who say they care about something related to your product information, it should be about walking into the conversation of social networking, and treating different people with a past of different actions and different interests, differently. Treating people differently makes no sense in terms of broadcast model advertising, ie, advertising at scale.

This is different.

This is lucrative for both sides of the equation – the advertising agencies would now be creating multi-pronged campaigns with materials targeted to each of the X profiles created, so they would be (logically) charging substantially more. Also presumably logical would be increased effect from (actually) targeted advertising.

I guess all I’m saying is that targeted advertising means more to me than throwing the same content, or less involved content, at people who are more likely to care.

If facebook is worth 15 billion on the strength of the information it has gathered from it’s community, maybe targeted advertising should mean a little bit more in terms of giving people a personalized experience, rather than just very specifically aimed generic content.

it begins.

NIN is apparently free from label interference.

This, following the radiohead announcement, seems to me like the floodgates are about to open.

Expect major acts to be going it on their own all through 2008. Expect change.

Expect shit to get a lot more complicated for Apple, and every other music retailer, once they don't have lumbering, massive corporations to blame things on / deal with, and instead need to deal directly with every major artist, each with different terms, each with no real need for the service.

These are the glory days, new media fans. Watch the skies.

on helio (written months ago).

I’ve written before about Helio, the telecommunications company that actually seems to understand the point. I bought a fairly recent issue of WIRED, (mostly because I read the Halo 3 playtesting story online, and was intrigued enough to desire sidebar content), and with it came a little pamphlet from Helio, talking about the ‘new social ettiquette’. Good marketing from a company that offers a product refined enough that it doesn’t actually require good marketing – this is the road to awe.

Image set on flickr.

The New Social Ettiquette is, more than anything else, Helio making a subtle point about how seamlessly integrated into modern (youth) existence telecommunications tech is, and how dependent one can become on an increasing level of mobile communications. MySpace mobile, IM, email, etc. This is the un-blackberry, moreso than even the iPhone can claim to be. This is what I imagine South Korean telephony to be. This is the dream.

The dream is goddamn hilarious.

Helio recognizes it’s audience. It doesn’t talk about technology, other than mentioning a ‘superfast 3G network’. The focus is on what you can do with it, and the relation to flirting. Flirting as killer app. This is far from brilliant, but it’s a much more measured approach than other attempts to link technology and sex.

Helio is demonstrating that its marketing army aren’t deluded into thinking that features sell products and services. How the features are used is the only product. The only product is experience. The New Social Etiquette booklet is one page of features, and nine pages of fun things you can do with them.

Is it aimed at teens and early 20s frat-youth? Obviously. But it works. It works in the same way CP+B campaigns work. They get the idea across, and you go out and find the details because you’re addicted.

Helio. The New Social Etiquette. Or more importantly, She’s Not Interested If.

radiohead gets it.

I should be sleeping. I have to wake up in a little over 6 hours. But, there are things afoot. Things that cause bliss.

Thom Yorke and Company UNDERSTAND.

I've been rambling for a little less than a year about the separation between object and content. In relation to the music business, the point is simple: somewhere along the way, everyone forgot that the business was based on selling music, and assumed it was based on selling plastic discs. This more or less made sense when the plastic disc was the only method of moving music. Insert one massive digital revolution, and voila, an industry that thinks selling music means selling slabs of plastic begins to fail horribly.

The two best ways to deal with the separation between object and content in the music business are fairly simple: 1) recognise that to be worth money, you better have a slab of plastic that offers value beyond just the music, and 2) acknowledge that the music is really just a promotional tool for selling other, related products (slabs of plastic, tshirts, concert tickets, dvds, ringtones, etc.)

So what does radiohead to, when not tied to any old-distribution label paradigm?

They offer the album for sale, on the web, in a glorious package. 2 discs, vinyl, attractive packaging that realises the product IS A SLAB OF PLASTIC, and makes it the sexiest plastic they can. At the same time, they make digital downloads available for free to anyone who buys the meatspace version of the record.

The real brilliant move? The digital download by itself is available for a price of you-call-it. By you call it, I mean radiohead lets you add the album to your outbox from the exclusive retailer, and you get to decide how much it costs.

Not only is this invaluable research for a band in control of it's own pricing and sales, it provides a reasonable, DRM free option for sane consumers. As someone who actually downloads albums they already own, just for simplicity, this speaks volumes. Radiohead UNDERSTANDS, better than any other album release has ever indicated, that music cannot be sold as though it is still contained in plastic slabs.

This is the one record no one can justifiably download illegally. They are meeting you so far past half-way that you can't really bitch. At the very least, give the the data. Let them know you want it free, or for a cent, or what have you.

Several months ago, I was ecstatic when the iTunes music store began selling DRM free (sorta) downloads. That was premature, and I apologise. Assuming this isn't a hoax, radiohead have just (again) knocked the music industry on it's ass. It's so rare to see innovation even musically, but this group of consistent innovators are trying something legitimately new, and inarguably well-informed.

Shall we make it worth their while?

[this is ignoring the fact the album comes out in 10 days, and they have created nearly unlimited press just by setting a tight deadline, and doing something logical, but unheard of.]