When The Going Gets Tough, The Tough Gets Clever

Michael Hedges June 25, 2010 Follow on Twitter

New media has turned content industries on their heads, shaken them and delivered a few bruises. Powered by a racing technology, Web and mobile services left the injured to squeal and moan. Content is again a battleground and the armies bigger than ever.

In the lifetimes of those who’ve passed their thirtieth birthday music has moved from captured content to content unleashed. While music formatted radio stations offered for only the price of a receiver combinations and aggregations of tunes of one style or another interrupted periodically by ads, consumers wanting their own choice had to run to the “record store” to buy a CD. The music industry couldn’t get out of the way of the cash coming in. Radio broadcasters made a killing, too.

Music formatted radio stations had a nice life, for about a generation. They owned the platforms and controlled the access. Operating costs were incredibly low, rights fee whinging notwithstanding, and profit margins incredibly high. When digital technology replaced analogue studios in the last decade of the last century DJs were replaced by PCs. Profits soared. Investment bankers showed their love.

The Web very slowly crept into that business model, one not limited to the radio medium. As bandwidth rose, MPG2 became MPG4 and hackers discovered the genius of bitTorrent, it was only a matter of time – very little, actually – before music formatted radio lost both the platform and control over access. Apple made portable music players cool (iPod) and loading music easy (iTunes). Radio listening to music-only stations, particularly by those under age thirty, plunged.

A survey conducted by YouGov of the under-30 set in Norway, quoted in Kampagne (June 21), showed Web-based music service Spotify eclipsing all commercial radio channels combined in audience. Spotify is a next generation music service, developed in Sweden and launched in 2008. Unlike its famous Swedish compatriot Pirate Bay, Spotify streams music in its 8 million title catalogue rather than serving as a download site. Another difference; Spotify is legal.

As a free service, Spotify offers tunes with occasional 15 second ads sprinkled in. Users can choose a pre-determined playlist, construct their own or borrow from others. Yes, there’s a social network feel to it. The premium service offers a higher bit rate and other benefits for €15 a month. The free service is available in Sweden, Norway, Finland, the Netherlands, France and Spain. Only the premium service is available more broadly. The company says it has about 7 million users for the free service and 320,000 premium customers.

The music business hasn’t been any happier with Spotify than Apple’s iTunes or any other Web-based music services. “It’s money that matters,” to quote American singer Randy Newman. The music business once controlled the platform, the access and the prices. When Apple – and others – set a market-based price-point and told the music business to take it or leave it the game changed forever.

Denmark is a small but obvious hole in Spotify’s primarily northern European offering. So far, music unions have halted the company from launching the free service in Denmark. For the premium service Danes must have a PayPal account or a credit card issued in one of the countries where the premium service is offered, like nearby Sweden. It’s a loophole in the Danish copyright law.

“It is, of course, a legal service,” said Danish composers union KODA spokesperson Birgitte Henriksen to Danish public broadcaster DR quoted by IceNews (June 22), “but it isn’t legal here in Denmark.”

And Spotify has its eye on the lucrative US market. “We can confirm it’s in the works,” said a spokesperson to Les Echos (June 21).  At the same time the company more or less confirmed availability on the Windows Mobile platform.

This is, without question, where the fun – and competition – is. Mobile platforms are more than just a hot button. It’s where the money is and likely will be for content distributors, aggregators and producers. The smartphones and smartphone developers are getting smarter.

Over the last month Google leakers have told TechCrunch, CNET and the Wall Street Journal about a coming Google music service, maybe yet this summer, to take on Apple’s iTunes and all the other music platforms. The design is based on streaming rather than downloading and will appear on Android smartphones. Hewlett-Packard (HP) confirmed (June 23) its acquisition of streaming music service Melodeo. A few weeks ago HP made a bid for smartphone platform Palm.

Mobile phones aren’t what they were two years ago, or two weeks ago for that matter. Smartphones are so smart they’re barely phones at all. Google said (June 22) it is “activating” 160,000 Android smartphones a day. That makes Apple’s iPad look like a quaint, niche product. And, too, the iPhone 4 sold out in the UK in one day.

The pinch radio broadcasters have felt from online music services is likely to become a slap as these applications migrate – smarter and smarter – to smartphones. Copyright laws have kept radio broadcasters from taking more advantage of new media, rights holders demanding more money for new platforms. Catch-up radio in podcast form need a market test but broadcasters, generally, must strip out music or pay a confiscatory fee.

Genius, though, may have found a solution. Kudos Records launched in the UK (June 14) a beta version of Playdio.com where programs – podcasts, et.al. – can be streamed anywhere, anytime complete with music. There is a catch. To access users must be Spotify premium subscribers, thus the copyright hurdle has been cleared.

In survey after survey across Europe and elsewhere audiences for music-only radio continues to wither, particularly among age groups popular with advertisers. At the same time more listeners are tuning-in to speech-based programming. In the middle are the shows mixed with music that cannot be accessed on the popular smartphone platforms. Kudos to Kudos Records. Perhaps broadcasters can learn a lesson from all those beatings.

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