Music and the Media MeltdownMark MulliganVice President & Research DirectorForrester Research

September 11th, 2009

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Music and the Media Meltdown

• How We Got Here

• The Media Meltdown

• Relationships Not Releases

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Digital Music 2.0: From Pay to Free, and Back Again

• How We Got Here

• The Media Meltdown

• Relationships Not Releases

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The music Industries are at a cross roads

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The three ages of digital music

Free PaidFree and

Paid

Rapid rise of file sharing

Modest rise of paid services

Evolution of multi-tiered marketplace

1995-2002 2003-2007 2008-

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Digital music has failed to meet three key strategic objectives:

1. Offset impact of declining CD sales

2. Compete with piracy

3. Generate a format replacement cycle

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The 21st Century European Music Industry Will be Smaller and More Complex Than Its 20th Century Predecessor

0 €

5 €

10 €

15 €

CD Sales Online digital music salesMobile digital music sales Ring tone sales (True and Ring Back)

Mu

sic

Rev

enu

es

(billions)

Source: Forrester Digital Music Model, 12/08 (Western Europe)

Recorded Music Revenues €6.4bn

Digital Music Revenues €4.0bn

2011: Music Market Begins to

Grow

2007: Accelerated

Decline

2001: Peak Revenues

Total digital channel share in 2014: 57%

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Music and the Media Meltdown

• How We Got Here

• The Media Meltdown

• Relationships Not Releases

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The Four Phases Of Technology’s Impact On Media

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Consumption is king as the distribution paradigm fades

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And monetizing consumption is the ticket out of the Media Meltdown

Consumption based monetization

Units based monetization

Total revenuesTotal consumption

Key

Current Media Landscape

Future Media Landscape

Media Meltdown

HighLow HighLow

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What do these have in common?

! They are both scarce, social experiences

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An implication: physical is the new physical

CD’s, downloads

Gigs, concerts festivals e.g. Live Nation

MoviesTheme parks, theatres e.g.

Disney

TV showsTheatre screening based events etc.

Print and online

publishing

Special interest events

Established Physical Distribution Business Models

Physical, Social Consumption Business Models

Media Meltdown Weakens Core

Revenues

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Closed loop ecosystems are the success stories of paid content in the digital age

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“The great wines of France are not content providers to the glass

manufacturing business”

Andrew Lloyd Webber to the House of Lords, April 2009

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Four Distinct Tiers of Music Services Built Around the ‘Four Cs’ of Digital Content

More Less

More Less

Content

More Less

Implementation: release windows

Convenience Implementation: discovery

& DRM

CostImplementation: pricing

& subsidies

Premium Services

Subsidized Services

Free & ’Feel Like Free’ Services

CommunityImplementation: forums,

networks

Same Same

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Music and the Media Meltdown

• How We Got Here

• The Media Meltdown

• Relationships Not Releases

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Music content should break free of the straight jacket of the album format leveraging new content assets

Structured studio releases

Live

Backstage, Interviews

etc.

Multimedia, Interactive

Content

• Formal album

• Singles

• EPs

• Remixes & covers

• Live concert streams

• Recorded concerts

• Live chat with artists

• User remix applications

• Interviews & outtakes

• Merchandize & ticket discounts

• Games etc.

Content Sources Content Package (e.g. 18 months of creative output)

Released via

successive release structure

d ‘windows’

to multiple channel partners

Route to Market

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Release Window

Preview Mainstream Pay ‘Free to Air’

(Week 3)(Week 1) (Week 6)

Single channel partners can leverage multiple release windows across distinct content offerings

Comes with U2 Handset / Orange Tariff

Comes With Music /

Orange Tariff

Orange Music Store

Orange Subsidized ISP Bundle

Consumer Product Bundles

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“The future is already here – it's just not evenly distributed” – William Gibson

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The Music Industries are at a cross roads…

…and one that requires careful navigation

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Thanksmmulligan@forrester.comhttp://MusicIndustryBlog.wordpress.comhttp://blogs.forrester.com/consumer_product_strategy/mark_mulligan/http://twitter.com/Mark_Mulligan