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The Convergence Conversation

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What price music?

The October convergence conversation asked the question what price music? The conversations always focus on the disruptive impact that new converged digital services and technologies have on established business models. The music industry was the first to experience this disruption as small digital music files combined with broadband access and P2P technologies to create huge levels of music piracy.

This market is beginning to mature, with a range of digital music services in place in the market. However, many of these services remain proprietary and industry is still not clear about which business models have long-term viability for the sale of music in a digital marketplace. Bringing together a range of players from the established music industry businesses to new providers experimenting with new distribution models, we discussed how digital music is valued, priced and sold in the new market.

Value vs price

A key debate emerged from our discussions relating to the distinction between the value consumers place on music and the price they are willing to pay for it. We observed that consumers have always and continue to place extremely high value on music. Music has cultural value and is part of people’s identity. We debated how this value changes in a digital world, do the teenagers of today value an MP3 file in the same way that their parents valued a vinyl record of their favourite band? Does something have to exist physically to be valuable?

This takes us on to the next key question, if music is so valuable to people, why is its price dropping? We debated whether normal economics relating to supply and demand explain the changes we see in the music market. It is certainly true that new technologies such as P2P and broadband have increased access to music. This undermined the control of the established industry over the resource of music, reducing its scarcity and therefore its price. However, it was also recognised that these same new technologies should open up the long tail of demand for niche music, creating new business opportunities for the sale of non-mass market music to smaller groups of consumers but on a wider basis. There was little agreement over these questions, however it was clear that the resource of music is central to the business model of many companies in the market, and they are all fighting to protect the value they draw from people’s interest in music.

Finding a way to make money

The conversation demonstrated the importance of music as an enabler in the market. Many of the companies offering new converged services to the consumer are using music as a key selling point. There appear to be many approaches to this market, and little consensus about the right business models to adopt.

It was noted that all music situations are priced differently; there are lots of pricing models. Despite this our current licensing regime is based on a physical model, hence the problems and uncertainty we witness today. It was agreed that the current dominance of proprietary download models does contain scope for consumer frustration. As we move towards the notion of a wireless digital home, consumers will be less likely to accept models which determine that the digital music they purchase can only play on some of their devices. There is a key need for the market to address these questions of interoperability.

We also discussed new models that some players are experimenting where consumers pay a flat fee for unlimited access to music. This creates a host of issues relating to licensing and collecting revenue for creators, but does also present opportunity for creating new value around music content through navigation and recommendation services. If an individual pays a flat rate for access to unlimited music, they are likely to need help finding what they want to listen to.

One clear conclusion emerging from this debate was that questions relating to business models and licensing will persist, in the meantime there is a real opportunity to create additional value around how people are using music content through enriching their experience. In this fraught landscape there is a need for greater simplicity for the consumer, the challenges of interoperability must be overcome for a truly seamless digital experience.

To read more about the conversation, visit the blogs of some of our conversationalists:

Ved Sen, ThinkPlank: http://thinkplank.blogspot.com/

Ingjerd Jevnaker, Rawflow http://ingjerds.blogspot.com/

Group links

SME Resource Centre

The Convergence Conversation

Groups & Committees