In his Musicworks keynote presentation last week, Sholto Ramsay argued that the music industry ought to stop thinking of music as a 'product' and more in terms of an experience. The corollary of that, he said, is that music should be priced on the basis of its features (e.g. packaging and other extras), quality (as in audio fidelity) and how people access it (on-demand or via different devices).
Applying a marketing perspective, Sholto spoke in terms of growing the market for the music experiences by addressing search, interaction and transaction costs. Here are some elaborations on what he said on each of these points, spliced with some of my own reflections.
Search in this context means how people find out what music they want to hear next, and how long it takes them to arrive at this decision. 'Search' is an unfortunate term here if it makes people think just of Google or other search engines: the process is more one of 'discovery' in that — by definition — people do not know the best terms to put into a search engine when they are looking for new music that might appeal to their interests. In my posting last year on the limitations of search for supporting learning I referred to information foraging theory, and 'foraging' is also a good term (though possibly not one that sounds comfortable in marketing mouths).
Sholto cited flickr (for photos) and del.icio.us (for bookmarks/web resources) as smart technologies that help reduce search/foraging costs. Which is fair enough, since these services, which are based on 'folksonomy' classifications, are among the most significant web-user-interface developments of the last year or two. But they are far from being the only game in town. Recently I've mentioned playlists a lot, and these are used in part as a means of foraging for new music. So are online forums like Myspace.com. Hence there are sites like Plurn that combines playlists with folksonomy tags, and GorillaPop, which combines playlists, community features and tags.
The more I think about search/foraging costs, the more I think there ought to be mileage in the kind of social software I outlined last year that helps users collect and share all the supporting information (reviews, interviews etc) relating to their favourite artists/albums/films.
Interaction costs relate to the time and aggravation it takes to specify and get what you want. Being based in the travel industry, Sholto illustrated interaction costs by comparing the straightforward choices available from easyJet with the more complex options that the British Airways site forces on its users. Music, unlike airline tickets, is a time-based medium: the longer you listen to a piece of music the richer your estimation of its value; staring at airline tickets for a long time doesn't bring the same rewards! So users' calculations of their interaction costs are more complex with music than with other commodities.
Many say that they find that the 30-second preview/audition clips available at Amazon and the iTunes Music Store are too short. In fact some of the music experiences with the lowest interaction costs may be those — like Last.fm/Audioscrobbler and Pandora — that take a long time to use (they provide a continuous stream of full tracks) but keep the input required by users to a minimal level. With Pandora the service works without you even needing to register.
Transaction costs are perhaps the most widely understood. Sholto referred to PayPal as an example of reducing the hassle of transactions, which helped grow the market for services like eBay. He asked, "£9.99 a month [for a subscription service] or £0.79 per track — which is easier?" The question was presented rhetorically, but I think it's fair to say that the monthly option has lower transaction costs. The problem is that the apparent competition between the two models creates confusion in the mind of the buyers.
Sholto argued that 'confusion pricing' works for things like telecoms services because everyone needs a phone and it doesn't matter much that no-one can work out how to compare prices — indeed it may help from the providers' point of view — but it doesn't work with 'elective' services like music downloads. What happens is that the confusion in pricing options leads people to hesitate and put off their purchasing for as long as possible, hoping that the dust will settle and the better option will become clear.
In the short term this works to the advantage of the 'à la carte' per-track pricing model, because people can be tempted into an occasional £0.79 purchase on impulse, whereas signing up to a monthly subscription requires a much greater commitment. In the longer term, if the industry presents its work as an experience rather than a product, straightforward and simple subscription options may enable the industry to grow the market, and their revenues, even if that means slightly lower return-per-listen than selling music track-by-track.Posted by David Jennings in section(s) Future of Music, Music and Multimedia on 5 September 02005 | TrackBack