Reinventing and Rediscovering Music

Posted January 29, 2009

The traditional music industry is dead and likely to be more studied than missed. Every label is in trouble, mainly because CD sales decline every year, with 2009 likely to be a free fall. Every dedicated music retail chain is out of business. Only the #1 retailer matters – Apple’s iTunes. The rest, including Walmart depend on CDs or are too small to count.

iTune customers have downloaded more than 6 billion tracks which is both extraordinary and odd. After all, most tracks are available for free online and free is a tough price point to compete against. Nonetheless, iTunes last year appears to have sold more tracks than users on file sharing sites downloaded for free.

How can Apple charge for something that is easily obtained for free? Some say they do it by adding enough convenience and value in the form of seamless device-website integration, reliable virus-free tracks, cover art, indexing, search, and recommendations to lock in their customers with love and loyalty.

Others say that’s fine, but Apple also cheats. They argue that Apple uses its iPods, iPhones, iTunes store, and “FairPlay” DRM standard to enforce a vertical monopoly by forcing iPod owners to use its store and forcing iTunes users to buy iPods.

Every consumer learns that Apple does this. Other online music stores cannot sell music files encoded with Apple’s FairPlay, and competing devices from companies such as Creative Labs and iriver cannot play FairPlay files. Consumers who want to listen to songs downloaded from iTunes must either have an iPod or convert the files to an open format, which is a real schmertz as those of us who have done it know. iPod owners who want to play music from other stores must also likewise circumvent the files’ DRM. Is this legal? iPod customers and the French government are both suing Apple to test these arrangements in court.

A bigger question is: does it matter? Earlier this month, Apple announced that Universal Music Group, Sony BMG, Warner Music Group and EMI would all offer their music without DRM. Eight million songs are available in Apple’s DRM-free format, with the remaining ten million tracks expected to be DRM-free by the end of March.

In other words, Apple has figured out that a one-way lock in is sufficient (iPods work only with iTunes). They do not need to enforce two way lock-in (I believe that DRM-free iTunes tracks will play on other devices). In any case, Apple encodes your email address in the XML metadata on each track you download with or without DRM, so if your files end up on Limewire, it is not hard to find the source.

Every business seeks to build and defend advantages — that’s what it means to have a business model. In this respect, Apple is doing what it has always done — integrating hardware and software to lock in users. It is hardly foolproof — note that their share of the desktop computers may be growing but it is still in single digits.

But the Apple model increasingly depends less on technology lock-in and more on assisting music discovery. Music discovery is subtle — but if there is going to be growth in the new music industry, discovery will drive it. Discovery takes many forms.

Deliberate discovery. My favorite music discovery engine is Owl Media because I got to know the founders and the people who built their technology. Owl searches the digital fingerprint of a song you like to discover similar songs. The main problem is that nobody wants to search — listeners clearly prefer to be surprised by music they like.

Discovery also occurs at online music stations. LastFM pioneered this category and is still the most social of the music radio sites. You can learn about new songs from those who like the same music you do, interact with people who share your tastes, and find out who is listening to the track you like right now. If you use music to make friends, it’s a great site.

As I type, I am listening to Pandora on my desktop. I set the site to the “Keith Jarrett channel” to get piano jazz I like. Now and then I hear a track I like and with one click I add it to my iPhone. It’s a great service from an Oakland-based company. I’d like the business a lot more if their “music genome” were not hand-coded by hundreds of music freaks (picture Google trying to hand classify every web page) and their revenue was less dependent on iTune affiliate fees, but that’s business nitpicking. As a consumer, I like it plenty. Plus their free iPhone app rocks (and is reportedly the most popular iPhone app of all).

iTunes itself is promoting discovery with Genius — it’s fine recommendation engine. It badly needs a new name, since Apple uses Genius to describe the geek squad toiling in the rear of every store. The problem with recommendation engines is that they only work while you are shopping.

The power of music discovery became clear to me last night. While working on a laptop at Starbucks, I listened to the stream of music that they play into all of their stores. Most stores also have a flat screen to display the name of the musician they are currently playing. One song caught my attention because it had the sort of complex, poetic lyrics favored by the songwriters who have long rocked my world: Bob Dylan, Bruce Springsteen, and Tom Waits.

I looked up at the screen and saw the name Josh Ritter. An instant later I had him on the laptop, watching him do last week’s Letterman show on YouTube. Within five minutes I had reviewed his bio (early thirties; son of two neuroscientists from Idaho), caught the editorial by the Amazon writer who was as blown away as I was (“…the best album of 2007, hands down, by the most under-accorded American musical genius…today’s Bruce Springsteen, today’s Bob Dylan….), perused his lyrics (phenomenal), and looked up his concert schedule (Feb 26 at the Great American Music Hall). I had work to finish, but later that night I checked out more tracks (see this or this).

I have yet to spend a nickel on the guy. But thanks to the emerging technology of music discovery, I found an amazing musician on a tiny label when I wasn’t even looking.

Discovery turns out to be a cousin of search. Search is how you find information, media, people, or experiences that you know you want. Discovery is when you find these things without knowing in advance that you want them. At best (as happened to me), the web helps you discover things even when you are not on a website.

The technology of discovery starts with your demographics and makes statistical inferences about what people like you typically like, it starts with your known shopping habits and uses that to help you discover stuff, or it starts with your keywords as a representation of your desires and intentions and goes from there. (Does Google save every search term you have ever used? Yep — along with your email and documents if you let them).

Getting discovery right is not simple — but the rewards to companies like Apple, Amazon, and Google (and potentially Starbucks) are huge.

As for Josh Ritter — check him out on Letterman.