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Cedric Perrier

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Is Apple's iCloud a Game-Changer for the Music Industry?

Posted: 06/ 7/2011 8:37 am

Apple's migration to the iCloud finally allows iTunes users to share their music wirelessly between their own multiple devices. But the new service stops short of introducing essential new social components to drive music sales. Much was made of Apple's new software updates which will see greater synchronisation with Twitter across contacts, maps and photos. Yet, strangely, there was no mention of deeper Twitter integration with Ping or iTunes itself.

Since iTunes 9, users have had the facility to 'share' music from the iTunes Store on either Twitter or Facebook, but the integration has been limited. On Twitter, for example, we've all seen a shared music item shown to include song title, artist, the #iTunes hashtag and a link to the track or album on the iTunes store itself. On Facebook, the sharing facility has been equally unsophisticated displaying only an album cover image accompanied by an iTunes store deep-link. It was not until 2010, when Apple launched it's own music-based social network Ping, that users were finally able to share, like or comment on a song directly from their iTunes Library. However, Ping has suffered from the fact that it is both native and exclusive to the iTunes platform.

Also noticeably absent from Steve Jobs' highly-publicised iCloud keynote speech at WWDC 2011 on June 6th was an iCloud-streaming facility: the ability to stream your own music playlists from the cloud to your devices. Whilst this is likely to be to the relief of broadband network providers and fledgling music streaming services such as Grooveshark, Spotify or IPO-ready Pandora, cloud-streaming via the world's largest digital music store could have proved an exciting prospect for consumers and the industry at large.

Besides knowing what is in a user's digital locker, a cloud-based streaming service would also be able to identify the music content a user was actually streaming and enjoying at any given time. Sync'd with personal Twitter profiles, users could recommend music they were actually listening to in real-time to friends and followers -- creating a very accurate sense of what music is trending across web-enabled devices at any given time. This is a component that the music industry has been missing since the launch of iTunes. To date, Apple and their label partners have only accumulated data based on user download purchases (frequency, territory, volume etc). Harvesting data in relation to what users are actually listening to would have provided a valuable new metric for the music business. For example, a user's digital locker may well be replete with the Foo Fighters' entire back catalogue, but that user could have a greater propensity to cue, shuffle or share jazz or classical music more often than anything else.

Compiling cloud-based data from the major service providers would be difficult, but it would provide the music industry with the clearest picture yet of how popular music is consumed and how music tastes are represented in key territories. After all, the social value of music is set to become every bit as important to gauge as its sales levels.

Perhaps the richest benefit of Web 2.0 isn't just social connectivity, but the accumulation of the social data such activity generates. Where music success has traditionally been measured by single, album and concert ticket sales, any new type of platform serving music to a consumer base will provide additional ways in which to measure market penetration and artist brand sentiment. In addition to online vs. offline sales, airplay figures and P&L, music companies must now learn how to interpret complex social data, from increasingly varied platforms. For example:

  • How many digital stores worldwide are selling a particular track?
  • How many times has that track title been returned in search results across those stores?
  • What is the ratio of 30-sec sample track requests in relation to downloads?
  • How many times has that track been gifted to another user?
  • How many times has the track title & store link been shared on Twitter?
  • How many likes has the track accumulated on Ping?
  • How many times has the track title & store link been shared on Facebook?
  • How many likes has the artist's official Facebook page generated following a release or tour?
  • How many times has their video been ripped and uploaded to YouTube?
  • How many viewings have the various video rips generated on YouTube?
  • How many identification tags have been attributed to their latest track on Shazam?
  • How many times has that identification tag been shared on Shazam's network?
  • How many times has the track been added to a wish-list?
  • How many times has that track been downloaded in key territories?
  • How often has the track been identified and matched by iTunes Match?
  • How often has the track been streamed to a personal device from a cloud-based service?

While the list above presents a mere snapshot of the metrics that will play an ever greater role in a label's ability to monetize rich content online, capturing data alone won't nearly be sufficient. Being able to interpret it in relation to established and emerging artist brands in the face of competing acts, digital media products (gaming, television, movies, apps) and macro-economic conditions will be key to survival and success in the music business. Companies such as Buzzdeck and Trendrr will see their stock rise as more music companies realise the value of industry-specific metric analysis in an increasingly wireless world. Estimates, released by Cisco this week, show that 40% of the world's population could have web access via 15 billion digital devices by 2015. By which time it is expected that over 1 million video minutes could be crossing the internet per second.

Naturally, cloud-based services and online movie sites such as Netflix, Hulu & LoveFilm will continue to place an ever-greater strain on networks. Amazon were one of the first casualties last week when excessive demand for Lady Gaga's new album 'Born This Way' burst their cloud as part of a 99 cents album promotion. Designed to promote their new Cloud Drive, the pricing campaign inadvertently re-ignited debate within music circles as to the commercial value of a digital recorded album. In reality, Amazon subsidised the full cost of the album to the label, selling just 440,000 downloads as part of the promotion. That the album went Platinum with sales of 1.15m in its first week of US release is thanks, in large part, to full-price sales of 710,000 (digital and physical) copies. So while there have certainly been calls for the 99 cents digital album model to become widely available, the case for profit-by-volume has yet to be made - even by Gaga herself. Figures for US album sales over the last ten years show that the growth rate of digital album sales does not yet mirror the decline in physical album sales, despite digital single sales achieving year-on-year average double-digit growth since 2003. Still, there is much to be said for iTunes being largely responsible for ushering-in the era of the super-single, a music product which thrives in a play-list culture while simultaneously fragmenting the commercial value of the digital recorded album.

So is the iCloud a music industry game-changer on the same scale as iTunes itself?

The new service allows iTunes' 225 million credit card-carrying members to access music purchased in the store to any one of their devices (up to 10). Each sync'd device will be capable of downloading or playing any one of these tracks at no additional charge. This cleverly circumvents the need for users to physically upload their purchased music collections back to Apple servers, unlike rival services offered by Amazon and Google.

But perhaps most interesting of all, is the re-emergence of the music subscription model, but not as we know it. Based on Lala.com's original music platform, iTunes Match is a new service that scans a user's iTunes drive for music content ripped from an offline CD collection. It works by identifying songs using its massive 18-million track database, then 'matching' high-quality, DRM-free versions of those songs and making them available via the iCloud for $24.99 per year. Critics will quickly highlight the fact that Jobs is doing nothing more than inviting consumers to pay to subscribe to music they already own. However, what the iTunes Match model does represent is a breakthrough towards music licensing with major labels and publishers: 70 per cent of all revenue generated by the service going to the record labels, with 12 per cent to music publishers and Apple taking the remaining 18 per cent. Moreover, the flat annual fee won't require users to rent server space dependent on the size of their music collection or expend personal broadband allocations by uploading thousands of songs from their hard drives.

Unlike the original Lala.com model, iTunes Match doesn't yet offer shareable playlists or cloud-streaming as the faintest idea of peer-to-peer (P2P) music-sharing still strikes a dissonant chord with labels and publishers. However, progress for them must lie in leveraging the marketing of music across social networks and moving music to the cloud, cost-effectively, is a positive step in this direction.

 

Follow Cedric Perrier on Twitter: www.twitter.com/musenco