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In the City 2005: The Digital High St

TuneTribe, Yahoo! Music, Playlouder, The Orchard and O2's former head of content examined the digital high street in this Interactive @ In The City 2005 session. Subscription versus downloads, filesharing, communities, trusted intermediaries and cross-platform challenges were explored and debated, reports Deirdre Molloy...

Interactive @ In The City – The Digital High Street

TuneTribe, Yahoo! Music, Playlouder, The Orchard and O2’s former Head of Content examined the digital high street at this In The City conference session - in association with NMK - on 30th September 2005 in Manchester. Subscription versus downloads, filesharing, communities, trusted intermediaries and cross-platform challenges were explored and debated…

Report by Deirdre Molloy

[Register and post your own comments on this article below...]

John Strickland of TuneTribe explained that at that point Tune Tribe had the largest online catalogue of independent music in the UK. Instead of continuing with the standard round of introductions, chair Mike Butcher asked if the concept of the digital high street was a helpful one.

Paul Hitchman of music site-cum-ISP Playlouder said the digital high street was a sad place because round the back the biggest ever bring-your-own boot sale was going on – an illuminating metaphor for the much greater P2P universe. Scott Cohen of The Orchard commented that this is how it has started (with retail) but it has nothing to do with what the internet is about – if you’re going to put up all this content you have to be more honest, instead of saying everything is great!

This led onto a discussion of community, with regard to which Shannon Ferguson of Yahoo! Music (Europe) argued that editorial will fade away because the functionality of the internet will allow you to find things more easily. A lot of that will be through communities of friends, and service provider recommendations too, and Mike summarised this as using technology for collaborative filtering.

Unsigned, indies and mainstream acts – newly divided?

Time-shifting and broader distribution of content is bringing in the biggest changes, said Paul Hitchman, but Scott countered that despite this there will still be hits, megastars, etc, when we get into the subscription model in a bigger way.

In this new, fluid, disintermediated world, is TuneTribe still going to be a top level niche outlet, Mike wondered. Paul Strickland replied by asking in turn – what are iTunes and Napster going to do for the unsigned artist? Shannon said Yahoo! are going to be more mainstream but also allow for a greater level of personalisation. Scott reckoned all the digital high street players are doing a great job of marketing indie acts.

Turning on the subscription tap

Next up they considered the subscription versus the (a la carte) download model. Paul Hitchman said subscription will be the mainstream way – you pay the ISP and you download as much as you want to. In this scenario iTunes is at the periphery. But reaching this point is a question of massive education.

How will chart eligibility work, asked Mike. Scott explained that a download chart was launching that year (2005) but Paul reiterated that subscription is the one hope for the music industry as people won’t buy whole albums any more. John Ingham concurred, adding that when you get to sample so much more music through subscription, then you’re overall consumption of music increases.

How does subscription move into the cross-platform distribution, Mike asked, with mobile, interactive TV and IPTV? Music content is just another piece of the revenue pie John Ingham reckoned, with audio and video streaming via mobile in particular on the rise.

Rise of the residuals – festivals, gigs, merchandise, in-game music

If music becomes a commodity the issue is how you add value, Paul Hitchman reflected. Apple have added value with the iPod, he continued, and record companies need to work with digital retailers and mobile networks.

Scott stressed that you have to convert people who are currently buying 3 albums a year into getting a subscription that equals buying 12 albums a year. The value will come from the residuals – gigs, merchandise, festivals. DRM and intellectual property are issues, but artists will be better of Scott believed, adding games as another lucrative area for artists to make revenues from.

Mike asked the panel if there was a consensus that iTunes were going to kill the music industry, and that Microsoft are not interested in communities? Shannon said that it will be more about the end-users themselves, and that will all evolve online; we will look to friends rather than an editor or reviewer, ie. to trusted intermediaries.

Engaging with P2P culture

What about free music, Mike asked. The BPI are in a quandary because the people who illegally download most are the same people that spend 5 times more than all the other music buyers. Less than 1% of downloads were paid for at that time (September 2005). John Ingham noted that the real big P2P phenomenon is sharing bootlegs. The fan has got control, he said.

Paul Hitchman noted that the closure of Napster 1.0 pushed P2P into becoming less controllable, and that has only increased in the time since, he continued, mentioning Grouper, an encrypted filesharing network. Scott commented that the people who are trading peer to peer are upper-to-middle class people. What we need to do is monetise this behaviour. Everyone is ready to do so except the rights holders. Paul explained that the average download per iPod is 2-3 tracks a month, so people generally aren’t using them to download CDs.

John flagged the technology innovations with mobile, noting that the Nokia N90 due spring 2006 has 4 gigabytes of memory, and the new Samsung will have 5 gig. Memory is becoming a side-issue. Paul commented that the download model is for dabblers, while the subscription model is for fans. In turn, John Ingham mentioned the wifi mesh network being trialled in San Francisco.

Trialling new business models

John Strickland revealed that the conversion rate from Bestival (ie. festival goers converted to TuneTribe users) was high. TuneTribe will be doing a lot of live gigs, viewing residuals as very important. Shannon explained that they were keeping Yahoo! Music subscription so cheap because is was good to get people into the idea of subscription. Paul Hitchman preferred the analogy that music is like tap water, in that you will pay to have it always there, to have music as a utility.

John Ingham brought a little perspective to the discussion when he explained that what a single UK mobile network makes in a year is greater than the revenues of the total global music industry. But on a more upbeat note Scott noted that in terms of the singles market, 26% is now digitally downloaded.

Who do you trust?

What then is the role of industry bodies, Mike wondered. To sue consumers Paul Hitchman quipped. The music business is all about controlling distribution, he said, but recording has to move from a product model to a service and licensing model.

The renting relationship of subscription also depends on and is defined by trust, a delegate from Seven Digital commented, but Microsoft and Apple are moving away from this. If consumers are in control, why wouldn’t they want to own the things they pay for, rather than have them under the control of the renter, he asked.

As the session wrapped up, Playlouder’s Paul Hitchman speculated as to whether it will be a music brand that consumers will trust - NME, MTV, etc - or will it be Yahoo!, Google or Nokia?

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See the original EVENT PAGE

About the Panelists:

John Strickland – CEO, TuneTribe 
Internet entrepreneur John Strickland founded the web design agency Interesource in 1995. The company has since developed e-commerce platforms used by organisations such as Edexcel and the London Stock Exchange. Along with Tom Findlay, he set up TuneTribe in late 2004, with the aim of shaking up the music industry and offering the independent sector and unsigned artists a better deal. In other words he's the big cheese at TuneTribe.

Mike Butcher – Freelance Journalist, Mbites.com & MusicBites.com
Mike Butcher is a freelance journalist who writes for The Guardian, The Financial Times and runs mbites.com and MusicBites.com. He was the Editor of weekly industry magazine New Media Age from 1997-2001, and then Editor of the European edition of The Industry Standard magazine.

Paul Hitchman – Co-founder, Playlouder MSP
A Cambridge Economics graduate, Paul worked in the music industry for 10 years (including stints at BMG and Warner Music) before founding PlayLouder in 2000. PlayLouder is a digital music & media company that operates one of the UK's most popular and influential alternative music websites and has been at the forefront of innovation in online music services, including the first UK legal downloads, the UK's first internet-only digital singles, and the world's first virtual music festival. PlayLouder also provides online marketing services to a wide range of music industry clients and produces broadband music content for clients such as BBCi, AOL and Wanadoo. In 2004 he co-founded PlayLouder MSP, a next-generation ISP that offers broadband internet access combined with unlimited legal music downloading for one monthly subscription fee. PlayLouder MSP is the first ISP in the world to license the right for its subscribers to legally share music and in return to pay royalties to music rights owners. PlayLouder MSP was awarded the Popkomm IMEA award for innovation in 2004.

John Ingham – VP Rights Development, The Rights Marketing Company (formerly Head of Content Development, O2)
VP Rights Development, has been involved in interactive media since 1989, when he produced interactive LaserDiscs for Pioneer Japan. He has worked in the music, film and advertising industries in Tokyo, Los Angeles and London, entering the World Wide Web while working with Peter Gabriel at Real World. In 2000, as Content Director for the online music portal Worldpop, he realised that the future was mobile as well as Internet and in Ibiza organised Europe’s first commercial mobile content service. At UK operator O2 for four years, he was Head Of Content Development for Music and Entertainment, helping to develop the UK’s biggest mobile Internet portal and the world’s first OTA mobile music download service.

Scott Cohen – Co-founder, The Orchard
Co-founded in New York City in 1997 by renowned producer and songwriter Richard Gottehrer and artist manager Scott Cohen, The Orchard sprang from the belief that every independent label and artist deserves the opportunity to make their music available throughout the world. One of the company's greatest success stories is The Raveonettes. The Orchard discovered the Danish band in 2002 and negotiated their high-profile deal with Columbia Records. The band is currently managed by Scott Cohen for Orchard Management. When iTunes launched in 2003, The Orchard finally realized their dream of selling digital music. Since then, they have forged partnerships with over 150 digital stores, from major players like iTunes, MSN and Napster to niche sites like Bollyvista.com and Downloadpunk.com and today distribute thousands of artists and labels from 73 countries. Scott is also a steering comittee member for NMK's June 2006 conference Content 2.0

Shannon Ferguson – Director, Yahoo! Music Europe
Profile coming soon. Shannon is also a steering comittee member for NMK's June 2006 conference Content 2.0

Interactive @ In the City 2005 Panels:
NMK ran the Interactive panels at In the City in Manchester on 30th September 2005. The other Interactive panel reports are here:
Tomorrow's People - 30th September 2005
Creativity & A&R In The Digital Age - 30th September 2005
mPod The New iPod? - 30th September 2005

For more information about In the City's annual music conference and convention, visit the In The City website