HMV has had a great 2009, with the closure of two of its main rivals in the UK, Zavvi and Woolworths, its been able to posture itself as the only real mainstream music, film and game retailer on the UK High Street. Along with this new commercial reality they have been able to focus more on their games portfolio and grow on the back of the expansion of that market.

However, they know as well as anyone, that as we continue to move into a world of digital downloads their business model will slowly evaporate. Music, as we know, can now be downloaded or streamed directly into devices, whether it be Nokia ‘Comes with Music’ phones, the Iphone/Itouch family of devices or games consoles which are now starting to push full price product through their online distribution solutions.

Hence they have invested and purchased 50% of 7Digital a UK based online retailer and distribution solutions company. 7Digital is an online retailer which also has a music streaming service. It is yet to turn a profit and is operating in crowded market place alongside companies such as Spotify (streaming) and Itunes, Amazon and many others for downloads.

This deal with HMV is wider than just music though. HMV also owns Waterstones a leading book retailer which in recent years has been trying to find its way in the digital world, playing ‘catch up’ to Amazon. 7Digital’s technology and services will allow HMV to launch an online book store and leverage the audience 7Digital already claims to have along with the current consumer base HMV and Waterstones have access to.

Yet, why go to their store? What USP will it have? Itunes were the first and their software and hardware combo are superb. Additionally they now sell a wealth of other content through the Itunes store which again gets nicely organised into their software. Amazon and Wallmart sell everything you can think of online and their music stores are there to add value and perhaps pick up extra sales. They have been very successful. But why go to the HMV/7Digital store? Will they have exclusive content? Will there be some unique software that makes their experience high value and too good to miss for the educated content consumer?

Im doubtful, and I would imagine that to some degree the HMV management are yet to come up with the answers. Perhaps the aim is to provide back end services to other businesses that want to sell content and not focus on a direct to consumer relationship themselves. As one of the last large ‘content’ retailers on the high street it will be a fascinating 5 years to see how they manage to progress from being in the physical world of business to moving to an online proposition.

Perhaps their overall strategy is to hedge their bets and add value to HMV so that they become an attractive purchase for another company, perhaps a hardware manufacturer who needs to add a digital distribution element to their business model. This would be similar to when Nokia bought Loudeye a digital music service, which then evolved into the Nokia Comes with Music proposition. For example, if Sony bought HMV, they would overnight gain access to a music store, ebook store and physical stores, some of which could be shut down, and others transformed into their versions of the Apple Store equivalent.

Its been a while since we updated this blog. That is not because there is a lack of news in the music industry! Far from it! However it is simply because we have been pulled in different directions by the industry itself. At the moment there any tons of opportunities to make money and pursue new audiences in the music and sound sectors. Indeed the creative industry sector is expected to grow over the next 5 years, and that despite the global economic downturn. 

Does this mean the times are good for everyone or even that the money you can potentially make from your ‘art’ and skills is of a high volume? Well lets tackle those two questions.

Times are clearly not good for everyone in the creative sector. As we know large record labels are failing, indeed they have been for sometime. However the recession is accelerating the rate at which their old business model is dying out. This is due to a number of factos such as:

• People having less money on non essential purchases, such as music
• When they do want to buy music, they want it for less (same with films, see the crash in DVD prices!)
• Other industries which might have utilised music as part of their model, and hence are a customer of the music industry’s are trying to pay less, as they are making less. Ad funded websites for example.
• Recessions are time when people invest in new businesses with new models, and the record labels do not represent this sector of business.
• Some of the record label’s mother companies, which might have once absorbed their losses for strategic reasons are themselves losing money. Sony for example. Hence that puts more strain on any part of the overall business which is shrinking or failing, the music part for example. 

Sony have managed to slip some nifty new features into its latest Blue Ray players. These improvements allow the Blue Ray players to quickly convert video files for use onto a PSP or Sony Media Player. This is COULD be great news for PS3 owners as often this kind of software upgrade finds its way into PS3 firmware upgrades. This would mean users who use PlayTV could easily convert the files for use on the PSP without having to export to a PC or Mac first. 

The more hardware like the PS3 or computers in general can have conversion software built in the better for all of us. What would be great is if its implemented at a system level so that the moment the user tries to copy content from one machine to another, whether its video or audio, its automatically optomised for that hardware. This would take the ‘techie’ element away and result in making it user friendly to the vast majority of consumers out there.

For sometime we have been used to music and advertising working together. In many ways, its never been subtle, from the famous Pepsi style ads, to HIp Hop acts wearing branded goods such as Nike and Reebok.

However, its never become a point of standard practise. Mainly because not all acts or all songs reach a large enough or relevant enough audience. Additionally, what with the economy being so tough at present, advertisers demand stats and feedback to deomstrate the bang they get for their buck.

A few years back, Sting’s video for Desert Rose was doubled up as the advert for a Jaguar. It was still subtle enough (in contrast to a pepsi ad) to fit around the narrative of the video but had enough shots of the car so that it could be used in a shortened form for tv and cinema adverts.

With everyone, reaching out and grasping new income models will the idea of advertiser driven content raise its head? We are already seeing how much of the tv industry is supplementing its income due to a market that has gone through huge amounts of fragmentation, and due to advert slots themselves being less effective partially attributed to the tivo style technologies that now exist. 

Shows are either being commissioned by sponsors or prexisting shows are being touted to possible sponsors who may like the concept and see a fit with their product or message.

Why not the same with music? I’m not only suggesting this for individual tracks or artists. Why not apply this approach to the great untapped ‘brand’ of the label itself? Labels have never understood brand. Even though they take great pride in their LABEL, apart from the DefJams or specialist jazz labels of this world, the ‘label’ has rarely stood for anything in the minds of the consumer. Consumers, for the large part, did not buy this or that album because it was on Universal or EMI. They followed the act.

However, if the labels can actually come up with identities (you could call them labels!) which have a very strong focus, and start to sell them as ‘channels’ being targeted at specific target groups- why then they might find that they have a platform which advertisers will want to embrace. This would help create targeted income on Utube Channels, physical product, tv slots. One can even see opportunities with regard to how their music is ‘presented’ on platforms such as Itunes, Amazon or the new mobile ‘unlimited’ music services.

Of course this could have a cynical affect on the music. However, it shouldn’t. After all, record labels have always pushed music that was appealing to an audience. Without doing that, it would not sell and hence not be supported by the label. All we are doing here is doing it in a more coordinated way and making sure the record company’s own label really means something.

We have already seen how music shows on tv are being snapped up by sponsors and ad agencies the world over. Now is the time to take that trend and make it apply to music in general and not just American idol and its copycat shows.

its being reported that Sony refused to allow the Playstation brand to be used on a Sony Ericsson handset. Well those of us in the music industry (and those of us with sources in gadget world) know the real truth. Sony is currently in the process of reorganising its product and brand offerings. Additionally its doing this in such a way, so that they all feed vertically into its actual business model. I.E. not just doing things to propogate technology or for market share, but doing ‘things’ which result in money (always a good idea for a business I say).

We saw earlier in the year how they split with BMG and that SONYBMG are now Sony. Well 2009 or start of 2010 might be the year they do the same with Sony Ericsson. 

Can Sony release a PSP based Iphone killer, able to play top games, stream and download music and movies, and do this over a 3G and WIFI network? For sure, and once the cost is reduced to allow this all to happen without it killing the current crop of batteries they will. Making phone calls on such a device would clearly kill a current battery if you also wanted to run God Of War on it for 2 hours.

However the other stumbling block is a simple one. As part of their deal with Ericsson, one assumes Sony can’t actually make phones. Hence, by buying Ericsson out they will be free to move in this direction.

Battery life will be the technical stumbling block, but huge progress is being made in that area.

Sony Ericsson have already been releasing some great music and video enabled phones, and recently Sony have released (or about to release) a beautiful OLED powered competitor to the Ipod Touch (excluding any decent game functionality). A bringing together of these technologies along with PSP intergration would make an awesome device for us techies. 

However would it be a new paradigm in the world of music and content? Maybe it would be too techie for ‘Joe the Plumber’ or even ‘Arthur the Academic’ who listens to music and podcasts whilst on the tube. Also, is the PSP brand worth much? The first PSP has hardly been a life changing success, and often confuses those into thinking all it does is play games. Meanwhile Apple are busy rebranding the IPOD/Iphone brand into making people realise its also a gaming platform.

For example, the PS3 does EVERYTHING. In fact it has to be one of the best multimedia boxes ever created! However, people don’t see the value in the price. Why? Because consumers perceive it as a games console and never realise what else the machine can do, and does really, really well. 

However, what if Sony canabalised their brands and products and eventually sold all phones/devices as Playstation and advertised it as Playstation with Music. Playstation with Film. I’m not suggesting these are particulary great marketing phrases - the point Im trying to get across is that they need to redfine what the word Playstation or PS means to consumers. Make it clear that its a way of saying ‘this device means fun and leisure, ALL your leisure.’

No one wins points for being subtle. Clever adverts which imply but never say what you can do, might be great art but don’t sell ideas or products. Imagine this: ‘Hey, what you are playing on your phone?’ says character A. Character B responds ’some music by …., then Im gonna watch an episode of Lost, and tonight Ill play some Killzone.’

If all the content named was popular or classic, and if all of it was owned and ONLY available via Sony online shops linked to the hardware - and if that was made upfront, and clear with the consumers. Surely then, they would have a total solution and a great business model?

Recently Nokia has announced its Comes With Music range of products. This is where you get one of their handsets and can then legally download an unlimited amount of music via their service for a year onto your newly acquired phone. 

Now when we say ‘unlimited’ that always means ‘within reason’ or that which could be ‘reasonably’ listened to by an individual in a year. 

The point is, this is slowly becoming a mainstream model. Sony Music is launching its own version (it has in scandinavia already) along with Sony Ericsson. I think we can expect that a similar deal will eventually work with the PS3/PSP platforms (at least for Sony content) and EMI recently went into a joint venture with Warner Music, not tied to a piece of hardware but allowing ‘unlimited’ downloads for a one off fee. 

Now in many respects these deals with labels add REAL value to music. The labels will get paid a slice off the hardware price or package fee (as with the EMI platform). The customer values music enough to want it and pro-actively download it, but they have lost the sense that they should pay individually for each track/album. Yet this way they are still paying for it, without feeling that they are - and then the money is distributed through to the labels and appropiate artists/songwriters etc etc. 

The flip side is that it could be perceived as the nail in the coffin of the traditional value system. The system which says:

‘That an artist or collection of artists and skilled individuals spent ‘x’ amount of time on this track/album. By purchasing it you are supporting them directly (and not the label - even though must of the money used to go to the label) and making sure they can continue to make music to the same high standard.’

Also it could be a way of blocking off the long tail. I.E. if an individual or band cannot get with a content aggregator.  They may also find that these new services only push material from major labels, as by associated with material with high cache levels adds value to the hardware and is a win, win; for the labels and tech companies. 

Does this squeeze out the individual, semi-pro? If they are left to ’sell’ their music, it would put them at a perceived disadvantage in the market place compared to the labels who have their ‘price hidden’ in the cost of the phone etc etc. 

Times are a-changing as they have been non-stop for the last 10 years. However, is something fundamental happening in front our eyes? As labels panic and seek to find an income (something which is kinda important for a business) are they undermining, further, the very product they wish to make money out of? Or, are they smelling the roses and leveraging the content the best way they can, today, making sure there is money to invest into the music of tomorrow.

Also does this mean that it will impossible to have a complete music collection in the future? Might we see a situation, as with movies and Blueray, that certain acts can only be listened to on certain playback devices? I’m not too sure thats ‘bad’ as its the norm for videogames and as I said, movies. However it would be a complete change for the consumer. 

Discuss……