September 22, 2015

This post first appeared on the AIMIA Institute blog.

This is the second part of a two-part series. Click here to view part one.

Over the past decade, literally hundreds of start-up companies and established tech leaders have built free streaming and subscription services for music. With good reason, since in 2015 alone over one trillion songs have been streamed. Google and Amazon joined the fray a few years ago, but the big mainstream splash occurred this summer with the launch of Apple Music. Even casual music fans are now aware they have options to sign up not just for free internet radio, but also for paid subscription music services.

Although it almost seems silly to wonder whether today’s streaming music business models will last, I felt for years that their financial stability was not necessarily secure. So, I feel the question is worth asking.

First of all, it is not a good sign that musicians are aggravated about how they are being compensated. Artists have been making headlines by rebuffing the tiny royalty payments they receive from such services. The biggest news was Taylor Swift pulling out of Spotify, and a range of star-studded performers, led by Jay-Z, are re-launching their own subscription platform, Tidal, with the promise that a greater share of revenue would go to recording companies and artists.

Subscription streaming in France

There is a need to take a deeper look at the financials behind these services. Let us say that the word “obtuse” is a generous way of defining the transparency of these deals. When I sent a musician friend of mine this Ernst & Young analysis of how Spotify in France splits its revenue, he remarked, “Meet the new boss, same as the old boss.” The music labels, as before, take in the majority of post-tax revenue.

Where is the money in music?

Most artists receive fractions of a penny on every track played, but almost none of the streaming music services are yet making any profit. Plus, there are lawsuits and regulatory changes (here and here) that could make the financials even more challenging. The deals Apple Music made with the labels are actually under investigation, because of the possibility that some provisions could be anti competitive.

Despite all of this, a big-picture look at U.S. music revenues (2014 RIAA Music Industry Shipment and Revenue Statistics) makes it clear why this model is here to stay. The growth rate of streaming services has been extremely rapid, nearly tripling between 2011 and 2014. Next year, streaming services will likely provide a larger percentage of music revenue than physical music sales. If these “disruptive” services are now the second-largest source of revenue for the music industry, they are not likely to disappear anytime soon.

As streaming use has grown, physical and digital download sales have shrunk, and the overall revenue for the music industry has plummeted. This decline has less to do with these new forms of legally purchasing, or listening to music, than with the opportunities to easily “share” music via the Internet. Not to mention numerous years of an economic downturn and the simultaneous growth of other forms of digital entertainment that grab people’s eyes, ears, and cash.

Since 1973, the peak of the industry in the United States occurred during 1994 through 2000, with the average American spending $60 to $70 per year on music. At present, that number is down to close to $20.


Consumers adopt paid entertainment services

In the midst of this, I believe that the subscription model actually offers hope for the industry. Marketers seeking to understand the potential future behavior of the music audience can see signs of the future in other entertainment media.

A majority of the U.S. public is now accustomed to paying for cable TV, Internet service, and mobile phone service, with streaming video services about to hit mass market adoption as well. Subscription service competition is rampant, so there is a real possibility that a majority of households in the country will set up a subscription streaming music service as part of their annual entertainment spend.

To grow users, the services will need to add pricing tiers at the lower and higher ends. This could start, for example, at $4.99/month with some restrictions (and/or some ads). Higher prices could be charged for added services (e.g., Tidal offers a $19.99/mo. option for lossless quality audio).

The ad-supported streaming music model of the future may not look quite like it does today, depending on regulatory decisions, lawsuits, and future licensing negotiations, but with Pandora now generating $1 billion in annual revenue and building a loyal brand following, it is hard to believe that the model will disappear either.

After years of thinking that this unlimited access to music was too good to last, I’m now wiping my brow and smiling. But I have knocked on wood, as well, just to be safe.

What can marketers outside the music world glean from this industry and apply to their own? The music streaming sector has evolved greatly over the last decade, and industry leaders now offer an increasingly personalized experience. Spotify offers their subscribers “Discover Weekly” which is an ultimate personalized playlist based on recommendations from analyzing listening history. With such advanced capabilities for marketers to collect data about their customers, they are able to offer truly personalized and customized experiences like never before.

Examine your business to see if you can encourage customers to move past the ownership model to a “renting” or subscribing one. The rise of the sharing economy shows us that this model has become more prominent. How might a similar disruptive innovation change your industry?



September 22, 2015

This post first appeared on the AIMIA Institute blog.music_streaming_logos_back

Back in 2005, I discovered Rhapsody, a first-of-a-kind subscription-based music streaming service, and my jaw dropped. What? For the same money I spent buying just one album every month, I can listen to every new album that came out that month, as well as a catalog of almost every album ever released.

So, for the past decade, I have easily perused music of all kinds, checking out knowns and unknowns.

Right now, for example, I am taking a quick listen to some of the latest album releases, from Tame Impala’s Currents — I appreciate that the song craft is not predictable, but it is too produced for me — to Future’s DS2 — good grooves, but I am turned off by misogynistic lyrics — to Wilco’s Star Wars — a favorite band of mine and a nice new album.

With the launch of Apple Music in July, this kind of offering fully hit the mainstream, but the evolution of streaming music to this point provides a fascinating look at the psychology of consumers, brand building, and how this business model is affecting music industry.

I am Not Buying It

I am a big fan of music and established many friendships, both offline and online, through this shared passion. Once I discovered Rhapsody in 2005, I was thrilled to spread the word to all of these friends. To my surprise, however, they did not buy into my excitement.

“So, do you own the albums?” my friends would ask.

“Well, no,” I would reply. “But as long as you pay your monthly fee, you continue to have access to everything, and there is rarely an album I can’t find on Rhapsody.”

Their typical response: “Hmmm. Sounds interesting, but I am not sure I need it.”

Mind you, this was coming from people that likely spent over $100 a year purchasing music, whether CDs or mp3s. There was psychological resistance to paying for access to an album without getting ownership. People were comfortable relinquishing ownership for other types of long-form media, whether borrowing books from a library or renting movies from Blockbuster, but they could not buy into this idea for music.

Unlike most books and movies, songs and albums are listened to over and over again, so the value of ownership is driven by both emotional and functional benefits. I believe people also were skeptical that a service like Rhapsody would even last. So, they preferred the idea of buying one new album each month that they could listen to forever (if they liked it), rather than paying each month for unlimited access to millions of albums because of the perceived potential of losing that access at any time.

In 2006, though, one brand changed the model for streaming music, Pandora. Because it mimicked the radio model, Pandora fit an existing expectation of “temporary” music access. Pandora took the radio listening experience to a new level with personalization. Once you picked a single song, album, or artist, Pandora produced a stream of music matching that style. Like radio, all you had to do was suffer through a few ads.

Pandora is not designed for users to select and immediately listen to any particular song or album, but without any fee (and no DJ chatter), people were happy to have a cool, new passive listening experience using the web.

Brand Building Changes the Game

Is it better to be a first mover or a fast follower? The streaming music model offers an interesting case study on this oft-debated question.

Rhapsody_App_badge_loRhapsody was developed and launched independently in 2001, but it was acquired in 2003 by RealNetworks, a pioneer in developing the capability to steam audio and video content over the internet. Despite creating an innovative model for listening to music, with licenses from all the major record labels, Rhapsody could not escape the shadow of iTunes, which launched that same year.

By October 2003, Apple’s iTunes, originally developed for the iPod, was also compatible with the Windows operating system and everyone with a computer could own digital music with a few clicks. By combining an easy way to purchase music “by the drink” through iTunes with the iPod, the portable music device of choice, Apple usurped any earned attention that might have come to Rhapsody, even though Rhapsody offered users the ability to purchase and own most of its licensed songs and albums, as well its subscription model. Without an investment in marketing and PR dollars to truly compete with iTunes, Rhapsody continued to trudge along in relative obscurity, gradually growing a small user base.

spotify-update-app-iconOther entrepreneurs were spurred by the possibilities of streaming music. Spotify, launched in Sweden in October 2008, smartly combined the ad-based and subscription models. This allowed it to grow large numbers of casual users who were willing to submit to ads and some service limitations, while also gaining more dedicated music fans willing to pay for full capabilities and no ads.

By 2011, Spotify was available throughout most of Europe and the United States. It not only surpassed Rhapsody in its number of subscription users, but also boasted another three to four times as many registered users who picked a free option.

Rhapsody was run by an older Web 1.0 team, who had likely become risk averse after the dotcom bubble burst. Rhapsody management focused on a stable, buyer-only business model with modest growth expectations. Spotify was developed by experienced entrepreneurs whose business model and growth plan were driven by VC funding and the goal of a high valuation based on rapid user growth and buzz. The Spotify team employed Web 2.0 principles: a freemium model, active social media integration, an open programming interface (API), and a budget for marketing, PR, and advertising.

Rhapsody was a first-mover, but it did not do much to build a brand, while Spotify—although it came later—proudly waved its flag as a disruptive agent that would transform the way music was consumed. That message got the tech startup community and its growing user base to spread the word along with Spotify. Today, Rhapsody has around 2.5 million paid users while Spotify has around 20 million paid subscribers and an additional 55 million active users of its ad-supported service.

Score one for the fast follower.

And in part two of this two-part series, I will discuss whether or not all of this will last.


145 Years Young: Digital Innovation at The Met

June 17, 2015

In 1967, IBM founder Thomas J. Watson approached The Metropolitan Museum of Art in New York City with a then unheard of offer… to donate computers to the Museum. The Met declined. Ironically, one particular curator doubted that a computer would be a “time-saving device.”

This resistance to joining the technology-driven world may now seem as dated as a piece from the Met’s Ancient collection, given that 2011 marked the year the Met lifted its cell phone ban and redesigned its website for optimal viewing on smartphone screens. And in 2013, the Museum’s first-ever Chief Digital Officer, Sree Sreenivasan, was brought on board to digitally transform the museum experience.

Art and technology have long been bedfellows—from Michelangelo with his chisel and hammer to Ryan TrecartinSree Sreenivasan at BRITE'15 with his mixed-media video installations. Speaking at the BRITE ’15 conference, Sreenivasan, who is also formerly Columbia University’s first Chief Digital Officer, noted, “Any art you see today is because the artist used the right technology at the right time—the right canvas, the right marble, the right tools.”

Sreenivasan understands firsthand the challenges of keeping pace with a rapidly evolving digital world, particularly at renowned institutions with such historical significance. At BRITE ’15, Sreenivasan shared insights from digital, mobile and social lessons learned during his tenure with The Metropolitan Museum of Art. He explained that a consistent strategy across mobile and social media platforms, like the one employed by the Met, is pivotal to staying relevant and continuing to meet consumers’ day-to-day desires in this age of constant change and innovation.

It’s no secret that mobile is now more important than ever. In September 2014, the Met launched its first app. Sreenivasan wanted to provide Museum visitors with an app that would speak more directly to their interests, “instead of putting the whole museum in [their] pocket.” Art enthusiasts can track upcoming events, save their favorite works of art to their smartphones and tweet about their favorite exhibitions. Within two weeks of its release, the app was downloaded more than 100,000 times and has been hailed as one of the Apple Store’s “Best New Apps.”

Though his title is Chief Digital Officer, Sreenivasan considers himself to be more of a “Chief Listening Officer,” observing the varying interests and behaviors of the institution’s 6 million museum attendees and the 30 million unique online visitors a year. “That’s a lot of listening,” quipped Sreenivasan.

One result of all that listening was a commitment to creating hashtags for each exhibition. No small feat, considering the Met currently houses over 2 million works of art. Sreenivasan credits the audience who tweeted their wishes for an intuitive way to share their museum experiences.

Sreenivasan notes that audiences are becoming increasingly “culturally curious,” eager to glimpse the behind-the-scenes of installations. The Met answered this growing need by displaying online the restoration of one of its most coveted acquisitions, Everhard Jabach (1618–1695) and His Family, ca. 1660, by French artist Charles Le Brun.

Charles Le Brun (French, Paris 1619–1690 Paris) Everhard Jabach (1618–1695) and His Family, ca. 1660 Oil on canvas; 110 1/4 × 129 1/8 in. (280 × 328 cm) The Metropolitan Museum of Art, New York, Purchase, Mrs. Charles Wrightsman Gift, in honor of Keith Christiansen, 2014 (2014.250)

Through the Met’s social channels, fans and followers were able to view this typically veiled process from anywhere in the world. “Instead of working on it in secret for a year and then putting it out, we’ve already started blogging about it.” Viewer comments have ranged from questions surrounding oil paint solvents to expressions of gratitude for the ability to witness art history in the making.

One such commenter said, “Thank you for giving us the opportunity to see this fascinating work…. [R]eading about it does not convey the same image.”

Another asked, “How many more do we have to look forward to? I’m anxious to see the work in the gallery, but not so much that I wish you to rush, rush. I am enjoying my time!”

When it comes to choosing social media platforms, Sreenivasan advised that, depending on your business, you don’t always have to be on every network, and “there is no reason to be first [on a social media platform]. Join when it makes sense for you.” Sreenivasan reminded the audience of the potential minefield of controversy that social media platforms can become. “Almost everyone will miss everything you do until you make a mistake,” he cautioned. In the October 2014 New York Times article, Museums Morph Digitally, Amit Sood, director of the Google Cultural Institute in London, echoed this sentiment, “I learned not to underestimate museums. They were a little slow to the digital game. That’s a good thing.”

Slow to the digital game, perhaps, but well-conceived. Sreenivasan’s digital strategy at The Metropolitan Museum of Art has allowed this nearly 150 year-old institution to remain a timeless cultural mainstay while continually reinventing how it delivers art to art enthusiasts, based on their desires as they express them, from their smartphones to the front steps of the Museum itself.


The Future of Omni-Channel: Innovations & Experiences

June 17, 2015

net-a-porterIn this technology-driven age, a common challenge for companies has been integrating new technologies into their existing business models, marketing and operations. This has been said to remain true for luxury brands. Convention has held that digital commerce is for the penny-wise. Research and consulting firm McKinsey dispels this perception. It reported that nearly 50% of luxury purchases are in fact influenced by digital. Warc’s Darika Ahrens aptly notes, “High-end income earners love high-end technology.”

Recognizing this, luxury fashion brand Rebecca Minkoff, an early adopter of new technologies in retail, is leading the way in immersive experiences that touch upon all senses to resonate with these digital-savvy, affluent consumers. Speaking at the Center Emily-Culp-BRITEon Global Brand Leadership’s BRITE ’15 conference, Emily Culp, Rebecca Minkoff’s SVP of eCommerce and Omni-Channel Marketing, discussed driving customer lifetime value by delivering multi-faceted experiences derived from technology, insights and organizational structure.

In 2014, Rebecca Minkoff launched its “Connected Stores” in New York and San Francisco with a fully integrated consumer experience. Interactive mirrors entice customers to browse video and content, order complimentary beverages, save merchandise options to their devices via the Rebecca Minkoff app, and check in-store and online inventory. Culp explained that by leveraging beacon technology and RFID tags, Rebecca Minkoff offers an even more perRebecca-Minkoff-Connected-Storesonalized experience. “When [our customer] walks into the fitting room, it recognizes merchandise and gives recommendations on what to wear [the item] with.” Customers can even adjust fitting room lighting to reflect the setting in which they would don the outfit (e.g. “SoHo after dark”).

In developing experiences for their omni-channel consumer, the question Culp asks herself is straightforward: “How do we flawlessly execute this omni-channel marketing in such a complex ecosystem?” At BRITE ’15, she outlined four essential points to succeed at this:

  1. Leadership: the ability to embrace smart risk and experimentation
  2. Expertise: building teams with hybrid skill-sets (e.g. creativity combined with an understanding of metrics)
  3. Linkage: breaking down the silos to align the KPIs of different departments
  4. Communication: sharing insights even when they may seem irrelevant to another team. “Maybe they can take it in a different way that another hasn’t [considered],” explained Culp.

Culp stresses the importance of not employing technology for technology’s sake. It should have a purpose. Rebecca Minkoff’s objective is to use technology to seamlessly deliver value to their consumers, relieving pain-points and empowering them to make informed decisions while shopping in-store and on any device at any time, anywhere in the world.

Through research, Culp’s team discovered that their consumer checks her smartphone, on average, 150 times a day, spiking at different points depending on when she’s at work using her computer or at night on her tablet. “The constant is mobile. So for us, when we’re looking at omni-channel marketing… we start with mobile.”


That said, culling data from all touchpoints—mobile, web, events, public relations, in-store—is at the foundation of their approach. “A lot of people think that data is boring,” she explains. “I inherently think that this is one of the most creative and fascinating parts of marketing today.” Quantitative and qualitative insights paint a holistic picture of their consumer. “[W]e can see as she traverses across these different channels what her behavior is and help her make informed decisions when it’s right for her.”

Check out Emily Culp’s talk at BRITE ’15 to hear more on developing omni-channel innovations and experiences to drive long-term value.


Using Data to Create Meaningful Relationships

March 31, 2015

At the Center on Global Brand Leadership, we were delighted to host our 8th annual BRITE conference this March.  BRITE ’15 continued our aim to present a range of diverse content, with sessions that ran from the marketing insights and initiatives of Doritos to a discussion of whether the future of artificial intelligence and robotics will help or hinder humanity.

One clear theme that ran through a several sessions this year was the influence data will have on brand building and business development. The hype cycle around the specific phrase “big data” has waned, because companies are now driven by how to effectively extract value from, and avoid the dangers inherent in, collecting and connecting massive amounts of data.

Data for Insights and Surprising Customers

Ann Mukherjee, President of PepsiCo Global Insights, kicked off the conference by noting, “We have to take consumer expectations for unpredictable marketing and make it predictable.” Mukherjee discussed the Doritos brand, and how PepsiCo used consumer data to uncover that the Doritos fan was ‘young and hungry’ – hungry for everything, not just a snack. “They want to be challenged because as they get challenged they think about how they challenge themselves.”

When it comes to developing loyalty, the Doritos target audience is no picnic. “Young snackers are promiscuous,” Mukherjee stated, “They’ll eat cardboard if it tastes good.” Given these dual insights, her challenge was to build something surprising, exciting, and most importantly scalable. At last year’s SxSW, her team did this by inviting the world to take part in its Doritos concert event, permitting fans to watch online and literally take control of the event by choosing lighting effects, songs that should be played, and what order artists should perform.

This ‘young and hungry’ insight also helped the brand redirect some of its marketing spend away from large TV spots. Instead, it looked for alternate opportunities to reach these young and hungry consumers, like partnering with the videogame Call of Duty and creating Taco Bell’s Doritos Locos Tacos. These tacos created so much buzz in limited release that six new manufacturing plants had to be built to meet the expected demand of the nationwide launch which spurred a 13% same-store sales increase in Q2 2012.

Meaningful Relationships

Martin Hayward, Senior Vice President of Global Digital Strategy and Futures at Aimia, stated in our joint keynote that Aimia hopes to help create a “utopian” future in which personal data access and permission controls are used, “to develop ‘real relationships,’ which is where the trust between consumers and companies is such that they happily share data because they know that data will be used to reward them and build long-term relationships for mutual benefit.”

From the first teases of data coming out of a new research effort between our Brand Center and Aimia, we see evidence that consumers are right now suspect of companies creating this utopian future, but they are also hoping for it. We looked at six industry categories and found that consumers don’t report much comfort in how companies handle their personal data, with all but financial services below a 50% comfort level. But, when asked about all kinds of specific data items – name, email, website history, social network access, etc. – roughly 80% of our respondents were more willing to share all of these pieces of information with a brand when they trusted it.

The goal of developing these meaningful relationships was echoed among a wide range of companies at BRITE ’15:

  • The start-up Billguard now has a million people voluntarily sharing access to their financial accounts because they collectively crowdsource fraudulent activities and save each other money. Founder and CEO Yaron Samid stated that Billguard is built as a trust brand and thus it is very careful about how to use all this data and work constantly with their community to uncover what additional offers or opportunities are viewed as truly added value.
  • At The Metropolitan Museum of Art, against the Chief Digital Officer’s better judgment, a decision was made to require visitors to submit their email when connecting to the museum’s free Wi-Fi. Within a few months, however, over 100,000 valid new email addresses had entered the museum’s database. As CDO Sree Sreenivasan told the BRITE audience, “What is the lesson there, that your CDO may not know anything he is talking about… but more importantly, be open-minded with any new idea.” If you provide true value to people, they are often happy to give up some information in exchange.
  • Chris Wiggins, Chief Data Officer at The New York Times, noted that he spends less time looking at online article clicks since the paper aims to generate trusted and loyal consumers that want to support the magazine with a subscription, rather than just gather eyeballs that the company can sell advertising against.

Of course, one of the keys to building these meaningful relationships, and connecting data to provide more targeted or personalized consumer experiences, is knowing where to draw the line. As Mike Weaver, Director of Data Strategy & Precision Marketing at Coca-Cola, stated, “If I say, I know you like music and let me relate my brand to your passion, so far we think that is ok. But if I say, I know you love Taylor Swift’s new album and especially the third track on that album, then you are going to get a little creeped out and we don’t want to get anywhere near that.”

Lots of Data Won’t Be Personal

At BRITE we also noted that large swaths of the new data deluge are going to be collected not directly from people, but by devices around the world that are joining the Internet of Things. By 2050, estimates are that anywhere from 30 to 75 billion devices will be connected to the internet.

The hype around the Internet of Things is often connected to devices used by everyday consumers. And at BRITE ’15 we had the pleasure of hearing Billie Whitehouse, Founder and CEO of Wearable Experiments, talk about her company’s efforts to entwine articles of fashion with the internet. This ran from the practical – Navigate, a GPS jacket that gathers data to help guide you through major cities [video] — to the, shall we say, more entertaining side of things – Fundawear, for which you’ll just have to watch the clip [video].

But beyond this hype, the reality is that just as many, if not more, of these connected devices will be part of the industrial economy – think of areas such as transportation, city planning, and manufacturing. In a new research collaboration that David Rogers and I are conducting with SAP, we find that for most firms, the top priority in implementing an Internet of Things initiative is gaining efficiencies and cost savings, with revenue as a secondary objective.

We also found that depending on the firm’s core business case – cost savings vs. revenue – the value firms sought to extract from data collection was different. Increasing the visibility of operations or improving customer service and decision-making rose to the top in firms driven by cost-savings, while revenue-focused firms were driven by opportunities to provide more customized products and services, gather greater customer insight, and create new business models.

But for each of these companies, the top barriers in developing these initiatives were the same – data privacy and security threats. Everyone is aware that these connected devices have the potential for great benefit, but attention to the privacy and security of the data they collect is paramount to their long term success.


As Martin Hayward told the BRITE audience, in many markets and categories the current use of data sadly leans more towards ‘offer anarchy,’ with companies seeking only to reach more and more consumers with purely transactional deal-based opportunities, all aimed at short-term immediate sales. Our data future will hopefully be more utopian, and not draconian, if companies and their stakeholders are able to build mutual trust and a rewarding value exchange.

How are you treating your data and building your relationship with stakeholders?



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