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EMI Music CEO: The consumer has spoken, but have we been listening?

Valerie | 13 Jul 2009, 09:37

Elio Leoni-Sceti, the CEO of EMI Music, believes that consumer-focus and innovation are the keys for creative industries to unlock successful new business models in the wake of digital.

“Britain’s creative businesses are world leaders when it comes to nurturing creative talent and working with innovative artists,“ said Leoni-Sceti, “but we must complement our artists’ creativity with our own skills in innovation. That means listening to the desires and needs of consumers and delivering new products and services that they want to buy.“

His comments came as he was confirmed as a speaker at the inaugural Creativity and Business International Network (c&binet) forum, taking place on October 26th-28th.

Following Jean-Bernard Lévy, CEO of Vivendi, as a confirmed key note c&binet speaker, Leoni-Sceti will take part in a Q&A session addressing the relationship between creativity and the consumer, and moderated by Patience Wheatcroft, the Wall Street Journal’s editor-in-chief - Europe.

Leoni-Sceti continued:

“Looking at the music industry, which has become something of a bellwether for other media businesses, we have a situation where 70 per cent of music consumption is digital and yet only about 20 per cent of music company revenues are derived from digital. Music is in demand and the demand is growing all the time, but we’ve clearly lost touch with our consumers.

“I passionately believe that if we listen to our consumers, this gap will become our opportunity. I very much look forward to hearing the views of creative industry leaders at the c&binet forum and, of course, those of government who have a crucial role in creating an environment where both technology companies and content investors will thrive.“
The central focus of this year’s event will be to galvanise concrete action to support the worldwide creative economy, realising agreements between international content industry leaders and international policy makers.

The 2009 c&binet forum, ‘Nurturing Creative Content in the Digital Age’, will also discuss the most effective strategies for commercialising content and ways in which creative businesses can increase the flow of capital and talent in to the sector.

With the creative industries estimated to be worth around $1.3 trillion globally ([1]) and contributing around £60 billion a year ([2]) in Britain alone, c&binet represents a collective effort of UK government departments (DCMS and DBIS), which have provided the initial funding and support, to address some of the core issues that will impact on the sector’s future growth. C&binet is also supported by leading industry figures including Lucian Grainge, Chairman and Chief Executive, Universal Music Group International, Nicholas Coleridge of Condé Nast International, Nancy Tellem of CBS Paramount Television and J Allard of Microsoft.

[1] UNESCO / World Bank figures
[2]http://www.culture.gov.uk/images/publications/CreativeBritain-introduction.pdf

Better user experience could combat illegal P2P filesharing

Valerie | 10 Jul 2009, 13:27

Studios and content owners need to improve online user experience, and make effective use of digital rights management (DRM) technologies, or risk boosting illegal peer-to-peer downloading, according to a new report from In-Stat.

The report, “Adopting Digital Rights Information Management” which analyses content consumption behaviour in the US, calls for a shift in monetization strategy to counter the illegal downloading of video content.

Key findings include:
•    US broadband households download 14 billion videos each year; 85% are illegal
•    In-Stat sees watermarking becoming a growing technology to track licensed usage rights
•    Converting’ power user’ households from P2P to legal video services would generate $1.4 billion in subscription revenue and $1.1 billion in advertising revenue

DRM has long been a point of contention in the content industries, with critics arguing that restrictions on the use of content will limit creativity.  A number of recent high profile decisions to remove DRM technology from their products, announced by companies such as Orange and Virgin have been welcomed.

Keith Nissen, an In-Stat analyst, argues that the best way forward for DRM technology is to enable consumers to watch content in more ways on more devices, rather than using it to prevent consumers from making backups or transferring content to devices. In addition, he says that ISPs, cable companies and electronics manufacturers could use compatible DRM in their devices to ensure the user has paid to watch the film or TV show on the device they are using.

Nissen concluded:

“What is needed is a new approach to monetizing digital content including moving a relatively small group of consumer households that do the bulk of P2P downloading (power users), to legal services. The question is whether the video industry wishes to control its own destiny, or get crushed by technological change, similar to what is occurring in the music business.”

Internet radio lives on following landmark royalties agreement

Valerie | 09 Jul 2009, 08:08

Record labels and internet radio stations in the US declared an end to a two-year battle over the payment of royalties this week, with commercial webcasters such as Pandora agreeing to pay royalty rates for music they stream online.

According to a statement from SoundExchange, a not-for-profit organization that collects and distributes digital music royalties, the terms of the agreement are complex but copyright holders have essentially agreed to a new royalty rate, far lower than originally demanded but still higher than “free”.

Pandora CTO Tom Conrad said that the deal cuts minimum per-stream royalty rates for pure-play Internet radio providers by 40-50 percent, with different licenses available depending on the size of the company. Importantly, the agreement replaces a 2007 royalty decision which deemed that internet radio stations pay 0.19 cents per streamed song, which Pandora argued threatened the livelihood of all Internet radio providers.

John Simson, executive director of SoundExchange explained that the agreement benefits both creators and distributors:

“This is an agreement we’re proud of because it shows that both sides can address the business concerns of the webcasters while giving artists and copyright holders the potential to share in the revenue growth of webcasters.“

Dennis Wharton executive vice president of the National Association of Broadcasters welcomed the news:

“This is good for music. It sets a rate where artists will receive royalities for the music they produce.“

Death of a global pop icon reveals fragility of the live music business model

Valerie | 07 Jul 2009, 11:41

As millions of fans across the globe gather at the AEG-owned Staples Centre memorial ceremony in Los Angeles today to bid farewell to the King of Pop, spare a thought for Randy Phillips, the promoter who committed $50 million (£31 million) to Jackson’s comeback.

According to industry estimates, Mr Phillips, the chief executive of AEG Live, the company behind the O2 arena spent up to $30 million on production costs for the Jackson shows, and advanced the singer $10 million to $20 million. That meant that on the news of Jackson’s death, AEG was $50 million down — and there were $85 million in sold tickets to refund and 50 nights to fill.

AEG Live says the cancellation of Michael Jackson’s string of 50 concerts will be offset by insurance, potential DVD sales of his last rehearsal – and perhaps by replacing the O2 booking with a nine-month tribute. Despite the handling of the financial aftermath being hailed as a “PR masterclass”, the implications for the music industry are clear: what the death of a global pop icon illustrates is the fragility of betting on the power of live music as a panacea to the challenges faced by the music industry.

As this article notes, in a climate of declining CD sales, it’s not surprising that industry veterans have turned their attention to the concert business as a way to bolster their bottom line. In exchange for putting up money for touring, music-video production, and other expenses,  music companies want to profit from more than a band’s albums and recording masters, and get a piece of the brand itself. However, it is becoming more apparent that whilst revenues from live events are certainly growing, it must be acknowledged that it is simply getting an increasing share of a decreasing pie.

Speaking at the Palais des Festivals in Cannes earlier this year, Brian Message, manager for artists such as Radiohead brought home this point, arguing that the “gravy train of the past is gone” and the music industry needs to confront a new world order if it is to survive. 

As Message explained, there is no longer one model that will work. The music industry needs to think about new, innovative ways to monetise content, develop multiple revenue streams and engage music fans in the way they choose– and today, that means tapping into and exploiting new distribution channels brought about by the digital age.

A live feed of the memorial service will be made available free to television networks and tellingly, media commentators are predicting Jackson’s memorial will be the “biggest thing ever in the history of the internet”.  This is surely a sign of the changing times and an indication of what lies ahead which the music industry must embrace if it is flourish.

Video on Demand market heats up

Valerie | 06 Jul 2009, 10:02

As US video site Hulu gears up for its imminent launch in the UK market, a number of stories have focused on the opportunities available for the company following the void left by Project Kangaroo, the proposed video on demand platform offering content from BBC Worldwide, ITV.com and Channel 4’s VoD which was blocked by the Competition Commission earlier this year.

Broadcast reports that the News Corp, NBC Universal and Disney-backed service is offering British broadcasters equity stakes in Hulu UK plus a share of online advertising, with ITV and Channel 4 named as contenders for content acquisition deals. The Telegraph meanwhile, writes that Hulu is looking to partner with British ISPs to ensure users will receive high quality video output.

The ascendance of Hulu, which is now the second most-watched video site in the United States after YouTube is in marked contrast to the declining fortunes of Joost, an early pioneer in bringing popular TV shows and movies to the Web, who announced last week that it would be dropping its consumer service, cutting jobs and losing its high-profile chief executive as it struggles to find revenue to survive.

Out-going CEO Volpi confirmed that it plans to reinvent itself as a white label platform for cable and satellite broadcasters:

“Today we’ve decided to make some changes. In these tough economic times, it’s been increasingly challenging to operate as an independent, ad-supported online video platform.“

Volpi’s comments reflect the importance of experimentation with the VoD business model as providers struggle to make an impact in a saturated online market. As the film industry transitions to digital, undoubtedly, there will continue to be some “bumps in the road”.

Boasting (by its own accounts) 40 million monthly users and accounting for 396 million monthly video streams, it certainly has the potential to realise its ambition of becoming the dominant video-on-demand service. With ITV already confirming that it believes that an aggregator in the UK has a role to play, and Hulu long explaining that it helps to boost content providers’ businesses rather than cannibalise them via aggregation, the scene is set for the predicted September launch of a VoD service that could dramatically influence UK viewing habits in the future.

ITV considers charging for content

Valerie | 03 Jul 2009, 15:02

ITV viewers could soon be forced to pay to watch their favourite shows via an Oyster card system, as the broadcaster considers introducing small charges to view on-demand content in a bid to boost revenues.

Speaking at the Future of Broadcasting Conference, ITV’s director of group development and strategy, Carolyn Fairburn explained that the success of premium content fees and video downloads on Apple’s iTunes had proved viewers would pay for on-demand content.

The vast majority of ITV’s revenue came from advertising. However, Fairbairn said charging for content was an area of focus for the broadcaster:

“Micropayments are absolutely on our agenda. We are part-funding the Digital Britain research into the viability of this.

“We will continue to look for ad-supported models, absolutely. However, the idea people will pay [for content online] is something we should look at and do. We need some kind of payment system and then we will see if it flourishes.”

As the broadcasting industry continues to suffer from the double impact of the changing media landscape and the economic downturn, there is growing concern that the free ad-supported model is no longer working or delivering the returns to TV companies that will sustain them moving forwards.

ITV1 suffered the worst ratings in its 54-year history last week as it slumped to 16.1%. Exploring paid-for options would certainly help to address one of its challenges - its reliance on advertising and is the latest in a series of measures to address how it can monetize its content. Earlier this year, Sir Michael Grade, Executive, then the Chairman of ITV called for a rethink on product placement regulations.

ITV’s brand partnership director Gary Knight believes it could be hard for ITV to switch to micropayments for catch-up, also highlighting how the BBC’s presence would complicate such a move:

“When you’ve given the great British public the iPlayer for free it’s bloody difficult to come along and say the ITV Player’s going to cost you.”

ITV’s plans mark the first time a mainstream broadcaster has attempted to charge for viewing since Channel 4 dropped its 99p fee for 30-day catch-up on 4oD two years ago. As C21Media notes, the debate about free versus pay is set to intensify as the battle between old and new media continues.