Who is the market for digital packages?
January 29, 2008
Continuing on my digital music packaging discussion. I thought I would talk about the potential market for these packages.
“What’s your market,” asks the VC?
“The people who bought CDs,” is my answer.
“No one buys CDs anymore,” they retort.
“That’s why there is a market for digital music packages,” I reply.
Why we bought music packages?
As I pointed out in my previous post, people* bought vinyl, tape, and CDs for 3 primary reasons:
- Convenience, which included listening on-demand, portability (tapes), durability (CDs), and acquisition (MP3s)
- Collectablity. These music packages were expressions of who we were and our social status.
- Connection. Albums and CDs connected us with the artists and bands we loved.
*Who are these people who bought albums?
Well in the 1990s buyers of CDs were roughly15-20% of the population in North America. That’s buying one (1) CD or more in any given year. During the 90s I bought on average 60 CDs per year. People like Ian Rogers bought 60 in a month! I would fathom a guess that I would represent 1% of the population. Ian Rogers 1/100th of 1%?
“Well that doesn’t seem like much” , says the VC?
“Well that represents *about $8 billion in yearly NA sales,” I say.
*Note: After reading a number of IFPI reports I have no confidence in their numbers. They just don’t add up from year to year. A colleague of mine believes it is a result of their somewhat erratic methods of data collection.
Let’s break up the market
The market is made up of:
Insiders – musicians, reviewers, industry. These guys and gals don’t buy music. Ok, I know a few do, but we can assume it is VERY small over all. The industry does not run on musicians selling to other musicians. (Then again. I think it does in the local Vancouver indie scene.)
Fans - these are people like myself who bought more than 1 CD per year and supported the recorded music industry. These are the people who buy for Collecting and Connecting. However, when looking at this group, I would say you probably are not a fan if you purchase less than 3 CDs in a year. So let’s extract those who bought only 1 or 2 CDs per year. I call these people…
Consumers - I know a lot of these people. You do, too. These people bought CDs for convenience to play in their car, or during parties, or what-have-you. They didn’t follow the artists they purchased. It was about listening to music they liked (or was popular) when they wanted it. As such this group is unlikely to buy digital music packages. I do not know what percentage of the market this group represents other than from some ad hoc surveys we conducted. If anyone has some research on it, I’d love to hear from you.
Public - these people did not buy CDs in a given year. They represent most of the people you will ever meet in your life. We love them. They are mothers, fathers, sisters, brothers, and friends, but they don’t buy music. Interestingly the industry wants to monetize them unwillingly in a number of horrible culture tax schemes. I will leave that for another post.
Below is a diagram illustrating the potential market for digital music packages. The biggest hole as I pointed out is what percentage do music consumers represent verus the music fans.
BTW. I actually didn’t recognize that the diagram looked like a CD until my colleague Seamus pointed it out. So Loren quickly re-authored it. :)
Some New Markets for Digital Packages
I’m one of those intrigued by the potential of your Dylan project. When I think about a viable model of the market for digital packages, the first thing that crosses my mind is this, "Are we talking about a simple producer/consumer relationship or does the internet introduce the possibility of a more supply-chain orientated model?"
Consider this—a market breakdown that factors in the possibility of new roles for content producer/managers just above the consumer tier in the online world that extends their ability to 'repackage' content again and again. There does seem to be a demand for tools by those who wish to find a role for themselves as content remixers. Is this something you’ve given thought to?
To me, when you talk of digital packages, the need that I envision addressing is the current lack of a way to tag online media in any viable, consistent, and portable way for the purpose of creating context or 'friction' in the frictionless online world. The ability to attribute media in a way that adds meaning for the ultimate consumer of the media is a service that consumers would perhaps pay for, and ultimately, in terms of a digital media packaging tool, what content remixers would factor into their services as a value-added cost.
There is a discussion that I am involved in of these fundamental issues of what the digital age actually offers in response to a series of posts at New Music Strategies if you wish to investigate some of these issues further. Thanks for your time.
Maurice
You are BANG ON, Maurice.
What a wonderful comment!
I just wrote this note on Project Opus, when I was asked to give a bulleted list of what was needed for adding value to an audio file:
1. Connect valuable metadata to ANY song file as a Web service.
-> AMG is closed and highly expensive for any indie site. They also only catalog music that is SOLD. It does not support all music recordings.
-> MusicBrainz though incredibly well intentioned and supported by some of the best people on the planet is overly complex and a bitch for users to maintain.
-> Wikipedia has actually great music metadata, but it's not structured or offered as a Web service.
2. Connect related media to ANY song file as a Web service.
-> are you listening to Leonard Cohen's Hallelujah. Here are the 50 other versions of that song available to you. Including the live version by kd lang, which will shake you to your knees (http://www.youtube.com/watch?v=P_NpxTWbovE&e).
->Plus other media like photos, reviews, flash movies, etc.
->offer this media aggregation as a Web service for other sites
3. Give fans a way to express their connection with the music and musicians
->Our connection to music cannot be expressed in Wikimedia or metadata/metamedia. We want to be part of the experience, I want to remix the media and add my own content to express my connection.
-> provide a fun authoring and media mixing environment for fans and artists
->offer this fan generate media aggregation as a Web service for other sites and services
4. Provide an infrastructure where it makes sense for artists to offer all their content up to their community of fans.
->Provide fans with an environment to reuse the content (as per point 3).
->Provide artists with easy non-DRM methods for tracking use of their content
->Make the data formats for the content used in this infrastructure open and free.
Points 3 and 4 talk directly to what you talking to.
And you are exactly right any service must enable other people and communities involved in music to be part of the value chain.
So you are right one of the things that a new packaging format could do is expand the market to actual insiders and other content producers - not what we would think of as your traditional fan.
If you are working on these ideas we should talk.
david ( . ) gratton ( at) projectopus (dot ) you know the rest.