Post-Conference Report
MidemNet 2004
Presented by
Digital Media Wire participated as a media partner for the fifth annual
MidemNet conference in Cannes, France on January 24, 2004. CEO Ned Sherman,
who moderated a panel on Marketing Music Via Technology, and VP of Marketing
Tinzar Than attended the 1-day conference. This report provides an inside
look at some of the conference highlights.
MidemNet 2004
focused on positive developments - including Apple's successful rollout of
the iTunes Music Store - to bolster the theme that the music industry's
integration of new technology is finally back on track.
The 1-day
conference featured top executives from Apple's iTunes Music Store, EMI
Music, OD2, RealNetworks, Universal Music, Nokia, Gracenote, Roxio, Vodafone,
Clear Channel, Digital Media Wire and Xbox Live, among others, who
participated in panels on a range topics, including "Sale of the Century: A
View from the Top", "What's Coming Next: New Products & New Formats",
"Technology Face-Off: DRM v. Unrestricted Content", and "Spreading the Words
(& Music): Marketing Via Technology".
Keynote Q&A
Sessions with Apple's Eddy Cue and Roxio's Chris Gorog
The highlight
of the conference was a 30-minute Q&A session featuring Eddy Cue, Apple's
Vice President of Applications and Internet Service, who was interviewed by
Conference Chair, Ted Cohen, EMI's SVP of Digital Development and
Distribution. The interview focused on Apple's success with iTunes, which has
sold more than 30 million songs since its launch in April 2003, exceeding
expectations of executives from the 5 major labels all of whom have licensed
songs for inclusion in the iTunes catalogue and solidifying its position as
the early leader in the fast-growing market for downloadable music.
Apple launched
iTunes, which offers individual downloads for 99 cents each, with the belief
that "if we delivered a much better service than Kazaa then people will come
and buy from us," said Cue. And "come and buy" is what consumers have done.
According to Cue, iTunes has logged the following sales figures since its
launch:
§
1
million songs sold in the first five-and-a-half days
§
3
million songs sold by the end of the first month
§
10 million songs sold in the first six months
§
More than 30 million songs sold as of January 5, 2004
§
95% of the 500,000 catalogue tracks sold at least once
Moreover, the
early success of iTunes has energized an industry that just a year ago viewed
technology as its chief nemesis rather than a path to success. It has also
lead to the launch of dozens of competing services, including Napster,
MusicMatch, MusicNet, MusicNow and Rhapsody, and others branded by the likes
of Coke, Pepsi, Wal-Mart, Amazon.com and Microsoft.
But, Cohen
pointed out that despite posting successful sales numbers, Apple's Chief
Executive Steve Jobs was recently quoted as saying that "there's no money in
online music" and Apple's success comes from selling iPod players not
licensed music. Cue did not dispute the assertion and credited iTunes with
contributing to the sales growth of iPod, which has a 31% U.S. market share
by units and a 50% share by revenue. However, the discussion raised an
important question that would be revisited throughout the day: Is there a
viable business model for selling music online that does not involve the
ancillary sale of software, hardware, soft drinks or other products?
Roxio's CEO
Chris Gorog, who was interviewed by Music Week's Ajax Scott, tackled the
question head-on responding that although Roxio's revenue from online music
is now only a fraction of its $90 million software business, he predicts that
in the future "online music will dwarf what we are doing on the software
side." "Content is king," asserted Gorog.
Gorog, who
overseas Napster, a Roxio subsidiary and chief rival of Apple's iTunes
service, made a strong case for Napster's strategy, which is modelled on a
monthly subscription format rather than the a la carte format of selling
individual downloads used by Apple. "We believe the consumer model of choice
will be subscription, even though a la carte has been great for jump starting
the business," said Gorog. "Subscription will help our industry cross the
chasm from early adoption to mass adoption." According to Gorog, the ideal
consumer model is an all-you-can-eat monthly subscription priced at $9.95,
which offers a full menu of songs, not the limited catalogue a la carte model
offered by iTunes.
Panel I:
"Sale of the Century: A View from the Top"
The first
panel, which included OD2's Charles Grimsdale, EMI's John Rose, RealNetworks'
Sean Ryan, Wanadoo's Olivier Sichel and mm02's Kent Thexton and was moderated
by Mark O'Donoghue, Publishing Director of MusicWeek, discussed the
challenges facing labels and their online partners. The panel focused on two
primary issues: the difficulty in addressing varied consumer needs and the
need to support different payment methods.
John Rose, EVP
of EMI Music, said that while 99% of the label's music is now available for
internet-based subscription-streaming services, the challenge for the major
label is to meet so many different consumer needs, which would require the
company to make its music available in any format, including digital
downloads, ringtones and true tones. According to Rose, "The challenge we
face in moving forward is getting all the rightsholders in the chain, not
just the record labels."
Charles
Grimsdale, CEO of the European digital service provider 0D2, stated that his
company's biggest challenge is to deal with Europe's varied online payment
landscape, which requires his company to support 13 different payment
methods. Grimsdale expressed concern that without more unification among
payments systems the situation for online music businesses will continue to
be difficult.
Other issues
discussed included the ability of online services to address customer service
needs and the complexity of a system that involves multiple formats of
digital rights management. On the question of how labels and their online
partners are going to make money online, Rose commented: "All of us are going
to lose money until the volume of music buying increases."
Panel 2:
"What's Coming Next: New Products & New Formats"
The second
panel, which included Universal Music's Dirk de Clippelier, DiscLive's Rich
Isaacson, Microsoft's Julia Miller and DTS Entertainment's Jeff Skillen and
was moderated by MusicAlley's Toby Lewis, discussed the status of consumer
adoption of new formats and products for music delivery, including DVD-Audio,
SACD (Super Audio CD) and game consoles, and the use of blank CD's to record,
release and sell recordings of live concerts at venues.
According to
Julia Miller, Director of Microsoft's Xbox Live, "More than 60% of our
customer base use CDs to customize their games and music together. People
want to control those experiences exactly the way they want. And we think the
winning strategy is to give control to the consumer." Miller took issue with
Apple's view that you can't make money from online content: "We believe that
content is where we will make money. People are willing to pay if you make
the content interesting and relevant to them."
While conceding
that recording, releasing and selling CDs at venues with recordings of live
concerts is a concept still in its infancy, Rich Issacson, CEO of DiscLive,
suggested that there will be considerable growth in this area in the coming
years as artists and labels explore new ways of packaging music to generate
new revenue.
Miller and
others on the panel argued that the explosion of new formats and products is
as much about packaging to meet the varied interests and needs of consumers
as anything. Addressing the question of who will win the "format war", the
panelists were in agreement that there should be no war in the first place.
According to Jeff Skillen, Vice President of DTS Entertainment, "The format
war is useless for the consumer." "If one of the formats was to win, you
would have to kill off the other one," added Dirk de Clippelier, Managing
Director of Universal Music Belgium.
Panel 3:
"Technology Face-Off: DRM v. Unrestricted Content"
The third
panel, which included Professor Karlheinz Brandenburg, Nokia's Timo Pastila,
Activated Content's Stuart Rosove, Macrovision's Adam Sexton and Vodafone's
Timothy Wright and was moderated by Paul Jessop of the IFPI, engaged in a
discussion of digital rights management (DRM) that centered around the issues
of compatibility, portability and consumer experience. However, as a member
of the audience pointed out during the Q&A session, the panel failed to
address the issue of whether DRM solutions are the answer in the first place.
The overall
theme of the discussion was that DRM, regardless of whether applied in the
online, offline or mobile environments, needs to be more flexible and allow
for compatibility between devices in order to provide a better user
experience. According to Professor Bandenburg, the goal should be to "keep it
simple."
Panel 4:
"Spreading the Words (& Music): Marketing Via Technology"
The last panel,
which included Polydor's Mark Krendel, Clear Channel's Nora Rothrock,
MusicIndie's Gavin Robertson, BestBuy's Scott Young and BMG's John Davis and
was moderated by Ned Sherman of Digital Media Wire, discussed some of the
cutting edge ways labels, artist managers and technology representatives are
marketing music.
Themes included
understanding the relationship between labels and artists with respect to
artist web sites and communications with fans which often involve email and
SMS text messaging, drawing the line between an exercise which is designed to
be commercial and one that is promotional, and meeting the challenge
presented by technology, which has created multiple communication channels
which can be costly and time-consuming to fill on a consistent basis.
According to
Nora Rothrock, who promotes Clear Channel's live shows in Europe, technology
has "made the consumer king." "Consumer expectations are greater than
before. Some people only want to receive information by email or SMS. Five
years ago you just had to place an ad in the newspaper," said Rothrock.
"Those days are over."
John Davis, who
is New
Media Director of BMG (UK), said that the label now manages 35 artist web
sites, which requires additional coordination between the label and artists
with respect to adding new content and promoting new releases and live shows.
All of the
panelists seemed to agree that technology is a double-edged sword, lowering
marketing costs in some cases and increasing them in others. Only one
panelist, IndieMusic's Gavin Roberston, had an opinion on the use of
peer-to-peer (P2P) to promote artists. According the Robertson, success
stories are beginning to surface from bands that are using P2P as a
promotional tool.
Addressing the
question of how music marketing is different today than it was five years
ago, Robertson said: "We're finally doing what we should have been doing
years ago."
Conclusion:
More Discussion on These Topics at Digital Music Forum
On March 1, 2004, Digital Media Wire and Billboard Magazine present the 4th
Annual Digital Music Forum (www.digitalmusicforum.com),
a 1-day conference in New York City that continues the discussion of many
issues addressed at MidemNet 2004 as well as tackling important law and
policy issues involving the RIAA and peer-to-peer networks.
The forum addresses the following questions:
-
Is there a viable business model for selling music online?
-
Can licensed services compete with free downloads from file-sharing
networks?
-
Who will be the winners and the losers in the world of online music sales?
-
What is the status of pending lawsuits and legislation concerning digital
copyrights?
-
Can the music industry profit from legitimate uses of P2P?
-
How are consumers reacting to new formats for music delivery?
-
Will new formats generate the kind of success that the industry experienced
with CDs during the '80s and '90s?
-
What are the challenges and opportunities for music industry executives
seeking to maximize the potential of the mobile market?
-
What does the future hold for satellite, digital and Internet radio?
Confirmed speakers include:
-
Chris Amenita - SVP, ASCAP
-
Amy Bernstein - Senior Editor, Business 2.0
-
Derek Broes - EVP, Worldwide Operations, Altnet
-
David Card - VP & Research Director, Jupiter Research
-
Scott Cohen - Co-Founder & President, The Orchard Global Media
-
Ted Cohen - SVP, Digital Development & Distribution, EMI Music
-
Peter Csathy - COO, MusicMatch
-
David Del Beccaro - President & CEO, Music Choice
-
Maureen Dorney - Partner, Gray Cary
-
Roy Elkins - CEO & Founder, Broadjam
-
Mark Frieser - CEO & Founder, Consect
-
Brian Garrity - Senior Editor, Billboard Magazine
-
Laura Goldberg - COO, Napster
-
Jim Griffin - CEO, Cherry Lane Digital
-
Ellie Hirschhorn - GM & EVP, MusicNet
-
Jeff Howe - Contributing Editor, Wired Magazine
-
Scott Kauffman - President & CEO, MusicNow (formerly FullAudio)
-
John Kilcullen - President & Publisher, Billboard Magazine
-
David Kusek - VP, Berklee Media, Berklee College of Music
-
Steven Marks - SVP, Legal and Business Affairs, RIAA
-
Tim Nilson - VP, Mobile Technology, Sony Music
-
Jonathan Potter - Executive Director, Digital Media Association
-
Ty Roberts - CTO, Gracenote
-
Sean Ryan - VP, Music Services, Real Networks
-
Ned Sherman - CEO & Founder, Digital Media Wire
-
Howie Singer - Chief Technology Officer, Warner Music Group
-
Steve Schnur - Worldwide Executive of Music & Audio, Electronic Arts
-
Perry Solomon - Founder & VP, Strategy, Peppercoin
-
Bob Struble - President & CEO, Ibiquity Digital
-
Nikke Slight - SVP, New Media, Atlantic Records
-
Don Teague - VP, Sales & Marketing, PaymentOne
-
Nada Usina - GM, Entertainment & Media Business, Nokia America
-
Jim Van Huysse - Executive Director & GM, The AOL Radio@ Network
-
Jon Vlassopulos - Sr. Dir., Bus. Dev., AT&T Wireless Mobile Multimedia
For agenda, registration and event details, please visit
http://www.digitalmusicforum.com
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