IFPI Digital Report

February 2, 2008

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Some days ago the IFPI released the new digital report.

Just a few thoughts of mine while reading the report:

**15% of the total music market revenues are now digital. That`s in my eyes, still a small figure. The transformation still didn`t really happen. The report talks about “reinventing the industry”, but I think that`s sounds too positive. The transformation on the “user side” is far ahead. The current p2p download figures are not mentioned in the report at this place. Why? (Later they mentioned that for every legal download there are 20 illegal downloads)

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And there was already a decline in growth rates from 6% last year to 4% this year. (By the way really interesting is the percentage of digital revenues of the total film market: 3% . The transformation didn`t really started there.)

**I liked this quotation:

“ Whenever we release a premium download as well as a basic album bundle, it’s usually the higher value product that sells the most, especially within the first couple of months. The fact that fans choose the expanded version, at an enhanced price point, demonstrates how much they value that additional content and the deeper connection with the artist it offers.” Eric Daugan, Vice President, Digital Business, Warner Music International

One indication more, that there seems to be a great potential in the fans and their connection to “their” artists. I think that`s an important chance for the industry. Create great customer experiences, build great brands around artists, around music services, around devices and the people will value that with a high price point. There is already some great brands at the devices market, there are definitely great artist brands, but there is still no amazing brand in the music service market that offers a really great customer experience…

** Mobile sales: I think there will be no differentiation soon between mobile and digital sales. There is an expansion of wi-fi technology coupled with 3G mobile devices (audio/video players and telephone) in the future. People will use their songs on all devices… won`t buy songs twice (… or better they will just rent songs, subscribe to their jukebox). Ringtones are over.

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** Still only 5% of the digital revenues are made on subscription services. That`s the biggest missed chance yet (I wrote a lot about bundling here). In Germany there is still no competitive product on the market. Napster is a first step. But the interoperability to the ipod, your car, and the missing marketing and pr is a problem. Nobody knows out there, that the product even exists… Why are there no musicians, who go out there on stage and say: I love subscription? Cause the other distribution channels are to mighty?

** Advertising-supported services: They are just mentioned in a few lines in the report. I think besides the subscription “high quality” customer experience business model that’s the second most important model to compete with the “dark side” of the net. Why are there no numbers in the report? It should be one of the revenue streams the industry should force soon.

** There are 1.2 million rock acts out there on myspace – wow! We need better recommendation systems … more Last.Fms!

** And another worth reading quote:

“ Digital technology has shifted power to consumers, and music marketing must evolve
from ‘push’ to ‘pull’. Our focus is to embrace this power and become completely
consumer focused. By listening to and responding to our consumers and to our
artists we aim to unlock the incredible potential for music in the digital environment.”

Mark Hodgkinson, Executive Vice President of Global Marketing, EMI Music

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