Archive for the ‘Research’ Category
June 15, 2010
Within an increasingly sophisticated argument about digital piracy and the motivations for stealing intangible assets like music and film, there is a growing number of research projects focused on the question of software piracy and sales displacement. In other words, what does the data, rather than vested interests, have to say about the potential loss in revenue as a consequence of software piracy?
The most recent study by Joel Waldfogel at The Wharton School, University of Pennsylvania, concludes by quantifying the displacement effect at between -0.15% and -0.28%, depending on the artist, genre and importantly, the music interest (music sophisticate versus mainstreamer versus lifestyler versus influencer) of the individual in question. That is, an additional stolen track reduces paid consumption by between a third and and a sixth of a song.
The methodology included sampling university students and their music consumption. The incidence of illegal music was obviously high, but so was the legal version of the same track. Interestingly, the first insight of the study revealed a definite, positive correlation between the percentage of students who owned a legal copy and those who possessed an illegal version.
For example, of the 50 tracks used in the survey, Coldplay’s Viva La Vida had the highest incidence of ownership, with 24.5% possessing a legal copy versus 17.5% who had the shared copy. Lifewise, the legal version of M.I.A’s Paper Planes was 17.7% versus 22.5% for the illegal option, and so on. Interestingly, the average valuation placed on Viva La Vida by the students was $2.22 – well above the iTunes retail price of $0.99 (the consumer has achieved a real, legitimate surplus in this instance). Correspondingly, the average value placed on Miley Cyrus’ 7 Things was just $0.36.
On this point, but beyond the scope of this paper, much needs to be discussed about current pricing structures of digital entertainment products and their real market valuations (as determined by consumers). There is definitely room to discuss the deadweight loss of certain music offerings which are simply being priced well beyond consumer expectations.
To conclude, we have an instance here where consumers purchase an average of 5.54 songs and steal an average of 6.71, while purchased songs have an average valuation of $2.76! Based on a displacement figure of -0.28, and in the context of no illegal music filesharing, the number of purchases would rise to 7.42 songs, not the 12.25 songs (5.54 + 6.71) in a simple one for one scenario.
The fascinating aspect of this research, and subsequent analysis, is the implications for all digital entertainment offerings. While we assess the implications for digital music sales, we must also be aware of the implications and learnings for filmed entertainment and associated distribution options.
September 7, 2009
As local newspaper publishers play a dangerous game of brinkmanship to see who blinks first and introduces a premium-paid news service, there are some elegant parallels to the music industry and the plethora of streaming music services emerging both here in Australia and overseas.
All news groups have long toyed with the idea of charging for content, but it never became a priority (or even a necessity) until advertising forecasts in the last 12 months fell under the knife for some major reconstructive surgery. Advertising cycles are inevitable – peaks and troughs – but few have matched the severity of the most recent example. In Australia, like most industrial markets, what has spooked the majors, like News Limited, Fairfax Media and others, is the rapid decline in the value of online display advertising. Very few properties have held a premium.
In the specific case of News Corp, the company’s about-face on the pay-per-view model almost certainly started with the acquisition of the Wall Street Journal. The Journal’s general success in charging for content is seen as a proof-point, providing the content leviathan with some Dutch courage to publicly castigate Google and its “parasitic ways”.
In music land, the latest music whiz kid, Spotify, with its elegant user interface and unfaltering streaming technology, makes the simple point to customers: mediocrity is free (160Kbps), while quality (320 Kbps) will cost. This is exactly the point being made right across the media landscape. Yet, while quality is one unique selling proposition (USP), the other is exclusiveness, and this is far more challenging as a USP.
The sheer enormity of interest developing around Spotify, and as a consequence several other ‘alternative’ offerings (depending on jurisdiction), including Grooveshark, Pandora, Slacker, Last.fm, and locally, Bandit.fm, Guvera and the recently collapsed Stripe service, gives the impression that music streaming is an inevitable successor to downloads and CD sales, or at the very least, of becoming the pre-eminent channel for music consumption.
Apply a reality check to that assumption, and streaming as a mass-market channel for music consumption is about a practical as flying cars. Technically possible, and a few early adopters won’t necessarily throw up much evidence of a poor experience, but as penetration grows, and more than a few try the option, the experience of a subscription-based music stream will increasingly fail any cost-benefit analysis.
Putting aside for the moment the vagaries of mobile network coverage, with congestion and reception issues likely to affect a mobile-based streaming service, this leaves broadband as the alternative mass-market channel.
The issue here is that the bulk of computer time for the majority of people ticks over in the workplace. This is neither conducive to listener attention (for the purpose of valuing ad spots) or company bandwidth. As the number of listeners rises, even by small increments, the vast bulk of workplaces will block access to all music streaming sites. Alternatively, streaming at home might be a pleasurable and entertaining option for some, but these audience numbers, let alone subscribers, will be relatively small.
This quantum shift from the current per-per-unit model, where albums and singles carry a unit price, to a ‘music as water’ argument, where content is treated like a utility, is going to depend on a zero-sum game between advertising and subscriptions. If advertisers don’t follow, then expect subscription prices to compensate. But if advertising does propagate the stream, and dissect every third or forth track, how much is enough?
The research is conclusive – both here and more recently in the UK. For the vast majority, streaming is only one option, and a free one at that. In fact, for younger listeners, streams are increasingly just another source of downloads. As with YouTube clips, particularly the remixes unavailable elsewhere, the proliferation of stream ripping conversion tools that convert material into MP3s, will simply make streams another source of material rather than an end in themselves.
So here’s a prediction: paid subscriptions for online news won’t pay the bills, and neither will music streaming.
August 10, 2009
The clean, crisp lines demarcating the radio stations we listen to, or the television programs we watch on free-to-air, tend to blur and mutate the more our media behaviour migrates online. In other words, taking a screeching left off the autobahn, the viewer becomes immersed in a very dynamic, less predictable media-experience.
What compounds the issue of unpredictability, and at times confusion, is the lack of comprehensive data on comparative behaviour across websites. In other words, online media consumption is still overwhelmingly assessed by singular points of ‘engagement’ rather than in the context of the person’s repertoire of online publications and applications.
In the context of online music audiences, the plethora of music-related websites makes the measurement and understanding of engagement even more acute.
In Australia, our understanding, let alone analysis, of these online eco-systems, or repertoires, is very limited, despite having evolved through a combination of habit, relevancy and external promotion. We know, for example, that just over 390,000 Australians visit The Pirate Bay in a single month, and that about 226,000 will visit the Take40 website, but in the context of an online entertainment category with a reach of 9.4m Australians (source: Nielsen Online), where individuals spend on average three hours a month in the category, are these audience figures respectable, impressive or positively underwhelming?
Each month, Australians visit more than 450 entertainment-type websites, and this ignores the plethora of social media, sports and news sites which tend to leverage the entertainment dollar. Given this level of fragmentation, a monthly audience of almost a quarter of million visitors seems more than respectable.
In the US, understanding media relativities in a digital context is clearly more mature than what we commonly experience in Australia. A quick snapshot of Pandora listeners aged between 18 and 34, for example, throws up some fascinating site affinities.
While shared audiences between Last.fm, Radio Time, emusic and Limewire seem self-evident, there are also some strong audience relationships with the likes of Music of Faith, All Gospel Lyrics and the entertainment sites, Bet.com, VH1 and Hulu (Source: Quantcast).
For MTV.com viewers, again aged between 18 and 34, the online repertoire is a little more secular. Sites like Bossip, Skyrock, Atlantic Records, Perez Hilton and NY Mag are all regarded as having some of the highest affinity scores with the cable group’s online viewers.
Locally, the situation is made more complicated by the regular ‘leakage’ of many Australian music consumers to a number of high profile international sites. Perez Hilton pulls in approximately 320,000 local visitors each month, compared with 215,000 for the Huffington Post, and the 3.6m Australians who switch onto the emerging social media giant RockYou each month.
Understanding online music consumption, let alone the potential adoption of music-related applications and technologies, is near ineffectual without better understanding the market’s overall immersion in entertainment content and the predominantly international brands that have secured local engagement on a frequent basis.
August 1, 2009
With news of Kazaa ‘back from the dead’ and the Pirate Bay now a little more mercenary (how long before the name changes to Tariff Bay?), the world of music downloads has lost a few of its high profile superstars to perhaps a misguided strategy that file-sharers will change their spots when cash-for-content becomes the mantra.
Yet despite the best intentions to swing heavy music consumers towards a ‘all-you-can-eat’ subscription model, the world of P2P goes on, swallowing terabytes of data every hour like a deep space vortex, distributing ‘leaks’ at near light speed. Faced with such gravitational pull (and distribution efficiencies), an uneasy truce seems to have descended between parties in these so-called copyright wars.
While legal machinations seem to be giving way to technical monitoring options, there is a measurable rise in deliberate marketing tactics designed to take the sting out of ‘leaks’ through the seeding of free sample tracks, either directly into social media communities or via an established media partner.
Whether you conform to the ‘music is water’ theory, or uphold a solid, unerring position on copyright, the reality of local P2P music download activity holds a simple objective truth: it is pervasive, and involves the vast majority of consumers who regularly attend live music performances, or take an active interest in maintaining a music library of sorts. New, or rehashed payment models bolted onto P2P ‘brands’ will not alter this behaviour in any material way.
Right now almost 78m music tracks are downloaded across Australia each week, with the top track alone, usually a mainstream, high-rotation artist (Black Eyed Peas, for example), recording more than 500,000 downloads on a consistent basis, while a local hip hop group, like Hilltop Hoods (Chase That Feeling), which again has the backing of local radio, might record up to 188,000 downloads. By comparison, an indie group like British India (God is Dead, Meet the Kids), with a much lower rotation, records just over 9,000 downloads.
Of course, the correlation between airplay and downloads is not that clear cut., or even that strong.
Black Eyed Peas (Boom Boom Pow), for example, records 571,687 downloads concurrently with 271 spins for the week, which equates to 2,109 downloads per spin. By comparison, Taylor Swift (Love Story) reports 422,780 downloads concurrent with just 18 spins, or 23,487 downloads per spin.
Other artists with high download rates but low spins include: Chris Brown (Forever), 267,982 downloads with five spins; Rihana (Disturbia), 283,557 downloads with seven spins and Dizee Rascal (Dance With Me), 137,585 downloads with just five spins.
Clearly, with so much data on local P2P activity now coming to light, there is still much more to understand about what the download market can define in terms of niche music tastes and what insights they provide to justify this type of analysis becoming an accurate barometer to music trends and, more importantly, emerging stars.
August 1, 2009
Recently, a rather old-fashioned word crept into our popular vocabulary - “narrative”. The thematic qualities of this term resemble a story’s ‘arc’ or the more sinister ‘sub-text’.
Whatever the moniker, this broader, almost minimalist approach to identifying what actuality matters in the ‘scheme of things’ is both a waste saver and a potential red light to crowds powered by the sheep mentality.
In the language of the dismal science, a macro-trend is just such an arc. Standing back, absorbing this vista means taking in a new perspective, and perhaps a new conclusion.
Such an approach has a habit of making the otherwise absurd, obtuse and the downright ambiguous as clear as crystal.
Take for example the synopsis that, for at the least next 50 years, Australia will never suffer a recession, a slow-down perhaps, but never two quarters of negative growth.
This brash, binary call isn’t presumptive at all. Taking your eyes off the next pothole, and back onto the horizon, you realise Asia’s middle class isn’t yet, relatively speaking, a mass market; that’s still a century into the future.
In the meantime, Australia’s minerals, agricultural produce and intellectual property will be sucked northwards like a twister in the sky, fuelling smelters, stomachs and minds.
A macro-trend of that magnitude won’t be diverted, or distracted, by a case of broker embezzlement, Chicken flu or even the next Al Qaeda suitcase bomb.
Ergo, Australia is recession-proof for the next half century.
Another macro trend relates to the long-term consequences of a networked world and the digitisation of assets, particularly intellectual property.
Social media in all its clever and hard-to-monetise guises, is its own type of macro trend. Like the ‘golden rule’ that economic growth requires the consumption of commodities, the ‘rule’ of social media is that the more people broadcast their lives, the more self-aware they become of the ‘content’ of their routines, including the experiences and memories that punctuate their days.
Put plainly, the larger and more active our digital networks become, the more we need to entertain these ‘audiences’ with worthy anecdotes and clever impressions.
Social networks are not sustained by the mundane, the average or ‘middle of the road’, they glow white hot with what we can muster that is ‘jagged and shiny’.
From this point onwards, the macro trend we call social media takes on a new persona – a mass audience and mass market for the unique, the tangible, and the experiential that cannot be replicated by processing lines of code.
Importantly, this shift is not based on the division of wealth, where the less well off are subjected to a commoditised, homogenised existence. On the contrary, the attribute of wealth is in fact neutered by the intellectual and creative elements that increasingly dictate terms. The artisan, the scientist, the explorer – these are the new rule makers. They personify a new aesthetic, largely detached from the materialism that has characterised the ‘acquisitor age’ (Ravi Batra).
It is this aesthetic that now ignites a more authentic introspection on the part of so many more individuals; indeed, a more widespread perspective on what contributes to happiness and wellbeing.
This search for quality, uniqueness and beauty is nothing new, only the scale of the phenomenon has altered; a scale made possible by the diffusion of network technology and our desire to broadcast ourselves committing to new experiences and a re-weighting of particular values.
The trajectory of this macro trend, or social arc, is unstoppable. Being on the cusp of this mass movement, where an increasing number of individuals now put their lives, their decisions and their associations into perspective, means institutions likewise must now recast their own assumptions about consumer motivations and political relations.
March 7, 2009
Well, its been almost six months since the last entry on this blog, and I’m pleased to resume my efforts on all matters digital, analytical, and here’s the twist, entertainment-related. The latter is more a reflection of my new role as Managing Director for Peer Group.
August 18, 2008
Universal Music’s recent product launch of a CD compilation containing user options such as additonal tracks, interviews and band profiles really crystalised the emotion felt by some consumers vehemently opposed to record labels because of their perceived recalcitrance in dealing with the commercial realities of a digital paradigm, and those who are increasingly challenging the ‘free’ mantra as a viable business model.
Universal has been stung with criticism that the label still persists with this walled garden approach to music marketing, effectively forcing consumers to pay for a cluster of tracks, with a supposed hook of user options. Others defend the label, insisting the ‘industry’ is getting it, allbeit by small increments.
MTV adds its two cents worth to the discussion with the release of its Music Matters annual research pack, profiling music usage in several Asian markets, including Australia.
The 2008 survey (5,700 15-34 year olds in the “urban middle class”) taps into markets as diverse as Vietnam, India, China, Indonesia, Singapore and Australia.
Not surprisingly, “whats hot” includes listening to music (53%) and social networks (37%); “whats not” includes spending $ on music and watching TV (46%). For an MTV-sponsored survey, that last one has got to hurt.
Despite the overwhelming enthusiasm for music (THE killer application), MTV sees the glass being half-empty. Illegal or ripped forms of music downloads now account for more than two-thirds of activity amongst the 15 to 34 age group (aggregated across the different markets), while in the specific case of Australia (”Oz”), 45% of survey respondents didn’t pay to download music in the previous month.
One of the more unpredictable stats in the research related to mobile activity, primarily music videos via the handset. In 2007, 13% of respondents used their mobile phone to access a music video (versus 27% via the computer and 78% for TV), 12 months later, mobile access reached 38%.
In terms of online reach for music videos, 32% chose YouTube, versus 16% for MTV, 10% for MySpace, 10% for [V] and 10% for iTunes.
The bottom line: consumers cannot get enough music content. Further, this rate of consumption is only set to accelerate as mobile and the building of personal libraries encourages even higher rates of music consumption, forcing the product’s life-cycle (i.e. utility of the music track itself) to become shorter and shorter.
Despite all the looney tunes and fruit loops which dominate the music industry’s personality scene, it would be a mistake to assume the industry is too stupid or too ignorant to learn and adapt to future market conditions - even if that involves adopting a free price point for some projects. The irony is the music industry, of all industry types, could be the first to develop a sustainable commercial model that works in a paradigm where scarcity does not play the ‘invisible hand’.
August 1, 2008
On a month-by-month comparison, the number of online display campaigns in June 08 was approximately 86% higher than the corresponding period the year before - from 2,219 to more than 4,300 campaigns a month, or almost 11 new campaigns a day! (Source: Adrelevance)
Into this mix sits the automotive sector, of which one of the largest online display advertisers is Toyota Australia. Coincidentially (if you believe in coincidences), the number of automotive campaigns in June 08 was also up 86% on the same period a year before. However, it is the broader automotive sector which seems to be providing impetus to that growth - in particular auto publishers/classifieds groups, like Drive and CarsGuide.
This is to the detriment of manufacturers, which in June 08, made up 59% of all auto campaigns, compared with 61% from the year before.
Toyota, as a case in point, slips to 14% of all manufacturing campaigns, despite an increase in the real number of online display campaigns. This four point slip in share-of-voice amongst auto manufacturers is predominantly the result of exceedingly aggressive behaviour from brands below the top three, including Honda, Jeep, Subaru, VW and Mazda.
In the case of Honda, for example, there have been some spectatcular jumps in online campaign activity. In March, its online campaign index jumped more than 1500% relative to its performance in January 08, followed by a similar increase in June.
With auto groups increasingly committing significant advertising dollars to online, at the expense of above-the-line, there is added pressure on media planners to justify higher CPM charges and lower response rates associated with an increasingly saturated automotive media. Unfortunately for planners, auto groups are unlikely to reverse their media thinking given the increasing investments they are making in website-initiated CRM programs.
July 19, 2008
The increasing dominance of search as a media option is having a profound impact on its positioning as a marketing discipline.
Given that three out of every five Internet sessions involves the use of a search engine, and that consumer satisfaction with their initial search results is running at more than 90%, the days are numbered when search will be viewed only as discrete and perhaps quaint option for mainstream brand and retail advertising.
More accurately, search will play the roles of both a substitute and complement to other media, depending, of course, on the campaign and business objectives, and in particular, how people ’shop’ a particular category. For example, do they research online, then buy offline, or research online and buy online, or research offline and buy online. Still with me?
Further, this phenomenon known as the ‘digital disparity’, where digital marketing spend, as a proportion of total spend, is still below the proportion of time consumers devote to digital media as a proportion of their total media time, is rapidly closing thanks to the analytical methods employed by the search industry (i.e. engines as well as their clients) to determine ROI on a range of variables, including brand equity.
Let’s face it, publishers who rely on general online display advertising dropped the ball on this years ago and have never re-gained ground.
In short, not satisfied to simply take the largest slice of the market’s digital spend, search is making some very serious investments in new methods and analytical tools to prove one point: that search is the most cost-effective advertising medium their is, and by a significant quantum.
From the ‘hygiene’ practice of correlation and trend reports, through to cross-media and diminishing returns analysis, day-parting ratios and efficiency matrices, search is preparing to make a very forceful case that an advertiser can optimise a campaign, and not just a website or landing page.Even more importantly, the argument will not be limited to the currency of CPA, CPC and the like, but will also engage the almost unchartered territory of brand advertising as well. In other words, the value of optimising a website or purchasing a keyword should not be confined to immediate actions, but possibly to events which occur well after the actual search has been made.
When click-through rates for online display advertising began to drop through the floor, this “highly accountable” medium drafted the branding argument to support ongoing ad funding. Most advertisers viewed the tactic rather cynically, and as a result, have not boosted their online display budgets accordingly (as a proportion of total budgets). For this reason, it becomes perfectly clear that search will need to do the heavy lifting in persuading advertisers of the medium’s credentials as the preeminent media choice.
July 16, 2008
In June the En-Score for the Australian Internet hit 345.55, up from 307.12 in June 07. As a refresher, the En-Score is a measure of online engagement, whether across an entire market, a single industry or specific site. The score is a reflection of audience ‘quality’ as opposed to a pure audience metric detailing the number of people (or browsers) visiting the site. The hypothesis is that any digital channel should have a single point of reference indicating depth of engagement, not just the size of its audience.
In the context of the broader market, this score is also a fair indicator of the average household’s dedication to the Internet vis a vis other media options, particularly television. As the index moves north of 400 some very serious questions have to be asked regarding the inevitable decline of engagement with other media types. Further cross-media analysis is certainly warranted on this issue.
For digital publishers, in particular, this continued upward trend in the market’s En-Score is an important indicator that the medium is taking a larger slice of the attention economy - to the detriment of mainstream media.
Breaking down June’s aggregate figure into specific verticals, such as news, entertainment, finance, automotive, careers, real estate and multi-category commerce, illustrates very comprehensively the overwhelming domination of entertainment as a digital genre (en-score: 23.8) - more than three times the engagement associated with news (6.8) and finance (6.9), and more than twice that of e-commerce (11).
Within the entertainment category, the star performer is TabOnline (14.5), followed by nineMSN Games (9.2) and iTunes (5.7). In the music sub-set, iTunes has a slight lead over AOL Music (5.2), but a significant lead over Yahoo!7 Music (1.7) and BigPond Music (0.15).
Compared with the top entertainment sites, the news category pales in comparison and doesn’t bode well for the sector. The top performer in June was Fairfax (2.9), followed by News Digital Media (2.3), the Weather Channel (1.8) and nineMSN News (1.2). Interestingly, the En-Score for the Washington Post was 1.2, well ahead of some Australian online news services, including BigPond News (0.4) and Yahoo!7 News (0.4).
12 months earlier (June 07) the news category had an En-Score of 6.3, compared to the current figure of 6.8 - a difference of 8%. Over the same period, the medium’s En-Score rose 12.5% (from 307 to 346), suggesting that over time online news providers are loosing share in the attention economy comparable to their offline peers.
