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It’s no secret that the global established music industry is in a tumultuous period. 2010 saw album sales dropping another 12% in the USA, by far the world’s largest music consumer. The increase in digital sales (which now make up 46% of music purchases) has not been enough to offset rapidly declining CD sales. It has become clear that capturing online music now is key in determining the future music industry superpowers. This is not to say that the battle hasn’t already started.
The online music landscape is a crowded marketplace, with many services jockeying for their position. The developing nations, however, are almost entirely left out of this revolution. South Africa, as an example, has a tiny digital music industry and most of the major international services are still not available here. As our internet population grows, however, we can hopefully expect more competition for our online purchases.
So what does this international landscape look like? Well there is one force that is dominating online music sales. Apple’s iTunes Online Store is by far the biggest player… and not only on the web. It recently surpassed Wal-mart as the largest music retailer in the US. Over 70% of online music sales go through iTunes. And why has iTunes become the world’s largest music retailer? It is an online store that operates like most others. The key to its success lay in the success of the iPod, and other Apple hardware. Having iTunes as the proprietary software for the iPod put it on every computer it needed.
When the store launched on iTunes, it was a simple step for users to start buying music… on software they were already comfortable with. This removed one of the major obstacles in online purchasing, the users’ hesitance to change. iTunes made it comfortable and trustworthy. Unfortunately South Africans cannot legitimately use the iTunes Online store to buy music. And there is no indication of when that might change.
The second largest music store, Amazon MP3, also found success based on its already established place in online purchasing. Even the pay version of Napster, another of the large online music stores, had an established name to work with. This is the unfortunate truth of online music stores. It is not an easy market to break into. The licensing deals alone exclude anyone without large-scale financial backing and major label connections, this before trying to get people to give up their credit cards to another, unknown, web-entity.
For North America and Europe however, there are multitudes of choices all over the web, from Rhapsody to Sky Songs to eMusic and the remnants of those that haven’t made it… like MSN music and mp3.com. Each offers a slightly different service, but are all overshadowed by the beast of iTunes.
For the developing countries, like South Africa, Nokia’s OVI store is the only major online music retailer. After disappointing figures in the developed market, Nokia is forging its user-base where iTunes and the others have ignored. In fact, Nokia’s “Comes with Music”, its unlimited music service included in the price of the cellphone, is being discontinued in most markets… with South Africa being one of the few exceptions.
On the flipside, there are the independent music sites. Instead of fighting massive labels for licensing rights, CD Baby, Bandcamp and a host of others have taken to monetising the huge independent online music scene. CD Baby has been enormously successful with both small and big artists, allowing them to sell on the site and retain 75% of the album price (along with a small service charge). It also includes deals with iTunes and other major stores.
Bandcamp has taken its own unique approach to creating a sales platform. Much like blogging platforms (Tumblr, Blogger etc) do, Bandcamp gives artists the ability to create their own website on .bandcamp.com, with a built-in ecommerce engine. Bandcamp only takes 15% of transactions for its service, without any service charge. As the artist makes more, this rate drops even further.
Even bigger artists (like Sufjan Stevens) are starting to use these services, to avoid the massive cuts that labels take for themselves. 85% of 20 000 albums is better than 10% of 100 000 after all. Both CD Baby and Bandcamp are available for South Africans to use, because they are not bound by the licensing deals that major labels control. If you’re looking for electronic music and remixes, then have a look at Soundcloud. It is another rapidly growing site for smaller musicians that has recently received US$10 million in investment.
These online stores are only a part of this evolving online music industry. With the proliferation of high speed broadband, streaming music is far more easily accessible than it ever has been before. Rhapsody and Napster, aside from their online store offerings, are also ‘stream on demand’ sites. Here users don’t need to pay to buy songs, but rather simply pay to listen to them. Both have around 9-10 million available songs to choose from.
Rhapsody enjoys around 1.5 million users and Napster enjoys about 1 million. Spotify is another streaming site that has enjoyed widespread success in Europe, but hasn’t yet moved to the USA let alone South Africa. MOG looks poised to take a stake, yet is still unavailable here. Both Spotify and MOG are focusing strongly on mobile accessibility and this should bring them to the African continent sooner rather than later, considering the mobile market here.
Grooveshark, however, is probably the quickest rising star in the streaming category, at least with music fans. This music streaming service allows free users to search for any song (within a 22 million strong repository of uploaded songs) and stream it for free. This is without the country restrictions that plague so many of the other big sites. This is due to its semi-legal adherence to licensing laws, because the content is user provided. For a music listener with a good internet connection, Grooveshark is a free and (mostly) legal way to listen to any song you want. This, as miraculous as it sounds, is something that many already experience with another giant of online music.
Despite being a video site, Youtube has also become a means for users to freely stream pretty much any song they want. Even with licensing issues resulting in many music videos and songs being blocked in certain countries, there is always somebody else ready to upload another version. Where Youtube really excels however, is in finding obscure and otherwise unavailable music.
Other music services have gone a different route, focusing on music recommendation rather than downloads or streaming. Pandora and Last.fm work like online radio stations that generate your next track based on your listening history. Both use smart, and very effective, algorithms to figure out what kind of music you like, and then let you listen. Unfortunately Pandora is flat out unavailable here and Last.fm costs $3 a month (it is free in the U.S., U.K, and Germany). Music recommendation is quickly becoming a necessary feature for major online music providers, with services taking either this route, or using social network powered recommendation (like Rdio and iTunes’ Ping).
So the revolution has already started. There are many other music distributors left out of this, already extensive, list. Not to mention the upcoming and much anticipated Google Music. These sites offer varying services for every kind of music fan, of every genre. They have already shown a far more affordable price for music than physical media ever allowed. More than any of this though, they show the strangling grip that licensing and copyright laws have over the music industry.
Of these services, only a handful are available worldwide… which would not be as disappointing if it weren’t for the fact that licensing issues are the only obstacle. These are artificial limitations placed on sites that could otherwise grow virally across the world. For an industry that is ‘at war’ with piracy, this seems counter-productive. And while acts from major labels are hampered by this, the independent artists are available anywhere through Soundcloud, CD Baby and Bandcamp and other independent sites.
With the exception of Nokia OVI, the most convenient way to download major international artists in South Africa is through illegal or semi-legal means. Our own Rhythm Online Store is a modest offering that has a good selection of South African artists, but not much else. Its song catalogue is rivaled by many private collections. So, during the crux of a music industry revolution, South Africa is left with only a few options. This may change soon, or it may not, but it seems Nokia has the opportunity to firmly plant its roots. Unfortunately that still excludes us from fully taking advantage of exciting and innovative new developments, in music recommendation and mobile streaming for example, but at least we now have access to a top class international music store.
As to when the established online music industry will come here, that depends on labels sticking their necks out. And until they do, the pirates will control these seas.