‘Growth hacking’ has been a buzz phrase within the tech world for years now: referring to inventive (and sometimes unconventional) ways to attract more and more users and/or revenue to a fast-growing startup’s product or service.
Is it a phrase we should be applying to music-streaming on a global basis? The very first session at Music Biz and Music Ally’s NY:LON Connect conference in New York this morning addressed the question.
Jonathan Dworkin, SVP of digital strategy and business development at Universal Music Group, was joined by Tracy Gardner, SVP of global business development and strategy at Warner Music Group. The moderator was Bill Wilson, digital programming and industry relations at Music Biz.
“We have all of the world’s platforms pretty deeply engaged in streaming music in one way or another,” said Dworkin. Amazon, Apple and Google have streaming services, and Facebook is signing licenses for user-generated content.
“But also the explosion of markets that weren’t really on the map even five years ago. Tencent in China has been an absolutely incredible story. What’s happening in India is absolutely fascinating. About a year ago, [mobile] data became extremely close to free… and streaming is exploding,” he added.
Dworkin mentioned Indonesia and the Philippines. “Markets that weren’t a part of the conversation two or three years ago are now the ones that people are talking about… And you have these tensions that are all driving better consumer experiences.” For example the competition between Google, Amazon and Apple for control of the smart home, with music a key part of that battle.
“The local players and the big global players are acknowledging that one size doesn’t fit all in every territory,” added Gardner. That extends to it not just being the big, global (anglo) artists and repertoire dominating in every market: witness 2017’s boom for Latin American acts, often singing in Spanish.
“The charts are what are driving popularity within these big popular global streaming services. Consumption is growing in territories that are highly populous, and many of which are not English-speaking territories,” said Gardner. And those audiences can push tracks onto the global charts on services like Spotify.
“You’re no longer just talking about breaking in your home town: you really do have this opportunity, like that *snaps fingers* to have access to a global audience,” said Dworkin. However, he called for streaming services to adapt to the particularities of local markets: for example in India, where he suggested that music isn’t traditionally navigated by artist or genre, in the Bollywood ecosystem.
Gardner talked about the need for more flexible ways to pay for music-streaming, particularly in countries where credit-card penetration remains low, and where pre-pay mobile users may run out of data and/or credit halfway through a month. Alternative billing options are required.
“We need to be a little bit cautious about being too dogmatic,” agreed Dworkin. “The story may play out a little bit differently. The pre-paid thing for example. Pre-paid is an enormous opportunity. We need to figure out how we add the next billion into the streaming ecosystem. The problem is it’s extremely hard to do recurring billing on prepay.” Yet recurring billing is exactly what’s underpinning the streaming subscriptions market in the west.
“It’s not just about taking somebody and moving them from the free funnel into the paid,” he said. “It’s going to evolve, and I don’t necessarily think, particularly as we look at developing markets, that he model’s going to look exactly like it’s looked in Europe and the US.”
The conversation moved on to conversion rates from free to paid in the west. “Conversion is not just an indication of how many people are moving to paid. It’s also an indication of how big your funnel is. You can have 100% conversion, but that’s a problem: it means you have no new audience coming in,” said Dworkin.
He praised Spotify. “They’ve kept users in the funnel, got another bite of the apple again and again, and kept converting them… because they’ve got an engaging product. I don’t think anybody wants us to get to 100% conversion. If we get to 100% conversion, we have a problem.”
Gardner agreed that moving people who are long-term free users “up the chain” of subscriptions is a key challenge. “Secondly, are people going in to that and dipping out, or are they staying and paying?” she said.
Dworkin talked about the importance of ilfetime value. “We’re trying to orient our thinking to talk about the opposite of the per-stream model. There has been a need to build equivalency around the business: what is the per-stream rate look like? That conversation does not really happen in our building any more, but it was happening, two, three, five years ago as the right thing to measure,” he said.
A service that isn’t very engaging will generate higher per-stream payments, but that’s not necessarily a good sign, in other words.
“What we spend most of our time looking at on a product-by-product basis as well as on an overall service basis is lifetime value.” How well a streaming service is attracting people, converting them to subscriptions, and then retaining them over time.
Gardner talked about recent research suggesting one in six Americans now own a smart speaker, and said labels are having to work hard to meet the challenges of ensuring it’s their music that Alexa, Google Assistant or Siri helps people find, rather than that of their rivals.
“It’s capturing a new audience that traditionally perhaps might not have consumed music via streaming, and it’s people engaging in a way they haven’t before. We’re seeing a lot more engagement: people are saying they are listening to music more using these voice-activated devices,” she said.
“So how do we become smarter about metadata for voice… where we’re optimising our performance in the service? We’re diving into metadata in a different way… There’s a new intermediary, where the human is uttering a search, and where the hardware device is interpreting that search, and deciding what type of search to send to the streaming service. That’s bringing a whole extra layer of complexity that we haven’t had to deal with before.”
Dworkin agreed. “Google and Amazon are parenting our children,” he joked. “It is like living with HAL! And definitely north of 80% of the use case around these devices is listening to music. It’s filling more and more and more of our time and our lives with access to and consumption of music. It’s incredible.”
The conversation turned to hi-res music, which Dworkin admitted has a problem in terms of the limited number of streaming services supporting it at the start of 2018. “It takes time to launch a new technology,” he said, but stressed he remains confident that as people experience hi-res music, they’ll want it for themselves. “The emotional experience is what will win the day, not the technical one.”
Is hi-res music a premium service, something that people will pay more for? “We think there’s an opportunity to price-segment the market,” said Dworkin. “There’s an enormous opportunity for price segmentation as the streaming market matures. It doesn’t just need to be about hi-res. We can think about hi-res as a suite of premium services: deeper visual experiences, special content…”
Gardner compared it to TVs, which have moved from high-definition to 4K and now 8K, with accompanying discussions about how much content is actually available for those screens. Hardware and content need to move forward together, she noted.
Wilson asked about “the distraction economy” and music’s challenges
“It’s truly the thing that worries me. I’m very positive, I’m very bullish about where we’re going. Never before has more music been made or consumed… but what does worry me is that with the ease of consumption, and with the disappearance of the UI layer and the rise of the algorithm… and the glut of content. I do worry that music is at risk of becoming an ‘and’ experience. I’m driving and I’m listening to music. I’m at the beach or gym or whatever it is, and I’m doing it. I’m worried that the consumers become less focused on the depth of the experience,” said Dworkin.
“I don’t see the experience of going down, putting vinyl down and having a focused listening experience… that doesn’t seem to be as much the consumption experience as it is ‘play me music that sounds like I’m hanging out in a cool hotel’… I think there is going to be some innovation around people trying to drive deeper music experiences though.”
Gardner offered a positive take. “There’s other media that we have to compete with. Music is definitely a format – you shouldn’t be watching a video while you’re driving, but you can listen to music! – but fans consume not just music. They want more,” she said.
“They’re looking at the videos, the Snapchats of the artists, all the ancillary ways of consuming the artist, I guess you’d say, alongside the music. So we’re trying to focus as well on how can we tell the story of our artists?”
Dworkin talked about hearing an artist described as “a playlist artist” – getting millions of plays, and people don’t skip their music, but they “can’t draw more than 10 people to a show” because those listeners don’t really care about them. “That’s a real thing! And something we need to be a bit cautious about. To me this is a sacred business: we’re doing the Lord’s work here! [said with a smile] – The power of music! I just think we need to be cautious about how, as we scale, about becoming too cynical. There is a danger of cynicism creeping in. And you see it: people gaming platforms, people gaming consumers, white noise, all of this crap creeping in at the edges. It’s very dangerous. The business will grow, but it’s dangerous for what I believe in anyway: the real artist experience.”
Gardner had the last word. “It is a slippery slope, and while it’s an acknowledgement of the way things are working, hopefully at the end of the day it’s the quality and he product itself that will win out, as opposed to people gaming the system,” she said.