Analysis

7digital boss sees mainstream music fans as ‘third wave’ for digital


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Simon Cole

“The digital music industry has convinced itself that the tiny proportion of people who currently listen to music on streaming services are the people who will shape the future of it. No industry works like that! No industry is shaped in the way early adopters adopt it.”

7digital chief executive Simon Cole has a bone to pick with £9.99-a-month streaming subscriptions – or, at least, with what he perceives as the music industry placing so much emphasis on that model, it may be missing opportunities elsewhere.

“8% of music consumed in the home is from streaming music services, and 92% is not,” says Cole, citing new research from YouGov released alongside the launch this week of new streaming service Electric Jukebox, for which his company is providing tech, catalogue and curation.

“Even if you only assume that half of that 92% was going to convert to digital in the next five years, that’s an enormous opportunity. And it leaves the market of people listening to music on their mobiles for £9.99 a month as possibly the smaller of the two.”

As a B2B supplier for streaming services trying models outside the norm, 7digital naturally has an interest in nudging the music industry in that direction. But Cole says the tide is starting to turn that way too, citing Electric Jukebox and another client – Malaysian telco Astro with its Raku service – as examples.

“I can give you three services we’ve licensed in the last six months, and none of them are £9.99-a-month. Most of the business models in our sales pipeline for the next 12 months are innovative in one way or another, and they don’t involve a simple straightforward £9.99 subscription,” he says.

“The value that the music industry needs from services remains at that level, and frankly so it should. But that’s not how you present it to the customers. We’re seeing companies come to the market with these Comes With Music-style business models, and we think that’s a significant development. We call it the third wave of digital music.”

Electric Jukebox is sparking plenty of discussion this week for its model of selling a ‘stick’ that plugs in to a TV’s HDMI port to deliver music streaming over Wi-Fi, with customers paying £179 for the device including a year’s free access, which they can then renew for £60 a year.

7digital’s involvement may raise a few eyebrows, given that Electric Jukebox’s chief executive is Rob Lewis, co-founder and ex-CEO of rival B2B supplier Omnifone. His last startup, Rara, used Omnifone’s technology, and although Omnifone is involved in the new service, so is its rival.

Rather than talk about rivals, though, Cole is keener to address a criticism voiced by a journalist at Electric Jukebox’s launch event: the suggestion that the service’s mainstream, TV-led focus is “all a bit 70s”. He wasn’t impressed with the assumption behind that.

“Well, actually, yes. A lot of people who were alive in the 70s have got a shedload of money, and aren’t currently listening to digital music. If the record people can get people into digital music who access the back catalogue and have got disposable income, that’s a much sexier position than just trying to squeeze £9.99 a month out of people who don’t really want to pay it,” he says.

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Curation is a big part of Electric Jukebox – as every other major streaming service in 2015 – with celebrities including Robbie Williams, Sheryl Crow and Stephen Fry on board to provide playlists. Yet just as important to the service will be the playlists created by 7digital’s own editorial team.

“They’re using another company for algorithmic playlists, but we’re doing the curation by human beings – by our team, and producers in our [radio] production companies,” says Cole.

“It’s one of our key benefits in this marketplace: that we can do this human curation using the basic skills that any good programme director or radio producer has got. These are people who could sit on a bus, and write down a list of music that each of the people on that bus will individually want to listen to.”

Cole accepts that the ideal model is “human curation scaled by an algorithm” to ensure those playlists get in front of the right listeners, but suggests that Electric Jukebox and 7digital are cooking up some interesting twists on the formula.

“They’ve got some bigger plans that will link them [the playlists] more closely to radio in terms of those personalities. People trust musicians like Robbie Williams and Alesha Dixon, and that can draw them in,” he says.

Just as a service like Electric Jukebox straddles the worlds of on-demand streaming and traditional radio, so does 7digital – with this incarnation of the company the result of a merger between the original 7digital and radio group UBC Media.

Cole is enthusiastic about the interplay between streaming and radio. “Streaming doesn’t kill radio and radio doesn’t kill streaming. They both end up as the same thing,” he says.

“What we are talking about here is access by people who love music to the music they love. Those people, in the coming years, won’t make much of the differentiation between a heavily, properly-curated streamed music service, and a radio service.”

He goes on to clarify that, noting that the key difference will remain the fact that radio is live and “tribal… everyone else is listening to the same thing you are”, but suggesting that the idea that people are either radio or streaming listeners is ridiculous.

“At different points in our days, we want different things. In the shower in the morning, you do not necessarily want a streamed music service because you can’t push a button. In the car you might want a radio service too, but when you’re at home in the evening with your nice speakers, you probably want to lean forward a bit more,” says Cole.

“But what we’re working on is where you can jump from one to another. Our vision at 7digital is why should you not be listening to Alesha Dixon on Radio 2, and then click that button to be taken to Alesha Dixon’s playlist, and jump off the live radio? There are some products in beta at the moment that do exactly that.”

The launch of Apple’s Beats 1 station as part of the Apple Music service earlier this year appeared to be sowing panic in some quarters of the radio industry, but since then, the terror has subsided, while the green shoots of new partnerships and services – from the BBC’s plans for digital music to Deezer and Spotify’s addition of podcasts and Rdio’s addition of live radio – suggest there is fertile ground for ‘traditional’ radio to innovate too.

The great opportunity in marketing music is the coming together of radio and streamed music,” says Cole. “Since music radio was invented 60 years ago, it has been the way that most people enjoy and discover music. I don’t see that changing unless the radio industry lets it change.”

Stuart Dredge

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