For this edition of The Audio Voice I am wrapping up the summaries I have been writing following the Audio Collaborative 2018 conference. The event dedicated to the latest audio trends was successfully promoted in London, UK, for the fifth consecutive year by market research firm Futuresource Consulting.
Combining inspiring presentations, discussion panels, and great summaries of Futuresource's market data and forecasts in front of an audience predominantly consisting of industry professionals, I think this excellent content deserves to be shared. As in my previous write-ups that are now available here and here, I'll try to summarize some key content and add some context and perspective, this time focusing on the panels on trends and opportunities in the music market and the gaming sector.
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| "Music Market Outlook - Who Dares Wins" panel. Music streaming is one of the greatest stories for the industry in 2018 - and it's closely connected with voice... |
And I start with the panel "Music Market Outlook - Who Dares Wins," where Futuresource's analyst David Sidebottom shared the stage with Pete Downton, Deputy CEO of digital music and radio services B2B platform and direct-to-consumer music download store 7digital; Christian Harris, Head of Digital Entertainment at Three, one of the most dynamic network operators in the UK; and Paul Firth, Head of Amazon Music streaming service. A timely topic, given that music streaming is one of the greatest stories for the industry in 2018 - and it's closely connected with voice...
For this panel, Sidebottom proposed looking at the music market transition to streaming and what will happen next. To provide some context, he mentioned how in the United Kingdom, already one in every five people pay for a music streaming service. "Even though that can be considered mass market level, the question is what will take this market to the next level?"
To provide the necessary background as to where the music industry currently stands globally, Downton, offered a short presentation combining Futuresource's own data with the perspective of a key provider of content such as 7digital. And he started by presenting a slide that provides an overview of the recorded music industry and its evolution over time.
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| The story of the recorded music industry... so far. Note the impressive growth of streaming music subscriptions just in the last three years. |
This graphic is certainly impressive in the way it shows how big the music industry was in the good old days of CD and physical media, compared to what it became with digital downloads. It also serves to show how streaming is catching up impressively fast. "Downloads where never a thing," this shows. "They really are a tiny blip in the history of recorded music," as Downton puts it. "Still we are not even nowhere near to where the music industry has been in terms of business volume in the CD era," he added, noting that in the CD era the global market represented about 500 million consumers buying records.
"Since then, we now have another 3 billion people connected with mobile devices, most of them middle class active users. That shows how large the upside can still be for the industry." As Futuresource's data shows, in 2019 we will be reaching around 200 million paying music streaming subscribers worldwide, combining all the available services.
So, how will things evolve? As Downton described, 3G technology was the key enabler for the mobile transition, which paved the way for the transition to digital downloads, but volumes only happened after 2007, after Apple launched the iPhone. Spotify arrived after the iPhone was already in the market and took off with 4G networks and broadband connections in the homes. "Many companies in the digital music space arrived too early, and the technology pieces were just not there," Downton added.
He concluded the presentation by illustrating how technology was effectively the enabler for this transition to streaming services. Since in 2016 Amazon introduced Alexa, smart speakers have been a clear incentive for new users to subscribe to those music services and the numbers have quickly increased. But looking ahead, Downton pointed out the arrival of 5G networks, the promise of thousands of new types of connected devices, and the evolution of voice interfaces, as the enabler of "the perfect storm" for the music industry. "Because its music and audio that's driving the usage of these devices," he highlighted citing the fact that connectivity in 5G will make the whole experience better, with easier access to music.
Interestingly, the 7digital executive also mentioned how his service already provides a catalog of 65 million songs, while 7digital is ingesting another million to its platform, almost every month. "There's an abundance of music in the world and we have access to it in real time." But how do we make music more accessible in people's lives? That's where Downton believes the role of machine learning will be critical.
Providing a glimpse of what a company like 7digital is doing and where it sees the market progressing, Downton also stated that new companies will be expanding music streaming offerings and that many of those companies will be those that already have a strong connection with consumers. Like Amazon is doing with its commerce platform, Downton believes many other retailers can play a huge role in the growth of music in the next period. "Retail is a 22 trillion-dollar industry. 80% of which still happens in physical stores with cash. The disruption is only just begun in retail on a global basis," he stated.
To illustrate with some real examples, Downton explained how large companies like MediaMarktSaturn (the largest electronics retailer from Germany, which is both a client and shareholder of 7digital) are adding music services to its expanding online commerce platform. Its new JUKE music entertainment service is already considered one of the best in Germany, and combines radio stations with music streaming, appealing to a vast demographic. As Downton highlighted, MediaMarktSaturn's turnover is over 28 billion USD - "which is more than the whole music market in its peak years." And the group is now investing to expand its digital retail operations to more countries, and they are looking at music in their platform, to replicate what they used to have in their physical stores.
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There's room for more competition and different price points in music streaming services. Pictured is JUKE, a music streaming service from German retail giant MediaMarkt/Saturn.
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And finally, "5G will connect all our cars," Downton stated, mentioning 7digital's ongoing cooperation with Houndify the music discovery, natural language processing, and AI open platform that enables any OEM manufacturer to implement voice interfaces. Houndify, a former rival to Shazam, the British company that was recently acquired by Apple, has already announced deals with automotive brands such as Daimler (Mercedes), Peugeot, Honda, Hyundai, and is working with the Chinese company Lenovo. All companies that want to leverage connectivity to offer voice experiences to their customers. "The car industry is going to be the core of what happens in the next five years in music," says Downton. "Music and audio do really well in that context."
Before the other members of the panel added their perspectives, Downton also mentioned a potential disruption coming from musicians themselves, using other forms of transactions, based on blockchain technology, a technology he believes will "help the industry scale, much more than it has ever done historically."
From Harris' perspective, the rise of the algorithm and discoverability was the big thing for the music industry in 2018, "Offering incredible ways to discover new content, and profile the user." And from his perspective as a head of services for a big mobile network operator, Voice will have a massive impact in the music world, allowing even more users to discover content.
Firth, head of Amazon Music, also highlighted the importance of voice in what is changing the industry, bringing the music streaming experience to more users. In his opinion, the pure simplicity of accessing the service and discovering music simply using voice will enable further growth. "People that would never be in the market for music streaming will start engaging with one," he stated, explaining how getting a music streaming service is the next most natural thing to do after getting an Amazon Echo speaker. And of course, he also added how Amazon Prime is helping to get more people involved with the streaming experience.
Firth described the first contact with a smart speaker to play music as a transition to a more natural way to discover music, and how Amazon is trying to make that easier and more rewarding. And he gave the example of a user asking Alexa to "Play Happy 80's Pop," instead of asking for a track or an artist. For the request, Alexa will connect a playlist based on those three keywords. The metadata needs to be accurate and know what songs were released actually in the 1980s. The algorithm needs to select those tracks among millions in the database and finally the playlist is personalized based on what the user has listened before. "A complicated process becomes really simple for the user. The best technology does that. Helping to make those services mainstream," he added. And later we would state also that, "Amazon wants to make Alexa a real assistant for the services. A best friend that recommends things before the user even asks."
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| Pete Downton, Deputy CEO of 7digital, points out how music streaming services can achieve further growth and reach a larger percentage of the population. |
The next reference to the panel was rather interesting. Sidebottom mentioned the fact that, until 2017, music services were helping to sell wireless speakers, such as Sonos, while now smart speakers are actually driving music streaming subscriptions. According to Firth, it doesn't really matter because both will help each other. From buying entry-level speakers, users will eventually buy a better and much more expensive speaker because of the time they spend listening to music. The problem, from his perspective, is that while around 30% of Amazon's clients spend money on music every month, the others are not willing to spend $120 a year for a music streaming service.
The panel also commented on how the consumer's relationship with music services will evolve. Downton added that the sales of Amazon Echo speakers actually lead to a disproportionate number of Amazon Music subscriptions. Because people don't necessarily think about asking "Alexa play that song on Spotify." And he went on to mention how users also value curation. "The biggest challenge for users that are not music enthusiasts is not what to play first. Is what to play next. No one has time to think what they want to hear during the next 50 minutes."
Please follow this link to read more about this topic and another Audio Collaborative session dedicated to Music and Games, which completes this article online.
