Legit downloads creep into vogue on sites

• Mike Barris' trenchant look at digital music (#2)

It was a pivotal time for music in the digital age.

June 1999. Shawn Fanning, a student at Boston’s Northwestern University, invents Napster, an online music peer-to-peer file-sharing service.

Giving the music industry fits with its end-run around the legal music market, Napster lets millions of ecstatic users share MP3 files. The service lasts through July 2001, when it is shut down by court order. But its impact profoundly changes the music industry. Napster stirs a voracious public appetite for downloadable music.

Fast forward nearly a decade, to June 2008. The speaker is George Van Horn, an analyst with market-researcher IBISWorld. 

"We expect illegal downloads will reach a tipping point, beyond which, further growth will be difficult,” Horn says. “As online music becomes more readily available, and more affordable, we'll see an increasing number of music fans indulging in legitimate downloading, attracted by a legal, quality, guaranteed product." (To read Horn’s remarks in entirety, go here: http://www.ibisworld.com/pressrelease/pressrelease.aspx?prid=127.)

Legitimate downloading? What happened to the MP3 revolution?

Back in Napster’s heyday, users pursued the site's illegal MP3s with a chest-thumping bluster and a spirit of defiance fully sprung from the head of Karl Marx. “I’m not really doing anything wrong – the music companies are already making plenty of money,” some might say. They might also say, “I’ve already paid for these tracks by buying them in vinyl, so I’m entitled.” Marx’s belief was that whoever controls the distribution of media controls the means of production and thus wields enormous power. The heyday of Napster embodied an out-and-out revolt against the big distributors, fueled by the revolutionary spirit of the Internet.

It’s hard to believe that illegal downloading could be going out of vogue when you consider a teenaged Morgan Stanley intern’s July 2009 report on teens’ use of media. The 15-year-old author declared that teen-agers “listen to a lot of music,” but are “very reluctant to pay for it.” The intern observed that most of his contemporaries have “never bought a CD,” and roughly “eight out of 10” are “downloading it illegally from file-sharing sites.”

(Read the full, thought-provoking piece here: http://media.ft.com/cms/c3852b2e-6f9a-11de-bfc5-00144feabdc0.pdf)

Could it be, could it just be, that people are actually willing to pay a price to access something legally, even when a free illegal option is available? Could it be that ongoing prosecution of illegal sites is slowly turning the tide and driving more listeners towards legal downloads?

Yes.

We’re seeing the beginning of a change in attitude about downloading that has raised the outlook for legal music-download services. This projected growth coincides with a surging interest in not just single tracks, but digital albums. In October, United Press International reported that sales of digital albums in the United Kingdom topped 50 million in less than five years, outpacing album sales on CD in their first five years.

Against that backdrop, legal downloads sources are mushrooming. Spotify, a European-based digital music service with 500,000 paying subscribers, appears poised to launch in the U.S., later this year, according to a report by paidContent. (http://paidcontent.org/article/419-spotify-does-expect-u.s.-launch-before-2010s-out/) And Sony Music is launching a new store called Ariama.com that will sell classical music downloads and CDs from over 50 labels.(http://blogs.reuters.com/mediafile/2010/10/05/sony-goes-direct-to-classical-lovers-with-ariama/)


On that note, let me introduce today's “Open Mike Live” spotlight. We're looking at 1201music.com, a jazz-downloads site that is stepping up its efforts to enter the legal-downloads fray. Marketing director Mechele Shoneman gave me an exclusive interview. (You can listen to the entire interview as a podcast, here: http://www.box.net/files/0/f/52605102/1/f_516846328) 


1201music.com (http://www.1201music.com) is noteworthy for its range of music, from classic jazz by Louis Armstrong to more nontraditional rock-flavored jazz by artists such as Dauner Mariano Saluzzi. The site also has distribution deals with iTunes and Amazon.com.

Shoneman, based in Marlboro, New Jersey, is in a good position to comment on the changes in people’s media use that have reshaped the music industry:  She didn’t start out in digital music, but spent 15 years working in traditional marketing for old-media companies such as publishing houses Prentiss Hall and Simon & Schuster. She handled marketing for catalogs, books, and print advertisements, then moved into telecom marketing with Lucent. Her resume also includes a handful of entrepreneurial forays into the online market, including an environmental website called Be Turtle.com.

MECHELE SHONEMAN

 

 “The beauty of online is the economies of scale,” Shoneman says. “You can build out an idea within a couple of months with very little investment and find out if you’ve got something or not.”

1201music.com, she explains, is “essentially a catalog site.” It is best known for its Black Lion label, which specializes in British jazz musicians and international jazz figures and carries a lot of reissued material by seminal artists such as Thelonius Monk.

Shoneman notes that the “distribution network today is 90% online - Amazon and iTunes are the kings of the industry.” And the public’s shift toward buying separate tracks has created “an incredible challenge for online digital music businesses, because their margins are razor-thin and it’s really become a volume business.”

A major challenge, Shoneman says, is dealing with the big third-party distribution networks and “trying to get on the top of the list to run special promotions." She addes that "unless you have a really original title or artist, you’re just another commodity.” Shoneman says separating yourself from the pack “can get really rough,” so it’s important to “build up an identity online that goes over and beyond these distribution channels.”

A jazz site like 1201music has one important thing going for it: The loyalty of the jazz-buying public, which for many years has typically accounted for about 3% of all recorded music sold. That isn't a big figure, but it is constant, even amid the sea-change in the music industry's fortunes.

Shoneman is candid about the challenges music distributors of all stripes and sizes face in competing against the onslaught of media choices vying for the attention of potential record buyers: “We’re at the very beginnings of watching what used to be a one-way conversation," she says. "Today, with the advent of digital media, we have the ability to listen to conversations, to start conversations, to get involved in and to really listen to our customers.”

Joining the dialogue, she says, makes good business sense. “It costs a whole lot more to engage a new customer than it does to re-sell to an existing customer - about 5 to 10 times as much. As well, marketers have been forced to become more genuine. Claims like “the latest and the greatest,” you don’t hear any more.”

Shoneman says the amount of media with which average Americans are hit every day has created “a very discerning audience.”

 It’s "very important to have conversations," she says. "Shoving one-way messages at people, like email blasts, is a no-no. The jazz audience at 1201music is very opinionated, very educated, and they have a long, long memory of what’s gone on in the music business and the music industry. For instance, trying to walk into a forum and talk about a very light subject like, hey, what do you think of our site design? will quickly spiral into one conversation about one particular disc. It’s a really touchy area.”

Shoneman recalls that “in the old days it was all about demographics – who is your audience, how old are they? What’s their income? What do they like to do? What’s their lifestyle? And now it’s really more about what they think. How do they move in the world?"

What "you think your influence is, is almost always wrong," she says. "You can do all the market research in the world, but you can always be surprised.”

Shoneman says that in light of the technology-based upheaval in her business, she would now devote "upwards of 70%" of a budget to online marketing. "Understanding how those keyword-driven algorithms work, so that you come up on searches like Google and Bing when somebody, for instance, types in “jazz music,” is absolutely critical," she says.

“Online, it is all about keeping score," she says. "I can track somebody from the time they came to my site, how much time they’re on my site, which product they’re looking at, and push a promotion at them with dynamic marketing – which you can’t do off line. Off-line, you’re spinning in the wind. Online, it’s a very defined way to go after someone.”

(Learn more about Mechele
Shoneman's marketing businesses at www.repaz.com)

Next week, we'll examine the digital boom's impact on a traditional radio station.

I'm going to let Thelonius Monk, one of 1201music.com's featured artists, take us home with a 1963 televised performance of his famous composition, "Round Midnight." You can watch it here: