The full "SPARC" presentation given by Mark Mulligan at MidemNet 2011, in 3 parts: 1. Why digital music has lost its mojo 2. Digital downloads: the transition technology 3. SPARC: the ingredients of future music products

1. Getting Out of the Digital Music Impasse
Mark Mulligan, Vice President, Research Director
January 22nd, 2011
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2009

2. Agenda
Why digital music has lost its mojo
Digital downloads: the transition technology
SPARC: the ingredients of future music products
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3. Digital
music is at
an impasse
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4. Music products Paid downloads
don’t yet meet don’t translate well
consumer outside of the
demand
iTunes ecosystem
License structures
are disadvantaging
the formal sector
at the expense of
unlicensed
services
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5. European music activity is flat while CD buying
continues to drop
Buy CDs
Digital Music’s Only
Watch music videos online
Killer Product
Go to gigs and concerts
Watch live concerts on TV 2010
Watch music DVDs 2009
P2P Music
Visit artist pages on social networks Most online music
Buy digital music
! activity is niche
Visit social music sites like Last.FM
0% 20% 40% 60%
Base: European online consumers
Source: European Technographics® Media and Entertainment Surveys, 2009 and 2010
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6. 12-15 year olds show little interest in the digital
‘transition’ habits of 16-24 year olds
I listen to music on the 25+
radio:
trend
I rip music CDs on to my PC
(i.e. copy from a CD):
Burn CDs
16-24
Music P2P trends
Buy music online
Listen on phone
12-15
Watch music video online
trends
0% 20% 40% 60% 80%
Age 25+ Age 16-24 Age 12-15
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7. Music’s three ‘generation’ segments are each
defined by technology and channel
The first digital music fans adopted transition technologies that supported
transitional music behaviors. Digital Natives’ behavior is ‘pure’ digital.
Retail and radio Digital gives more Music as pervasive
‘distribute’, telling convenient access soundtrack to
people when and to and management interactive social
where to listen of distributed music environments
25+ year 16-24 year 12-15 year
olds olds olds
Analogue Transition Digitally Native
Generation Generation Generation
7 © 2010 Forrester Research, Inc. Reproduction Prohibited
2009

8. Music’s digital generation divide
Analogue Transition Digitally Native
Generation Generation Generation
Age: 25+ 16-24 12-15
Music app iTunes and Mobile and
CD and radio
of choice: BitTorrent YouTube
Weekly 3.8 hours 7 hours 5.5 hours
listening:
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2009

9. Agenda
Why digital music has lost its mojo
Digital downloads: the transition technology
SPARC: the ingredients of future music products
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10. The car went through numerous evolutionary transition
stages before getting to where it is today
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11. Current digital music products are still only transition
technologies
? ? ?
Analogue Generation
And consumer
demand has
Transition Generation
already moved on
Digitally Native
(again)
Generation
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12. The demand needle has shifted but business models
have yet to catch up
Access
‘Rip and
Burn’
‘Buy and ‘Watch and
Listen’ Share’
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13. Experienceis
Experience is
the product!
the product!
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14. Agenda
Why digital music has lost its mojo
Digital downloads: the transition technology
SPARC: the ingredients of future music products
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15. Music products need…
S
P
A
R
C
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16. Social: put the crowd in the cloud to bring life,
relevancy and context to the music experience
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17. Participative: put interactivity at the heart of music
products (especially premium ones)
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18. Accessible: give consumers
access. The distribution
paradigm is dying. Ownership
still matters but access
matters more
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19. Relevant: join the dots in the fragmented digital
music journey
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20. Connected: embrace connectivity. Music fans are
connected and expect their music experiences to be too
Types of
connected devices
8+
7+
6+
Millions of 5+
5.5 15.1 33.3 61.5 98.1 142.8 173.8
European 4+
adults 3+
2+
Base: 14,052 EU7 online adults
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Source: European Technographics Consumer Technology Online Survey, Q4 2009

21. This is not a strategy….
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22. Thank you
Mark Mulligan
mmulligan@forrester.com
http://blogs.forrester.com/mark_mulligan
Twitter: @Mark_Mulligan
www.forrester.com
© 2009 Forrester Research, Inc. Reproduction Prohibited