Guest post: Guvera.com – an alternative perspective


A week ago I wrote a guest post on music startup service guvera.com

You can read it here – https://talkingdigital.wordpress.com/2010/01/12/guvera-com-revolution-evolution-or-de-evolution/

The article has gotten some interesting comments and has had loads of views – however today a comment came through that I really thought deserved its own post.

It came from Nick Love. Nick works at Fox Interactive Media as Business Development Director – Australia and Asia (read more about him here – http://au.linkedin.com/in/nicklove) however this post wasn’t about him making a statement on behalf of his employer, it was more his opinion built around his experiences over the past 15+ years.

Here is what Nick had to say.

——–

A bit of a disclaimer here – I work for MySpace, however these are my personal opinions and views gathered over the years rather than those of my employer.

It is an admirable direction that Guvera are heading in, despite the very real issues set out above. Anything that meets consumer content usability and accessibility requirements AND pays artists is a great direction to head in. However I’m not sure Guvera’s model will work from a consumer adoption perspective, and as a result may not attract long term advertisers. It may attract trial spends from big advertisers, and Guvera may hang their hat on these in the early days but will the advertisers sign up for a second or third campaign? Will it be a long term, sustainable business?

The future of ad funded digital content is not downloads – it is about access to vast catalogues of legal content that is located on the cloud for consumers to stream anywhere they have access to the fixed or wireless internet on any device. Advertisers will insert themselves into these services in a non-invasive manner and engage with consumers in these environments. Ultimately advertisers fish where the fishes are and consumers are adopting cloud based services at a rapid rate.

Spotify, Vevo, YouTube, MySpace Music, iLike, LaLa, Mog, Grooveshark et al are the most effective ways for consumers to easily get access to music, either for free or for a small monthly fee. Even the small monthly fee approach taken by the premium services from Mog in the US and Spotify in Europe may, in my mind, ultimately be paid for by telcos, ISPs and other subscription based businesses and bundled for “free” to acquire / retain customers.

It is rumoured that Google is looking to bundle Spotify’s paid premium streaming service with its Nexus One handset and provide the service for free to consumers to boost the music cool factor of the device. Compare that to the unlimited free downloads offered by the Nokia Comes With Music service – by all reports the results have been disappointing in terms of active users despite the offer of free music downloads (see http://musically.com/blog/2009/10/15/comes-with-music-107k-users-worldwide/).

From what I have seen and experienced over the years Australian consumers do not see much value in free, ad funded, music downloads. Will they see value in free downloads if they are also required to create and manage a profile of their interests, tastes, likes and dislikes as the current Guvera model requires them to? The evidence suggests that consumers do see value in easy, unrestricted, free access to legal streaming music from cloud based services, particularly as these services provide the tools to help users discover, recommend and share music based on their friends’, favourite artists’ and influencers’ tastes – not what Jim Beam or McDonald’s tells them to listen to and download if they maintain their profile for advertisers.

Free music download promotions that I have seengenerally haven’t worked for advertisers in terms of consumer redemptions, whatever the good intention of all parties involved. I have been involved in a number of free music download promotions with record labels, media agencies, media owners and advertisers since the beginning of the legitimate digital music business and have been a keen observer of similar campaigns around the world. Here are some of the hard truths I have learned:

1. There will always be someone at an advertiser or media agency that thinks it will be a great consumer loyalty promotion to offer free music downloads.

2. Invariably a deal is done with one record label on an exclusive basis so the catalogue available to the consumer is limited. Occasionally more than one label catalogue is available.

3. Consumer redemption of the free downloads is poor, because consumers don’t see value in a “free” track from an advertiser because for the most part they steal the tracks anyway from bit torrent sites or now stream the music for free at MySpace Music, YouTube etc.

4. Advertiser sets a KPI based on number of free downloads redeemed and is angry because there were only small numbers of redemptions and blames the media agency. Media agency blames the media owners for not delivering the message and so on.

5. Advertiser doesn’t participate in any more music related promotions and goes back to the safe option of TV.

6. The only successful free download promotions I have seen involve full catalogues from all labels, and bundling with another service, such as the Bandit.fm / CBA debit card promotion that gave away $20 of free music per month redeemable at Bandit.fm for cardholders that deposit $1,000 or more per month into the card. Perhaps this is a model that Guvera could consider if they aren’t already?

In Europe, the US and now in Australia advertisers are increasingly seeing free streaming services as means of cost effectively reaching and engaging with consumers in order to have a credible music presence. They certainly aren’t rushing to free download promotions.

Some further facts that need to be taken into account when deciding whether the Guvera model will work for advertisers:

1. There is evidence that cloud based streaming services are halting the growth in bit torrent sites because of their ease of use and full catalogues of quality music from all major and indie labels. Why? Because they are easy, have low barriers to use, have full catalogues and are generally a quality consumer experience. (See http://www.nytimes.com/2009/07/26/business/26stream.html)

2. MySpace Music (music.myspace.com), a joint venture between MySpace and the four major record labels, has 5 million+ artists, audio and music video catalogue from all major and independent labels and is a platform for fans to connect with those artists, other fans and advertisers and discover, share and recommend music content across the web. The results suggest the audience is engaging with this model (http://mumbrella.com.au/myspace-music-leapfrogs-nearest-rival-15460).

3. Vevo (www.vevo.com), a joint venture between Google and some of the major record labels that streams music videos for free to users on an ad funded basis launched last month (although it is not yet available in Australia). Vevo’s CEO claims that major advertisers, such as Proctor & Gamble, are on board for a US$25 – $30 average CPM. (see http://mediamemo.allthingsd.com/20100115/vevo-bounces-back-from-a-rough-start-with-20-million-streams-a-day/)

4. Apple own the paid download market by a considerable distance, however I believe the reason they recently purchased streaming music service LaLa (www.lala.com) because the future of music consumption and the global mass penetration of the iPhone and its variants will rely less on expensive local device storage and more on 3G/ 4G networks to provide access to music and content that sits in the cloud. They also recently purchased a mobile advertising company.

You can see the trend here and it’s not heading towards free ad supported downloads.

Will Guvera’s download based service, that has more hurdles for users and less catalogue (for now) than a bit torrent site or a legal cloud based streaming service, be a hit with consumers?

Will consumers see value in maintaining a Guvera profile about themselves in order to get free downloads, or will this be too much of a hurdle in the face of bit torrent sites and cloud based streaming services that are easier to use, have more content, and don’t require the user to jump through hoops? If the consumers don’t engage with the service en masse will the advertisers follow and stay?

Unfortunately I’m not sure whether the Guvera model will work but I wish them all the best and applaud them for having a crack at stemming the flow of illegal content downloads and introducing advertisers to the music marketing opportunities.

Keen to get your thoughts.

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3 responses to “Guest post: Guvera.com – an alternative perspective

  1. Good article Nick. I spotted this just now as an update.

    Piracy continues to cripple music industry as sales fall 10% – article from The Guardian today.

    http://www.guardian.co.uk/business/2010/jan/21/music-industry-piracy-hits-sales

    Not winning the war just yet.

  2. I’ve appreciated the discussion to date. By extension, we’re all touching on the broader issue of future business models for all digital content – text, audio and video.

    While agree with much of what has been said re: an ad-based music download service, or more specifically, one which rewards the consumer commensurate with profile data, I’m not convinced of the streaming-based, cloud-supported option either; especially one based on mobile delivery (and associated charges), or on peak usage in the work place. Both access points are charged with a variety of problems, not the least being the impact on local area bandwidth. Already several European institutions (public and private) have blocked access to Spotify for this very reason.

    Supporting this more sceptical view is the current state-of-play of illegal music downloads in Australia. According to our data, there’s an average of 20 downloads per track sale. Let me reiterate, that’s an average. Metal and Country, for example, have much lower illegal download/sales ratios compared with Pop or Hip Hop.

    The extent of this pirate market is staggering. Approx. 7.5m tracks are illegally downloaded in Australia each week – and that’s based on a White List of tracks played on radio in the last six months. There are many more catalogue tracks which are not accounted for.

    The correlation with airplay is relatively high. Last week’s number one illegal download was Jay Sean’s track Down (f/t Lil Wayne), reporting more than 596,000 downloads. The trigger was the 414 spins on commercial radio in the same period.

    My point is the consumer market still demands (and aggressively so) ownership of material, illegal or otherwise. That market is being served by efficient retailers (like iTunes) and file-sharing/ripping technology. Profile-based music supply services (with incomplete catalogues) and cloud-streaming options (how are those music licence fees going to be paid for?) will, I believe, remain niche services relative to POS & pirate markets for a very long time to come.

  3. Sorry, Mr. Love, but I disagree. Streaming sites do not satisfy my listening needs because I do not want to go to a website every time I’d like to hear a song. I’d rather own all my music legally so I can listen to it anytime, even without an internet connection (disclaimer: I do not have web access on my phone, so I may be an unusual customer). For the privilege of acquiring and owning free, legal music, I’m more than happy to take 5 minutes of my time to fill out a profile on Guvera. You are one lazy person if you can’t be bothered to do that. S

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