Forbes - logo

David Bowie’s Music-As-Utility Vision Could Actually Come True
And Save The Music Industry

March, 2016 – by Cherie Hu

Can music be a utility, like water or electricity? 14 years ago, one of the most renowned musician-entrepreneurs thought so.

In a 2002 interview with the New York Times, the late David Bowie predicted that we would eventually treat music like running water or electricity, in that we would pay for access rather than ownership. In 2005, Berklee Online founder David Kusek proposed a similar model of a “music utility,” in which consumers would subscribe to unlimited access to music from a digital network provider for $3 to $5 per month. One year later, Spotify was founded across the pond in Stockholm, and the rest is (quite recent) history.

It might initially seem degrading to call music a “utility”—water and electricity, after all, are not emotional goods or art forms—yet this analogy is appropriate for describing the way we interact with music today. Music surrounds us wherever we go; we take the background music in supermarkets, restaurants and shopping malls for granted; we freely listen to the radio on long car drives and regularly access millions of songs online at little to no cost. More paying music consumers are transitioning to a subscription model as the industry at large preaches the gospel of ubiquitous access over ownership, which aligns well with current revenue models for utilities and telecommunications.

A recent survey conducted by MusiComms, a global initiative that promotes collaboration between the music and communications industries, shows that consumers are already thinking about how the devices that shape their lives can also deliver their music. Over 40% of respondents indicated that they would change wireless providers if free music streaming came with their service plan, nearly 25% of survey respondents indicated that they would buy streaming services from their automobile manufacturers, and even 10% of 25–34 year olds would listen to music through their thermostat. Many telecommunications companies have reacted to this trend by adding unlimited music streaming to their services (including but not limited to T-Mobile, Virgin Mobile, MetroPCS and Boost Mobile), and energy companies will have to step in to make this hypothetical thermostat-speaker a reality.

“It doesn’t matter if you think it’s exciting or not,” Bowie told the Times in 2002. “It’s what’s going to happen.” He seems to be right.

That being said, the recent news about SoundCloud Go suggests that the music industry is getting stuck in the standard monthly subscription model available through streaming services. Not only is the streaming space now more homogenized, but it is also clear that labels are hyper-focused on making streaming work for them, while failing to consider other consumer-facing technologies in their business models. It is important to remember, as Mark Mulligan wrote, that the standard $9.99 subscription model is not “the next CD.”

Hence, there is potential for utility industries to step in amidst a time when music desperately needs new distribution processes and channels. Moreover, the music industry needs to be involved more directly, and earlier on, in its own salvation. Label executives and other rights holders had to catch up with the innovations that Napster, Spotify and similar services brought from outside, whereas these execs have relatively more control over the future direction of their B2B investments.

Historically, the music industry’s B2B investments have always capitalized on how music is the only form of entertainment that can enhance the user experience without directly intruding on it (e.g. you can listen to music, and cannot watch movies, while driving a car). In previous decades when vinyl records and CDs were the dominant music formats, this translated to partnering with retail stores, both to enhance the shopping experience and to advertise music as a physical commodity for purchase.

“Music was a physical product that needed positioning and shelf space, and we worked with retail to market our products to their customers,” explains Andrew Kautz, Chief Operating Officer at Big Machine Label Group, which represents artists like Taylor Swift and Tim McGraw. “In addition, positioning was the primary driver for sales, and music has often been used as the lure to get the customer in to retail to sell them other products.”

Physical music formats are becoming more obsolete in the wake of streaming, which has two implications. Firstly, music-industry revenue from advertising income and telco bundles is bound to increase; in fact, digital B2B revenue increased by 37% in 2014 from $1 billion to $1.4 billion, and was responsible for the increase in overall digital music revenue that year (not consumer spending). Secondly, music companies are no longer bound to physical marketing efforts, and can explore B2B collaborations with utility companies, automobile manufacturers and other partners with more experience in connected devices and the cloud, as opposed to solely focusing on content and retail.

The relationship between music and utilities in particular is symbiotic: music can help develop the high-quality, personable experiences that are growing in demand among utility customers, while utility companies’ natural distribution chains can give music the larger and more stable audiences they are constantly seeking. Utility companies are also becoming more powerful in this age of the Internet of Things because they own the customer more than any other sector does . Google’s landmark acquisition of Nest in 2014 for over $3 billion points to the growing importance of studying life inside the home, and presents a potential penetration opportunity for music as well.

“People don’t necessarily think of music as a customer experience tool, but music engages people in a way nothing else does,” says Juliet Shavit, President and CEO of SmartMark Communications and Executive Director of MusiComms. “It is also a great measurement tool for seamless connectivity. Think of a song that plays uninterrupted, that starts in your home, continues in your car, and travels with you outside. Then think about how powerful it is to engage a customer throughout that journey.”

One looming challenge for B2B collaborations between music and companies in utility and automobile industries is the notoriously slow adoption rates of new technologies. For instance, only 1% of drivers use high-definition streaming radio, while 58% still use AM/FM radio, according to Scott McCormick, President of the Connected Vehicle Trade Association (who spoke on the Music and Communications panel at CES in January 2016). In addition, the average time a car is kept in the US is over 11 years, so it takes roughly 15 years for the driving population at large to adopt the latest connected-vehicle technologies.

MusiComms - logo

About MusiComms™
MusiComms™ is a global initiative dedicated to collaboration between the music and communications industries with the goal of seeking out new opportunities for innovation and long-term sustainability and profitability of both markets.

As a consortium, MusiComms™ hosts a number of activities that bring together leadership from music and technology-driven industries to develop, innovate and implement new revenue models and marketing opportunities, with the ultimate goal of leveraging music to distinguish brand and fuel business opportunities.