Digital Media Conference: 11:20am – Can Mobile Save the Music Industry?

Daniel R. Odio from PointAbout was a panelist at the Digital Media Wire’s Digital Media Conference East. You can watch his panel here. You can also view the Table of Contents for all the panels.

Mobile Track: 11:20am – Can Mobile Save the Music Industry?
This panel of mobile insiders will discuss the latest developments in the mobile music market, including mobile marketing initiatives, portable devices and other mobile-related innovations and revenue-generating opportunities such as music videos, full-track streaming of music, ring tones and “ringbacks.” What mobile innovations are having the greatest impact on the way consumers discover, purchase and listen to music, network with fans and artists, learn about concert information and release dates from their favorite artists and interact during the concert experience? What are the developments that will shape the industry in the years to come?

Panelists
Trevor Madigan, Global Head of Music Sales, NOKIA
Daniel Cohen, VP, Business Development, Dada Entertainment
Geno Yoham, Executive Director, AOL Music
Chris Phenner, EVP, Business Development, Thumbplay
Jon Potter, Executive Director, Digital Media Association
Moderator: Aydin Caginalp, Partner, Media & Entertainment, Manatt Phelps & Phillips

Audio of the Panel:
(You may need to fast forward through the first several minutes of audio before the panel starts)

Here is the transcript of the event:

Digital Media Conference East – “Can Mobile Save the Music Industry?”
Wednesday, July 1, 2009

Legend: Panelists were:

TM: Trevor Madigan, Global Head of Music Sales, NOKIA
DM: Daniel Cohen, VP, Business Development, Dada Entertainment
GY: Geno Yoham, Executive Director, AOL Music
CP: Chris Phenner, EVP, Business Development, Thumbplay
JP: Jon Potter, Executive Director, Digital Media Association
AC: Moderator – Aydin Caginalp, Partner, Media & Entertainment, Manatt Phelps & Phillips
Jay: Introduction

Audience Questioners:
US: Unidentified Speaker
JD: John Demanis

Jay: OK, Can Mobile Save the Music Industry? – It’s the next panel here. And, we’re very fortunate to have Aydin Caginalp here who is a Partner, Media & Entertainment, from Manatt Phelps & Phillips, a law firm; has been a great supporter of what we do at Digital Media Wire and Potomac Techwire. I’m just going to read you Aydin’s bio here. Real quick, Mr. Caginalp’s practice concentrates on business transactions including acquisitions, mergers, joint ventures, private equity, and general corporate and commercial matters with an emphasis on international matters, entertainment, and new media. He’s listed in the “Best Lawyers in America”; his work extensively is the media and eCommerce fields in connection with acquisition of technology companies – music, broadcast and production companies, throughout the world. In connection with internet activities, his work on the establishment of ISP services, search engines, eCommerce companies, and various initiatives involving the delivery of music and entertainment products through the internet, as well as, digital rights management, and with that, I’m going to hand it over to Aydin.

AC: Jay, thank you very much. I am very happy to be here. And, I would like to start out this session by asking our panelists, who are each very distinguished, but who represent different facets of the industry to represent themselves. So, let me start with Jonathan.

JP: Hi, I’m Jon Potter, I run the Digital Media Association. Our member companies include: iTunes, Motorola, Nokia, who else, RealNetworks, Amazon.

AC: The little companies.

JP: We’ve still […] Pandora, which sort of is little, but sort of is big, but, we represent the companies in Washington and around the world on legal issues, advocacy issues, and business model, and royalty issues.

AC: Chris?

CP: I’m Chris Phenner. I’m EVP, this is all for Thumbplay and we are the largest direct consumer, seller of mobile content, sell ringtones games, videos, and Full Track MP3s, as well as, through an open platform we call, ‘Thumbplay Open’, where artists can offload and sell their own music over the air taking advantage of market, delivery, and billings – it’s just slow.

AC: Geno?

GY: Hi, my name is Geno Yoham, I’m the Executive Director and responsible for General Management and project IG [?] for the Winamp product for AOL. And, Winamp is the number two media player, media manager in the world, second to iTunes, and the strategy […] behind […] this is […] our community-extended player platform with over 6000 extensions for the Winamp Media Player, and some plugins and visualizers, and we can […] the users to add and remove functionality, customize their experience in the […] and that’s a specific way. We just launched a new extension platform called, “The Open Services Program”, which allows developers or good party websites to develop customized experience based on the client, an open set of […] guides to interact with the player and render your content inside the player. For our international product over 80 million users are active every month; 90 per cent of this audience coming from outside the U.S.

AC: Dan?

DC: My name is Daniel Cohen. I run […] Dada Entertainment which is part of Dada, which is an Italian company based in Florence, Italy that does mobile distribution of music in about 25 countries across the world, including the U.S. and Canada, and our responsibilities cover […] deals with labels as well as […].

AC: And, Trevor.

TM: Hi everyone, my name is Trevor Madigan and I work for Nokia. I look after global sales for Nokia Music focused on the global operators; and my area of interest comes with music which is a product which allows you, when you buy it, to download an unlimited amount of music tracks that you get to keep. So, that’s our main proposition at Nokia Music.

AC: Welcome to all of you, and I thought in reviewing a variety of materials for this session, I came across an article by Paul Verna, which was published on June 15, 2009, in a magazine called, “eMarketer.” And I thought we would start with that, because we’re talking about, Can Mobile Save the Music Industry?, and this raises the question, “Can Mobile Save Itself?”, because Mr. Verna states in his article, that, “While total sales of digital music would increase between 2009 and 2013, mobile sales would decline in 2009 in comparison to 2008, and continue on a declining basis through 2013.” And this was attributed to the spread of social networks, which is the group that is in the next room, that’s attracted a lot of attention. But, I thought I would ask whether anybody on the panel agrees or disagrees with that statement, because if you disagree, then we might as well shut down, and go next door. So, Chris, let me ask you to start out.

CP: Sure, I spent a lot of time talking with folks who long ago and for some years said, prematurely predicted the death of the ringtone; I sit on panels like this that say, “Beyond the ringtone, what’s next?” And, there’s no doubt if you talk to folks at the major labels who sell music, that they are seeing a decline in unit sales. I think in the overall projection that I just referenced here, there was a curious lack of citation of from what data source those growth figures came from. I would say two things: the first is that in our experience, we are seeing nothing in the form of the kind of slowdown that I‘m seeing, for example, […] by Nielsen and the Ring Skin folks who track some segment of the delivery of personalization content; but our segment, which is that direct consumer is largely just not reported as part of that. I think that will change and those methodologies will get better.

The other thing I would say is not talked about, but it’s hard frankly to see […] from a standpoint, is that if you look at the leading, call them, ‘discovery engines’ or ‘affiliate referrals’ to the world’s largest digital music stores, iTunes and others among them, what you’ll notice is a pretty high correlation between those that have mobile apps and those that sit at the top of affiliate referrals which lead to digital music sales. So, mobile music sales is defined as the place where we will find the music that ultimately go from that experience to buy it; I think it’s seen the renaissance, if not on first incarnation of itself, largely thanks to the […] launched recently, that we have never seen, and then mobile today is already the largest and fastest growing of at least discovery referral channels that sell music. So, I fundamentally object to that assertion.

AC: Trevor, you’re charged with the responsibility for launching a phenomenal new product – you’re in a publicly listed company. Somebody at the next shareholders meeting might come up and ask, “Why does the company spend money on what’s perceived to be a declining market?”, how do you respond to this?

TM: I think that the first thing is that I kind of reject the notion of mobile music. I think there’s only one internet, and mobile is access point. So, we really feel that the digital music business or digital music content that exists in the web, mobile is just a new and interesting way to access it. You see the digital music market potentially being around 8 billion by 2010, and we feel that the access by mobile will be about 30 per cent, or so. But, ultimately, we have an equal bet on the PC, as an example – it’s not just about mobile. So, when we look at it, we look at all the aspects of access to digital music. And, I really feel strongly that we need to break this notion of mobile being a separate thing, and that’s really what […] very strongly.

AC: Jonathan, I saw you nodding.

JP: Yeah, I guess, I would agree with the notion that trying to distinguish the mobile music industry from the social networking music industry is absurd. And, maybe somebody needs to push-out study, and throw out an email to his listeners or his audience with a headline, but when somebody is on MySpace; getting on an iPhone, buying a track or is using Thumbplay through their iPhone, and calling either applying a Nokia device or on AOL Radio through CES, through their iPhone, or whatever – it’s an absurdity, this is about lawfully acquiring music. And the real question is, “Is there going to be a music industry?” – The answer is undoubtedly – yes. “Is it going to look the same?” – no, but the access points are going be what they were five years ago – absolutely not, today – absolutely not. And, we’re creating all sorts of interesting channels to the consumer between the artist and the consumer and what they’re going to have is probably organizations like mine are going to merge and converge with other organizations. We’re not going to have a mobile and […] form and a mobile media promotion market, and a digital this or that, it’s just going to be, basically, the new music industry, it’s going to be mean [?] music industry.

AC: Yes, go ahead.

GY: You have to think of the mobile device as part of the ecosystem, and today, I think it would be a mistake to not think about it that way because it’s a date. Users have invested so much of their time, are already curating large catalogs on the desktop; and to force them to try to repeat that or do it in a different way, and not leverage that investment would be a real disservice to the user, and just like an opportunity […].

AC: I guess if the labels have anything to complain about, they have made a lot of money by changing configuration over the years, and the current structure and the ecosystem does not allow the configuration change within the control of the labels, is now subject to the control of the individual user who already has this collection on the desktop. Alright, let me move on to something that Chris had just mentioned which is what is selling on mobile other than ringtones? What are we seeing, what are we offering? And Trevor, we’ll save your offering for the last, because yours is so unique as to be an independent product line on its own. So, Chris, let me ask you to lead that on.

CP: I think that the two categories we were most surprised by, because we don’t overtly promote them as much, is video, and then more recently as we launched in November, full track music. And, so, just about anytime with [?] they’re engaged with ThumbPlay, I think it’d be pretty obvious that personalization content, particularly, former ringtones and wallpapers at least, assorted, what we’re about and without us really trying to have to suggest too strongly, or promote too aggressively related-type of assets with that; and even they still are relatively small assets like ‘Glower’, bit-rated Mp3s, or only 90 second clips as segments of music videos. We’re startled at the way which people are more than equipped to find whatever they’re into, download it; and, in some cases, collect or dispose of it, but, ringtone, as gateway […] continues to prove itself to the extent we are surprised by it, continually

AC: Daniel? Your company started out in a different part of the world, what did you start with, and where are you now?

DC: That’s a big question. So, we started out early […] times, but in Europe. Europe is sort of the Wild West for […] then, about four years ago, a bunch of European companies, or in Chris’s case, a European came over and formed the, basically, did in the U.S. […]. And, it’s gone a slightly different route, the U.S. traditionally we’ve always thought of as being a bit behind the Europeans, in terms of the way that it’s […] mobile content, and to some extent, that’s still the case. We’ve also just launched in Canada, a ringtone service. Canada reminds me like the U.S. where there aren’t any […] in the market; it’s just all about ringtones right now. So far it’s a great business there, so, it’s lovely, and we’ll enjoy it while it lasts, but, history shows that after a while, people’s appetite for ringtones begins to lose some of its […], and, I may not agree with what Chris is saying. I think this should be a natural first question.

The issue here, the more we look at it, it depends how you define the mobile music business [?]. Talk about ringtones and wallpapers related to music which are very mobile-specific, which are only […] consumer […] mobile phone. Those are still, at least for us, where we see a lot of that’s gone with all the business being done. But, when we try to broaden what […] mobile to transfer videos they’re all sent out currency online, there is some interest, but, I think we […], and we can’t just […] mobile […] only. All of this, there has to be an ecosystem; that only makes sense when you are talking about 4-track music or videos and streaming in the context of […] slightly inferior experience, because dimensions […] being offset to provide for the complete experience online, as well. So, again, there is this bifurcation [?] between the pure mobile […] and the more general music […].

AC: Geno, you, through AOL, offer yet a whole different spectrum of product. We talk about what it is that you offer and how that relates to the mobile industry.

GY: Sure. So, with Winamp, it’s about user ownership and user curation of their own catalog, and, […] to better understand my point earlier, a lot of time and effort to put that catalog together. […] the opportunities extending the access to that catalog from a mobile device. We have product now that is a few years old, […] remote which does that, which allows you to access your catalog from a mobile device, and […], as well. It’s not a great […] experience yet, the challenges are inactivity, bandwidth, there’s been a lot of progress in that effort to try to be […] enabled; it’s still a hard thing for users to be able to do. So, I think […] the opportunities […] the users access to their catalog, and not necessarily giving them all the music at once, but giving them access to their data that their catalog represents, that they may be packaging that […] in a customized way that makes it more consumable and more perfect for consuming […] mobile device.

AC: Trevor, you’re in charge of a pretty big project, and you’ve launched in Europe; could you talk about what the consumer proposition tends to be, and how you’d see the response develop to that?

TM: Yeah, absolutely. What I think what was very interesting that was mentioned though was the term, ‘total solution’; and, while I think we’ve noticed at Nokia is that it’s no longer good enough to sell just the device, it’s no longer good enough to just sell service. And, you’ve got to offer a solution, a total solution to the customer. And, for us, we have refocused operating device service and a partnership channel to market with the carriers for data, and other things. And, what we’ve done when it comes to music, is we’ve tried to offer a many-[…] device that you’re allowed access to unlimited download to music that you get to keep. And, I think that the real solution there that we’re trying to offer is that we find the biggest entrance to mobile music or digital content is the transactional nature of it. When you ask a consumer to pay, it’s a challenge. However, when you give them a solution of price for a device, with data […] with other things, it becomes a very good proposition that they’re willing to buy into. And, we’ve seen really very positive results on the markets that we’ve launched in, and we provide 20 markets we have brought Nokia music to, and about nine markets now comes from music, too. And the user data is very interesting, I think our goal now is really to scale that ad, globally.

AC: When you offer this product, I assume you have to buy a Nokia product, and sign up with a carrier. Give me a roundabout price as to what we’re talking about for the unit.

TM: Well, again, that’s a very good question, because although there’s set cost for the device and service, you can walk into a store in the UK at the moment, and get a device for free with a data plan, and with that signing up to a carrier. In other markets you might see a full price with no subsidies that could be anywhere from $100 to $400 or $500 depending on the device category. So, because we sell so many devices and they’re individually focused on many different segments, it really depends. And, the subsidy levels are vastly different in most of the world – Italy, Sweden, might have […] subsidies, but the U.S. or UK might have high subsidies. So, really, it’s ‘how long is a price of string’ question.

AC: An in terms of the carrier in the UK, for example, does one have to sign up with a particular carrier, or do does the consumer have a choice?

TM: We have about 20 upgraders [?] supporting tons [?] of music globally now, and it depends market by market what the different situation is. In the UK, you can purchase it by an […] of three, or you can actually go in and purchase it at a retail […] carphone warehouse. If you go to Mexico, you can go specifically to Telcel; if you’re going to Brazil you can pick […] any of the carriers, so it really depends, market by market.

AC: So, in the U.S. when you launch, do you have particular plans as to what you will be offering?

TM: I think that the U.S. for Nokia has been a challenge of thousands, the only market where we don’t really have that 40 per cent plus market shares; but we have built up [?] strong activities in the last few years, back into Verizon, we’ve many products in AT&T now; we’ve invested in a facility in San Diego. When it comes with music, I think it really goes back to the point of what the right solution is for the U.S. consumer. So, we’re really making sure that the product, the price point, and total offer is correct, and then we will bring to the U.S. So, that’s what our focus will be for the U.S.

AC: Alright, let me ask the rest of the panel as to how they see that product comparing with an iPhone or some of the other phones that are being offered today, and whether this is likely to be a winning solution, because I don’t see anybody else in the U.S. at the moment offering you unlimited consumption of music that comes with a handset. How do you see that developing and challenging the position of an iPhone?
Jonathan, you’ve been quiet here.

JP: I’ll jump on this, it’s always fun when you have a […] of iPhones […]. I think one of the propositions that iPhone, that I can store and the iPod proved is that simplicity to the consumer, at the end of the day, is simplicity has extraordinary value. People are willing to pay for things that are easy to use, because they understand that they’re going to be easy to use. And, so, one of the valuable propositions that Nokia is adopting, if you will, it’s simplicity – we’re going to give you a tool, we’re going to guarantee that it works with our solution; now, of course, if it becomes an open platform, also that phone, and you download Thumbplay, or you download [..]; who’s going to make sure that the integration works, and that becomes a ‘push me pull me’ between the various products. I like to challenge for everybody who’s an independent participant as opposed to creating a silo. You can create a silo and also make an open platform which gives consumers choice, and the consumer takes the risk then when they do it, but, providing that, an elegant end-to-end solution will always have value.

Pricing, I think we talked about at dinner last night, like Virgin Mobile, or Virgin Broadband in the UK is offering all you can eat, except it’s 32K -the internet service, right, so, they know you can only eat so much before your signal goes down. So, it’s probably a risk free proposition for the […]. If you’re talking about 4G network and it’s all you can eat, how are you going to limit people from signing up for a year and then saying ‘sayonara’, I’m sure that’s something that you’re negotiating with the labels, and like that. These guys have some subscription services; AOL is the leader of ‘all you can eat’ internet subscription service, way back in 2000 or whatever it was, when […] the networks and we said […] is good. So, AT&T Wireless, whatever it was, wanting, when they first went to ‘all you can eat’ on wireless phones, so the value proposition is phenomenal, the question is what’s the breakage? […] business model, yet it works for all […].

GY: You said ‘winning solution’; I don’t think there’s one winning solution. I think this will definitely appeal to a certain segment, a certain audience in that more of the throwaway culture, I just want to know what is the best now, listen to all that and I don’t really; I’m not a collector, right? So, I think there still an ownership culture for sure in the U.S., especially those, you know what the excuses are, probably – they want to select their music, they want to curate their music, they want to organize it, and that’s their perspective. With ‘all you can eat’ it comes with programming and suggestions and recommendations that would broaden the audience, but, I think it’s not just one solution, it’s a solution that’s missing, definitely here in the States.

AC: Chris.

CP: Well, I think it’d be unpopular or stupid to try to like, say, take on the iPhone success as it relates to music; and, you clearly are seeing roadmaps and other platforms that enhance the OEMs; follow that, meaning you make the handset, you provide the marketplace, you make the rules of that marketplace clear, and then you pick, in a quasi-egalitarian manner, whom you provoke or associate with. That’s speaking broadly across all app categories. What’s funky about music, and I don’t think Apple planned it this way, is that the outsource is largely an open ecosystem, except they happen to have this multi-billion dollar business called iTunes that they brought to the party as iPhone launched. And, what that’s meant is that when you look at the elegance of the click throughs and the acquisition experiences when you’re identifying a song on Shazam, or discovering a song for the first time on Pandora, or that click from third party app from iTunes is so slick. And, so, not readily available in any other headset platforms, and to Trevor’s point or his efforts, Nokia has a chance of picking rightly, the category of constant, always finding itself first in the all good fun and all the disruptive things online – that’s called music. Whether it’s file sharing, social media, and now mobile pre-eminence in mobile, the Apple ecosystem of App Store, and more recently, with RIMM’s […], music leads the charge. And, because of that, music […] is treated differently from the ecosystem standpoint. So, I don’t think it isn’t enough for the OEMs that go up against Apple iPhone to just to just kind of lay on the marketplace, like Android is doing, misspellings in that App Store, from what I understand.

JP: Well, that’s an introspective what my old world was into an electronics business, and representing Panasonic. I remember the old days of map origin when it first came out with the copy protection scheme, so, an iDeck which was a copy protection scheme for HBO, and HBO would put a copy protection scheme on its content, and so you go as a consumer at home with your VCR and try to record the HBO movie, and you couldn’t, and you blamed Panasonic which made your VCR, and you returned the VCR. And, that’s going to be the challenge that when you control your own ecosystem, you can guarantee the consumer it works, it’s your customer service records [?], your software, they know what’s going on, you can do Tweets, and when you go to the over [?] platform like Android, when you talk about misspellings, forget about misspellings, what if you should break the system?

Apple is over controlling the App Store because they have a review committee.
Well, they’re also protecting their consumer experience; that would be their presentation of it. And, that’s going to be a real challenge for the Android guys; Google’s also a member, by the way, I hope so. But it is, it’s the real challenge between the different sorts of ecosystems that people are offering platforms is […] ensure the consumer a great experience so that those bitching phone calls don’t come to you, when it’s actually somebody else that created the problem.

DC: Well, I can see the individual, that’s simplicity, and simplicity is here, and I think it’s what Nokia is doing is simple, and then you get […], and you get a year’s worth of free music. It could be made more simple, we’re still talking, I think about […] copy protection […], and that to me, […] it’s probably not my field, but I’m sure, […] that Nokia, […] that, and I think the deal that was referenced with Virgin in the UK and Universal is interesting, principally because it’s […], and, actually, I should just point in the UK […], maybe we don’t want to […] make it up sometimes. But it was interesting because that’s […] where it’s […] free, you get MP3s, and you get as much as you want from Universal and see what the day [?] was doing, and it’s yours to keep for however long you want to keep it, to copy, and do whatever else you want.

And, to me that’s ultimately […] service to take on Apple, that’s going to have to have a comprehensive amount of music, it’s going to have a […] sense on a monthly basis, or an annual basis. And, it’s going to have to let the consumers do whatever they want to do with that music; the same way I think they now do with those individual tracks that they buy from iTunes. So, I think that’s probably the way we’re going, but I think that’s probably the only way what we’re going to see in that anyone’s going to be able to successfully take one sort of the iTunes dominance in this market, […] model […].

AC: Well, we start with the proposition that simplicity is good, controlled to some extent is beneficial because it allows an end-to-end solution to operate without any interference or issues from arising. Yet, now, almost every phone comes with web access, Wifi capability, and that allows you to enter a whole different world, and while Nokia and Apple have built very controlled environments, if you have the web-enabled phone and you pay for the data service from your carrier, you can now hook right into Slacker – total lack of control, and it’s what Slacker offers you. And with all of the services that are coming on what happens to the ability of the consumer and how does this impact the manufacturers and the intermediaries, when you could access anything on the internet and go right on to something like a web radio? Do you really need to be purchasing the music, because you could be streaming it all day?

CP: The question actually I’d like to hear from these guys who are really in the business, not surrounding it, is related to that which is when I hear about curating your collection and downloading your collection, where I look at this in five years is ‘the cloud.’ My collection, am I purchasing, am I possessing, or am I just accessing it, is it a subscription, do I feel like it’s a transaction or not; it’s almost irrelevant. Going back to the last panel when they talk about, is the network strong enough yet to access video? Is the network strong enough to access my collection where I want it, when I want it? And, is that mobile phone really not just a remote control? And, when I go to the car, is there a Bluetooth solution so that my car radio knows that I’ve got my phone with me, which knows I can access my collection which takes me all the way back to your question which is, “OK, I can get all varied services?”; yeah, but how many times do I want to enter my user id, my password, and frankly, I have too many damn passwords, as it is.

GY: That’s exactly the point, I alluded to earlier – the music becomes virtual, and it’s really about your data. So, like the fact that I have an MP3 string on a hard drive at my house; do I really want to stream from that copy of it, MP3 to my phone? No, I want the data that knows that I’ve curated that, I’ve tagged it, I’ve organized it, and I‘ve invested my time in that. So, how it’s delivered to me as a user, I probably really don’t care so much, but what I do care about is having to recreate that again on a new service.

TM: I think that one thing I would add is that from our perspective at Nokia, we certainly believe music is one of the most emotional things, both for our customers, the consumers, or everyone, but it generates a huge discussion and interest. And, a hundred years ago, man would not leave his house without his keys, his wallet, and his watch. A hundred years on, it’s really the mobile phone, maybe the wallet, maybe the keys, depending; but you always go back for your phone. And the reason I mention that is that when you have a fully connected solution with that ‘House of Music’ that […] things, it really becomes something really personal. And I know for a fact, that, from our research, people really get annoyed when they’re amassing a big collection of music, and then stop paying and realizing it’s very irrelevant. So, being able to keep the curators is massively important factor.

DC: And, I think in a way, […] at the moment, there are clearly advantages now to be able to double your music, when you’re playing it on the subway, or wherever, there are advantages. There are also disadvantages to access […] because, that will happen, and, in the end, we’ll see what happens. Probably in time it will make more sense that everything will be accessed from the […] at the speed you […]. We’re not quite there yet, but then we’ll see where we get to.

AC: And how long do you think that will take?

DC: I have no idea.

AC: And next year, the 2010 model cars, I think it was Mercedes, BMW, Ford, and Chrysler are going to be coming out with web-enabled devices built right into the car. So, you’ll be able to reach the cloud, with your car, assuming you’re in probably a metropolitan area where you have access to Wifi. So, why buy under those circumstances?

JP: Why buy XM/Sirius under those circumstances?

AC: Well, that’s what I was having a discussion with the gentleman who works for XM. So, why buy Sirius/XM under those circumstances?

CP: Because, they’re not members of DiMA. [Laughter] I think we have that answer. [...], I’m kidding. I don’t know if that means I have to pick up this question, also. No, I was thinking about, did anyone see the web-connected printer that HP announced earlier this week, “No computer needed, touch screen, API set below, API printer, same announcement – yes, and third party apps are installed on it. I think that story’s going to continue to be more the case than not; in which case, it puts the onus on whether we’re independent actors from part of larger companies; it puts […] having to build yet another stinking app, with yet another stinking API, that talks to another kind of device. To me, watch what’s happening in the App Stores for mobile right now, its just, it’s Facebook […] all over again, two years ago; rush of all these folks in, they’re not all, maybe all of them not fall through entirely how to make money, but they have an app, and they have two million unique users; and we’re happy to help them sell all the content we […] when they wake up to that reality. But, the services are going to have to follow the devices, whether those devices are cars or printers, or coffee machines, or…

TM: Just […] quickly to that point, I think the one thing we should take way from this description is really that the ecosystem of music is very strong. It might be shifting a little bit where the money is going, but, if you’re selling devices for MP3s, or your selling tickets, no matter what it is, the industry, the emphasis to this is to do extremely well. It’s just we’re seeing that shift a little bit within where the money is actually moving.

AC: Well, all you guys are in different facets of this industry. What would like to see that’s available on your mobile devices that are not there yet? What are we lacking to make this a really great experience for you?

CP: I’m a billing nerd, and I get laughed at, and internally is what I say is what’s happening in billing has never been more exciting. And, I’m not talking about […] when a payment actually gets cleared or bank accounts and things are tied with, but from a consumer basing standpoint, the rapidly reducing the number of clicks from finding an app for the first time, to also having content for access to content. Are you kidding me about this app thing within the App Store? The guy is crazy that you click on an icon, enter a password, little green Martians cross and point, like you’ve just been pick-pocketed for 99 cents and up [?].

TM: Doesn’t that take you back to the TELCO solution because there’s a billing solution associated with that?

CP: No, and here’s why. Important companies that already (have) tens of millions of consumer credit cards or hundreds of millions of consumer social networking profiles are exposing tools to third parties to, at first, make authentication, and, they’re taking the typing out of the content creation, but when you think for just a second about simple it would be for them to add a click or two more for permission for a billing event to be associated with that experience? I’m trying to connect like features that come from some of the leading social networks, which essentially is the typing and create association in service in two places. I think when billing is first, simplicity of those experiences; that will be a happy time.

AC: But you want more security for billing?

CP: No. I want more extensibility, I want more widely billing APIs, I want to be able to bill if I kind of breathe into this microphone, provided that it’s authenticated the way that it should; I’m to the opposite of that for security.

AC: OK. Geno.

GY: I would agree with all that. So, additionally, wouldn’t be surprised […] analysis of all this, you mentioned Slacker, […] radio, a building […], someone else doing the curations for me, and someone selling the […] model of the […] model. I’m surprised that that’s a great development, but on the […] side, I think what we need is better access for catalogs, better ways to port our data from service to service, and also, more, better access to catalogs. So, if you’re purchasing music today, if you […] top 40 purchases are available from mostly services, but, more often than not, myself and my […] are finding that catalogs are still lacking. There’s a lot of stuff that’s out there for sale, so you’re shopping for multiple sources; so being able to port data, become better access to catalogs, and the billing services and the social services all coming together in the service that […].

AC: Daniel.

DC: And I think when it comes to mobile, and for all the talk about everything coming from the cloud, we’re miles away from that mobile right now. There are no […] values […], well, they’re not really in the […] something to the internet you want to hear, whatever you want to hear. They […] players specifically something you want, that guides you to something you might like. We have […], we have Dandur [?] […] services you want to do, but, they’re pretty […] if there’s a specific song you wanted to hear or a specific artist, but that […] solution. I think the fact that the closest we get to that from mobile is probably the Yuchiban [?], the iPhone, and Yuchiviz [?] probably the number one music streaming service that we use; it’s a grossly immature way of doing it. It’s […]. And it’s also is properly configured to help you find the music that you want, but that’s really what […]. We are working on developing […] on demand, streaming service for a handset, and then all this talk, when that’s up and running, on behalf of the […] beginning […] talk about downloading songs to your iPod probably will […] will go, but it’s going to take a bit of time yet I think.

AC: Trevor.

TM: Well, my immediate thought was to say exactly, but my personal interest there, so I rethink we have a really good focus at the moment around music, and I think we’re moving the barriers is really the short-term objective. There are still too many barriers; everyone has referenced it on the panel, from billing to just searching. And, so that’s the short-term goal. I see Nokia would see the evolution of where music goes, really to the integration into the other key aspects of what’s going on. I think what I mean by that is that your device has geolocation – where you are, what music you’re listening to, how that integrates into maybe the live events you’re going to go to. You take pictures of the events, you want to upload via social network, and all those things working very closely together with a single connected device that’s always with you, not seeing the future, and we’re going to see that coming on more now, sooner that we think, but it’s not there right now, but it certainly will be, we feel.

AC: Jon Potter, last word.

JP: A personal interest, I want more simplicity in power cords. [Laughter] Wireless power. […] these guys got it right [?], the combination of you choose between listening to a user-generated or user-influenced playlist, and actually being able to select your own playlist remotely. Closing that gap is going to really be the magic to, “I have my collection, or I have my choice of what somebody else is curating or the combination”, […] from the combination are those three options – having it together in one app would be fabulous. I […] longer that I care to admit here, has gotten itself past the billion mobile app users milestone at a rate that I’m not sure any of the other music services could claim; this state is not […], but I’m shocked at how fast they have roared to the top of the iPhone App Store, and they’re seeing a terrific uptake; probably the number one app on Android, that’s as a defining instinction. But there you can get access to the tracks you upload into the cloud or brings him his playlists; I’m sure there’s other stuff, I don’t have an Android for myself. It’s an iPhone, as well.

US: I can get you a Symbian device if you’d like. [Laughter]

AC: OK. We’re going to take one or two questions from the audience. The gentleman right here in the second row.

JD: John Demanis [?], […]. My question actually is, “Why pay for Sirius/XM, this is coming?” And, I think to ask my question is really two-fold; 1) both apps supported, and subscription models have a lot of questions around them, particularly in the mobile market. Where do you guys see that this model is evolving to, and 2) what are customers willing to pay for, where they’re willing to lay out x dollars […] to access […]?

TM: Well now, I’ll say it again. I think that they are absolutely willing to pay for a solution and that is not one specific thing. It’s a combination of many different things. And, I think the other point is simplicity in making a few kinds, being able to buy something, and ‘out-of-the-box’ it works; not ultimately it will always be the right course of action when it comes to music or media, in general.

CP: I hear a lot of predictions about music being free, that that means wanting a […] plan […], thinking that that’s not true. And, whether it’s transactionally-based or one-time transactions, or subscription-based is probably more than just streaming access. Those services have become vastly appealing, but the idea of music […] free is a very popular tech […], I don’t where they’re getting that from, I don’t know why, I don’t see any evidence of it whatsoever.

JP: I think there’s a tone of evidence that for a substantial portion of the population, music is free, and for them the question is when will that substantial portion of the population decide that quality of the content – what bit rate the content is, or quality of the access, because their time is worth more than their money. When does the issues for the buyer, the potential buyers, when do the issues of, “Well, I have to actually have to go to work, but I want my music, and I want my quality, and want the sound […] because I’m a date, I really don’t to listen to the trash that I listen to in my clunker”, how does that all work?

And, so I think people will always take a high quality service, high quality content, and just [...] when their budget and their values push them that way. I don’t have a Sirius/XM issue, my point was really to the extent that, I’m driving down the road in my car, and Pandora is as easy to access as XM, the challenge is phenomenal, is even more that XM has confronted.

And we go back literally 10 years, and I’m sitting with the RIAA [?] present, the RIAA, that’s fine. And they’re talking about how they want put all these restrictions on what internet radio and what internet news services can do in the home. And I said, “Well, you haven’t layered those restrictions through legislation on XM and Sirius, you’re not gunning for them.” And they said, “Well XM and Sirius – they’re just the car.”
And I said, “Are you guys out of your freakin’ mind, you can put a little satellite dish on the roof of your car, why can’t you put it in your house, and by the way, it’s going to get smaller and smaller; you’re putting your phone, if you’re out of your mind.” They didn’t think that far ahead, they never thought about it; it was mind boggling. And I said, “Well, how do you know it was just for the car?” They said, “We read the S1.” So, to me, XM and Sirius are internet radio with a proprietary chipset. It’s just music, though.

AC: Let me just add something to what Jonathan said, and I felt this way for a long time, “Free comes with a price.” There is no such thing as absolutely free. When you get free, you get a lot of other things with it. So, anything that you want that is going to be simplistic, easy to use, comes with a trustworthy name attached to it so that you can be sure that you are not getting a whole bunch of things downloaded into whatever device you’re using, you’re going to have to pay for that.

DC: But, I think, it’s not quite the experience that you have, […] even downloads, there is now a lot of people are used to accessing streams free. […] great service, […] quality, and it’s very simple to use, and it’s free. And the issue there is that it’s going to be on, […] sustain our business […].

It’s free until the world […] the advertisers.

DC: […] set so the level of expectations of legitimate people, legitimately wanted to consume music expecting that it’s going to be free, and that, I think, is the biggest challenge we have to face. And we probably will have to accept that legitimate music will be partly free, we’ll have to agree to some […].

[Some bantering back and forth]

AC: Oh, I appreciate that, thank you. And it comes with ‘no strings attached’, right?

Now, I’m sleeping on it.

AC: Well, thank you very much, and thank you to our panelists. We’ll be ready for the next presentation.

[Applause]