Few cynics are as hardened as teenage cynics. Add the experience of growing up in Manhattan, and the “seen-it-all” attitude is delivered with even more scorn.
Music-mad Simon loves American hardcore, Jamaican ska and punk. His computer hard-drive is full of songs, most of them illegally downloaded from websites. What the tech-savvy 15-year-old doesn’t have is an iPod — or any intention of getting one.
“I’m out actually doing stuff, talking to my friends. They don’t have iPods either,” said Simon. “What do I need an iPod for? All those ageing hipsters with those telltale white headphones poking out of their ears are sad.”
Apple Computer’s wildly successful iPod dominates digital music in a way that Sony’s tape-playing Walkman could have only dreamt about. As a result, Apple’s iTunes music store has become the leading music retailer on the internet.
But five years after its launch, the iPod is starting to lose its sheen. According to Zandl Group, a New York-based trend forecaster, the iPod backlash has begun.
Zandl conducts regular surveys of 2,000 youngsters aged 8 to 24 on a variety of topics including music tastes, clothes and techno products.
For the first time last month, the iPod started attracting a statistically significant amount of negative comments.
“There were complaints about the batteries dying after the warranty ends,” said Zandl’s Carla Avruch. “These are expensive items. There’s a lot of cynicism about that.
“The iTunes format is also attracting complaints. People can’t easily transfer their music to other players. The iPod is still very popular but there are definite signs of a backlash.”
It’s not only teenage consumers who are looking for an alternative to the iPod. The music industry, too, is keen to see someone break Apple’s hold on digital music.
Three years ago, Apple’s launch of its iTunes music store was greeted enthusiastically by an industry that was reeling from the loss of billions of pounds of CD sales because of illegal song-swapping over the internet.
The immediate success of iTunes, which works seamlessly with the iPod, gave the record companies hope that consumers would pay to download their music.
But the strong appeal of the iPod, along with the international expansion of iTunes, means that Apple is now selling songs at the rate of about a billion a year. In the eyes of the music companies, Apple has become an over-mighty retailer, demanding too big a say in matters like pricing.
In any case, the larger problem of piracy and illegal downloading has not gone away. The number of songs shared using peer-to-peer networks such as Bit Torrent, Lime Wire and Kazaa is much greater than the number sold legitimately through sites such as iTunes, Napster and the multitude of other online stores.
This potentially creates an opportunity for a new approach to digital music. And last week, a group of seasoned media industry executives — including Robin Kent, Lance Ford and Eric McClean — announced plans to create a new advertising-funded business that will offer consumers music for free.
The quirky name they have chosen for the new service certainly makes it memorable. But can Spiral Frog make the leap from concept to viable business? Ford, who is Spiral Frog’s chief marketing officer, said: “The big dilemma for the music companies is stolen music. The ratio around the world is one paid-for track to 40 stolen — that’s a bloody disaster for them. The industry loses hundreds of millions of dollars trying to outlaw piracy, and it’s practically impossible.”
He continued: “If you talk to those who feel there’s a genuine right to get music free, they say: ‘We’re never going to pay for music.’ It’s a very ideological decision.”
The solution, Spiral Frog believes, is to embrace reality and make music available for nothing — recouping the costs from advertisers, and sharing revenue with the record labels.
“Advertisers are keen to reach those under-30 girls and guys, the centrepiece of whose life is music,” said Ford.
“There’s a flood of dollars, pounds and euros going from traditional media to the internet. But huge sites like My Space and You Tube are only just figuring out how to accommodate advertising. The unedited nature of their content makes it difficult for advertisers to work with.”
The users of My Space (which is owned by News Corporation, ultimate owner of The Sunday Times) and its rivals fill their web pages with writing and pictures that are often of dubious quality or taste. Advertisers more accustomed to the orderly world of television and newspapers are wary of being embarrassed in these seemingly chaotic online meeting places.
So there is Spiral Frog’s ambition: to solve the problem of online music theft, while making it easier for advertisers to reach a youthful audience that is deserting newspapers and television.
THERE is a lot of work still to do before Spiral Frog’s American launch later this year (it is not due to reach Britain until March or April). The company has secured an agreement with Universal Music to provide access to its huge catalogue, which includes tracks by the likes of Eminem, Scissor Sisters and 50 Cent.
Initial reports suggested that Universal had given its backing to the new service, but the extent of its support is a matter of debate — no Universal spokesman was quoted in Spiral Frog’s announcement.
Industry sources said that Spiral Frog had committed a decent chunk of its initial $10m equity backing, provided by two undisclosed London hedge funds, to secure its licence from Universal.
One person familiar with the licensing negotiations said: “It seems daft to use your VC (venture capitalist) money to pay millions of dollars to the major record companies. Sony BMG, Warner and EMI will be expecting the same or similar upfront fee.
“Is that being sensible? Or is that being cyncial and greedy? Does Universal really care whether this works or not?” Not much, it seems. One Universal insider said Spiral Frog was “an interesting experiment”. But anyone who compared it with iTunes “doesn’t know what he is talking about”.
“The average music consumer doesn’t want to sit through one and a half minutes of ads every time they want to get a track,” he added.
SPIRAL FROG is not the first attempt to create an online music business funded by advertising. Leanne Sharman, now Napster’s UK general manager, used to work for MP3.com, which the French company Vivendi tried to turn into an advertising business but failed.
Sharman said: “The challenge for Spiral Frog will be to strike the right balance between generating significant revenues to have a viable business model, and not bombarding consumers with too much advertising that puts them off.”
Banner ads and pop-ups alone will not be enough. “You need to create a service that caters for bespoke sponsorship,” said Sharman. “You need a whole shopping list of different things.”
Spiral Frog has acknowledged this. Contrary to some reports, the site’s users will not be forced to sit through a 90- second ad for Coca-Cola before they can download their Keane or Shaggy track.
Ford said Spiral Frog will aim to encourage its users to spend time on the site with “encyclopaedic” information on artists, including interviews, concert details and song lyrics. “Each time they turn a page, new advertising will appear. There will be banner ads, video and contextual ads. If the personality of the site is everything we want it to be, we hope that they will be there a long time anyway.”
In America, Napster is already experimenting with advertising-supported “free˜ music — allowing users to listen to songs on their computers up to five times. The hope is that some of these will then convert to paying customers.
Although the initiative has attracted much more traffic, Napster has never recovered the momentum it had when it was the first peer-to-peer file-sharing sensation.
Alison Wenham, chairman of the Association of Independent Music, which represents many smaller labels, pointed out that free music is not as strange a concept as it may initially seem. It’s already here in the form of commercial radio.
Wenham said: “The radio model has the appearance of being free. Nobody is particularly aware of the very complex and mature licensing structure that lies behind it.”
Tim Grimsditch of the specialist music consultancy Frukt, made a telling comparison. Last year in the UK, the record industry made £1.8 billion from selling music to about 30m consumers, according to the British Phonographic Industry.
In contrast, commercial radio, which also reaches 30m people, generated revenues of only £519m. In other words, said Grimsditch, a “free” model could generate a substantial business — but a much smaller one.
Spiral Frog sees it more simply. It is betting that the music industry has lost a younger generation of music buyers for ever. Ford said: “There’s a group of thirty-somethings who will pay for music. There’s a much bigger group, and more to come, of younger consumers who will never pay for music, and who will probably have an alternative device to the iPod.
“The younger you go, the less (people) care about iPods. It’s their Dad’s music player. They want something different.”
Rivals tune up for iPod's podium
THERE are dozens of different digital music players, from brands that include Sony, Samsung, Creative, iRiver and San Disk. Many are good products but, until recently, had made little dent in Apple’s ability to claim that the iPod and iTunes hold a 75% share of key market segments.
Nobody was more frustrated by this than Microsoft, which makes media-playing software that works with most other devices. In the PC world, Microsoft’s success was built on the shoulders of a multitude of hardware manufacturers. But with digital music players, its partners have been unable to dislodge the iPod from the winner’s podium. The risk for Microsoft, and others, is that Apple with its proprietary iTunes software becomes the de facto standard for the burgeoning world of entertainment online. Where music is today, film will surely follow.
In response, Microsoft is making a rare foray into the hardware business by creating the Zune — a yet-to-be released music player that is expected to be accompanied by an improved version of the MSN music store. This is far from being the only challenge to Apple’s early market leadership. MTV, one of the best brands in music, recently launched its own online store, called Urge.
Amazon, the world’s biggest online retailer, is also in talks with the four global music companies about a digital-music service. It is said to be developing Amazon- branded music players, and a subscription service to sell them at a deep discount, similar to the way telecoms companies discount mobile phones. It already sells about 10% of digital music players in America, including iPods.
‘Amazon, Microsoft, Google, Yahoo, everyone’s looking at doing something in music,’ said a music executive. ‘iTunes isn't going to be it for ever.’
