Off Deck Boston: The future of the music industry is digital, a future that Off Deck could be a huge part of

Rating: Dada claims that Off Deck providers are essential to bolstering flagging music labels

The music industry is in the middle of what the Chinese would have called “interesting times”. The number of units sold by the major music labels has been steadily increasing year by year. Unfortunately for them, the actual value of these units has been decreasing at a far greater rate, by almost 25% over the last 10 years. The reason? Those units are now digital. So, where a unit used to represent a CD sold in a store for 15 to 25 euro, a unit now often represents a single digital track, sold for one euro or less.

The crisis for the music industry comes in how they deal with the new shape of the market place. So far, they haven’t been doing such a great job. Extremely constrictive DRMs, and consolidation of companies (eg. Sony Music and BMG into Sony BMG) have been staving off the inevitable, but they haven’t turned the downward trend around.

Where do off-deck providers come into it?

A running theory has been that if music format is going digital, then music sales must also go digital. The most successful example of this is, of course, the iTunes music store. But that presents it’s own problems to the major labels. For the first time, they find themselves out of control of their own market. iTunes sets the price, calls the shots, and takes a hefty chunk of the profit. And that really rankles with the labels. Not only that, but iTunes doesn’t reach the entire market. The DRMs in place on the music store make it useless to anyone who doesn’t own a Mac, iPod Touch or iPhone, and that’s a huge segment of the market.

Daniel Cohen, Vice President of Business Development for Dada believes an off-deck model is the answer to the music industries problems. One of the major advantages of off-deck is its position in the mobile internet. Users who are able to purchase a track any time they like, rather than just when they’re at a computer, are likely to download far more units. Not only that, but off-deck providers have the chance to be intensely personalized and local. Different segments of the music can be serviced by different off-deck sites (all tied to the same label, of course), which also ties into the potential of mobile sites for direct marketing. Perhaps most importantly, carrying these songs over off-deck providers cuts out the carriers. The labels don’t like dealing with carriers, because they want a cut of the profits on a per unit basis. Labels would have far more control over off deck.

“Working constructively with off deck music providers will be an important part of the future of the music industry”

The biggest barrier in the way of this model is, unfortunately, the labels themselves. For such a large company, making such a large change in sales philosophy is incredibly difficult. But there are other problems to take into account, which Dada boiled down into three sections:

Network availability – MP3’s are harder to carry over mobile, because they’re bigger then most of the multimedia content out there. Labels and off-deck providers alike need the Networks to open up, offering subscribers better data plans for network customers.
Sensible licensing terms – labels must not charge more for the privilege of downloading songs on mobile. It must be the same price as over the Internet. Also, there needs to a liberalisation of DRM rules. This has been happening with the major labels online, mostly due to huge user lash-back, but it hasn’t spread to mobile yet
Great handsets – the iPhone was the first proper device combining phone and music player, and the first one really used as such. Most people usually don’t carry a separate music player with their iPhone. The more great handsets there are, the more ubiquitous mobile music downloads will become.

What we think?

I’m a huge fan of this idea, but it simply doesn’t exist at the moment and I’m not confident that will come around any time soon. My dream would be that I could take out my mobile, log on to my preferred off-deck provider, run a quick search and download the song I wanted, and have the cost forwarded straight to my bank account or credit card. No need for carrier or network interference, just a simple two step process from the label to the provider to me. But the problems inherent in that process are incredible. How to handle mobile billing alone is enough to give people haemorrages, and that’s just one in a litany of woes facing this particular ideal.

Daniel Cohen’s presentation really made me believe that this model would be the best for labels and consumers… and it would certainly be good news for off-deck operators. But until massive changes place in the mobile space, it’s probably just going to remain a pipe dream.

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