Vcasting a new volume

As the entertainment industry struggles with the plethora of distribution options presenting themselves in an effort to grasp the best way both reach the consumer and stay in business another option is slowly emerging. The mobile-only album. Hip-hop producer Timbaland recently struck a deal with Verizon Wireless’ Vcast to create songs for sale only via the exclusive platform. The tracks will be provided once a month, release only days after they are finished in Verizon Mobile Recording Studio Bus while Timbaland is on tour. Throughout 2008 Timbaland will work with artists on his parent-label, Interscope Records, to produce tracks for the exclusive series. Vcast subscribers will receive the mobile over-the-air (OTA) download as well as a PC version, with the availability of ringtones and ringback tones as well for the standard pricing.

Groundbreaking Concept

The concept of delivering music over a multitude of platforms to reach the consumer in every element of their entertainment life and cater to their ever evolving needs is widely viewed as a long overdue attempt by the industry to more effectively court the consumer’s highly-prized discretionary income. The increased competition from a variety of new entertainment resources along with the dismissal of CDs by much of the public as being passé and over-priced continues to erode record label success. Overcoming the barriers to paid music consumption is not going to occur via and single platform and experiments are abound.

The attempt at OTA-only releases goes hand-in-hand with more record labels experimenting with digital-only releases. Niche labels such as Eyeball and Metal Blade over the last several years releasing digital EPs and pre-releasing full-lengths of artists and digital only labels, such as , began to pop up. Even stalwarts such as Radiohead found ways to go down the digital route with the controversial pre-release of In Rainbows at a name-your-own-price price-point. Digital is being positioned as both complimentary to traditional physical music sales and in lie of CDs themselves and is continuing to grow at double digit pace in terms of paid downloads (although peer-to-peer sharing continues to dominate the landscape). OTA exists much in the same fashion, as a compliment to traditional digital platforms for the most part, but in this case almost as a replacement for them already.

OTA music is still a fledging concept, that’s adoption hinges on consumers interest in adopting to the platform. Thus far, the adoption rate remains low, so an OTA-only music release seems quite ahead of its time. Then again, the argument could be made, exclusive content might be the best way to jumpstart interest in the format. After all, if given no other choice and a strong enough desire to obtain the content, one would be forced to adopt to the platform. Thus, the Verizon-Timbaland promotion becomes quite an intriguing affair not only in the uniqueness, but also some of the potential implications of it.

The Consumer

The underlying consumer sentiment will ultimately dictate how the promotion plays out and in the grander scheme, if and how OTA succeeds in general. Consumers, even if unknowingly, are constantly striving for more convenient ways to satiate their impulsive entertainment behaviors. OTA represents one way by which convenience and impulse can be fulfilled as it can be accessed theoretically anytime and anywhere someone has a mobile phone and signal. The uniqueness of the content this promotion provides a driver to adopt the behavior and set a tone for pattern use as an interested consumer must perform the task 12 times in order to obtain the entire compilation, receiving it piece-by-piece as each song is completed.

The question is, is the average consumer ready for this type of distribution. The answer is, probably not. But consumer behavior is a fickle and funny matter and what might initially fail could become enormously successful just as success can often collapse in failure quickly. As everyone probably was told in elementary school at some point, ‘you won’t know ’till you try,’ the entertainment and telecom industries are taking the approach to heart and hoping they can strike a chord with interested fans and set a precedent for future offerings.

If the consumer adopts the system eventually other entertainment will follow the OTA route as music seems to be the guinea pig of the entertainment industry, usually falling in the early adoption phases of many of the consumer patter changes and related progression.

Marketing Focus

Highly focused marketing is what the deal is about.

This is possibly the biggest asset the OTA offering will have going for it. One telecommunication carrier using its own distribution platform. One artist focused on his own works. One record label from which to draw resources from. No clutter, no confusion. Everyone’s roles are clear and everyone’s focus defined and the limited number of partners allows for greater communication by all and control over the outcome.

Verizon can leverage its telecom industry leading Vcast entertainment platform in order to leverage its existing subscribers to utilize the new concept and increase its revenue. Interscope can flex its established marketing muscle and that of its parent company, Universal Music Group (the largest of the four major recording and distribution companies), to position concept to fans and reach consumers in a unique way. Timbaland can use his existing success as a performer and tap a new group of fans hailing him as a trailblazer and a visionary.

A huge coup of the focus could be for telecom. Although the revolution is led by Verizon, it helps all the carriers if consumers see the value of the effort. As the call for more open access to mobile airwaves increases carriers embedded in delivering service access to mobile connections will struggle to differentiate themselves from competing discounted or free services. The dissipation of their service contracts will mean they need to find additional avenues of revenue as well as compelling reason to retain some server contract consumers. One way to differentiate is to also provide access to compelling offerings, such as special entertainment portals and exclusive content. By offering content in additional to access it creates a reason for consumers to maintain similar habits to their current carrier service subscriptions. The focus of the effort drive emphasis on adoption.

Another huge coup could be for the record industry. Once again, Universal is trying to break the mold and embrace another distribution channel. After heavy criticism of their leadership’s lack of foresight in the digital world, Universal broke rank with iTunes to embrace other digital stores for exclusive and specially positioned content, forced the hand of DRM-free without price increases, offer sliding scale and incentive pricing and is now dabbling in OTA. If Universal is even nominally successful in partnering with Verizon through the Timbaland promotion it could help the whole industry attempt to embrace the platform the way other trailblazing became trendsetting. No label wants to be left out and if other labels jump on board with similar offerings through either the same or a competing service it increases the available OTA-only content and usage awareness, both benefiting the industry as a whole.

Exclusivity’s Downside

The flip side of the focus coin is the downside to the project is the exclusivity.

First, the exclusivity of the deal minimizing the distribution. Unlike most distribution platforms that are open to the general public, this is aimed specifically at Verizon Wireless’ consumers alone. In part, it is a subtle ploy by Verizon to increase gross adds and port other carrier’s subscribers to their service by creating a distinction between their Vcast service and similar services available through other mobile carriers. The other part of the equation is to increase the use of data on the network and increase the likelihood of OTA will be utilized by both the consumer and the music industry as a viable platform.

Verizon may be the number two carrier for North American subscribers behind AT&T, but even in that position it still represents under-to-about a quarter of the mobile carrying public nationally. Consider, they also trail several of their competitors in average revenue per user (ARPU), which can be driven by a the low number of unlimited data plan subscribers in their base and then the low number of Vcast users. From the perspective of availability, unless there is a mass exodus from other carriers to Verizon and Verizon is able to convert the vast majority of these to high ARPU customers, it is unlikely the songs will reach the mass audience. Considering Apple’s iPhone has quantifiably greater draw as a device compared to the star-power of any single artist and iPhone was unable to truly shift the balance, it us impossible to consider even with a roster of exclusive artists Verizon would be able to leverage the exclusivity of tracks and reach a critical mass.

Although some of the numbers are not readily available without dispute, competing platforms by other OTA providers figure similar penetration to Vcast, meaning there is no true market leader and as a group they have yet to combine achieve critical mass in penetration. OTA is simply not an acceptable form of music distribution to the consumer yet. Barriers include the cost, the complexity of purchasing, the DRM involved with some of the platforms and handsets, the lack of both bandwidth and memory for the OTA process and the lack of truly compelling content. The Timbaland deal attempts to address the final reason, however, the limited appeal of Timbaland to the general public may not contribute much toward success, nor does the scarcity of the material (one song per month for one year). With traditional digital downloads still struggling to gain greater traction, OTA faces an even greater uphill battle to convince its adoption. It will take more than one song a month by any artist, much less one that appeals primarily to a targeted genre such as hip hop to achieve this.

This all combines to severely limits the release and therefore make it difficult to truly gauge its success. With limitations such as this, paltry sales could still result in it being potentially hailed as successful. Furthermore, circumventing the exclusivity might require some work due to Vcast’s use of DRM, however, that has yet to stop peer-to-peer redistribution which will certainly be targeted highly by the fans in order to obtain the tracks. The music is bound to reach a much wider audience despite the tight grip of the distribution platform itself right now.

Second, the exclusivity of the artists. Currently, the program is being done with one artist, Timbaland. Not to discredit the RIAA certified success of previous works, but on the whole a hip-hop producer appeals to a targeted audience, perhaps wider than some other genres might, but exclusivity to a single producer of a single non-transcending genre is going to limit the adoption. Furthermore, by Timbaland being limited to the Interscope Records roster, as was initially reported by Billboard, it further inhibits the possibility of greater consumer usage. This comes down to both the limited number of artists available as well as the segmentation of additional marketing dollars to be contributed by a label to the project, exclusivity to Interscope means the label is stuck footing the entire marketing cost itself, if it chooses to provide any at all.

OTA Wins

It is highly unlikely even if this is coined an initial failure due to low sales numbers OTA-only music will be forgotten. For Timbaland, there will be forever the trail-blazing moniker of being the first and as the program unfolds and the other artists are named the star power potentially allows for more breast-beating and probably a few extra dollars in their pockets from sales, if that. For Verizon will probably gain a few subscribers or data plan upgrades to the service from users loyal either to Timbaland or one of the artists he works with for the project, however, the carrier will probably earn little more than glamour points as an industry leader, which is what it probably really wants in its brand portfolio. Interscope might see a small kickback in sales related to the release itself as well as other assets related to the artists involved, but really benefits more from the increased exposure to a new distribution platform and promotional tool for future releases.

Since all the players can spin success as they choose and none are known for readily accepting anything as a failure in the first place, the finger-pointing back to the attempt at OTA music is sure to keep it in the forefront for some time. The project itself guarantees a year’s worth of marketing and promotion assuming it is carried out to term, which in-and-of itself is quite a bit of exposure to the underused format.

Therefore, the real winner either way will be OTA itself. Despite the possibility of low initial sales, OTA will get a huge boost in branding by Timbaland and the artists he works with, Interscope Records, Verizon and whatever handset manufacturers decide to jump into the promotion mix as well as the always open possibility of other corporate sponsors (such as ones already involved in Timbaland endorsement deals) getting involved. If OTA is going to compete with traditional digital downloads and establish itself as a viable distribution platform for music, revenue driver for telecom and way for artists to more effectively connect to their fans. OTA is struggling and every element that brings greater awareness to it as the potential to increase adoption rates which then creates the potential for it to become a more viable long-term solution in a growing mobile environment. It is hard to imagine with the players involved they won’t put a big enough push behind it when the time comes to gain mass knowledge at worst and that’s what OTA in general so desperately needs to succeed.

About thedoormouse

I am I. That’s all that i am. my little mousehole in cyberspace of fiction, recipes, sacrasm, op-ed on music, sports, and other notations both grand and tiny: https://thedmouse.wordpress.com/about-thedmouse/
This entry was posted in business commentary, Opinion. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s