17, 2007:

A
AUGUST
few months ago, the UK law firm and research company
THE ATTENTION ECONOMY Olswang released a new report called The Impact of Social
AND THE MUSIC INDUSTRY.
Networks on Music Commerce. I have had the PDF on my
desktop, marked in red, for a long time, and I finally got to
dig into it today.

on
With kind permission of Olswang *Lond

 THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY 

 This is an absolutely brilliant piece of research (albeit with
a fairly small number of UK-only participants, about , I
think) that very clearly spells out where the future of music will
take us: licensing access, sharing new revenues, ad-supported
monetization, diversified revenue streams, complete music and
video convergence, user-generated playlists and viral syndi-
cation, and so on — you’ve heard all that from me before I
reckon.
Here are some excerpts and comments:
Social networks are changing the accessibility of music,
helping it to become more democratic and utilitarian
and this is having a profound impact upon the discovery
and purchase of music, with far-reaching implications
for the music business.
 THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY
My comment: You can say that again. Streaming full-length
music tracks, fully selectable by the users without any restric-
tions whatsoever, is now becoming the default on social net-
works and blogs. Basically — and I said this two years ago
— this is the new radio, and it should be licensed like radio
(albeit for a higher share of revenues).
The Impact of Social Networks on Music Discovery &
Purchase: The Digital Music Survey is currently in its
fourth year and is an independent survey of , UK
consumers. The research indicates massive increases over
the last  months in usage of sites containing music
such as YouTube (up  to ) and MySpace (up
 to ).
Amongst teenagers the incidence is huge –  have
used MySpace and , YouTube. For users of these
social networks, music is playing an increasingly impor-
tant role. For example,  of social network users have
embedded music in their personal profiles ( of teen-
agers). Approximately  do so to show off their taste
and half do so to reflect their personality. What’s more,
it seems to work as almost  agreed that they could
tell a lot about a person from the music in their profile.
My comment: Embedded music and media players will indeed
be the  driver of content syndication, and will play a huge
role in how music is being found and purchased. Give it just
another – months and every web user will know what a
widget is – and probably use them, too.
Imagine Amazon.com offering MP-only downloads that
are based on a weekly or monthly flat rate, and/or bundling
deals that “feel like free” to the consumers that are on the re-
ceiving end of click-throughs from  million social net users.
(They already did this with Premium Shipping and are now
THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY 
 Olswang continues:

The survey findings strongly suggest that social networks

are also impacting music discovery.  of people re-
vealed they actively surf social network sites to discover
new music and artists and two-thirds of all users regular-
ly or occasionally discover music that they love on their
preferred social network site. The incidence is higher still
on MySpace (), Bebo (), and YouTube ().

My comment: This is indeed a huge marketing nirvana for the

record labels, and one they need to embrace a lot deeper than
they have been doing until now. Just like the New York Times
dumped its Times Select offering in favor of an open, ad-sup-
ported approach (and the WSJ is sure to follow), record labels
need to shelf the idea of fixed per-stream fees. It just sets up
on
With kind permission of Olswang *Lond

hurdles that won’t be meaningful, anyway, and it will dampen

everything. Being in the pipeline is what matters, and getting
more people to pay attention is what will drive future music
commerce. Don’t abolish the tollbooth — just move it down a
bit further, and be smarter about it. Pull before you push!

on
With kind permission of Olswang *Lond
doing it with Kindle, their new book-device that has the con-
nectivity already included.)
It will no longer matter where and how the purchase hap-
pens, and whether any new friction can be interjected to shore
up that good old scarcity paradigm. All that matters will be
who gets the clicks and who does not — getting and retaining
attention is the new mission; distribution is simply the default.
Friction is Fiction.

 THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY 
 Cru- tion obsession, format wars, territorial restrictions, and licens-
cial- ing turf wars. Ouch! Talk about a dysfunctional ecosystem
l y , — this is winning the grand prize, in my humble opinion.
the
dis- Russell Hart, Chief Executive of Entertainment Me-
cov- dia Research commented: “Social networks are funda-
ery mentally changing the way we discover, purchase, and
i s use music. The dynamics of democratisation, word of
mouth recommendation, and instant purchase chal-

on
With kind permission of Olswang *Lond
lenge the established order and offer huge opportunities
to forward-thinking businesses.”
John Enser, partner and head of music at Olswang,
says: “The music industry needs to embrace new op-
portunities being generated by the increasing popularity
of music on social networking sites. Surfing these sites
and discovering new music is widespread with the latest
generation of online consumers but the process of actu-
ally purchasing the music needs to be made easier to
encourage sales and develop this new market.”

translating into changing purchase behavior.  of so-
cial network users claimed it has a “big/massive impact”
on the way they purchase music and  state that they
“regularly/occasionally” buy CDs or downloads of mu-
sic that they discovered on a social network site. This
rises to  of MySpace users. However, more needs to
be done to make purchasing this music easier, with 
of respondents agreeing with the statement “I wish it
was easier to purchase music that I find on these sites.”
My comment: I think it is shockingly pathetic how little the
record industry has done so far to harvest the fruits of this enor-
mous interest in music. People are totally interested in music,
but until now the industry has only done its utmost to deter
the interest, with impossible commercial terms, copy-protec-
My comment: Record labels: Are you really listening?
I am going to stop here as you can read the rest on the
Olswang site, but here is one more morsel that must be
shared:
Enser says, “As illegal downloading hits an all-time high
and consumers’ fear of prosecution falls, the music in-
dustry must look for more ways to encourage the public
to download music legally. Variable pricing models and
DRM-free music, which would allow consumers legally
to transfer music to other devices, were popular among
respondents and represent new ways of enticing people
away from breaking the law.”

 THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY THE ATTENTION ECONOMY AND THE MUSIC INDUSTRY 