ownership not important – access is

Posted on November 24, 2009

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we must all be getting old (Ok, i must be getting old). i remember buying a new CD (yup , not even a record) and bringing it home after hours of agonizing at the CD store. opening up the packaging and experiencing everything there was about it. I would add it to my growing collection and would marvel and the quantum i had collected. when my friends came over we would spend hours checking out CD’s and generally fiddling.

I never listened to most of my CDs. and actually, there were plenty more i would have liked to listen to that i didnt have. this was before the net and continious access. its the fundamental shift towards continious access and the beaviour changes that brings that really shifts how we enjoy music. sure we can still buy it, but is this an outmoded way of thinking when i can listen to any song i want at any time? why own it when i can just access it?

similiar to the software industry when saas (software as a service) first emerged, the concept makes a lot of sense and actually means higher revenues over time. the challenge is the transition. to move from an upfront  once off price that is normally higher than a monthly  subscription value takes some corporate chutzpah, even if what you are doing is the best thing in the long term (not many bonuses are based on the long term – only on this year or this quarter).

below is an interesting article on the topic from paidcontent.org

Throughout this country, throughout the world, in conference room after conference room and boardroom after boardroom, executives of content companies are analyzing data that shows the dwindling numbers associated with owning content. For the recent generation, this has been mostly reflected in CD and DVD sales. More recently, iTunes downloads have been added to the analysis.

But if you remove yourself for a minute from the raw data and just observe the iGens (under 25s) around you, you can see how ownership of content is either non-existent or tremendously devalued. You do not need data to comprehend that.

That is OK, though. There is a much more profitable frontier around the corner – and it is called “access.”

The over-40 generation was only able to own records in their youth. VHS and DVDs were just coming into their own. Then, the next generation—the generation that grew up in the ‘90s and the early part of this decade—were flush with ownership. They could not own enough—2,000,000 CDs sold during NSync’s first week of release (the glory days). DVD sales in the millions per release, entire seasons of TV shows that you either grew up with or had watched. Bookshelves at home lined with hundreds, if not thousands, of CDs and DVDs and then video games.

But now…

What is valued? Certainly not ownership. Yes, under-25s will own, but not nearly to the same degree. Not nearly with the same sense of personalization. Not nearly with the same passion. What is valued now is access. Compare the number of streams of music on MySpace Music vs. the number of CDs sold on the Billboard chart in any given week. It is staggering. Tens of millions of streams vs. tens of thousands of CDs sold. Look at all the investments being made in new technologies that allow immediate access to content: Streaming services, Apps, Blackberry, Android, iPhone, Nokia (NYSE: NOK), etc.

But anybody who studies generational transformation knows two things:

1) That we are in the very early stages of this transformation. Very early not because the consumer is catching up to new technology, but the reverse. New technology is catching up to the consumer. Ever since the birth of Napster in 1999, the under-25-year-old-consumer has been leading the charge. Content owners, technology companies, and the ecosystems around them have been trying to catch up. Everyone is screaming that Spotify is “the solution” in Europe. What is Spotify focusing on? Two strategies: allowing you to base your digital library with streams (as opposed to owning MP3s) and ubiquitous access (iPhone/android apps/ISP bundles). But their distribution model is only the beginning. What is TV Everywhere but ubiquitous access to content? What is Hulu but ubiquitous access to content? There are many, many more examples.

2)  That no one has truly figured out how to successfully monetize access vs. ownership. Content companies were great at monetizing ownership. Monetizing access is a very different expertise – and content owners have relatively little experience in implementing it. By studying the data about access to music and video, one has to realize the potential of monetizing access. If you add up the views of music videos on YouTube and the audio streams of music on MySpace alone, they are in the billions per year. The popularity of access is enormous. The value of access is enormous. The monetization potential is enormous. But try to remember, for a moment, how long it took the radio industry to evolve into a profitable TV industry? (Hint: a lot longer than a decade.)

It will take time to figure out which buttons to push to earn the proper return. Is it mobile access (Telcos, Apps)? Is it ISP bundling (BSkyB (NYSE: BSY), Virgin)? Is it hardware bundling (Nokia)? Is it subscription models (Rhapsody)? Pure advertising plays (Hulu)?

If we can accept the fact that under-25-year-olds will not own content and stop the nostalgia for “the good ol’ days,” we can create a new economy that is even greater than the economy that we are leaving. Then the content owners and the eco-system around it will all become much more profitable and be able to re-invest in the creation of even better content that feeds this whole system.

 

 

 

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