Ted Cohen Gets Google, Merlin, Amazon & Universal Music In The Same Room @ #MIDEM

By Stuart Dredge for Midem content partner Music Ally. Find them at musically.com and @musically.

The panel "How To Work With The Fab Four" moderated by Ted Cohen served as the centrepiece of Midem’s Visionary Monday afternoon session. The panel comprised Charles Caldas, CEO of Merlin; Zahavah Levine, director of content partnerships for Android at Google; Craig Pape, director of music content acquisition at Amazon; and Rob Wells, president of Universal Music Group’s global digital business.

First question: Is there room for new digital service players, or does the industry need a year to take a breather?

“From a holistic viewpoint.. there’s more than enough room for additional players and entrants,” said Wells.

“Over the next 12-24 months we’ll see potentially genres of music that are currently underserved – classical and jazz… we’ll see more fracture of that. There may be urban and hip-hop streaming or a la carte services… That goes against what some of the pundits and commentators are saying. It’s incorrect and inaccurate to assume that there’s too much choice for consumers in the marketplace.”

Caldas agreed, saying we’ll see more diversification both territorially and by genre. And he suggested digital evolution is moving in the opposite direction to what’s happened with retail, where small local stores are being squeezed out by large supermarkets. “We’ve started with the megastores, and we’re seeing increased specialisation [in digital music]” he said.

Over to Levine, who’s working on the Google Music service. What issues does she deal with when dealing with rightsholders?

“We have got 250m activated Android devices globally now, with 700,000 new devices being activated every day,” she said, neatly sidestepping the question. “This has been a population that has been under-served: there hasn’t been an easy convenient music service for Android users… Android users have purchased less according to NPD Group than iTunes users, and we’re going to fix that.”

How important is the idea of the cloud to Google’s service? It currently comprises an a la carte store, which can be accessed from any internet connection or Android device, and also a music locker for people to upload up to 20,000 tracks from their music collection to.

“Most Google services are cloud-based services… the ability to log on from anywhere and not to have to worry about plugging in cables and moving songs around and keeping your collection together… The vast majority of people from Google Music are purchasing from their mobile devices. They need to know when they purchase that it’s going to go safely into their cloud locker… Cloud storage is key.”

How scary were cloud services for UMG and Merlin?

“In the interests of how best to serve the consumers, not scary in the slightest,” said Wells. “Universal hasn’t yet licensed the Google scan-and-match service, but it’s just working it through.”

Caldas said “we’d love to see these cloud services be smarter – more intuitive, more user-friendly, more recommendation based… looking at people’s collections, building more purchase and subscription abilities into how the cloud works. AT the moment it’s a box, and you put things in the box. I’d like to see the box come to life.”

Levine said Google shares that vision. “Anybody can use our download store, but our users that have uploaded their collections to the cloud are purchasing at much higher rates… a much higher percentage of those people are purchasing, and when they do purchase, they purchase a lot more… We know what they’re listening to, so we can make very smart recommendations.”

What about this idea that cloud lockers are blessing pirates – a musical amnesty programme. What were he concerns about this?

“There was obviously internal debate about whether these services would turn into Laundromat for illegal content,” said Wells, who said UMG got beyond that. “It’s something we know consumers wanted to do, and we’re tracking the files that go in there as well… From an industry perspective, these things are an exceptionally good next step.”

How about cannibalisation – new services that may be impacting on download sales? “There is a lot of debate constantly, and it’s great debate – it’s healthy debate, not just in the boardrooms… We tend to fix the issues on a market-by-market strategic basis. The fact that there is now debate, we are far further along the strategic road than we’ve ever been.”

Are the other labels, publishers and collecting societies all at the same point in this thinking? Wells posed the question to Google and Amazon with a glint in his eye.

Levine: “We have a great product vision, and then we have to convince a lot of other players to buy in to that same exact vision… And unfortunately that process ends up compromising products sometimes, because not everyone has the same vision… The large majority of the industry is on board with our vision, and the early results will help bring the best on board quickly.”

Cohen harked back to a previous Midem keynote with Google’s David Eun, who he famously asked ‘Why are you trying to fuck the record companies?” And Eun said he wanted partnerships rather than to screw the labels. Are we there yet, at the partnership point?

“It’s complicated,” said Levine. “We’ve made incredible progress… The IFPI report just came out, and 50% of revenues in the United States are digital music revenues. That’s huge, and because the industry and the services sector have worked together… At the same time, I do think it’s still harder than it should be.”

Wells chipped in. “Are Google still trying to fuck the major record companies? I think the fact that they are now into a licensed legitimate music service is a great hope… It’s probably inaccurate to call it a Google Music service, it’s an Android music service. And the fact that it hasn’t yet infected other parts of Google is disappointing at this stage, but I haven’t given up hope.”

Wells said he hoped other parts of Google beyond the Android division will realise the benefit of having an in-house licensed music service.

How about the indies? “It gets better every year,” said Caldas. “For us it’s not any more really a question of indie versus major, poor versus rich, it’s about value.” He added that Merlin is at the table in negotiations sooner than it used to be, and is generally getting more respect. “The deals we’ve concluded yes, the deals we haven’t, no.”

He talked about the leaps of faith required to license some new services, including Spotify. “That service has added new value to the market, and that’s all we can ask for.”

What about Apple – will that company inevitably enter subscriptions, and how will the game change then? “Steve’s in the cloud and he wants you there with him!” suggested Cohen, before asking if it will marginalise rivals or be a rising halo for everyone.

Wells: “Apple aren’t famous for releasing bad products, and if they were ever to move into the subscription space, the product they would launch would be well thought through… I think it will be a success. And hopefully if it is a success, that rising tide will lift all boats. If they were to move into this space, Universal would be very supportive… but we’ll wait and see. There’s no news at the moment, it’s all speculation.”

How hard is it for a new service that isn’t enormously well-funded to get in front of UMG to talk about licensing? Wells claimed the label is pragmatic about licensing, and that the delay only comes if the service is “brand new… it takes a bit of time to get our heads around it… This isn’t about ‘how much money do you have, write me a cheque’,” he said.

Caldas was asked about the takeaway lessons from Beyond Oblivion’s fall. “To some extent, they’re getting dragged through the mud at the moment because it’s easy… what the truth of those details are is anyone’s guess,” he said.

“Ultimately, they failed because they didn’t quite get the device manufacturers to buy into their vision, which was what was going to make that particular model work… We feel too often services are shaped by the demands of the biggest rightsholders. Some have been much better at holding their line and creating the product that they want to create.”

Back to Wells, who was asked if major labels have too much influence on new services’ models. “We know what works and what doesn’t work. We know the impact of a tweak to a frontpage, to a profile on streaming services. We get intelligence out of these platforms,” he said.

Cohen moved the conversation on to curation, and its growing importance for cloud and streaming services. How are Google and Amazon addressing this?

“Coming up with the right mix of technology to make smart recommendations, and having the right editorial voice to surprise and delight customers is important,” said Pape, who noted that cloud services now have a lot more data not just on what people have in their collections, but what they’re listening to a lot right now.

Wells: “It’s very important… in a world of infinite choice, where do you start? We’ve only just scratched the service of curation on these services, and no one’s yet built a platform where you can gamify that.”

Levine agreed with both. “Social is a key element in music discovery, and choosing among 15m tracks what’s going to appeal to people,” she said, referring to Google’s feature allowing Google Music purchasers to send links to tracks to friends on the Google+ social network for them to listen to a full stream.

What has surprised UMG about the Facebook open graph that launched recently? “There was a trend – some of these services, the funnel was slowing down a bit, but with the Facebook integration we’ve seen the funnel open again.” But he warned that people need to look beyond Facebook in other parts of the world – China for example, where Baidu has launched Ting.

What about an interoperable music format that plays nice with all ecosystems – Apple, Amazon and Android for example? “It works on the web,” said Levine, pointing to the Google Music HTML5 app. “But they [Apple] don’t play nice for the download app.”

Do people really need to buy music any more, in a streaming and cloud environment? Are we moving completely to access-based models?

“In a world of full access streaming services, physical product actually becomes more important,” said Wells. “Because it’s high-end product. People will continue to buy physical, but it will be more expensive, more collectable, something that will sit on shelves. The digital world doesn’t cannibalise that.”