Universal Music: In tune with the times?

Universal Music took a very interesting strategic step last week when it announced that Apple would no longer have guaranteed access to its coming releases. The move may impact the Oligopolisitc Music Industry where the Big-Four comprising of Universal, Sony-BMG, Warner Music Group and EMI music control nearly 80% of the world market.

2005 U.S. music market share - Nielsen SoundScan. Image source: Wikipedia

The Music Industry has been undergoing a lean phase - falling physical sales and increasing piracy has put tremendous pressure on the Big-Four to find new ways of monetizing their assets. The Music industry has been undergoing constant transformation - the unbundling of the album, flexibility in what consumers can buy, the vast array of music-based products - ring tones, SMS-tones, ringbacks, music videos, song clusters - all this to identify and exploit content monetization oppourtunities.

According to figures recently released by Nielsen SoundScan, physical album sales fell by 15 percent (from Jan. 1 to July 1 this year), while sales of digital tracks rose 49 percent! Clearly, the future is digital for the Music companies. Apple iTunes has a virtual monopoly in the Online Music Sales market and only a market leader like Universal could have challenged its pricing strategies. The move is clearly being seen as a bargaining tactic to get a bigger cut of the 99¢ that Apple charges per download.

Also, it could help Universal adopt alternative business models like Ad supported downloads and dynamic pricing (charging more for the newer/hot selling titles and charging less for the not-so-hot songs). It remains to be seen whether Universal will emulate EMI or not - which recently decided to sell DRM free songs on iTunes (by charging a 30% premium on the DRM free songs). Also interesting would be to see how the other players react to these developments. Let's hope that the Music companies would soon re-invent their business models and earn enough money to survive - we all love our music, don't we?

Cheers!

Anurag

Internet Startups to Watch

I recently found a very interesting compilation by CNN Money on the most promising Web 2.0 companies with really interesting business models, here are my favourite picks:

1. Joost (I'm still awaiting an invite, will somebody help!)
2. Adify
3. Admob
4. Turn
5. ViTrue

Interestingly, most of the business models are based on Advertising! Looks like Google will have a healthier balance sheet in the next financial year ;)

Cheers!

Anurag

What's the deal with Large Deals?

My company is one of the "hungriest" companies in the Industry and as part of company of Integrated Service Delivery strategy, we end up participating in vendor selection process for very large outsourcing deals. RFP response is one of my job responsibilities too and I have been in few large deals in the Media & Entertainment domain myself (apart from the normal small RFPs). In my opinion, responding to a large RFP (>$25 Million) is one experience every Pre-Sales/BD guy must have, especially deals managed by outsourcing advisories like TPI & Everest.

The importance of these outsourcing advisories is more in case of companies going for outsourcing for the first time and in case of outsourcing of entire "Application, Development & Maintenance" work. An advisory, when contracted by companies intending to outsource analyze the client requirements and invite a selected list of vendors to take part in the bidding process. Therefore, it becomes really important to be in "Approved" vendors list of these advisories, particularly for the Indian Big Five (and even some of the mid-sized players) - because none of them really has a "real" differentiated offering. How to map these advisories? I found the following interesting answer posted by a gentleman called "Mark Wiggins" on LinkedIn answers:

If were an IT Services firm trying to capture influence, then I'd be looking at:

1. Whether the parent companies of these firms publish related syndicated research - if so, you can bet that the subsidiary draws upon this as a knowledge resource when advising clients;
2. Balanced scoreboard, Vendor Evaluation criteria, TCO and ROI analysis white papers etc - whether there is an opportunity for vendor neutral analysis from the consultants with IT Services companies to place this material on Orbys, TPI etc websites?;
3. Conferences/Events - are these firms interested in showcasing their credentials at a vendor user conference or forum that that the IT Services companies are sponsoring? Conversely, what are the principal events where Orbys, TPI speak - network direct and engage with them at these events;
4. Engage them as a client (if possible) on Win/Loss analysis, RFI/RFP rsponse preparation or bid situations where they are not involved on the client side?;
5. Track down former employees of these firms via LinkedIn and put this question to them?;
6. Find out what Industry Associations and neutral online networking educational forums their principals participate in and engage with them there?;
7. Examine the next level of association of such firms - analyst firms (as mentioned above), journalists, freelance consultants, alumni, industry associations, business associations, Big 4 firms, vendors etc for common links.

Really interesting stuff, great job Mr. Wiggins.

Cheers!

Anurag

The future of Advertising

On May 18, 2007 Microsoft made its biggest acquisition ever by paying $6 Billion to acquire aQuantive Inc. - a digital marketing company in its never ending pursuit to play the catchup game with Google. Some (most) people will feel that Microsoft paid too much for a company that has just $14.2 million in net income on $142.6 million in revenues. It all started when Google acquired Doubleclick (for half the price Microsoft paid for aQuantive!), interestingly Microsoft too was in the race. Valuations of similar companies skyrocketed and Yahoo! had to shell out $680 million to acquire Rightmedia, while Global Ad agency WPP bought 24/7 Real Media and AOL acquired German online ad company Adtech.

One would be interested in knowing why companies such as Microsoft, Google and Yahoo paid such astronomical prices for such (relatively) small companies. Being the smart company that Google is, it quickly realised that concentrating on Search Advertising won't help in the long run, it needed to find new ways of earning advertising revenues and moving into Display advertising was an obvious choice. By acquiring Doubleclick, Google got the missing pieces that it needed to have an end-to-end offering in the advertising world - this business has four main entities:

1. Brand Owners (companies like P&G, Nike etc. who want to advertise their brands)
2. Ad Agencies (like O&M, JWT etc. who are responsible for creating, planning and handling advertising for Brand owners)
3. Media Owners (like Rediff.com, BusinessWeek.com who own web properties and allow Brand owners / Ad agencies to place advertisements on their web properties for a price)
4. Ratings Provider (like Webside story that specializes in Internet metrics and audience measurement technology)

While Google's self-service model was good for search advertising, it was not suitable for Display Advertising. Here, the Brand owners would want to serve ads across the Web to specific audiences (based on a particular segmentation criteria - demographic or psychographic) and for that they want television like reach numbers and ratings (e.g TRP ratings captured by TAM in India). Also, Google did not have particularly strong relationships with Ad agencies that was required for this. This is where DoubleClick was strong, they had good relationships with Ad Agencies and knew the business of Display Advertising. To capture better demographic information and surfing behaviour, Google quietly launched Web History - which would allow it to analyse user's surfing behaviour and build their profile.

Going forward, Google would build an Online Marketplace where Brand owners and Ad agencies will be able to completely plan and manage their Ad campaigns- not only the Online Ad campaigns but also their campaigns for television, radio, print, out of home and mobile as it would facilitate Media owners to auction available space to the Brand owners. This way, Brand owners will get accountability and their ads will be highly targeted. Media owners (or publishers) on the other hand will be able to charge premium on popular web properties and will be able to retain the visitors as the advertisement will be relevant for them.

Given all this, Google's Doubleclick acquisition makes a lot more sense and makes the competition look stupid - once again!

Cheers!

Anurag

(c) 2007. Copyright Anurag Saxena.

It's a new beginning!

I work in the "Interactive Media" practice of a leading Indian IT company and have been spamming the mailboxes of my co-workers with my thoughts on the fast changing environment in the "Micro-Vertical". As part of my job responsibilities, I'm expected to proactively update myself on the different and new trends emerging in the market and to capture the pulse of the developments happening around and support the organization to move to the next generation for providing better client solutions. Although I'm not new to blogging, but this in many ways is a new beginning for me. I shall try to live up to my own expectations and make some sensible posts here but as the saying goes, “Beginning is easy - continuing hard”.

Cheers!

Anurag