Discovering the Profits in Music Services

Rob Hof

If there's anything I learned at the just-ended conference Music 2.0 in Foster City, it was that nobody's really making any money off digital music. Except maybe the labels, and they don't think they're making enough. What's going to change that? "Discovery" was the magic word I kept hearing. "Discovery is one of the key ingredients to making this work," said JupiterResearch analyst David Card.

Whazzat? By discovery, Card and others in the music biz mean the ability for music fans to find what they want. Even, in many cases, if they don't know they want it. I think they're on to something. Even the relatively primitive way that Yahoo's LAUNCHcast throws related artists into my personalized radio station has turned me on to Slaid Cleaves, Orchestra Baobab, and a whole lot of other great music I didn't know about.

To get people who aren't waiting eagerly for every new release, whether it's Coldplay or Britney Spears--and that's most people over the age of 30, who also happen to have the most money to spend and the least time to hassle with illegal downloading--music services have to promote discovery of new music. Help us find that song we'd forgotten about, that tune we just heard on the radio but didn't catch the name of, and especially new music we don't know about yet that matches our tastes.

"Discovery is really what Music 2.0 is all about," said Andreas Weigend, chief strategy officer at MusicStrands, a music recommendation service that hopes to become something of a Google for music. He noted that at, where he worked until early last year, personalized recommendations boosted sales by about 20%. Weigend thinks such discovery features could boost music sales even more than they do for books, because it's easy for music services to capture data about dozens or even thousands of songs that music fans are listening to. Most people don't buy nearly that many books, nor can Amazon know whether they actually liked them or even read them.

Startups such as MusicStrands see a business specifically in providing tools for both consumers to discover new music and music services to beef up their offerings. Mercora, a startup that lets people legally share streams of their own music, recently put a search box front and center on its service, and when you type in a name, you get lists of related artists and music you might like.

None of that's going to change the grim economics of music services right away, but I wouldn't be surprised if they make a big difference down the road. "Those are all very new tools," notes Mike McGuire, a research director at Gartner G2, "but I think the will represent, five or six years from now, the way things will be done."

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