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The Chronicles of Streaming: A Conversation with Pete Downton

From physical CD to Napster file-sharing and from iTunes to purpose-built classical streaming platforms with richer metadata and room for discovery, the classical music industry has evolved beyond what any industry maverick could have foreseen. The ability of technology to change how we listen to music has had a game-changing effect which has accelerated considerably from the turn of the millennium up to the present day. primephonic editor Rachel Deloughry had the opportunity to speak to Pete Downton, Deputy CEO of 7digital about this exciting era.

An unprecedented timeline

I guess I saw the tail end of what had become the CD boom that had driven growth in the recorded music industry. To provide a little bit of context, I joined Warner Music Group initially in 1996 and worked in the physical business in the UK company. To give you a sense of what that meant in practical terms: when I joined Warner Music, there were five major record labels. Between us, we employed upwards of 40,000 staff around the world, managing principally the physical distribution of music. Of course classical music was a meaningful part of that activity.

And so, there was a transition in 1999 when peer-to-peer first emerged as a major consideration for the music industry. With Napster, one saw that the industry had, to a degree, anticipated the shift to digital. But it tried to make digital in the image of physical, by offering the same kind of products in the same kind of way but on an internet retail basis. I always refer to that period in recorded music as ‘the abbreviated grieving process’. We began with denial, we experienced anger, which resulted in us suing pretty much everybody!

And then in 2003 we reached acceptance with the launch of iTunes. Having worked at Warner as part of the team that helped bring iTunes to the market, it had become apparent from the previous year or so that the industry needed help: it needed help to organise itself and to make this transition, because the old rules didn’t really apply any more. We were struggling to organise ourselves and our own assets, let alone determining and dictating the way music should be distributed. So we were really fortunate that around the same time that this was taking place, we were at the forefront of the discussions leading up to the launch of iTunes. At Warner, Roger Ames, our global chairman and CEO, was the first senior executive from the recorded music industry to engage with Steve Jobs and the team at Apple. And so we saw up close the transition that the industry needed to make. However when iTunes launched, it was regarded in the technology industry as the last roll of the dice for Apple. Apple was a business that was completely dwarfed by the big internet and mobile players of the time, by companies like Nokia and others who were worth hundreds of billions of dollars. Apple was a relatively niche player in that marketplace.

So, one of the things that really enabled Warner to have a disproportionate impact was seeing the transformation of an idea as simple as iTunes, and watching the reality of that idea play out in the marketplace. I remember vividly on the second full day of iTunes sales in North America, receiving a phone call from the North American team saying that they had sold a million downloads, which was the forecast for the first year! So this gave us a tremendous confidence that music still had a real relevance. If we could find the right combination of technology, partners and distribution, and the confidence that music would continue to have a valuable role in people’s lives, if we could bring those things together, then it was a signpost for the way the market might evolve.

Pete Downton

That said, if you were to look at what happened after iTunes, there was a renewed confidence in the industry and many larger players tried to replicate what Apple had done. Microsoft in particular had a tremendous initiative with many of the world’s retailers involved in consumer electronics manufacturers, but nobody ever really replicated it in the form of music downloads. The industry bubbled as a download industry until 2007 when Spotify came along. Now, at the same time, we were constantly looking at what Rhapsody (the new name for Napster) was doing, and we were seeing that if you deliver a compelling product to a music fan, the levels of engagement were fabulous. I think the reality was that the industry wasn’t prepared to make that transition. And I don’t think consumers were either.

 “We thought, if only we could get this thing that meant so much to people and make it available using new technologies and new digital channels.”

So if you think about where the industry was: this was 2003 or 2004 and iTunes had given great confidence to the industry. We thought, if only we could get this thing that meant so much to people and make it available using new technologies and new digital channels. Everything looked very rosy. What actually happened was that the transition from an old CD business into a new digital retail business turned out to be a relatively niche opportunity, in that it didn’t broaden!

iTunes was a success in its own right but it was nowhere near reaching the same levels of consumers that the physical CD had ever reached. Frankly, consumers and fans were looking for more depth in a musical experience and for classical music fans, it was just underwhelming. The way that classical recordings were being presented on internet services was almost impenetrable. It was a model that was built around pop music and driven by popularity. It was inconceivable to most classical music collectors and fans that they would use digital to replace their old physical music library. To be fair, Apple have done a better job than most to enrich what they do, but fundamentally those services were about pop music and hit songs and genres other than classical and they certainly didn’t lend themselves to discovery of classical works for the simple fact of the metadata. It was impenetrable.

Downloading didn’t take off in the classical world initially. Consumers have always wanted to upgrade to something better, but it wasn’t better in terms of the convenience of discovery. Arguably as important was the denigration of sound quality. The trade-off between convenience and quality certainly lost a lot of consumers who had previously been classical music collectors and jazz music collectors. There was no comparison between what they were being offered as a download and what they had been offered in the physical world. And it wasn’t just those genres that struggled.

We reached a ceiling because of so much that was happening in people’s digital lives. If we look at what happened in film and TV over the same period, the quality, experience and convenience was getting better and better. Music, on the other hand, has tried to take the physical experience and copy it across, business model and all, onto a digital platform. So we were constantly trying to find companies that would deliver not only the convenience of digital but at least as good a quality of an experience as we had found in previous formats. If you think about it, during that period Rhapsody was doing reasonably well – it was a service that had a million or so users but it never really broke out into the mainstream because the consumers were finding it difficult to get their heads around not only recurring subscriptions, but also the idea of being able to access music as opposed to collecting music.

"...I think we’re in the first hour of digital music. In some ways it’s painful to say that because I’ve been at it for 20 years, but it feels like we’re just getting started.”

Music is so important for people’s self-expression and the act of collecting music itself, that ritual of music buying is art of the experience. We then fast-forward to 2007 and the launch of Spotify; not only did Spotify do a lot for the music industry in terms of their technical capability combined with a music obsession, but it was the first time we’d seen that in a single company. And I think ironically it was able to grow, develop and improve because it didn’t come from North America. North America has this tendency to burn brightly and often to burn out but Spotify was able to thrive, initially across a single territory and then in a handful of territories. It really had the breathing space to build and develop and improve on the experience. And meanwhile, all the time Spotify were improving their experience, customers were becoming more accustomed to access music as opposed to ownership, or accessing content based on someone else’s schedule. Spotify allowed audiences to access content according to their own schedules and lifestyles. So I think between 2007 and 2014, we were going through this transition in consumer behaviour and Spotify dragged the music industry kicking and screaming into the streaming era. A lot of the infrastructure that was necessary for the music industry to completely change its model was developed then.

But still, it’s fair to say that while Spotify provides a great experience for someone who is a mainstream music lover – someone who wants pop, classical, rock, and many of the contemporary genres – it’s not a finished article when it comes to classical music. For the different ways you want to search the catalogue as a classical music fan or collector, the bar is set pretty high. You want to search by composer or by work, understanding that an overture is not necessarily a full work, for instance. The infrastructure necessary to deliver classical still wasn’t in place by 2014 when I think streaming really started to gain momentum. 

Experience, Search and Discovery

I think streaming has done a fantastic job at replacing a lot of our listening habits and has even improved them. Now we are starting to see classical music being made available on various streaming platforms in a way that’s appropriate, and it’s being made possible because the record labels in particular have been forced to look closely at the kinds of metadata that are necessary to underpin a classical streaming service. And they are starting to build something that supports services that are fit for purpose in terms of search and discovery. But also we are only now seeing the coming together of services and devices in a way that makes it possible for people to access a streaming service and to listen to music in a quality that I think most classical aficionados would appreciate. If you give somebody the convenience and ability to browse through a catalogue, that’s fine, but you’ve also got to experience it. The ability to stream higher quality is thanks to bandwidth improvements but also because of progress that’s been made in delivering new formats in high resolution. That now means that the context is there and the tools necessary to deliver really compelling classical music experiences on the internet are just becoming available.

That’s on the service side. If you combine this with developments in connected devices, particularly audio devices and platforms such as Chromecast, you now have the ability to stream to your hifi system. It’s an incredibly exciting time to start to serve those audiences in a way that genuinely is an upgrade to a much better experience. So for 7digital, and for me personally, it is a really exciting time.

I worked in the early days of DVD audio and SACD and I was involved in attempting to resuscitate the DVD audio format in 2000 when the industry had frankly missed probably its most obvious opportunity to drive a new wave of growth by following up on what had been the most successful consumer package media format of all time. The music industry could not organise itself to deliver those products as an experience, despite the fact that they had tremendous momentum. And then at that point the industry stopped for the best part of a decade investing in audio quality. We’re now starting to see all the major labels and independent labels, especially in classical, gear up to deliver not just the catalogues but also new releases, contemporary artists and working in much higher resolution. So over the next couple of years, there are opportunities for businesses to evolve which means that music fans don’t have to compromise on quality or convenience any more.

“….. it’s being made possible because the record labels in particular have been forced to really look closely at the kinds of metadata that are necessary to underpin a classical streaming service. And they start to really build something that supports services that are fit for purpose in terms of search and discovery.”

If we look at another phenomenon over the last few years, namely the resurgence of vinyl, I think it’s evidence of demand without a product. It tells us about the way that people want to engage with music and what’s important about music in their lives. There are certain needs and requirements that are currently not being satisfied by the existing digital music marketplace and by that I mean the depth that you get from being able to understand more of the composer, the producer, the engineer, the artist, the songwriter. The story around the music and the context about the way the music has been created has always been a part of the experience and so if I look at today’s most widely used streaming services, they‘re great at finding things and making things available that are popular, but the depth of context isn’t really there. That creates tremendous opportunities in the music industry, to provide services that really do meet the expectations of those who are looking for more depth, both in the quality of the audio, listening to works from different orchestras, being able to form their own opinions about the best performances, and also the stories and the context around those works. So context is everything and if we’re to look at where we are in the transition from a physical packaged media business into a digital streaming business, I think we’re in the first hour of digital music. In some ways it’s painful to say that because I’ve been at it for 20 years, but it feels like we’re just getting started. And there are ways we can approach new technologies to make it easier to discover and navigate the catalogue and then bring another context around those recordings. The next few years are going to be tremendously exciting for music lovers of all persuasions. I’m tremendously excited about this. But at the heart of it all is the storytelling. The way that you experience and re-experience music, there needs to be tremendous depth to it and we are only just getting started digitally.

Investment in Digital Music Innovation

But at least we’re getting started with the right tools now. There are more catalogues available, better metadata and fewer technical barriers. We forget how far we’ve travelled in the last 24 months. So many of those early challenges have been removed and that creates a fantastic platform for innovation. The work is not finished by any stretch of the imagination. Over the last 2 or 3 years, the industry – the likes of Universal Music Group, Decca, Naxos, Deutsche Grammophon – has become focused on how we make sure the classical experience is compelling. And there’s a resurgence in interest in artists and repertoire.

Pete Downton

So despite the fact that the relative share of the digital marketplaces has been challenging in classical music over the past few years, I’m really encouraged by the focus on investment that we’re seeing across the major labels and the major independent producers of classical music and just a great example of where the industry is headed. At CES (Consumer Electronics Show) this year in Las Vegas, three major record labels came together to demonstrate not just a desire to help support high resolution music, but also that they are investing in and making these services available. So I am encouraged about what the next few years will look like for all musical genres, but particularly classical and jazz that have been so under-served in the last few years.

Goldman Sachs published a report not so long ago about what the music industry will look like in 2025.The most significant thing about this authoritative report is that it pulls together all elements of the music industry and looks at them through a single lens. The challenge of the music industry over the last couple of decades has been fragmentation, and that is just as significant in pop music as it is in classical music. Once you separate investment in artist and repertoire from an ability to generate revenue, then it becomes challenging to continue to invest. For the first time, we’re beginning to look at the industry through a single lens which is tremendously encouraging for all genres of music. And I’m a cynic. I’ve been doing this too long to be easily convinced of these things! So I can safely say, it really is an exciting time for the music industry.

The advice I’d give to those new to streaming is: you’ve got to try it. You’ve got to look at the simplicity of the way that streaming is now being delivered and the simplicity of taking the music off a computer and making it available through your audio system. The advances we’ve seen in the last 12 months means it’s a whole different proposition now. Find the service that’s right for you because not all services are equal in terms of their focus on context or the breadth of content. The great thing is that the industry is now in a growth phase. So it’s easy to get a taste of this and give it a try. You don’t have to let go of your CD or vinyl collection to give it a go now. I think people will be pleasantly surprised at just how far it has developed just in the last 18-24 months.

Pete Downton in conversation with primephonic editor Rachel Deloughry

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