The digital era has revolutionized the way people spend their leisure hours, in ways that would have been unimaginable even a few years ago. Watching DVD movies, taking digital photos, and listening to music downloaded from the Internet are all quite common practices now. Technological convergence is also a reality, thanks to such products as Microsoft’s Xbox 360 console, which enables people to play games, watch DVD movies, view photos taken on a digital camera, carry out videoconferences using Internet-based chat, and navigate the web — all of this while comfortably seated in their living room.
The digital revolution is changing business models. For years, the CD industry has been suffering a major crisis because of its inability to adapt to changing times. Sales of recorded music continue to drop, not only because of piracy but also because the digital era has changed the way people consume music. Young people do not want to buy a complete CD only to discover that they like only a couple of songs on it. It is more comfortable for them to download the music they want from the Internet, and listen to it on a small device that enables them to carry hundreds of songs wherever they go.
It was left for a computer company like Apple to demonstrate, through its iTunes download service, that it is possible to make money from music downloads over the Internet. In Europe, where Apple now operates in 17 countries, the company reached the landmark of 100 million songs sold legally a mere year and a half after it arrived on that continent.
Making Money from Leisure Time
“When I travel, I take my entire digital world with me. This represents a radical change in the way people enjoy their leisure time. When I was a student, I would have needed a million euros worth of hard [vinyl] records to preserve all this content,” explains Andreas Weigend, the German-born chief strategist at MusicStrands. The company was founded by Spain’s Francisco Martínez at the headquarters of the Artificial Intelligence Research Institute in Barcelona. MusicStrands is one of the strongest exponents of the new era of the Internet (baptized, ‘Web 2.0’), because the company applies artificial intelligence to recommend music to consumers over the Net.
Until a few months ago, Weigend was ‘chief scientist’ at Amazon, the e-commerce company, and he is one of the world’s greatest experts in technologies that make consumer recommendations. Weigend was also the co-founder of MoodLogic, which was rated one of the best music organizers — software that makes it easier for consumers to organize their database of MP3 downloads — in a user poll conducted by CNET.com, the technology portal. In addition, Weigend is a [visiting] professor at Stanford University, where he gives classes on data mining and electronic commerce.
Amazon succeeded in boosting its sales by 20% when it applied those recommendation formulas. In the case of its online bookstore, the process was quite simple. A customer interested in a specific book can find out about other titles that have been purchased by other customers who bought the same book. MusicStrands goes one step beyond that. Using artificial intelligence technology, it makes it easier for customers to discover new songs that they might like, based on their current preferences. The idea is to decode musical tastes on the basis of analyzing the DNA of music. If you analyze the preferences of many people, you can uncover patterns for making music recommendations. The company automates its musical recommendations through an analysis of patterns it identifies in the lists of music that customers reproduce and create on the [online] platform.
An Ocean of Internet Content
In this digital world, it is getting easier and easier to create content. There is also a need for new tools that provide people with a simple way to manage their music and discover new experiences. This is one of the novelties of the second era of the Internet, known as Web 2.0. It is a jump beyond the revolution brought by Google, says Weigend.
Search engines solved the problem of finding information in an ocean of Internet content. “Now, with Web 2.0, we not only have the content created by others but also the active community that this generates. In addition, you have to create other classification categories,” explains Weigend. For example, in the case of music, a search engine like Google only enables people to find pieces of music by using such search terms as the composer, year, song title and style.
The digital revolution grants more decision-making power to each user. One of the most common phenomena is the blog, or web log. In a few short years, blogs have gone from being a mere fad to a major trend. There are millions of blogs on the Internet. Every second, someone somewhere is creating a new web log on cyberspace, experts estimate. Anyone can have his or her own blog because the online publication tools are very easy to use. Some bloggers have managed to attract a loyal public that follows them on a daily basis. No doubt, traditional communications media have been paying attention to that fact.
There is also a revolution in the music industry. Traditionally, we have become quite used to the notion that it is the record companies that hold the key to power. Songs become a hit because the record labels determine that they will succeed. “As individuals, we have little ability to discover new content because the industry has already decided what is going to be a hit,” says Weigend. “However, thanks to the digital era, the record companies are losing control, and it is moving onto the street.” This transformation will have a major impact on the business world. “In the past, money in this industry went to the big record labels, which were able to determine what was — and was not — a success. In the future, the business will be in the hands of those who provide the ability to discover content,” Weigend explains.
By 2010, 25% of all digital music sales will come from recommendations exchanged online by friends and acquaintances that are using such software as MusicStrands, according to a study by Gartner, Inc. and the Berkman Center for Internet and Society at Harvard Law School. Sharing musical tastes with other people has already become the driving force of the online music industry, and it is democratizing the culture, notes the study. Music customers surveyed by the researchers say that the opportunity to share music with one another is a major factor in deciding which service to use. One-third of all respondents say they are interested in technologies that enable them to discover and recommend music [to others]. One out of every 10 people is guided by these recommendations when it is time to buy. “The record labels and artists should investigate the dynamics of web sites that offer lists of music that people have downloaded and reproduced, as well as other applications. They can be useful in redesigning their marketing and promotion strategies,” says Mike McGuire, an analyst at Gartner.
In addition, these tools enable people to become familiar with new music created by people who would otherwise have no way to become famous. In the digital age, it is much easier to create your own content. For example, for a mere few hundred euros, you can make music and introduce it to people through the Net. “The digital revolution benefits consumers, and also those people who have the talent but who were outside the wheels and cogs of the industry. Blogs are an example of how these people can capture the attention of hundreds of thousands of customers. In music, the same thing will happen,” predicts Weigend.
In his view, the companies that are better positioned for this new era will be closer to consumers. “The mobile phone operators will be one of the big winners. You always take your cell phone with you, and it knows a lot about you. For example, it can automatically find out if you want to listen to music, and what type of music. At a given moment, [the music] can become a regular part of the agenda that you carry around with you on your cell phone.” There is an enormous [business] potential in combining mobility and connectivity to enable customers to access digital music and entertainment content from any location. MusicStrands has developed a technology for mobile phones that will enable users to synchronize their mobile phones with their PCs, and transfer information between the two.
In the digital era, some people can feel the weight of an over-supply of information. However, the revolution itself generates the tools for emerging from that morass. Search engines are one such solution. So, too, are systems that permit people to discover new content.