This morning I was reading Bob Lefsetz’s post on the Steve Jobs’ interview from Walt Mossberg’s D8 Conference. In it, he discussed the controversy of banning Flash from Apple’s mobile devices, which I’ve been following with great interest. He also reminded the audience (and me) that Apple has in the past banished floppy drives, serial inputs, and optical drives. All long forgotten and computing has improved because of it.

It instantly reminded me of the textbook example of AT&T and how they developed the push button phone to replace the rotary phone. They didn’t do it because it was vital. People were happy with their rotary phones, and little seemed to be ready to challenge it. They did it because if they didn’t develop the push button phone, someone else would. And if someone else did, they would lose their market dominance.

Industry leaders have always done this to remain leaders. Develop new and improved and you will continue to succeed. Lefsetz’s point is that labels are not doing this by clinging to the CD, and he is correct. Not just clinging to the CD, but clinging to the album format. I managed a Record Town chain store in 1990. It was fascinating because it was smack in the middle of transitioning from vinyl to CD. When I started, vinyl made up about 20% of the store (cassettes were actually dominant then). Within about 12 months, it went from 20% to 5% to 0%. This largely happened because it was imposed upon by labels who quit manufacturing vinyl just before it was truly obsolete forcing CDs to become the dominant player.

By the same timeline, record companies big and small should probably have been forcing this transition in 2006 or so as opposed to slowly drawing it out. By making the choice of just slowing the bleeding, labels are now in a tougher position because of where we appear to be at in a product lifecycle. Where is that exactly?

Music companies are still transitioning from CDs to digital downloads, while the consumer is transitioning from digital downloads to cloud-based streaming.

To compare, it’s as if in 1990 the labels would say “Let’s phase out the 8-Track to move to cassettes” while consumers were clearly adopting to CDs.

While cloud-based consumption has been building for awhile, I think we are likely to find the official start date to be June 7. This is when Jobs addresses the Apple Developer conference. He’s widely expected to announce the new iPhone. But he’s also probably going to announce some new feature that takes advantage of his purchase of Lala.

If you haven’t been following, Lala was a cloud-based streaming service that offered multiple payment methods to consume music. It didn’t dominate from a consumer basis but it did create a robust infastructure. Apple purchased Lala for and then promptly shut it down this week. Now, no matter what you think of Apple, they’re not going to spend shareholders money just to close perceived competition. They aim to use it, and next week we’ll likely find out how.

The “how” is not what I want you to be interested in, for the moment. What will happen is that next week will truly mark the beginning of cloud-based streaming becoming a meaningful part of music consumption and revenue generation. Futurehit.DNA readers are already prepared for this eventuality. Short intros will continue to be crucial. Sharing will likely be easier, so make sure the songs have elements that encourage this. As albums move further away from the preferred consumption bundle in favor of playlists, releasing more songs more often becomes vital.

Next week, when we find out exactly how Lala is integrated into iTunes, many music pundits will place huge importance on what it will do to the recorded music business. Given the landscape, the changes will be significant, but will more likely be the obvious next step. If you’ve been making music thru the Futurehit.DNA filters, the only change will likely be more exposure and more revenue.


  1. Mike June 3, 2010 at 9:50 am # Reply

    Well spotted, nice prediction. I’m looking forward to the WWDC because of the new iPhone but forgot all about Apple’s relevance to music consumption! It’ll be interesting to see what they announce in regards to cloud based streaming…

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