word of mouth times 800 million

Megatrax CEO & Founder Ron Mendelsohn
Megatrax CEO & Founder Ron Mendelsohn

Facebook’s recent announcement of partnerships with streaming music services such as Spotify, Rhapsody, Rdio, iHeartRadio and others represents yet another inevitable development in the unfolding of the digital media landscape.  These partnerships allow Facebook users to see in real time what their friends are listening to, share playlists and make recommendations. (Using Spotify, I was easily able to put together a playlist and publish it on Facebook, although I haven’t received any comments yet about my rather unconventional and eclectic musical tastes…)

This is an interesting development for a number of reasons. “Word of mouth” has always been a primary motivator when it comes to making purchase decisions, and certainly music is no exception. Being able to instantly see what friends are listening to and immediately interact with them is a very powerful thing indeed; I agree that it has the potential to create “an amazing new world of music discovery,” as touted in a recent Spotify press release. While there have been streaming music services around for a number of years with millions of tracks available on demand, the problem has always been “where to begin?” As noted in “The Paradox of Choice,” by psychologist Barry Schwartz, too many choices can be overwhelming and people tend to disengage rather than confront an unlimited array of options. Relying on a network of friends to help navigate this sea of choices is certainly a positive development that should lead to both greater music consumption and faster adoption of these streaming services.

But the flipside of this development is that, not coincidentally, Facebook turns into a front and center player in the fbiconmusic industry virtually overnight. Facebook will now be in a position to promote artists, labels and bands, and they will therefore be able to wield considerable influence over music streaming services, record labels and publishers in exchange for access to their vast user base. For evidence of this, look no further than Spotify’s decision to require Facebook membership as a prerequisite to use their service. It should come as no surprise to anyone if Facebook announces similar partnerships with streaming movie services services such as Netflix, unless they opt to just buy the company outright following the recent dive in its share price.

However, Spotify’s decision to tether their fate to Facebook is probably not a brilliant idea for the long term. For one thing, it is a bit presumptuous to assume that every Spotify user is also on Facebook, and more importantly there is no guarantee that Facebook will retain its current position of social media predominance in 10 years time (remember MySpace, anyone?).  In particular, I am eager to see what kind of a solution Apple comes up with in terms of streaming music. As I have stated in earlier blogs, there is little reason for anyone to own music via iTunes or iCloud when any track ever recorded can be streamed instantly from the cloud. Sooner or later Apple will acknowledge this fact and devise an appropriate solution as their iTunes model is starting to fray around the edges.  Or perhaps Amazon will develop a service in conjunction with their new tablet. The game is not over yet…

Ron Mendelsohn
October 3, 2011

 

One Response

  1. Great post, Ron. Facebook’s announcement is huge, for sure.

    I can’t help but be a bit pessimistic about this. I see these services like Spotify that offer anywhere/anytime availability of “all the music that ever was” as another step in the continued perceived devaluation of music by the general public (youth, mainly). We as music creators have to hope that the potential increase in music consumption outweighs the reduced “value” given to individual songs. Bad for artists, but good for music aggregators like Megatrax perhaps?

    Hmm, this is all excellent food for thought…

    Eliot Pister

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