It's a generally accepted fact that Apple saved the music business. In the '00s with the iPod, iTunes and a fierce vision for a new way to experience music, Apple created a sensational alternative to illegal services and inferior legal ones. Music would never be the same.
But times change. Now, another single company offers the industry its best chance to reinvent itself, usher in a new age of innovation and make the business and the experience of music exciting yet again. And that company isn't even a music company.
Like it or not--that company is Facebook.
There won't be a licensed music service or beautifully designed MP3 players. Facebook just wants your time.
It's the place where 142 million Americans spent 53.5 billion minutes in May, according to Nielsen--by far the most of any single website or brand. According to Facebook, it has 700 million global users with an average of 130 friends each. This command on Americans' time gives music companies what they need for the next generation of digital products: a "social graph" that represents relationships between its 700 million users and the things they care about: movies, books, videos, events and music. The latest version of the Open Graph, debuted at Facebook's Sept. 22nd f8 conference in San Francisco, allows companies to integrate their websites with Facebook's vast social structure in new ways. By tapping into the Graph API, or application programming interface, sharing activities and interests is easier and more powerful than ever.
As a result, companies are building better, more meaningful products that take advantage of consumers' social nature. Clear Channel executive VP of digital Brian Lakamp calls it the "social connective tissue" that brings the value of millions of personal relationships into his company's new iHeartRadio service. Pandora, Spotify and Ticketmaster use it, too.
In short, there seems to be an agreement that Facebook makes products better. And without its Graph API and the breadth of its user base, a wide range of music services would be stuck in the 2000s.
Entire new markets are sprouting up around its social platform. RootMusic, whose BandPage app allows artists to market themselves on Facebook, raised $16 million from GGV Capital, Northgate Capital and Mohr Davidow Ventures. In January, FanBridge announced a $2 million funding round and the acquisition of San Francisco-based Damntheradio, creator of a music-oriented Facebook marketing app similar to BandPage.
More established companies are also investing in the platform. Ticketmaster, one of the world's largest e-commerce companies, now builds it products "on the rails of social," CEO Nathan Hubbard says. In August Ticketmaster unveiled an interactive seat map where users can see where their Facebook friends are sitting at a particular event. "This is just the start of a host of features in social that you'll see across everything we do."
Artist services company ReverbNation already had a popular Facebook marketing app for artists when in September it launched an advertising service called Promote It that uses Facebook's Ads API to help artists create effective ad campaigns on the platform. Promote It is a major investment with a dedicated team of engineers who have been working on it since December, ReverbNation COO Jed Carlson says.
The social network has even helped birth a new generation of ticketing companies. Eventbrite has raised nearly $80 million to date. Ticketfly has raised $15 million, including a $12 million round in April. TicketBiscuit, Ticket ABC and ShowClix have also raised funding in the last year. All can attribute some portion of their success to social marketing enabled by Facebook.
Ticketfly CEO Andrew Dreskin, whose first ticketing company TicketWeb launched in 1995, calls social media "a watershed moment" for ticketing because artists and venues can harness the marketing power of fans. "It's a dream come true for ticket sellers."
In fact, a number of ticketing companies are part of Facebook's Open Graph launch: Ticketmaster, Ticketfly, Eventbrite and secondary ticketing services StubHub and ScoreBig.
Facebook could eventually transform e-commerce, too. Already such companies as Moontoast, Topspin Media and Nimbit offer the tools to let people set up online stores within Facebook. Shopping within the platform is in its early stages but is a promising channel-what's more seamless than making a purchase where you already spend your time online?
Ticketmaster could end up selling tickets within the Facebook platform, Hubbard says. Although he notes that "some evidence shows people prefer separate commerce and content experiences," Hubbard says that Facebook is "doing a really great job" of driving awareness to its events. "If that ultimately means creating a more seamless experience by integrating e-commerce into the social experience, we're going to be there."
But Facebook's biggest contribution to music could be in the area that needs the help most: music subscription services. If iTunes boosted digital music into low-earth orbit, Facebook can send it on a course to the moon by turning subscription services into a household product.
Facebook solves a number of key problems that might otherwise doom cloud-based music services that offer unlimited access to large catalogs of music. Spotify, MOG, Rdio and even veterans Rhapsody and Napster need to generate greater public interest. Subscription services could represent the future of music, yet they accounted for just 5% of U.S. digital sales in 2010, according to IFPI's "Recording Industry in Numbers 2011" report.
They need word-of-mouth marketing. Fortunately for them, Facebook's immense audience, combined with the viral nature of social media and people's passion for music, creates a powerful channel to promote these products. "It's one of the most cost-effective routes," Rdio COO Carter Adamson says, "in terms of marketing these services."
Reaching the biggest possible audience at social networks means giving consumers a free taste in hopes of later converting them into paying customers. So, subscription services are tweaking their business models accordingly. In mid-September, both MOG and Rdio announced free versions of their subscription music services. (Spotify has had a free tier of service since its U.S. launch in July.) Both will give consumers free listening on their Web-based services-but all-important mobile access will cost extra.
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