September 26, 2012

Digital Remastered

In an in-depth interview Paul Smernicki, Director of Digital at Universal Music UK discusses the impact of digital technology on the music industry and says other sectors can learn much from the experience of record labels over the last decade

It’s 12 years now since file-sharing services like Napster disrupted the record industry’s business model by challenging distribution practices which had been in place for decades. 

In the case of Napster, a well-publicised legal battle ensued, but the genie was out of the bottle. Throughout the last decade digital technology has initiated a much discussed shift from ownership to access. During that time the record industry has experienced, in accelerated form, many of the challenges now confronting other sectors. But, says Paul Smernicki, Director of Digital at Universal Music UK, the outcome has been an eco-system that’s healthier for fans, artists and labels – and consequently for the music industry as a whole. So how does he judge the impact and the implications of new digital technology?

Access all areas

“There are new consumption models now,” he says. “We’re looking at streaming and access as opposed to ownership and I’m a big believer in those models. We’ve got really strong partners like Spotify who’ve seen great growth and we’re now seeing some really meaningful revenue.” But, he points, out Spotify and iTunes aren’t the only games in town. For the team at Universal, two other issues are key right now. The first is the massive growth in video, which according to ComScore currently accounts for 80 per cent of the UK’s total internet audience. The second is the process of curation. 

“YouTube is actually the biggest streaming music service in the world,” says Smernicki. “For a lot of fans it’s the go-to source for listening. One of the things we’re working on at the moment is how we become much better at commercialising video. We’re good at commercialising premium content through a fairly small number of partners, but we’ve got this tremendous catalogue and a lot of it’s not necessarily music or performance related. The question is how we serve that to people editorially – through which channels and partners.”

And that brings us to curation – something we can all expect to hear a lot more about as digital media moves towards maturity and users seek new ways to make sense of – and to personalise – the sheer volume of content available. “Spotify is a fantastic service,” says Smernicki. “But not everyone wants access to 15 million tracks. For some people that can be paralysing. However, there’s a lot of potential in the way you can use Spotify as the guts to build mobile applications which then become editorial. There’s an app called SpotON Radio, where you type in an artist you like and it’ll build you a playlist of similar stuff.”

Indeed, it would be interesting, Smernicki says, to examine in detail how music fans use multiple services: Spotify for streaming, for new discoveries and social networking and iTunes for purchases, for example. “People are creating their own ‘over-the-top’ services, if you like, which bring these platforms together. Technology is the gatekeeper to music now. And not just in terms of access, but how you discover music, how you share it, the whole context around it.”

From commodity to community

One of the consequences of the digital revolution has been its great democratising influence. Now that anyone, in theory, can distribute and share their own music globally, what’s the role of traditional records labels?

“People have been saying for 10 years that technology means the death of labels,” says Smernicki. “Well, that’s not happened, and I don’t see it happening. We operate in slightly different ways and it’s certainly not to the detriment of the music industry – or music generally – that you should be able to discover, share and make music available. The tools exist for small, bedroom labels to do, potentially, all the things we do, yet people still want to sign to labels. That’s probably because we can do all those things better, but we really need to be on our game. Ten years ago, probably close to 100 per cent of our income would have come from recorded music sales. That’s not the case now. Our portfolio of skills is still across recorded music, but also involves sync deals, brand relationships, merchandise, an element of live. We can legitimately go to artists and say, we don’t just record your music, put it on a disc and get it in the shops. We can do all these other things for you as well.”

It’s not just in the availability of music as a commodity, says Smernicki, that digital technology is having a massive impact. Culture, context and community have always been integral aspects of our relationship with music and, as brands across the board are finding, these are precisely the issues social networks are designed to leverage.

“It’s the sharing of stories,” he says, “the ability to connect to people all round the world on a social level. This is no revelation, but even for small artists, if you only have a thousand fans around the world, if they’re real fans and they support you, there’s a career – or something – there for you. To me that’s really exciting and it’s hard to see how you could do that without social platforms now.”

Some bands, he says, may try and resist social media – either because they want to retain a bit of rock ‘n’ roll mystique or because, being bands, they haven’t quite got their Facebook accounts together. But, just as brands have found, it’s the fans who’ll decide where, when and how those conversations take place. 

“The old industry model was very broadcast-based and I don’t think what fans thought was necessarily considered in the same way back then, probably because you didn’t have the sort of raw feedback you get from online communities. Community is about proximity and shared experience. Technology almost allows you do that more meaningfully, more deeply and more persistently than you can around physical events like gigs. People still congregate round those events of course, but the narrative doesn’t start and end on that day. There’s the conversation leading up to that, the sharing of stories and photos afterwards. These things are so omnipresent and so much part of the fabric of what it is to experience music that it’d be impossible to unpick them now. It’d be a unique story if an artist was able to do that on any sort of scale without those tools. And why would you want to? Unless you were really deeply obtuse about it.”

The future’s already started

Given the extraordinary advances of the last decade, how does Smernicki see the next three to five years unfolding within the record industry?

“Well, none of us can know, of course. The war on piracy on the desktop may have been lost already, but I think there’ll be a real development in the sort of experience we can offer streaming on mobile on 4G, though that will have to be about more than just content. It’ll be curated. And not just by people but by non-dynamic things.” Among those doing pioneering work in this field, Smernicki says, is The Echo Nest, a ‘music intelligence platform’ which enables technology to hear and ‘understand’ a piece of music and then generate recommendations, playlists and fingerprinting data.

As to what other industries can learn from the music business – the answer clearly lies in adapting to new technology, understanding consumer behaviour and responding to that. 
“We’ve been through the worst of it in the music industry. If I do my job well, I actually hope we don’t really have this conversation about digital in the future, because it’ll be so deeply integrated into the business,” he says. “But a lot of other industries are struggling with issues which to us might feel quite basic. I don’t often get asked by other industries how we tackled things, but I do feel other content industries ought to be more interested in hearing about our experiences in the music industry, because we were right at the front and we took a lot of hits.”

Article by Jon Fortgang