Archive for January 2009

Lifetime value of the consumer

January 9, 2009

¬†This week there is an interesting Billboard Q&A with Universal’s Head of Digital in the US, Rio Caraeff.¬† If you can get past the metaphor orgy (e.g. “…put a little skin in the game …behind the curtain …You can’t hit the ball unless you swing the bat. Sometimes you strike out, but if you’re afraid to swing, nobody wants you on their team.”) he makes at least one interesting point …

What I’d like to see in the year ahead is a larger shift away from revenue-per-unit to a revenue-per-user model. This is much bigger than the notion of subscriptions or monthly recurring fees. It’s the general concept of getting paid something for everybody that accesses the network or has a device that’s music-capable. It’s really about driving a scalable and transformative business model for the music industry and away from figuring out how to get more money from the small amount of people that choose to pay for music.

I think he’s absolutely right about the move away from how to get more money from the small amount of people that choose to pay for music.

But in the same way that old school music people think in terms of physical media, he risks seeing the world through digital eyes.

In this interview at least he homes in on payments for network access for music capable devices but for a company like UMG the winning game is in smart plays across all their business holding to deliver on the idea of lifetime value of a customer.

Yes get paid on network access and try (and bring those unruly ISPs in line) but really a digital networked consumer might also be a potential market for the odd well packaged CD, or for merchandise.

UMG, and some of the other majors, are now invested so widely that they need to think of themselves as a Disney – content owner, merchandiser and with a wide spread of demographics not just because of the content itself but because of it’s use (e.g.gifting).

OK so this interview is about Digital and you gotta start with your own business unit, but the real saving of the music industry is in identifying all the touchpoints in the customer lifecycle (i.e. the customer’s life) and creating the concept of lifetime value.

Making sure you have a product available to the cusomter at the moment they need it, therefore anticipating need, yes stoking up their need and using business partners where necesary. It may involve third parties and some third parties, e.g. Amazon, are in a great position to deliver on this.