Three items from the backlog and I'll put them all in here under the same heading. It's clear that 2012 saw lots of streaming services but little differentiation and not nearly enough cash-flow. Companies that survive through 2013 will be those that can separate themselves from the pack and convince customers they've got something worth paying for.
Netflix's play is to challenge cable channels like HBO in the original-content space. WIRED called this "Big Data" but I think it's more about
a la carte. It's true, as Roberto Baldwin points out in the article that Netflix has a lot of data on peoples' preferences and can track popularity in astonishing levels of detail. But
as I noted earlier this year, a lot of people cut the cord in 2012 (including me) because they were tired of paying a big yearly bill for lots of shows they didn't watch.
What Netflix can do is not just pick a potential original-series winner via its algorithms, but it can price the offering according to individual wants and tastes. It can bundle the series with peoples' existing subscriptions, it can offer a higher-cost tier that includes original content, and it can offer a pay-as-you-watch model for people who are unsure that they will indeed love the new content. This is the true advantage of an Internet-based company over a traditional cable-channel company and it's where I expect them to win big.
Speaking of data, Tim Westergren of Pandora showed up on TechCrunch last month to tout his company's ability to use data to help artists. Carefully avoiding
the sticky financial questions that have dogged the service in the last couple years, Westergren concentrated on the potential of a direct connection between musicians and their listeners. A connection facilitated by Pandora, of course. If I read between the lines of what Westergren is saying, it appears that he and his company are making a play for the independent artists. A big-name, label-backed act
isn't going to see much (if any) revenue add from Pandora. So why would someone let their music be streamed on the service? Because it means discovery, because it means being connected to the people who want to listen to your music, and because it means learning enough about those people that you can adjust what you do to reach them and make more money from them. Whether it's something as simple as picking the right people to show CD sales discount ads to or as tricky as figuring out which cities you want to hit with your limited tour budget, data is going to be your friend. If Pandora has the data then artists may find the whole deal profitable enough to participate in.
Sticking to the notion of data and socialization, I wanted to round off this trio with a nod to SoundCloud's moves this month toward socialization of the music-streaming experience. I've been a long-time user of SoundCloud, in part because it's a reliable, easy-access and popular site for the kinds of modern electronic music that I favor.
As with many such sites I've long been able to follow artists, favorite things, and so on. Recently they added Facebook-like dashboard and "who likes who" features. Despite my initial skepticism I've found the features really useful. Like Facebook, SoundCloud now gives you a Dashboard on login that shows you things your favorite artists have uploaded. But you also get to see things they favorited on the site. This isn't technologically new, and certainly other social media sites such as Twitter let you favorite things. It took me a while to think about this and try to understand why it works better here than there.
What I think makes it work is the specialized nature of the community. On Facebook I have over 350 "friends" and they have a wildly varied set of interests. My personal interest in those 3500 things is small or none for many of them. So if a FB friend likes something its information value to me is low. On SoundCloud not only do I have a much smaller set of people I follow, each of them is a working artist with an active interest in hearing and using new music. What interests them is likely to be fresh and interesting to me as well. That's not guaranteed, but my experience in the past month is that it has a better than 50% hit rate, which is way higher than any other social-media site I've used.
SoundCloud is also linking to the rest of the world, but to my eyes that's not going to provide unique value - it's just a convenience. What's making SoundCloud a site I return to over and over again is the active participation of engaged people with high levels of knowledge and similar interests to my own. How that turns into revenue for SoundCloud and the participating artists is still to be seen, though.
