product strategy

Creating vs. Building

Posted on November 28, 2016 | by Bas Grasmayer

Laziness is good. It teaches us to get results with the least effort possible. If you avoid procrastinative behaviour, laziness can even be a great recipe for success, because you’ll be a master at shortcuts and finding the most effective ways to get things done.

I, like everyone, can be pretty lazy at times and it can take a lot of motivation to muster up the motivation for some activities. Over the years, I’ve learned that the strongest motivators for me are either:

Instant gratification, eg. the dopamine triggers created by most time wasting activities and procrastination;
Having a purpose beyond what I’m doing.

This year I set up the MUSIC x TECH x FUTURE newsletter as a way to ‘force’ myself to write something every week. Prior to that, I had ‘created’ (written) articles mostly sporadically, but now I had a weekly deadline. And I had a vision: I knew that MxTxF was something I wanted to grow, to build, and hold to a high standard. All creation happened within that context.

Creation for the sake of creation is great.

But if you’re striving to achieve something, then the path of random creations is one where you’ll depend on luck and pure chance.

So whether you make music, work at a label, or aren’t doing anything creative – ask yourself: what could I be building?

Start from doing what you’re already doing.

Why are you doing it?
What are you learning from it?
Does it all fit together?
Does your work add up?

If the answer to the last question is no, that’s fine. If you make coffee for customers every day, then every day will look more or less the same, and every morning you hit the reset button and do it again. Same day, repeating, with the same results. Whether you fail or succeed in that case depends on consistent performance and random external factors.

The lazy person’s nightmare.

If that sounds like you, think about what you could do that adds up. Then wrap it in purpose.

Back to the coffee example. Let’s say your wrapping in purpose is that you want to become the best coffee place in your town. Now you have a context to fill. You’ll need to talk to your boss and make a plan, you need to figure out what makes a place great, talk to your customers, etc. All of this you can do while doing what you’re already doing.

The lazy person’s dream.

Now let’s look at music.

Stop expecting to get a lucky break. The word luck implies unlikeliness and when you work hard and never get lucky, it can become intensely demotivating.

Create to build.

You’re building a following.
You’re building a fanbase.
You’re building your artist brand.

Every time you release music, it’s a step in building those things.

In that context, you can evaluate your steps.

For instance, 2 times this year, the open rate of my newsletters dropped below 30%. Terrible, because I strive to keep it between 40-50% (higher would be nice, too). In the context of building something, a low open rate is terrible: if you can’t win people’s attention consistently, then you’ll lose it eventually.

So I looked at what I did.

In one case, it was just the subject line that was a bit too pushy and may have caused people to auto-ignore the email, thinking it’s yet another spammy newsletter.

The other case was more difficult, but my hypothesis was that the edition the week before was a bit weaker than usual, so people didn’t open it the week after. I didn’t have a good way to know this for sure, but it gave me a new way to think about what I’m building.

What that means is that by placing my creations in the context of something I’m building, it forced me to zoom out and think more carefully about the greater picture.

You may assume people are not watching your new video, because you posted it on your Facebook at the wrong time of the day, but maybe it’s because your last video sucked. If you’re just pushing out creations without thinking about the greater context you’re building, you’ll miss that information.

The value in creating consistently and feeding it into something you can grow is so much greater than the sum of parts. So don’t just create; build.

Best of all, it’s a great way to justify laziness. Just don’t procrastinate.

What if Spotify turned Daily Mix into a standalone product?

Posted on October 31, 2016 | by Bas Grasmayer

Implementing the obvious missing feature could point to a new product direction for Spotify.

About a month ago, Spotify introduced Daily Mix, a new set of playlists that lets you ‘rediscover’ your favourite music. It mixes past favourites with tracks you might like and its stated aim is to take the work out of organizing daily listening.

For years, Spotify has focused on creating better ‘lean back experiences’ that allow for more passive listening. A music tech product’s typical early adopters are people that are heavily invested in the process, but as they achieve greater market penetration, they need to target new audiences.

At first, Spotify focused on human curation and it remains a strong focus. More recently, after the Echo Nest acquisition, Spotify has chosen to give algorithms more play, such as through Discover Weekly and Release Radar, and now Daily Mix.

The obvious missing feature from Daily Mix, and much requested, is the ability to download tracks to your device through an offline sync feature.

Their official explanation for it, frequent updates and large amounts of tracks, doesn’t really seem to add up. Many users offline sync large playlists that are regularly updated. If it’s an issue, then users just pick one or two favs of their Daily Mix playlists and sync them.

As I thought about it, it reminded me of what I envisioned Soundcloud’s future as a subscription service would be. Soundcloud’s current proposition of serving dead artists’ music alongside the brand, brand new for $10 / month, doesn’t make any sense and likely got forced upon them by labels taking a tough stand and impatient investors.

What I always thought Soundcloud would do, was simply to release an app that would allow users to offline sync their favourites and charge users about $2 to $4 a month. As Spotify’s reportedly in talks to acquire Soundcloud, perhaps Daily Mix can be their first step into launching more price points.

Let’s imagine Daily Mix as a spin-off.

New price point

Spotify’s in need of a new price point. On average, the monthly spend of Spotify’s new subscribers is $3.09, not $9.99. This is due to discounting. Spotify, and others, are having a difficult time bringing in the mainstream music consumer at $9.99 per month.

Spotify user price by Midia — From: The End of Freemium for Spotify?

Spinning off Daily Mix as a separate product for the mainstream consumer could provide those users with a limited, but focused experience and monetize them without discounting.

The price point is a great way to onboard users. A user may use Spotify’s main app in ad-supported mode, but pay for Daily Mix. They’ll get used to having a monthly payment in music. Meanwhile, if they want to hear more by a certain artist in their Daily Mix, they can tap the artist name and be directed to the main Spotify app.

Inside Spotify’s main app, they can work to upsell users to higher price points for additional functionality.

Moving beyond all-you-can-eat (AYCE)

The original proposition of music services was that if you pay $9.99 a month, you’ll get all the music out there… However, with streaming holdouts and exclusives, this doesn’t seem viable. Due to the original frame, consumers are sometimes unwilling to spend more on digital music.

Music services need to shift away from having users associate their payments exclusively with the content, and instead monetize functionality around music.

Cannibalisation?

There remains the question of cannibalisation. Part of Spotify’s users who currently pay $9.99 / month may actually find that a Daily Mix app serves them well enough and subsequently downgrade. This makes an app like Daily Mix tough to license.

There are precedents though. Apps like MTV Trax let users download & listen to the most popular hits on a daily basis and in some markets, like Spain, they charge around $1 / week.

Alternatively, Spotify could wrap Daily Mix into some kind of trial, minimize functionality and hide the playlists to give it more of a radio feel, or work on the premium offer to be able to retain more premium subscribers, as well as upsell more effectively.

Another idea: expand Daily Mix with something not included in the main Spotify app, so that music aficionados can be convinced to spend some money on top of their $9.99.

Extra features for power users in $9.99

In a multi-app strategy, there are 3 things Spotify must do:

Make sure user conversion funnels for each app are functioning;
Make sure the lower tier apps don’t cannibalize the higher tier too much;
Optimize upsell funnels across its products.

Spotify likely needs it current feature set with Discover Weekly, Release Radar, Daily Mix and other features in order to onboard and retain users. Also, they don’t want to piss off subscribers, so they need to come up with product propositions that differ enough from the scope of the current product.

Some examples of features that could be sold at extra cost:

Buy Pacemaker and let Spotify create actual mixes for you;
Playlist creation games, eg. with friends or well-known artists;
Direct-to-artist subscriptions for exclusive content, interaction, discounts, etc. Think Apple Music Connect, done right.

They’ll have to figure out the specifics out soon and work out a plan on how to counter cannibalisation. As more mid-tier price point music subscription apps are entering the market, Spotify will need to compete.

Who would you rather lose a customer to? Someone else’s app, or your own?

6 questions I wish music startup founders asked more often

Posted on October 17, 2016 | by Bas Grasmayer

Keeping a close eye on the music space, I encounter a lot of startups and fledgling products. Unfortunately, a lot of them are misguided, for a variety of reasons, most of which can be prevented. Often, these early mistakes result in painful pivots or founding teams giving up, which is a real shame, as we need more applied innovation in the music business.

Here are the questions I wish music startup founders would ask themselves early on.

Does this work as a mainstream behaviour?

The biggest mistake music startup founders make is they assume that everyone loves music the way they do. Most people simply don’t care that much about music. They like it, they love it, but in a very different way from whoever’s likely to read this — let alone found a music startup.

You need to be very critical of your idea. It’s ok if it doesn’t work for mainstream consumers, but then adjust expectations and target your product accordingly.

Does this work as a mainstream price point?

So let’s say you figure out you have the perfect lean-back experience for music listeners. You’re creating something that’s not demanding of its users and doesn’t require big changes in existing behaviours. In other words: you’re ready to cater to a mainstream audience.

What about the price point? Price points are difficult to determine and people are notoriously bad at predicting what price they’re willing to pay for something. If you’re going for a mainstream audience, your safest bet is pricing for impulse purchase decisions.

How does this work rights-wise in the long term?

You can’t live on the APIs of YouTube, Soundcloud or Spotify forever. At some point, you need to build your own business. Do you understand the costs involved of licensing? Will content disappear from the service?

Launching light weight is fine — if you’re looking to test an idea, using an API can be a great choice, but you need to understand your long term strategy, too, and plan for the next steps.

What are the ways in which people already solve this problem?

Changing an existing behaviour is hard work and takes commitment. It’s risky to assume people will immediately fall in love with your product, drop everything, and never look back. Problems I see entrepreneurs frequently try to tackle are: staying up to date with your favourite artists, better ways to find new music, or giving people all their music in one place.

Are these problems consumers are already aware of? We all have our workarounds, so it may not seem urgent to your target users. Understand exactly how people are currently solving the problem, so that your product fits into a certain behavior and augments it, so that it becomes better.

Radically changing a behaviour is painful for users.

Do I really need to do a consumer-facing startup?

Sometimes entrepreneurs do music startups, because they have a vision for the music business and they want to break into it. Doing consumer facing startups is often costly and makes it trickier to gauge interest and test the market. If your goal is to create a better music landscape, perhaps you could consider solving problems within the music business.

After all, many of the imperfections that consumers have to deal with have a lot to do with problems in the music business internally.

Does this already exist?

Shout out to the plethora of music discovery apps posted to Product Hunt every month.

Spotify’s strategy to become a habit-forming product

Posted on August 8, 2016 | by Bas Grasmayer

Last Friday, Spotify unveiled its newest feature: Release Radar – a personalized playlist of newly released music, updated every Friday. It’s reminiscent of Discover Weekly, but Release Radar’s recommendations are always newer tracks. My first impression is that it’s much more likely to recommend music from artists you’re already familiar with.

As Spotify keeps rolling out features like this, and competitors no doubt follow suit, the implications for the music business will be significant. Matt Ogle, who’s behind both of these playlists, revealed last March:

There are 2,000 artists for whom Discover Weekly is currently 80% of their streams, and something like five or six thousand for whom Discover Weekly is half of their streams.

But I’d like to zero in on Spotify’s product strategy and why features like Discover Weekly and Release Radar are so important for the service. It has everything to do with the power of habit.

Habit Loop Spotify

Discover Weekly creates a perfect habit loop. The routine is listening to your refreshed playlist. The reward is the release of good hormones due to interesting new finds, and perhaps the social currency of sharing. The cue, or trigger, is simply the fact that it’s Monday and the start of a new week.

On Sunday, another habit loop is triggered. To prevent losing newly discovered gems, users log on to save tracks from Discover Weekly to their playlists. Loss prevention is one of the strongest motivators.

Spotify Discover Weekly Habit chart

Spotify’s bet is that they can create another habit, focused on different days of the week, by releasing a new feature in the style of Discover Weekly. Being able to consistently drive traffic back to your product is great if you’re ad-supported, might help to convince free users to upgrade to premium, and helps premium users justify the recurring cost of their subscription.

Now, instead of 2, there will be 4 cues.

Spotify Discover Weekly + Release Radar chart

Friday is a great day for Release Radar for two reasons:

Easy to remember: it’s the last day of the week and people have the weekend on their minds.
Since last year, Friday is the global release day for new music.

Here are two hacks I made that bring some cool additional automation to the new Release Radar playlist:

Curious how Release Radar works? The wonderful folks at Hydric Media, who are behind the hit music app Wonder, created a free tool called Playground, which opens up all the different parameters of Spotify’s Echo Nest API powering the Discover Weekly and Release Radar playlists.

How has your Release Radar experience been? I’ll show you mine, if you show me yours. Send me a tweet: @basgras.

The Global Implications of VKontakte’s New Music Licenses

Posted on July 24, 2016 | by Bas Grasmayer

Last week’s most important music business news could well be the deal struck between Russian social network VKontakte (VK), and all 3 major labels. It follows a long history of conflict between VK, sometimes referred to as Russia’s Facebook, and the music industry. It seems like the music will stay freely available to VK users, and the service will start testing various monetisation models through new functionality aimed at its music listeners.

Two major implications of this deal:

VK was like a Napster meets Facebook. Anyone could upload music (and other types of media) to it and anyone else could retrieve and access that music. For free. Now, suddenly, this behaviour has become monetized.
There is a global ecosystem of unlicensed music apps that rely on VK’s huge music database to source their content. I assume the majors were not willing to license that, so we should start seeing some of these apps struggle to maintain catalogue.

In Russia, music is social

To understand the significance locally, you should know a couple of things about Russia’s online music landscape. Due to the presence of basically every song you can think of on the country’s most popular social network, people have grown up consuming music inside a social layer. This has made the online music landscape in Russia inherently more social than in many other countries.

Facebook has Pages, VK has communities

A few years ago, the battle between VK and the music industry looked more like a war. It was threatening to destroy an important pillar in Russia’s live music business: the VK communities centered around music.

Moderators of these communities regularly post music to the groups, so for many of the groups’ followers it’s a way to get fresh playlists, find new songs, or connect to familiar tunes. There are groups for well-known superstars, like Drake, for local pop singers, like Dima Bilan, but also for lesser-known niche artist like the Dutch producer Boaz, who has worked with artists ranging from Major Lazer to Yellow Claw and has largely remained in the background.

When promoters are organising shows, they reach out to communities like these to connect to audiences of tens of thousands of people. Sometimes they pay moderators to promote a show, or just offer some free tickets. These communities have been instrumental in driving audiences to shows in Russia & other CIS countries. The fact that these groups can now survive is a big win for VK and the wider music business. Not only do they drive audiences to shows; they also provide valuable data that helps to identify tastemakers & influencers, and potential hits.

What should VK do next?

The presence of a vast music and video catalogue on VK has given it a good competitive advantage over Facebook. VK is the 3rd most popular site in Russia, way ahead of Facebook, which is number 8. It trails Yandex, Russia’s Google, which is reportedly discussing a partnership with Facebook.

VK must leverage its unique advantage to stay ahead of Facebook, and offer a unique, competing experience, that could also appeal to users outside of Russia. These users would already be locked into the Facebook ecosystem and will thus not be interested in joining VK as just another social network. Even if they would be, it’s unlikely VK as a classic social network can attain the critical mass it needs in new, Facebook-dominated markets.

Another threat is the rise of messengers including Telegram, which was founded by Pavel Durov, who also founded VK, but parted on complicated terms. Messengers have been an expected threat to social networks for years, which is why Facebook spent $21.8 Billion on acquiring WhatsApp and offered $3 Billion for Snapchat in 2013. More recently, Facebook has invested heavily in Messenger, launching a bot platform in April this year, which is now host to over 11,000 bots, like the DJ Hardwell bot.

VK is not well-equipped to compete with messengers, yet, and should start making efforts to maintain relevance in a mobile-first landscape, which in emerging economies may also mean mobile-only for big parts of its audience.

This means 3 things:

VK is in dire need of a clear, focused mobile strategy;
VK can use its licensed music & media offering as a competitive advantage;
VK should consider unbundling in similar vein to what Facebook has done with Messenger, Instagram and WhatsApp, so that they can make products that will appeal to Facebook users, too.

Sidenote: VK is partly owned by Mail.ru, which also owns Russia’s second most popular social network Odnoklassniki. Both are included in this licensing deal. The latter has an older user base, so VK will have to target demographics below 35 years old.

Monetization

With all major licensed music services reporting losses, it’s unlikely that music on its own will be profitable for VK. It should consider it a loss lead for the foreseeable future and use it to strengthen its market position. This is not to say they shouldn’t start experimenting with monetization, they definitely should.

Key strategic points for VK:

Stay away from subscription models for now – it is really complicated to convince people to start paying for something they’re used to getting for free. It’s something big parts of the music industry have struggled with for decades now – don’t let this thinking infect your business model.
Carefully study the social data behind VK music communities – what drives interaction, what makes things go viral, what excites people, etc. VK, like Facebook, is in the ads business. These factors are not just crucial for developing new products, but also for their core business model.
Focus on building a new social product for mobile that would fare well in today’s messenger landscape. One of its most important ingredients should be music.
Add mictrotransactions. It’s the easiest way to get people to pay for digital goods in emerging markets. People are not used to recurring subscriptions, many people have pay-as-you-go mobile plans, and microtransactions play nice with mobile wallets, which reduces friction around payments.
Do NOT connect the microtransactions directly to music. Get people to pay for things other than music, but use the music to drive those purchases. For example, imagine if musical.ly were to charge users for video filters. Creating the association of paying for music will kill your business before starting. First, let people get used to making payments around music. VK already has experience in selling virtual goods, like avatars, virtual flowers, etc.

I believe microtransactions, in VK’s case, are more likely to bring repeat revenue from users, at a larger scale, than subscriptions can. If they must do subscription — offer new functionality instead of pay-gating what users already had for free. Make it different from established players like Zvooq or Yandex.Music, or from Spotify which tried to launch in Russia and then withdrew. Bear in mind Soundcloud’s and YouTube’s difficulties in converting free users to subscribers. It’s notoriously difficult to convert users from unlimited free to paid. Price for impulse decisions, so people pay before doing the math that they can do workarounds to get the music they want without paying.

VK, now licensed, is probably the largest social music service. Where music services have always struggled to create a functional social layer, VK has managed to blend music and social networking seamlessly. It will be interesting to see what’s next.

Written for my weekly newsletter MUSIC x TECH x FUTURE. If you enjoyed reading this, please consider sharing and subscribing — it’s of great help.

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