Services like Rhapsody charge a monthly subscription fee to grant users, with browsers or mobile apps, access to an extensive music catalogue. The content is stored on a server somewhere other than the user’s hard drive (i.e. “the cloud”). There is no need to safe-keep a personal music collection or move it around devices. MOG is an example of a pioneering cloud-based service, and we wanted to know more. Anu Kirk, is the Lead Product Manager of Mobile Content.
MBJ: What is MOG doing to acquire licenses/content? Where do you feel MOG has the most potential for growth in terms of its catalogue?
Anu Kirk: MOG uses a company called MediaNet as the provider for our catalogue. We also have our own in-house licensing team of people with some legal background, some label background, and we proactively reach out to specific labels that we want to make sure that we have on board. This process is based on feedback from our users, who request such content, but also on our knowledge of the industry and our desire to bring in, so to speak, cool labels. We reach out and ask these labels if they’d like to be part of MOG. We have contracts, or terms that we offer them, we send out an agreement, and hope that they sign.
MBJ: Do you find that MOG has been reaching out to smaller indie labels lately, or is MOG still focused on trying to make deals with larger independent or major record labels?
AK: Well, I feel that ‘indie label’ is sort of a vague term. Fifteen years ago, an indie label would have been something like Amphetamine Reptile, or something like SST [Records]. But today, an indie label can literally be a guy that’s made a couple of records on his computer. I definitely think there’s a difference between that and a company that has been around for a couple of years with a sizable catalogue and sales of physical product. And sometimes, if it’s a label that people have heard of in spite of the tiny genre it serves, we go after it. But many smaller labels that are genre specific, or even just digital, come to us directly because they’ve heard about the service and they want to make sure their music is placed. Many are happy to go through an aggregator like IODA, CD Baby, Tunecore, or a service like that. One of the interesting things about being a record label today is that it is not all that different from what running a label was like back in the days of physical media. Think about what you’re trying to do at a label: you’re trying to sell your product. In the old days, you would be on the phone with distributors trying to make sure that your record was at Tower Records, the Virgin Megastore, Sam Goody, and the warehouse. Now you make sure that you’re on MOG, iTunes, Rhapsody, and Rdio. The label has some interest in getting their stuff to us as well.
MBJ: How does MOG compete with and differentiate itself from other major streaming destinations such as Rdio, Rhapsody, or Grooveshark?
AK: MOG operates a business, in many ways, very similar to Rhapsody and Rdio. All of these services are comprehensive subscription services that charge the same amount of money for access to a similar catalogue of music. The way that most of these services tend to differentiate themselves is through the quality of their service, the user interface design, i.e. the “packaging” with which the app is delivered. We’ve also differentiated ourselves by being on different kind of platforms than other companies. Rdio, for example, has done a pretty good job of getting on to mobile phones, but they have not done a great job with consumer electronics integration and they don’t have a Chrome App for the Google Chrome browser. Rhapsody has done a pretty good job of getting out to a little more, but they have not been as aggressive about adopting new platforms and technologies as MOG is. I don’t think that any of the services really believe that their catalogue is substantially better or worse than another.
MBJ: MOG’s “radio slider” feature allows people to customize and control their radio experience. Does MOG hold any exclusivity over that technology? How do you perfect/develop that technology so that users get a quality mix of artists on demand?
AK: One of the things you had asked was how do we differentiate ourselves. The radio slider feature that allows you to move between the original artist and similar artists is a good example of the type of differentiation that MOG is interested in attaining. The other services may have similar types of features, but they are not presented as elegantly or stylishly as the slider. This radio feature is, I think, a key feature of MOG. One of the problems that other music services have is that you pick the song or an album, and it plays that song or album and then stops. The service plays the one song you like, then you’re listening to silence until you figure out what you want to hear next. With MOG’s radio feature built right into the play queue, after a song is played we add stuff that you’re going to like. This makes discovery super easy. The slider uses a particular algorithm that we developed over a couple of years for matching similar artists, and gives the user control over how much and how wide they want to go. We think it’s something really unique to MOG.
MBJ: What are your feelings about free trials? How do they affect MOG’s specific business and subscription rate?
AK: Well I think that giving people the ability to try the service is extremely important. Even though subscription services have been around for decades, many people are unfamiliar with them; they don’t really know what they are all about. People want a free trial because they want to see if the service has music that they want to hear, and they want to check out the interface. I think the free trial is absolutely essential. In terms of how long that trial should be, that’s something that the industry is constantly experimenting with, as is MOG. When MOG initially launched its web subscription service before they had the mobile phone apps, the trial was one hour long. That was a very short period of time, but all you needed to get out of those trials was an email address. The concern was that if you made the trial any longer, people would be creating fake email addresses just to listen to music for free. But currently, we’ve been experimenting with free trials that are 7 days or 14 days. I’m sure you saw the announcement that Rhapsody is going to try and give people a 60-day free trial. I think there’s a certain point where you reach diminishing returns for free trials. What you really want to do is give people some idea of how the service works, but you don’t want to remove the sense of urgency or excitement about signing up. It’s really important. The other piece is that you want to make sure that the user isn’t just sitting there with a clock ticking, that they are actively engaged with the product, and that they understand what it is and how it works. So it’s critically important, but also one of those things that we have to keep experimenting with to find the right balance of duration and how much you pester the user during the trial.
MBJ: What are your feelings towards the actions that Spotify has taken to bring its service into the U.S? How do you see this affecting MOG’s business?
AK: Well, the funny thing about Spotify is that they have been “about to come into the US” for two and a half years. I don’t want to sound overly skeptical, but until they launch here, it’s sort of an academic discussion. Spotify gets a lot of press for a couple of reasons. They have the totally free option, and you can’t have it in the U.S. right now–so it’s got kind of the thrill of the forbidden. They also happen to have a pretty good product. It’s not substantially different than MOG, Rhapsody, or any other subscription services, but they’ve done a pretty nice job of executing against a very small feature set. For this, they get a lot of credit. But if they launch in the US, it is highly unlikely that they are going to have the same free model that they have over in Europe. And if they do have it here, it is highly likely that everybody else who is in the States will offer exactly the same thing. The labels can’t just give one set of deals to one company and not offer the same to others. It just doesn’t work that way. That said, obviously everybody is concerned because they do have a fantastic reputation based on a few people using it and saying it’s awesome when free. But mostly, we’re taking a wait-and-see approach. We’ve done a lot of talking internally about what we think our strengths and weaknesses are relative to Spotify, and how we can counter their next moves. I think of them as another competitor that may or may not enter the market in the summertime. I would be surprised if what they launch is substantially different than what’s already on the field.
MBJ: When could we expect to see MOG available outside of the US?
AK: I can’t comment on that publicly, I can tell you it’s something that we are very interested in, and that we are investigating. We want to make sure that if we do launch overseas, it’s going to be a quality experience and something that everyone can be excited about and give us platform to build on for the future. We definitely want to do it. Much like Spotify coming to the States, moving overseas is a little more complex than it appears on the surface. It’s not like you can just copy your software to a computer in a different country, turn it on and off you go. You have all sorts of compliance issues, and have to do deals with the labels locally. So yeah, we’re definitely looking at that but we can’t give a time frame.
MBJ: The MOG Music Network is a destination within MOG that provides news, reviews, and blogs on current music events and trends. Does this platform lead a lot of people to subscribe to the MOG service? What percentage of MOG’s overall business does this account for?
AK: The MOG Music Network is a network of blogs that MOG partners with to help deliver advertising for those blogs. You have all these people who are very passionate about music, writing all these cool entries, and keeping up with the music scene. These are people who want to write about music for a living; they don’t want to worry about monetizing their ads. So we have a partnership deal where MOG takes care of selling the ads on the sites in exchange for the revenue. We have something like 1,800 blogs there, though I’m not quite sure what the number is now. It’s a separate business from the subscription service, and we have a loose linkage between the two. Obviously, we think there is some of value in having those blogs out there with the MOG name present, because it does encourage people to come check out the service. It also reminds people that we are in the business of getting excited about music–not just billing your subscription on a credit card. It works out rather well, we leverage some of the blogs content on the MOG website, and the blogs help MOG get more subscriptions.
MBJ: Do you find that people are using the apps such as the Google Chrome App, or mobile apps, more often than they are actually visiting www.MOG.com? If so, how might MOG’s model change to adapt to the app trend?
AK: We’re still trying to analyze the data ourselves. It’s funny, doing that type of analysis you would think would be very easy and important, but we’re so busy building the site and the service that doing detailed tracking and trying to draw conclusions from this data is difficult. When you get any group of smart people together to look at some numbers, you’ll get totally different conclusions. What I can tell you is that usage across different platforms is really dependent on the user. One person might only use it on their iPhone, one person might be using it on everything, and some people might be going back and forth between platforms to try and find which one works best for them. We definitely see a lot using more than one platform partially because that’s the key value that MOG brings to the table- the idea that you can get all your music anywhere that you want. The chrome app is definitely the direction that we want to go in for the website. We like the fact that it is very clean and simple, focused on music listening with fewer of the distractions that are present on the website. We want to move the existing site more in that direction. It’s just that we have a relatively smaller team for that and it takes us a little while to get where we want to go.
MBJ: There is a lot of discussion and speculation on what companies like Apple and Google will do next. Where do you see the industry headed if Google or Apple decides to release their own cloud-based service?
AK: Well, I actually think that with Apple’s recent announcement about it’s plans to charge subscription services 30%, it is much less likely that they’re going to launch something. Right now, it’s a lot of rumor and speculation for both Google and Apple. I would honestly be surprised to see them not do something in the space, but if you look at those companies, traditionally Google has not charged users for things. Most of their products are free to the consumer. It would be very difficult for Google to launch something like MOG or Rhapsody and make it free to the user without them losing lots of money. What I heard they might be doing is making a locker for mp3 files, and something like that may fit in with what Apple is doing. It’s hard to say, but I think you can make a strong argument that Apple is assembling all of the pieces to launch some kind of integrated digital media service that includes eBooks and movies. Again it’s really just speculation, and nobody really ever knows what Apple is doing and I’m very reluctant to speculate. I will say that I think if Apple or Google entered into the same business, it would actually be a great thing for MOG because one of the things those companies would do is drive the market, advertise, and explain these new services. It’s sort of like the iPod- there were mp3 players before the iPod, but it was very difficult for people to understand what they were. One of the great things about Apple’s Internet marketing is that they spend a ton of money educating people. If those guys came in and did the same thing for the subscription music business, that would be awesome. I also think it’s healthy for the industry to have competition.
MBJ: You had mentioned Apple’s announcement about the 30% revenue tax it would collect from all subscription services through its Apple store. What action has MOG taken to respond to that announcement, and when will it go into effect?
AK: Apple will not implement this until the end of June, so it hasn’t affected anyone yet. Apple has been sort of vague about whether or not they intend to collect from services like MOG or Rhapsody. I love developing for the Apple platform, and it’s a great and wonderful platform to work with. I also recognize Apple’s right to monetize its platform. I think what people like Rhapsody [and us] have taken issue with is the amount that Apple wants to charge. Being a music service like Rhapsody or MOG is somewhat like running a record store, and the margins are not huge. None of the existing services can afford to support a 30% payout. It is also fair to say that I don’t think any of the services today are making anywhere near 30% of gross revenue themselves, so they would in effect be giving Apple a bigger cut of their earnings. And it is hard to argue that Apple adds more value to MOG than MOG adds to MOG. We’re not making 30%. I think the most likely outcome in the short term is that, were Apple to go through with this, MOG we will just simply remove the ability for people to sign up and pay for the app from within the app. They’ll have to go to our own site to sign up. And Apple seems to say that this is a legitimate way to avoid the levy.
MBJ: MOG’s CEO, David Hyman, is an active collector of vinyl. This seems to suggest that an interest in physically delivered music. Given your line of work, how is the physical experience different in your opinion and how does that transfer into the MOG service?
AK: Historically, subscription services have positioned themselves as “never buy a CD or a record again”. This is not the case of MOG, and is not a realistic way to look at music. The way I like to describe it to people is that that, on balance, these types of services encourage more purchasing of music and spending. Think of it this way: four-fifths of the households in the US, or more, pay for cable or satellite television. They still go out to the movies, or buy a DVD, watch pay-per-view videos on the web, or use Netflix. They use all of those things, and in some cases more than they did before. So I just think it’s a question of making the pie bigger, and it means that you have choices. If you wake up one morning and you have “Sweet Home Alabama” stuck in your head, you don’t have to go and buy the song for a buck, and you don’t have to go and buy the CD for $20. You can go to MOG and play it. I like to say that choice drives more informed buying.
MBJ: What advice would you give to aspiring music business professionals entering the market today?
AK: I think it’s an absolutely great time to be a musician or a creative person, because the tools are so powerful and cheap. It’s a challenging time to be a music businessperson, because the business model is uncertain right now. People are experimenting. The down side is there’s no formula that says, “Okay, if you do this then you’ll have a successful business.” But the upside is that you have this opportunity to do something new and exiting that nobody else has thought of–which could make a big difference. I’d mostly say to people getting into the business: don’t limit yourself. Dream big and go for it, try and think about something that will be exciting and make it happen. I’ve been a musician myself since I was fifteen, and I’ve been working in the digital business for ten years. Keep dreaming, keep trying, and keep coming up with new things. That’s when the magic happens.
By Ben Scudder