Some lessons about piped music - and a cautionary tale for the retail TV industry.
Muzak's filing for bankruptcy yesterday is no surprise. I flagged its mountain of imminently due loans several weeks ago on Twitter and socialmedian, and in the current financial meltdown it was going to be a miracle if an entertainment-based business found someone willing and able to refinance over $400m of debt. It's very sad for those who will lose their jobs, but it's also very interesting to look at the underlying reasons for the failure, especially in the light of the similar demise of DMX in 2005.
What's not working for these music pipers? Is it the nature of the service they offer, the malaise affecting the whole commercial music business, or the business model these companies have been operating? And are there any lessons to learn?
First, the nature of the service. I do have great reservations about mindless music as a global veneer. There is little independent research on whether people like it or not, so most of the numbers one sees are produced by interested parties: either Muzak and its competitors, or the music industry and its ambassadors such as the licensing agencies - in the UK that's PRS, PPL and MCPS. Those numbers are universally positive, giving the impression that music is great to have in the background everywhere, all the time. You and I both know that's not true.
There is one independent survey I know: it was carried out in the UK in 1998 by NOP for the Royal National Institute for Deaf People, and it was setting out to find out how piped music affects the deaf and hard of hearing, of whom there are 9 million in the UK - that's around one sixth of the population. The survey also interviewed the general public by way of comparison; a total of 1,002 people were interviewed, and interestingly the level of engagement and passion for the subject of the interviewees was judged to be exceptionally high. This is a hot topic with the public, and the results should make salutory reading for retailers. Let's start here:
And these are just the conscious reactions to sound. The picture gets worse when you factor in the unconscious effects of music, which are the most important part. Sound's impact is like an iceberg: most of it happens at unconscious level, below the waterline. We have become so used to suppressing noise that we are unaware of the vast majority of the sound around us - but it still affects us all the time. In shops, even for people who say they like the music, the standard fare of upbeat pop music acts as a stimulant, speeding shoppers up and causing them to leave the store faster than they otherwise would. This is losing further sales because, as every retailer knows, the longer we are in a store, the more we spend.
So most piped music is reducing sales, both by upsetting and deflecting a third (or more) of customers, and by shifting the rest out of the store too quickly.
The demographics make this even more painful for any retailer aiming at the top of the market:
At least most of us can leave the store. Staff have to put up with the music all day, and unsurprisingly, according to a survey in 2007 by the UK Noise Association, 40% of them dislike piped music and only 7% like it.
And yet most shops play music these days. Why?
There are three reasons. First, the desperate need for the music industry to create new revenue streams has led to strong sales pressure from Muzak and its competitors, backed by hyperbolic claims in one-eyed research about the effects of music on customer satsifaction. Second, the billion flies argument: everyone else is doing it, so it must be a good idea and shoppers must like it. And third, it can work. If carefully chosen by someone who really understands the function of a space, the people in it, the environmental factors (noise, quality of sound system etc) and the brand or values behind the space, music can create a delightful, appropriate and effective experience. Sadly, this is rare and most piped music is bland, mindless and ineffective - which, in my opinion is why it is so offensive to many people. We all understand music very well (though nobody knows quite how), so we find inappropriate music upsetting: somewhere deep down we know it's wrong.
Tha's why the issue raises such strong feelings. There are even organised anti-piped-music communities such as PipeDown and Mu-sick, to name but two of several. Many people, me included, mourn the devaluation of music that results from its use as a universal veneer. Society's relationship with music has been radically changed as a result of its omnipresence in public places: it used to be something we had an active, intense relationship with, but now most of the time it's the soundtrack to some other activity.
But all of this is isn't why Muzak has just gone bust. The company had tens of thousands of sites, and hundreds of major retailers as its customers. None of these retailers, as far as I know, had rumbled the fact that their music wasn't working, so the big game of the emperor's new clothes was still being played. There is no shortage of piped music in the world, most of it from Muzak, so what went wrong?
And so to possible reason number two: is this a symptom of the bigger disaster that is the commercial music industry today? Album sales are nose-diving, digital rights management (DRM) is becoming indefensible, and young people believe that music is a right, not a commodity (or product, as the old record companies used to describe it). Has Muzak gone belly-up because people won't pay for their music any more?
It's an attractive premise but it falls down because we are unaware of the cost of the music we are subjected to in shops. It is, of course, far from free, and we certainly do pay for it in higher prices. The music industry, through its licensed agents, is rabid about collecting fees for all public performance of music, despite the regular bad PR arising from its pursuit of corner shops or local garages with radios on for their staff. The legal landscape is complicated in established markets: in the UK, the Performing Right Society and Mechanical Copyright Protection Society (now combined as PRS for Music), and Phonographic Performance Limited, collect for different rights in any one piece of music. For big retailers the fees are huge, running into millions a year, and our experience at The Sound Agency is that the methods of calcuation are arcane, often incomprehensible and inconsistent. In less developed markets, it's like the Wild West: you can obtain cheap bootleg MP3 music from many Russian and other Eastern European websites, and there is little policing of public peformance, so vast amounts of music are bought and played illegally.
But even with effective policing, however large the fees are, and however difficult the system is to understand, the shopper is oblivious to this or to the extra cost of the musical wallpaper they suffer in stores. There is no equivalent of an organic section - a quiet room where you can buy goods without listening to or paying for the music. (Come to think of it, that's a great idea!) So this can't be the reason for Muzak's downfall either.
Which brings us to the third possibility - business model. All the piped music companies have been operating the same business model: an up-front fee (typically leased) for purchase of their players, plus monthly fees for each site served.
The players are usually adapted PCs, sold in large volumes by the pipers to leasing companies which then charge the retailer a monthly price for the staged purchase over three years. The music piper makes a 10-25% margin on the initial sale. The retailer doesn't have to find a big pile of cash for the boxes. The leasing company does what it knows best. Everyone is happy at that point.
Over the next three years (the typical life of one of these deals) the pipers charge a monthly fee per shop. This has to cover the rights to the music - typically that can amount to £20 or more a month - plus the service contract for the kit. It should also include a service fee for the piper to cover music updates, account management, administrative costs and R&D.
This is where it all goes wrong. The pipers have become so competitive in pitching against each other that they have driven the monthly fee down to the bone. It barely covers the rights and service fee - indeed in some cases it doesn't even do that. There is no margin for the piper, so all their profit is in the initial sale. They become like sharks, having to move forward with new sales all the time or die. The problem is that what was once a vast virgin market is now highly competitive and mainly sold-up and under contract.
There is a great analogy here with the mobile phone companies. Ten years ago they made all their money from selling handsets, and they could hardly make enough to satisfy the demand. Now everyone has a handset and the market is so competitive that we expect not to pay for replacements in most cases. Seeing this coming, companies like Nokia and Vodafone have successfully transitioned from a volume product sales model to a rich service model: their profit stream is shifting from handset sales to a lifelong relationship based on offering great services like navigation, music (of course!) and personal organisation.
The pipers just didn't see the wall approaching. Muzak took on massive debt to expand, but it failed to grow in the right direction - towards added value services and a profitable ongoing relationship with its clients, and away from being a box seller.
In Europe, Mood Media has taken a slightly different tack, expanding into the fast-growing digital out of home market - retail TV to you and me. This will give the company several years of rapid growth, but eventually, when every shop has screens all over the place and we are all complaining about being bombarded with video messaging at every turn, the same wall will be standing in the way.
In sum, businesses based on capability ("We're doing this because we can") have limited life-spans. Businesses based on need, value and service ("We're doing this because people want it") have long-term sustainability, as long as they listen to the market. Piped music in its current guise and with its current business model is a busted flush because it's based on technical ability and an assumption about customer need that is not grounded in reality. The DOOH market should pay attention right now: this could be you in five years.
My hope is that retailers will start to use the new tools that are available, especially in the new field of neuromarketing, to create an integrated approach to retail environments, designing them in all five senses. As far as sound is concerned, I believe that carefully crafted generative, ambient soundscapes will replace music in most retail and other public spaces, doing the same job as a good piece of design with lighting and colour - creating a space that's interesting, branded, appropriate, comfortable, functional, and pleasant to be in.
Muzak's filing for bankruptcy yesterday is no surprise. I flagged its mountain of imminently due loans several weeks ago on Twitter and socialmedian, and in the current financial meltdown it was going to be a miracle if an entertainment-based business found someone willing and able to refinance over $400m of debt. It's very sad for those who will lose their jobs, but it's also very interesting to look at the underlying reasons for the failure, especially in the light of the similar demise of DMX in 2005.
What's not working for these music pipers? Is it the nature of the service they offer, the malaise affecting the whole commercial music business, or the business model these companies have been operating? And are there any lessons to learn?
First, the nature of the service. I do have great reservations about mindless music as a global veneer. There is little independent research on whether people like it or not, so most of the numbers one sees are produced by interested parties: either Muzak and its competitors, or the music industry and its ambassadors such as the licensing agencies - in the UK that's PRS, PPL and MCPS. Those numbers are universally positive, giving the impression that music is great to have in the background everywhere, all the time. You and I both know that's not true.
There is one independent survey I know: it was carried out in the UK in 1998 by NOP for the Royal National Institute for Deaf People, and it was setting out to find out how piped music affects the deaf and hard of hearing, of whom there are 9 million in the UK - that's around one sixth of the population. The survey also interviewed the general public by way of comparison; a total of 1,002 people were interviewed, and interestingly the level of engagement and passion for the subject of the interviewees was judged to be exceptionally high. This is a hot topic with the public, and the results should make salutory reading for retailers. Let's start here:
- 34% of the general public finding piped music annoying
- 36% of the general public never notice piped music
And these are just the conscious reactions to sound. The picture gets worse when you factor in the unconscious effects of music, which are the most important part. Sound's impact is like an iceberg: most of it happens at unconscious level, below the waterline. We have become so used to suppressing noise that we are unaware of the vast majority of the sound around us - but it still affects us all the time. In shops, even for people who say they like the music, the standard fare of upbeat pop music acts as a stimulant, speeding shoppers up and causing them to leave the store faster than they otherwise would. This is losing further sales because, as every retailer knows, the longer we are in a store, the more we spend.
So most piped music is reducing sales, both by upsetting and deflecting a third (or more) of customers, and by shifting the rest out of the store too quickly.
The demographics make this even more painful for any retailer aiming at the top of the market:
- 45% of 45-54 year olds find piped music annoying
- 21% of 15-24 year olds find piped music annoying
- 51% of people in social group AB find piped music annoying
- 26% of people in social group DE find piped music annoying
- 86% of hard of hearing people find piped music annoying
At least most of us can leave the store. Staff have to put up with the music all day, and unsurprisingly, according to a survey in 2007 by the UK Noise Association, 40% of them dislike piped music and only 7% like it.
And yet most shops play music these days. Why?
There are three reasons. First, the desperate need for the music industry to create new revenue streams has led to strong sales pressure from Muzak and its competitors, backed by hyperbolic claims in one-eyed research about the effects of music on customer satsifaction. Second, the billion flies argument: everyone else is doing it, so it must be a good idea and shoppers must like it. And third, it can work. If carefully chosen by someone who really understands the function of a space, the people in it, the environmental factors (noise, quality of sound system etc) and the brand or values behind the space, music can create a delightful, appropriate and effective experience. Sadly, this is rare and most piped music is bland, mindless and ineffective - which, in my opinion is why it is so offensive to many people. We all understand music very well (though nobody knows quite how), so we find inappropriate music upsetting: somewhere deep down we know it's wrong.
Tha's why the issue raises such strong feelings. There are even organised anti-piped-music communities such as PipeDown and Mu-sick, to name but two of several. Many people, me included, mourn the devaluation of music that results from its use as a universal veneer. Society's relationship with music has been radically changed as a result of its omnipresence in public places: it used to be something we had an active, intense relationship with, but now most of the time it's the soundtrack to some other activity.
But all of this is isn't why Muzak has just gone bust. The company had tens of thousands of sites, and hundreds of major retailers as its customers. None of these retailers, as far as I know, had rumbled the fact that their music wasn't working, so the big game of the emperor's new clothes was still being played. There is no shortage of piped music in the world, most of it from Muzak, so what went wrong?
And so to possible reason number two: is this a symptom of the bigger disaster that is the commercial music industry today? Album sales are nose-diving, digital rights management (DRM) is becoming indefensible, and young people believe that music is a right, not a commodity (or product, as the old record companies used to describe it). Has Muzak gone belly-up because people won't pay for their music any more?
It's an attractive premise but it falls down because we are unaware of the cost of the music we are subjected to in shops. It is, of course, far from free, and we certainly do pay for it in higher prices. The music industry, through its licensed agents, is rabid about collecting fees for all public performance of music, despite the regular bad PR arising from its pursuit of corner shops or local garages with radios on for their staff. The legal landscape is complicated in established markets: in the UK, the Performing Right Society and Mechanical Copyright Protection Society (now combined as PRS for Music), and Phonographic Performance Limited, collect for different rights in any one piece of music. For big retailers the fees are huge, running into millions a year, and our experience at The Sound Agency is that the methods of calcuation are arcane, often incomprehensible and inconsistent. In less developed markets, it's like the Wild West: you can obtain cheap bootleg MP3 music from many Russian and other Eastern European websites, and there is little policing of public peformance, so vast amounts of music are bought and played illegally.
But even with effective policing, however large the fees are, and however difficult the system is to understand, the shopper is oblivious to this or to the extra cost of the musical wallpaper they suffer in stores. There is no equivalent of an organic section - a quiet room where you can buy goods without listening to or paying for the music. (Come to think of it, that's a great idea!) So this can't be the reason for Muzak's downfall either.
Which brings us to the third possibility - business model. All the piped music companies have been operating the same business model: an up-front fee (typically leased) for purchase of their players, plus monthly fees for each site served.
The players are usually adapted PCs, sold in large volumes by the pipers to leasing companies which then charge the retailer a monthly price for the staged purchase over three years. The music piper makes a 10-25% margin on the initial sale. The retailer doesn't have to find a big pile of cash for the boxes. The leasing company does what it knows best. Everyone is happy at that point.
Over the next three years (the typical life of one of these deals) the pipers charge a monthly fee per shop. This has to cover the rights to the music - typically that can amount to £20 or more a month - plus the service contract for the kit. It should also include a service fee for the piper to cover music updates, account management, administrative costs and R&D.
This is where it all goes wrong. The pipers have become so competitive in pitching against each other that they have driven the monthly fee down to the bone. It barely covers the rights and service fee - indeed in some cases it doesn't even do that. There is no margin for the piper, so all their profit is in the initial sale. They become like sharks, having to move forward with new sales all the time or die. The problem is that what was once a vast virgin market is now highly competitive and mainly sold-up and under contract.
There is a great analogy here with the mobile phone companies. Ten years ago they made all their money from selling handsets, and they could hardly make enough to satisfy the demand. Now everyone has a handset and the market is so competitive that we expect not to pay for replacements in most cases. Seeing this coming, companies like Nokia and Vodafone have successfully transitioned from a volume product sales model to a rich service model: their profit stream is shifting from handset sales to a lifelong relationship based on offering great services like navigation, music (of course!) and personal organisation.
The pipers just didn't see the wall approaching. Muzak took on massive debt to expand, but it failed to grow in the right direction - towards added value services and a profitable ongoing relationship with its clients, and away from being a box seller.
In Europe, Mood Media has taken a slightly different tack, expanding into the fast-growing digital out of home market - retail TV to you and me. This will give the company several years of rapid growth, but eventually, when every shop has screens all over the place and we are all complaining about being bombarded with video messaging at every turn, the same wall will be standing in the way.
In sum, businesses based on capability ("We're doing this because we can") have limited life-spans. Businesses based on need, value and service ("We're doing this because people want it") have long-term sustainability, as long as they listen to the market. Piped music in its current guise and with its current business model is a busted flush because it's based on technical ability and an assumption about customer need that is not grounded in reality. The DOOH market should pay attention right now: this could be you in five years.
My hope is that retailers will start to use the new tools that are available, especially in the new field of neuromarketing, to create an integrated approach to retail environments, designing them in all five senses. As far as sound is concerned, I believe that carefully crafted generative, ambient soundscapes will replace music in most retail and other public spaces, doing the same job as a good piece of design with lighting and colour - creating a space that's interesting, branded, appropriate, comfortable, functional, and pleasant to be in.
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View Julian Treasure's profile
Great insight on the reason for the sale. I am developing a digital signage system that provides visuals in much the same way as Muzak provides audio and will look to grow the business and sell it in 5 years.
ReplyDeleteThis is a very thought-provoking and interesting article. I'm grateful to James van Etten (newsletter Clippings for the Digital Signage Industry) for directing me to it. As one who's involved in creating musical-based promotional ads, I (naturally enough) believe that there's still a place for music to be used as a positive stimulus and not just to engage cynically but to entertain, genuinely. In fact, I'd say that the guys from 30 and 40 years back actually got it right - it's just that now a) people are sick of the same and b) where the formula's changed (particularly with music in TV ads) there's just very little that's genuinely memorable any more. We're trying to change that by attempting to roll the clock back a little, in order to look forward. And we like doing it so much, we send out our own wee messages from time to time, to "fly the flag", as it were. Here is our latest vid (http://www.youtube.com/watch?v=Q9IGChII7Zc). Thanks again for such a stimulating article.
ReplyDeleteYou are correct indeed when you state, "Society's relationship with music has been radically changed as a result of its omnipresence in public places: it used to be something we had an active, intense relationship with, but now most of the time it's the soundtrack to some other activity." This, I think, is Conductor Barenboim's sentiment -- that we are no longer trained in listening to the different elements in music.
ReplyDeleteThe greatest tragedy (in my view) is the exact music being piped. When I boarded an airline, I hadn't ordered trancemix at 120bmp to be broadcast throughout the entire cabin. Yet that's what the airline forced upon me. When I entered a restaurant to have a nice, quiet breakfast, I hadn't ordered a pop beat at 120bmp with no resolved beats. Needless to say, it ruined my breakfast.
A study by Joshua Leeds showed that when dogs listened to Metallica, they barked. But when the same dogs listened to classical music, they were calm and rested.
I would like to thank you for noting that there has been a lack of serious research into the area. One has to wonder whether people actually like constant, rapid, unresolved raps pumped into them at such a rapid beat. It really does have an impact on one's physiology. But of course, the Muzak Corporation's wonderful "Audio Architects" may claim otherwise.
Julian's analysis is insightful and pertinent as usual. At Sound Strategies we ran a similar, more general piece some months back, where we make the case for treating music access as a utility like water or electricity: http://sound-strategies.typepad.com/have_your_say_about_sound/2008/08/soundings-augus.html#more
ReplyDeleteUmm As a Muzak customer for over 15 years I have to disagree on alot of points here. I constantly have my customers telling me they love the music and how it adds to the atmosphere of the shop. I personally witness people staying longer singing the songs and waiting around to see what comes next. And all I do is chose a different channel every few days so nothing special is going on. My Muzak rep works at a small local installation company not some leasing company and is a fantastic technical resource. Over the years I've used many different Muzak receivers and not a single one is a modified PC, more like a set-top box for satellite TV the only issue is when it snows I used to lose signal but now they have a solution for that as well. Personally I find it strange to walk into a store and be greeted by silence. I find it very cold and informal. I especially see value in the Muzak on hold for telephones. They also have a great delivery method for instore and onhold messages. (Gee I'm starting to sound like my rep) But seriously though its really really easy and incredibly powerful marketing tool. I can easily see an increase in sales after running my custom in store ads for a few weeks. I get the impression from this article that the author has had some negative experience with piped music before and just has it out for it.
ReplyDeleteI will agree though that society's relationship with music has been radically changed as a result of its omnipresence in public places. I wouldn't categorize it as bad though. In fact I personally have bought CD's based off of one song that I heard overhead in my store.
Just my 2 cents from an aging shop owner.
Well, Richard, what is your response to your customers who don't like someone else's taste in "music" imposed on them and requests that you temporally turn it off while their in your store? Do you accommodate them?
DeleteAs a run-of-the-mill consumer, I will say quite frankly that I heartily dislike background music. I enjoy playing my CD's and listening to them mindfully, at home, at a reasonable volume. I believe that there are more people who actively dislike muzak and background music than those who who actively like it; the thing is, few people are willing to come forward and admit this for fear of being labeled as spoil sports. I would appreciate links to the studies cited on this blog.
ReplyDeleteI don't like the muzak either and don't want it forced on me in stores and restaurants. Do you ever try to get them to turn it off, or at least, turn it down? Be prepared for a debate on why it can't, or shouldn't, be turned off. Or just excuses for not accommodating customer. "No, I won't turn it off". " I can't turn it off". "I am too busy to turn it off". They give you the impression there is no on/off switch or volume control. Well, Muzak, is there a on/off switch or volume control? I have an idea for you. Add a great big red push button in a prominent location with a great big label saying "for the convenience of out customers. Push to mute the music for 20 minutes". Now there is a new feature that is sure to please people who enjoy peace and quiet and give them some choice in the matter, and they won't have to bother the manager or listen to their excuses.
ReplyDelete