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Musicload Pulls Its Weight Amongst Giants
Germany is an interesting market where the rapid shift to DRM-free music could result in even more shifts in market share
By Eric de Fontenay (Founder & Publisher)
(more articles from this author)
2009-04-22
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From a macro-level, the U.S. online music retail market can appear somewhat stale, monolithic, what with the dominance of Apple across so many sectors. Fortunately, the same can't be said for our brethren across the pond where linguistic and cultural differences usual result in a more fragmented and competitive marketplace.

Germany is an interesting market where the rapid shift to DRM-free music could result in even more shifts in market share. Deutsche Telekom's digital music service Musicload recently completed its shift of six million songs in the DRM-free MP3 format a month sooner than planned. Timing is key with iTunes and Amazon having a significant presence in the market. Research consultancy Strategy Analytics recently found that most German broadband users prefer Amazon for online media purchases.

"As Amazon launches its MP3 download store in Germany, it is putting tremendous pressure on the market leaders, Apple iTunes and Musicload from Deutsche Telekom," said Martin Olausson, Director of Digital Media Research at Strategy Analytics. "We are expecting a fierce battle for supremacy in the German online music market in the months ahead and our research suggests that newcomer Amazon may very well come out on top".

In the midst of this simple fact - MP3 has won, DRM (at least for online music) is dead - as well other shifts such as the emergence of mobile music, I spoke to Joachim Franz, Vice President of Musicload, on the evolving German online market.

Do you believe that the end of DRM for music will have a significant impact for Musicload and the industry as a whole? Or are we just playing catch-up?

The switch to DRM-free MP3 will have a strong positive impact on market growth and help develop digital music download towards mass market. With DRM protected content, Musicload customers had lots of technical difficulties, actually 70% of all incidents in customer care related to DRM.

Musicload's DRM-free media files are also free of digital watermarks, which identify the buyer's personal data for tracking purposes in cases of illegal file sharing. "Watermarks send the wrong signal to honest customers. We assume that music fans who buy their songs from us will not distribute them illegally. As a result, we decided against using watermarks."

How difficult was it to convince the rightholders in Germany to make the move?

Musicload is offering 'real' MP3, which runs on all digital music devices, fully interoperable, including iPod. Thus, Musicload has argued in favor of DRM-free MP3 music to the labels and had started aggregating MP3 content in 2006 with Four Music and EMI, with others following. By March 1st of this year, all six million songs from all four major labels were switched to MP3. It makes us especially proud to be the first digital music store in German-speaking countries to close the chapter on copy protection.

How is Musicload able to effectively compete against international heavyweights like iTunes and Amazon?

Musicload is the best known music download portal in Germany, with 79% brand awareness. With respect to sales figures, Musicload is in a good position at #2 in the German market.

What distinct advantages does Musicload bring to the German market?

Musicloads offers several distinct advantages: German language editorial staff, with a good, credible and specific knowledge of the german-language music market. Interoperability - being device-agnostic - is a clear strength of Musicload, especially over iTunes AAC-format, which is not fully device agnostic. DT-customers can pay comfortably via their phone-operator bill. Musicload rolled out to Austria and Switzerland in summer 2008.

Verizon recently announced a tiered pricing for MP3s, but I noticed that Musicload has been using a tiered system. How is the pricing determined? Would you say that music downloads are elastic, ie., relatively price sensitive?

Musicload has always had tiered pricing, allowing for full flexibility. Musicload is very successful with a 'Buy X songs out of Y songs for Z EUR' feature, eg 10 out of 40 carnival-songs for 6,66EUR.

Yes, I believe in price-elasticity and variable pricing for the future. Frontline, new music and superstars will attract a high price, while back-catalogue will be attractively pitched to consumers at a lower pricing level.

The iPhone has catapulted Apple into the mobile market while Nokia uses it's position as a handset manufacturer to launch a service like Comes With Music. As a part of T-Mobile/Deutsche Telekom, how is Musicload positioning itself for the mobile market? Or will we even be speaking of online and mobile as separate and distinct markets in the near future?

The high volume market in Germany is in fixed line, therefore mobile is not yet the full focus of Musicload as a mass market provider. As of today, T-Mobile operates a separate music offering for mobile, which is called Mobile Jukebox. Migration of this service with Musicload will likely be completed within 12-15 months.

We are already offering a hardware-service bundle of Musicload Nonstop (unlimited flat-rate streaming service, full catalogue, 8,95EUR/month) with a wireless audio device (internet radio) - think of Real a Rhapsody-Sonos bundle (www.my-noxon.de)


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