What was the first song you ever owned in digital form? For me it was Gangster Trippin by Fatboy Slim, provided on a 3.5” floppy disk. Today I have over 3800 songs in my iTunes library and that’s considered paltry — but I hardly use iTunes for music anymore, preferring streaming services like Rdio, 8track or YouTube. iTunes took a long time to revolutionise music, but the next generation of innovators rocketed onto the market with a greater long-term impact. iTunes got it first. Spotify got it right.
I’ll shamelessly admit to being a Napster user back in 1999 and 2000. The world’s first popular peer-to-peer music sharing service was irresistible. It was magical at the time, to be able to find virtually any song ever recorded and have it available for listening minutes later. It showed us what music could be in a digital world.
The piracy party went on for some time before the law slowly caught up with Napster and Steve Jobs convinced the record industry that digital downloads were the way of the future. By making it easy — and legal — to buy and download music from his iTunes store, Jobs proved that convenient beats free.
Apple worked hard to persuade record label executives to sell music for 99c per song. Negotiations dragged on for months and there were major risks involved. The revolution lead to consolidation in the music industry and thousands of jobs being made redundant. Seismic shifts were required for the big change to happen — but the next leap came almost effortlessly.
Nielsen and Billboard recently published their mid-year report on the US music industry showing that digital consumption in the USA is shifting away from download platforms such as iTunes and toward unlimited streaming services like Spotify. On-demand streaming has risen 42% when compared with the first half of last year, while digital downloads are down 12%.
That’s the nature of innovation. First-movers take all the risks and do all the hard work. They negotiate the required changes to business, regulation and the rest of the status quo. Then others swoop in, providing customers with the definitive proposition and reaping the longer term rewards.
It’s weird to think of Apple as a market incumbent, but it is in the world of digital music. The recent acquisition of Beats is part of its strategy to catch up.
We’re seeing a similar scenario in the financial space where companies like Mint and Square were part of the first wave. They launched native apps for smartphones, established themselves as leading thinkers in terms of personal finance and payment solutions. Square showed us what payments could be in a mobile world and Mint shifted our understanding of who owns transactional data.
Now there is a stampede of second-wave innovators taking over. Bitcoin startups like BitX, Circle and Coinbase are changing the fundamentals of the game and will have a greater long term impact.
Catching the second wave is something Apple does well too. The iPhone certainly wasn’t the first mobile phone in the market. It wasn’t the first with installable applications either. Apple made some mistakes, learned from what others had done and timed its launch perfectly.
We’re seeing Apple do the same thing with smart watches. It’s waiting for others to test the market and for the first-round of feedback to settle down while it hones the definitive product.
It’s natural to feel a sense of urgency when we see things moving in a direction and get an idea of what we should be doing about it. We’ve been fed terms like ‘first-mover advantage’ and convinced of our original thought. The truth is that no idea is truly unique and if you spend time crafting what the market really wants you can get away with being late. Rather get it right than get it fast.
Apple didn’t make the first tablet computer, Google wasn’t the first search engine and Uber wasn’t the first way to organise a ride with an app. They all came to the party late, crashed it and left with the booze.
Which reminds me of something else I like — old school vinyl records. I was pleased to see the Nielsen report also show a spike in vinyl sales that are up 40% compared to the first half of last year. Often the result of a long spate of innovation is an appreciation for the way things used to be. Or, as my friend Paul says, “Old school is the way forward.”