Future Stories #2: The Future of Telcos - Content & Service Pipes

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Traditionally, telecom companies simply offered various types of phone services and connectivity, and moved lots of data around - maintaining and constantly improving pipes & networks was the primary mission. Today, the basic connectivity offerings have become seriously commoditized: prices are dropping towards zero in a ‘feels like free’ way, and due to the ever-increasing P2P action the comfortable old position of being a ‘dump pipe’ is no longer a viable option, no matter which way you look at it. The bottom line is that there is no way that Content and Services will not end up packaged into those expensive pipes, cables and wireless networks. But take note of those keywords: PACKAGED and BUNDLED and Feels Like Free.

Increasingly, the Future of Telecoms is more in the com than in the tele; in facilitating communications based on, around and ‘lubricated’ with Content and Services. Voice traffic will only be a small and probably diminishing slice of the pie here - similar to how CDs and digital music ‘unit sales’ will make up only a fraction of the future revenues of record labels.

In a networked ecosystem that wants to serve and empower those pesky ‘always-on’ digital natives, telcos and operators have no choice but to branch out into adjacent or even completely alien sectors - if they don’t, other players such as device & handset manufacturers, web portals, social networks and search engines will feel compelled to fill the gaps and push the pipe & network guys further and further down to the bottom of a digital ecosystem that has only just now begun to flourish (remember: only about 2% of the world is on broadband, today - there is a long way to go, yet). Imagine a Facebook Mobile Network, a Samsung Mobile Video Platform, and (of course) a Google eBook Reader?

Photo via Kevin Kelly

Clearly, those Web0.0 ‘dumb pipes & walled garden’ concepts are dead and gone - now it is all about what comes through those pipes, not where they come from. And crucially, content must now be defined much broader: not just as a piece of ‘professionally made’ and bona-fide copyrightable work that is being transmitted but also inclusive of all the surrounding user interactions, attention kernels and clickstreams (oooopps... sorry for the geek speak). Context becomes very valuable Content, too.

TwitterMusic, Google VidRead, Gone.MTV, Skype.TV, MotoTube…

For telcos, it’s about time to get into a new game, and it’s called Media2.0 - a vast and mind-boggling opportunity for (pro)aggressive networks to literally leapfrog over some of those incumbent and still future-shocked media companies, giving birth to or simply fueling new disruptors that could very well be the next Viacom, CBS, BBC or Warner Music. Deutsche Telekom, Orange or Telefonica should have bought Last.fm, not CBS!

Now, witness Nokia packaging UMG’s and SonyBMG’s music into their handsets, and sell it together. Witness Google trying to package ‘free music’ into their Top100.cn search engine in China; witness CBS’s Last.fm API’ing ‘free interactive, on-demand music’ into social networks. Services such as Last.FM, Pandora, Flickr and Twitter (and there are many others) already make heavy use the telco’s networks to ship and distribute data at an ever increasing pace and volume. Now, many telecoms and network operators around the world are starting to realize where their future is taking them: Content + ConText+Communications+Services+ Ads2.0.

So let’s plot a few futuristic scenarios:

Twitter may just start to provide pre-loaded content-’links’; users would be able to receive messages with a hot medialink to a file that is pre-loaded somewhere, and instantly stream it via any flash-enabled mobile device. MicroMedia anyone?

A telco (Verizon? SingTel? TMobile?) will buy whatever is left of SonyBMG when Bertelsmann finally drops out of the joint venture; and SK Telecom may well end up buying a majority stake in Warner Music, globally  (they do already own 50% of their Korean JV with WMG). My take is that Music2.0 is likely to coincide with Telco2.0 if the large (but quickly shrinking) music conglomerates and the forever-at-snail-pace music rights organizations keep on playing hard-to get with anyone that has the audacity to want to actually use their music legally.

China Mobile will start ChinaSpace, a social network build around content that is generated entirely by the users (or shall we say Usators).

Within 18-24 months, a major telecom (Vodafone? Telefonica? NTT?) will announce that they are entering the music business. They will start from scratch, unencumbered with back-catalog, contracts and Music1.0  (;) people and concerns, working with new artists and with those well-known brand name acts that have finally left their labels for good, riffing off the various Music2.0 blue-prints that have been making their way around the Net (including my own humble Music2.0 book I hope;). This will be fueled by the fact many incumbent record labels (no, not just the major labels and the RIAA) have famously succeeded in being ubiquitously hated by the music fans i.e. the users, their artists, the general public, and - you guessed it - the telecom execs, themselves. 10 years of back-patting and spending 100s of Millions of $ to convince these guys to somehow give the consumers what they really want - no wonder there is serious thirst for revenge here. Telcos are fed up and will cut their slavish ties to the old major label system in the next 9-18 months.

Flat-rate music offerings will become a standard - and fuel the telcos of tomorrow. Smarter toll-booths for more traffic.

Skype will be sold by eBay to either a major social network (F….k?) or a major telecom, and will come back full circle to how it got started: a powerful network for sharing data the cheapest possible way, be it phone calls or other bits and bytes i.e. content (read: music, film, TV, books...). Skype is where legal P2P will happen, first.

Within 12-18 months, together with Google, one of the leading advertising and communication agencies will strike a deal with a major telco and jointly launch ad-supported and user-generated content services based on an Advertising2.0 approach, completely side-stepping traditional content production and licensing procedures and offering new artists (and out-of-contract acts) yet another way to go direct.   

So, dear Telcos, Operators and ISPs, here are my 2 cents:

• Stop worrying about pleasing the incumbent music & media industry players and ‘the studios’- either they will follow your lead and give 5 Billion users what they want, how they want it, or you need to leave them behind as quickly as possible
• Play your hand now for it is strong: you have the network, you have the users, you have the billing relationships - you can get the content the way you need it, too!
• Like the Radio and Broadcasting Industries before you, start by demanding a new, standardized blanket license for full-length, interactive music streaming followed by unlimited downloading of music on digital networks; and while this is being negotiated start making deals with Ad Agencies and Advertisers to prep the Advertising2.0 pipeline.
• It’s music first and then Film, Video, TV…. $700 Billion of Advertising per year are ready to be traded in this battle for content in return for attention. Seize the day.

When: 18-24 months
Where: everywhere
Impact level (from 1-10): 10
Opportunity rating (from 1-10): 8

Some sources of Inspiration for this Future Story:
IBM Future of Advertising Report    Telco2.0 Two-sided business model
Telco2.0 Blog
Edelmann Trust Report

Download the PDF: gerd_leonhard_future_stories_2_the_future_of_telcos.pdf

Also available on Digital Music News

Future Stories by Gerd Leonhard is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License.

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Future Stories #1: Blogs will be Record Labels, and Bloggers will be the new Music Moguls. BlogJs anyone?

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Within 2 years, the leading music blogs will become what used to be called 'Record Labels'. The people running them will be those sharp, tuned-in, hyper-networked and resourceful BlogJs formerly known as bloggers. They will use their blogs as the primary attention channel (yes - attention really is the new distribution) and will dish up a complete, interactive and highly relevant multi-media experience that will include TV shows, chats, webcasts and games. Forget about 'websites' and browsers - the BlogJs will do it on all platforms and devices.

The future  brings 1000s of micro-music-channels that will literally broadcast - or rather, 'narrow-cast' their longtailing creations - be it text, audio, images or videos - to their hungry subscribers using MediaRSS feeds and customized my-stuff-pages such as [fiction alert] imoogli, beatwibes amd muflakes that will 'live' on any connected device, e.g. your mobile, your TV, your computer, your interactive bathroom screen, your wrist watch, your wimax-ing car radio, or your new P2P global gaming network. Widgets will continue to become instant, ubiquitous mini-site modules that will allow anyone to re-distribute any kind of content, to any device and any platform, anywhere. Most marketing will be done through and with the users - and some of them will get paid for it, too.

BlogJs will attract an influential, engaged and proactive audience by flouting their charismatic personalities - indeed, these disruptors, thought leaders and influencers will be our future broadcasters. Like digital-age  editions of 'analog' radio personalities such as the BBC’s John Peel (rip), these BlogJs will lead the way in matters of coolness, style, technology, gadgets, trends, politics, fashion and games, using new platforms like [fiction alert] Muserati, Digggster, Musicious, Lovenotion, MyDace and many others. And yes, many of them will be from China, India, Russia, Brazil, Indonesia or Mozambique. Goodbye anglo-centric blogoshere...

Social Networks are the new Broadcasters

...and they will broadcast to (and from!) those always-on, always-within-reach and utterly personalized mobile devices fka mobile phones, not just to or from computers. Blogs will amalgamate with, and integrate into social networks. Personal publishing will evolve to include entire ‘me-casting’ toolboxes. My taste, my list, my ears, my audience, my artists, my network i.e.... you guessed, it, my record label. Another 9-12 months and we will have the the first BlogJ signing the first hot new artist to a agency-type agreement.

Music blogs will explode with the advent of the new music fat rate. Sites like [fiction alert]  Quadrogum will rule, and blog aggregators like UeberFeed will become the next Infiniti Radio. Widgets will become as common as email (which will fade away). Hundreds of niche-obsessed BlogJs will emerge, becoming trusted opinion leaders that will draw 10s if not 100s of 1000s of networked music fans  that will discover new music this way - strictly by lifestyle i.e. genre and sub-sub-sub-sub genre. Much like it used to be in music-television; coolness and credibility will rule here.   (photo above from flickr.com/lynetter)

Those former MP3 pirates and stream-rippers are the new Clive Davis’s and Ahmet Erteguns - they have the ears for the new artists and a direct pipeline (read: feed) to perfectly matched audiences, around the globe.

BlogJs will open clubs and spaces where their 'readers' can meet, both in RL (Real Life) as well as virtually. Think [fiction alert] HypdaBar. The [fiction alert]  nipho9-5 (see box on left) will be their weapon of choice, fully loaded with a 20 mega-pixel camera and HD Video recorder, quadrophonic real-time sound remixer, 10+ ways of always-on connectivity, 2.5 terrabyte of flash storage, and a build-in image projector.

Once flat-rate music offerings become the standard...
- and they will, without a doubt (see more details here) i.e. by early 2009 - music-based blogging will be unleashed in a major way and stands to become very powerful very quickly - everyone is going to want a piece of that hot new BlogJ. This is when we will see blogs become record labels and music publishers (albeit with an altogether different operating paradigm), filling the gaping void that has been left by the dinosauric and hopelessly control-obsessed major labels, those large indie label chiefs  that still hope to become major label bosses themselves before the money dries up, short-sighted and technologically hyper-challenged managers, and eerily self-outmoding public broadcasters.

In less than 2 years from now, ubiquitous and fully legal yet 'feels like free' music offerings will bring us music bloggers that will become bigger than the biggest radio DJs we’ve ever had. And just like a lot of successful radio personalities before them they will move on to become A&R people and label owners, too. The difference is, of course, that they will have powerful, direct, zero - friction distribution channels at their disposal, and a loyal global audience, built-in and ready to go. All they have to do is keep on earning and retaining the attention of their users. 

Look for those new BlogJ’s to attract highly-targeted and 'loaded' advertisers, steered by forward-looking major-brand CMOs and next-generation creative agencies such as TribalDDB or Droga5. These ads will pay as much as $5 per click-thru (CPT), with major brands ‘sponsoring’ music blogs that fit their exact brand vision.

Once the bizarrely overdue and tired issue of 'how to legally provide streams and downloads of any song I choose' is solved, so that a BlogJ can finally use music just like a radio station uses music (i.e. powered by a collective voluntary blanket license), music blogs will explode and quickly increase their reach beyond the current blogosphere inhabitants and netizens, beyond the computer, and most importantly beyond the web browser.

Imagine a blog that streams a personalized radio channel via a mobile application that sits within your favorite social network - this is the next radio! Whether or rather how you will get to keep the music will not be relevant any longer - what matters is the selection, the endorsement, the context, the relevance. No longer are we going to be hungry for just any music provided that it's free, now we are hungry for relevance. So, here is some advise for the last few incumbent record labels of today:

• Dive into music blogging, NOW - either start your own or engage with existing ones...
• Build a global network of bloggers that you can 'feed' with your music. Engage, talk, learn...
• Get ready to invest time & money in the top blogs
• Look at bloggers as your next A&R people

Soon, a music-RSS feed from the leading goa-pop guru can be just as valuable as those hip shows programmed by Nick Harcourt at KCRW or by Stephen Hill at Hearts of Space (and theirs will be even more renowned).

Once broadcasting is legally and officially delivering music and the myriad of bizarre licensing problems fall by the wayside, bloggers will quickly morph into record labels. Artists will 'sign' with them to get their official approval which will mean instant notoriety in your target audience.

Blogs are...Labels.

When: 18 months
Where: everywhere (but EU, Asia and BRIC countries first because there are much less legal issues around so-called mechanical copies)
Impact level (from 1-10): 4
Opportunity rating (from 1-10): 9

Download the pdf: blogs_will_be_record_labels.pdf

Check out my new book, Music2.0 here (includes paywhatyouwant PDF download) or on Amazon

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Update: I just saw a very good comment on this by post, by AkiraTheDon so I thought I would share it - kinda proves the point!   He says

"... its worth it. Anyway. I pretty much agree - a lot of what dude’s saying is already happening. I, for example get 97% of my hip-hop music from a handful of blogsites, like Nah Right and 2 Dope Boyz, that serve me brand new music almost hourly. Its been like that for a while now. I don’t buy any music magazines anymore cos they pretty much all suck ass. Reviews are more often than not written by people who haven’t even listened to the record, with a rating ascribed by the editor based on either: how much they wanna bang the PR involved, what marketing have told them to do, how much they had to drink last night. Having someone go, “this is dope, listen to it here” is obviously the way to go.."

PS: I guess that makes me a 'dude'?

New Blog Channel: Future Stories

I am launching a new 'channel' within my blog, called Future Stories. These essays and presentations will feature 'stories on the future', i.e. things that I think are very likely happen in the next 2-10 years. The style of these posts will be less 'learned' and theoretical but more conversational, 'fiction'-like. Future stories will cover topics ranging from music to film, video, TV, broadcasting, branding, advertising, telecom, lifestyles, education and technology, and will make ample use of mashed-up flickr images, video and audio.  I will set up a separate entry URL for this but all posts will run on this blog, as well (and will be made available as pdfs, as well).

My first story will be on "The future record labels are... blogs". Stay tuned.