How Sony BMG used the Web to reach a disappearing audience

Friends or foes? The Internet vs. the music industry

The advent of the Web has arguably been the most radical game-changer in the history of the music industry since the radio. In a shift that seemed to happen overnight, brick-and-mortar music stores, CDs and the Sony Walkman began seeming outdated in the presence of iTunes, MP3s, P2P file-sharing, iPods and - of course - illegal music downloading. While the Internet has streamlined the way the modern 21st-century world experiences music and made it much less-costly (even free in some instances - Pandora and Grooveshark, anyone?), the major players in the music industry struggled to quickly understand the changes in consumption (Who is still buying? Why do they buy? Where are they spending? What will make them buy more? Where can we reach them?).

Music sales plunged 40 percent from 2000 and 2007, and industry employment decreased by one-third in the past 10 years, with the tech-driven changes in music consumption behavior cited by many as the cause of the declines. The increase in music-purchasing (or music-stealing) options required the larger production and distribution companies to focus on gaining faster, deeper and better insight into the consumer mind-set to ensure that they produce more hits and fewer flops, saving both time and money. The major record labels and music entertainment companies needed to prove that they were still relevant, and more than that they needed to appear to be on the cutting edge of trends and technology; to be the source for all things music entertainment; and to make it as efficient (and appealing) as possible for consumers to influence what goes to market and what stays home.

Harness the power

While the Internet has been the source of many of the music industry’s problems, Sony BMG Music Entertainment, Munich, Germany, has found a way to harness the Web’s power and use it to its advantage. Sony BMG and others realized that although the Internet-driven shift would require an overhaul of the music production and distribution business model, it also was producing more highly-engaged and active consumers who are prolific in their purchasing, sharing, listening and watching, thanks to the ease, speed and accessibility of new technology.

Since most music fans are looking to the Web for their music-related needs, why not meet them where they already are, with tools they already know how to use? Online multimedia functionality not only revolutionized music consumption, it also opened the door for research to come alive. Survey respondents are no longer required to recall a song from a written title or imagine a music video from a paragraph-long description and a few screen shots. Instead, respondents can react immediately to a song, video or product as they experience it, providing more informed and valuable insight.  

Didn’t consider the Internet

Unfortunately for Sony its prior methods of analyzing key consumer purchase drivers didn’t consider the Internet as the newest major vendor in music and didn’t produce results accurate or timely enough to help meet demands and target releases. Before July 2007, Sony gathered consumer contact information primarily via CD insert cards, and approximately one-fifth of consumers who responded agreed to allow their data to be used for research. The submitted data was then stored and saved in Sony’s consumer database and Sony would occasionally send questionnaires via e-mail or traditional mail to these consumers. Postal questionnaires were sent out yearly, and e-mail questionnaires were sent out approximately 10 to 15 times per year. But the questionnaires were one-dimensional and focused on consumer reaction; they only scratched the surface and did not provide a deeper understanding of the consumer, says Michael Puetz, director of customer relationship management (CRM) in the media and strategy division of Sony.

In addition to the periodic questionnaires, Sony had its own very basic online survey panel in place. The company wanted to establish a consumer insights process to understand the wishes, needs and attitudes of its consumers, but the solution was primarily based on data that was captured offline via the CD insert consumer feedback cards, and response rates were rather poor, says Puetz. The research reached mostly hard-copy purchasers through a digital medium - excluding the very online consumers at the core of the industry’s downfall who most needed to be reached, understood and accommodated.

The final element to Sony’s research model was conducting ongoing benchmarking projects to determine best practices and gather competitive intelligence to uncover competitors’ strategies and tactics. Throughout the benchmarking process, Sony discovered that Warner Music Group, also in Germany, had established an online survey panel of its own, and Sony recognized that Warner’s solution, provided by Cologne, Germany, research software company Globalpark, was more sophisticated and potentially effective than what Sony had been able to do internally.

Update its tools

So, to keep in time with the competition (and the evolving music market), Sony chose to update its online survey tools. The objectives of the revamp were threefold:

• use the latest survey technology, operating on a modern platform;
• build a substantial proprietary online panel, comprising participants having a high affinity to music/entertainment; and
• link panelist data with Sony’s CRM/consumer database via a Web interface.

In short, Sony sought to cope with the challenge of doing market research for hundreds of projects with rapid turnaround time by establishing ongoing (and convenient) relationships with its most invested and enthusiastic consumers. Sony looked to an online panel solution as an efficient way to get closer to consumers and pull them together in an at-the-ready online community to gather input instead of having to go out into the marketplace and physically sample every item, every time. The new panel needed to provide insight and answer Sony’s most pressing questions: Which artists should we sign? How do we design an album? Where do we sell it? What kinds of concerts are consumers attending? How are they experiencing music in the clubs?

Sony selected Globalpark and its tools because of Globalpark’s experience with the entertainment/music industry (specifically with Warner Music Group and Universal Music Group); its platform’s multifunctional capabilities, such as offering standard types of questionnaires as well as the ability to set up a media library and insert audio and video clips into surveys; its belief in the benefits of “surveytainment” (more on that later); and the possibility of expanding into communities, wherein panelists can discuss already-completed surveys.

In July 2007, Globalpark account manager Andreas Knappstein began working with Sony to launch www.musikfreund.de, an online panel site for Sony’s consumer audience. The musikfreund.de panel was built and set up as a collaborative effort between Globalpark and Sony and is controlled by Sony. The software is integrated with the Sony music system and the company’s established branding.

German-speaking panelists

To begin the panel-building process, Sony set out to recruit German-speaking panelists having a high affinity to music/entertainment via its CRM and Web assets. Sony installed a button/link in every artist or company e-newsletter, as well as on most of its artist and label Web sites, that allows consumers to opt in and join the panel. Sony classifies the panel into three sub-panels to be able to address the panelists as accurately as possible:

Young and Hip - consumers who are typically the fans of hip-hop, alternative, R&B, etc. and speak in a modern, colloquial style (e.g., using “hey” as a greeting). 

Mainstream - consumers characterized by liking mainstream music and speaking in a common modern way (e.g., using “Hello, [first name]” as a greeting, the German “du” address).

Classical - generally older respondents who purchase classical music or jazz (German schlager or volksmusic) and speak in a very polite way (e.g., addressing a person as “Dear Mr./Mrs.”, the German “Sie” address).

Sub-panels are contacted for surveys based on what questions various departments have, and the Mainstream group is the core - approximately 90 percent of Sony’s surveys refer to this group. Over 75 percent of respondents in the Young and Hip and Mainstream sub-panels respond to questionnaires within the first three days, whereas those in the Classical group tend to need more time. In total, the panel comprises several thousand participants, although Sony prefers the exact number to remain confidential.

Surveys are constructed and administered to panelists internally by Sony’s insights team (Puetz and two others) using the designed questionnaires in the Globalpark program, and Sony also places surveys on Web sites of individual artists to test the potential to market artists as a brand.

Sony is able to incorporate MP3s, video clips, images and a whiteboard application into its regular survey questionnaires to explore how panelists feel about national and international artists (namely newcomers, or artists new to the industry or label) to help artists-and-repertoire (A&R) decision makers decide whether to sign an artist or release a product.

In the case of international artists, if panel feedback is negative, A&R will most likely decline to release the artist in Germany, but in the case of domestic artists, panel feedback can help A&R decision makers alter the look, feel and sound to better suit the interests of Germans. If A&R decides to move forward with an artist or product, the song and image tests become a vehicle for new product analysis, and panel responses aid in establishing a marketing concept. For example, panelists were asked about music flatrates, where customers pay a monthly fee for unlimited music, to determine the accepted price range for such offers.   

‘Surveytainment’

Many of the methods Sony implements in its online questionnaires include what Globalpark refers to as “surveytainment,” a way of making survey questions more emotional, engaging and - above all - fun for the participant. Surveytainment uses eye-catching, modern question types and technology, including Windows-driven graphic capabilities, audio and video clips, drag-and-drop rankings and collaborative tools. Using the whiteboard application, for instance, panelists can show Sony what they think would make an attractive cover by rearranging and altering the images provided. And although more complex, it is also possible for panelists to upload their own imagery or text for a true collaborative product innovation.

According to Globalpark, surveytainment’s aim is to make the research process more engaging and effective. The key is to make sure that these new techniques are applied to increase understanding, not distract from the main objective. For example, the more imagery on a screen, the less likely the participant will actually read any long question text, relying on inference versus the written word. But applied correctly, surveytainment can bolster quantitative studies and bring a qualitative component to research as well.

And, according to Sony, the ideas behind surveytainment have unique importance in the music/entertainment industry as they introduce sound and imagery into questions that would otherwise be static or require respondents to rely on recall.

Surveytainment bridges the gap between in-person interviewing and independent survey-taking. Before the aid of the Web and digital recordings, song and video testing with the masses was limited and financially impractical. It’s no longer eight people in a focus group responding to a CD on a stereo system - it’s thousands of active music consumers experiencing the song or video in their natural music-listening habitat: online, in their own homes and offices.

Internet savvy may be the reason consumers stray from traditional consumption habits, but it’s Internet savvy on research’s part that makes understanding and anticipating consumers’ needs - and their next step - possible.

Became the main part

The musikfreund.de panel indeed replaced a few ad-hoc research processes and became the main part of Sony’s day-to-day research business. For example, because panelists can hear audio during a survey, tests of developed songs have been particularly successful for Sony, says Puetz. Further, with the help of the online panel, Sony consumers have become a regular component of the company’s artist-and-repertoire and marketing decisions. As a result, consumers are now reliable partners in developing new business models and proofs of concepts, such as the creation of various flatrate offerings.

Ultimately, the panel serves as the basis for Sony’s actions surrounding virtually every aspect of new artists and products and is a major part of the decision-making process for Sony’s marketing team. The panel assists in creating target group profiles, including information about media usage, which becomes useful for advertising, marketing and media plans once a product is launched. The panelists in the target group profiles then come to represent different types of consumers (varying in age, gender, music taste, media use, etc.), and the feedback provided by the panelists is used to understand and predict how an artist or product will perform in the market. Furthermore, because the musikfreund.de panel and the Sony Music Germany consumer/CRM database are linked, certain results within the target groups of panelists can be transferred to the database to be used for special announcements, offers, promotions, recommendations, etc.

And panelists seem to like it, too! Sony has asked panelists about the panel itself, and contrary to expectations, panelists requested more questionnaires (in a higher frequency) rather than fewer, says Puetz, and the majority pointed out that participating in the music panel is more important than the incentives.

A long time coming

The music industry’s adjustment to cater to its Web-centric audience may have seemed a long time coming, but what first appeared as a death sentence for music production and distribution companies turned out to be a boon: The Internet not only fostered the development of more active and valuable music fans but it streamlined the way research could reach, explore and market to them.

Getting a wide range of consumers involved in the creation, selection and marketing processes early on can increase their sense of investment in and connection to the end-product. By listening to music lovers and providing them a creative and more interactive way to tell the industry what most interests them, Sony and companies like it are poised to better match product and audience and deliver entertainment and merchandise that will succeed in the marketplace.