So says Yahoo Music boss David Goldberg, who believes that once the Internet finds its way into cars, CDs and music radio are dead. These are excerpts from a conversation between David Goldberg, head of Yahoo Music, and Tony Perkins.
Tony Perkins: Let’s talk about consumer psychology. My father-in-law—who has this mac-daddy pad in Los Gatos, Calif., with speakers in every room—has Rhapsody, and he loves it because he can play big band music when old people come over. He’s just as happy as can be. The idea that he actually has the content on his hard disk means nothing to him.
David Goldberg: Right.
Perkins: But that’s kind of a psychological thing. So where is the market psychology on that?
Goldberg: It’s interesting. I would say that your father-in-law is probably the exception. In general, older consumers are much more concerned about ownership, download, and control. The younger consumers—maybe because a lot of them have never actually bought stuff, never even been that interested in the physical part—are less concerned about these issues. For them, the big priority is access. Half of all music consumption will be in people’s cars. Even our subscribers are buying lots of permanent downloads. Why? Because if you want to put it in your car, the most convenient way to do so is to buy a bunch of downloads and burn them onto a CD.
Perkins: How about satellite radio or TV in the car? Will that be a solution?
Goldberg: I think satellite radio is going to be part of the consumer’s experience, but it will be more about talk than music.
Perkins: Howard Stern?
Goldberg: Yes, and NFL and all those sort of things. Obviously, it’s better to have 100 channels of music than to have eight, but if I can have my own music, that’s better than 100 channels. So in the long run, I think it will be difficult for satellite radio to differentiate itself and have a valuation around the music component. It will be much more about talk.
Perkins: So how do you put Internet access into a car?
Goldberg: That’s the hard part. There are a bunch of solutions, and none of them is particularly ready for prime time. It’s going to take awhile, but I do think that the transition to all-digital music will happen—replacing not only CDs but also music on the radio. I believe music will completely migrate off radio—a transition that’s 10 years or 15 years away.
Perkins: You’re talking about broadcast radio, right? Internet radio will continue to exist, won’t it?
Goldberg: Yes, but it’s personal: It’s a one-to-one experience around music; it’s not five channels of broadcast terrestrial radio. I’m still going to have control and be able to skip to the next song and all those kinds of things. One of the things people do all the time—even when they’re listening to one of the 150 programmed channels that we create—is skip to the next song if they don’t like the current one. Music is very binary: People either like something or they hate it. There is no, ‘Well, it’s okay.’ I mean, I don’t like Metallica, and I don’t need to buy Metallica songs to know that I don’t like them. I already know what I like, so if a Metallica song comes on, I’m going to change the station, because that’s all I can do in my car. But with all of our technology, I could instead just skip to the next song.
Perkins: It’s kind of like the radio becomes a CD where you can fast-forward it to the next track.
Goldberg: I don’t think radio will go away. I think there’s a lot of value in a one-to-many broadcast experience, but I think it’s going to become much more focused around talk than music. And there are lots of things radio needs to do around talk that will engage the audience. What’s talk radio now? People call in. There are a lot of other interesting things you can do with the technology to make people much more engaged.
Perkins: Let’s talk about the MySpace phenomenon. What is your analysis of it?
Goldberg: I think they did a good job: It provides a very good community experience. And I think the music flavor of it, if you will, is a great way to attract consumers—though it’s much less about music than it is about community.
It’s like finding other people who like the same kind of stuff. It’s about personal expression with a music flavor—in the same way ringtones aren’t about music but rather about personal expression. MySpace is where people can say, ‘This is who I am,’ and music is a huge part of that for people. Same thing if you look at Facebook: Music is a huge part of what people list on their Facebook pages, but it’s not the reason for Facebook’s existence; it’s just a part of it.
We’ve known for a long time that music provides a great way to discover other people with similar interests—just as other people provide a great means of discovering music. At Yahoo Music we’ve focused on the latter. It’s like, ‘How do I find music through finding other people who like the same kind of music I do.’ And we do a lot of the background for people. You can see the 10 people whose musical tastes are most similar to your own, but it’s less about finding those people and more about discovering music. MySpace has taken the other approach, and it’s been a huge success for them.
Perkins: You know what they’re moving into next? Comedy! Everybody thinks they’re comedians so they’ll all get comic acts.
Goldberg: It will be interesting to see if it works, but it’s different than music in that you list music on your page because it tells people something about you. I’m not sure how many people actually want to be comedians. They can say, ‘I like Eddie Murphy; I like Steve Martin,’ but that doesn’t mean they want to become them.
Perkins: Really young people—the 21-year-old demographic—get their news from Jon Stewart.
Goldberg: So the question is, how can they take their platform—
Perkins: And add different forms of content.
Perkins: I haven’t studied this super closely, but if you look at the demographics, something like 80% of Friendster users are in Indonesia and Malaysia. So it seems to me that what saved MySpace is the music: It somehow enabled them to create a geographically balanced vehicle.
Goldberg: I think the tools are good also. They gave people a lot of great self-expression tools and made it simple to add stuff to what they were doing there. Now, it’s a lot of other things, and it’s photos as well. Photos are actually a big part of it.
Perkins: Do you guys look at that and say, ‘Okay, we need to have a MySpace killer’?
Goldberg: This is an area where there are a lot of different things going on at Yahoo: We have our 360 stuff; we have Yahoo Groups; we have pieces of all of this stuff. The questions are, what’s the right way for people to access to these things, and does it all sit in one place? Is it distributed across Yahoo? Does it integrate things outside of Yahoo? Should our stuff be integrated with people’s MySpace experience?
These are interesting questions that I don’t think we have all the answers to yet. I think it’s very clear, though, that we as a company believe in social media and what we’re doing with Flickr. All of these kinds of things are important to people’s media consumption, but they’re also great businesses in and of themselves. So, do we want to make an impact in this space? Yes. But are we going to do exactly what MySpace is doing? Probably not—not that they’re doing anything wrong.
Perkins: How is Yahoo 360 doing, do you know?
Goldberg: I do, but I’m not allowed to say.
Perkins: So it’s obviously not doing as well.
Goldberg: No, it’s not that: We’re just very tight about giving out numbers.