What Happens After Facebook?

Michael Birch, the creator of Bebo, is in expansive mood. And his subject for today is the future of music.

“I don’t want to buy a…CD and then put it on my computer,” he says. “I want to click a button and listen to something there and then. I want to be able to listen to anything, and they never allowed that to happen.” 
You don’t have to be a genius to know who he means by ‘they’. It is the same old story, but with a different twist: the 39-year-old web guru accepts that musicians and other copyright holders should be paid for their product. But how much?
“I do believe in protecting copyright for those who want to protect it,” he says. “But the problem in the past was the record labels. They’d stall the file sharing networks – and in fact I can understand why they did that – but then they wouldn’t provide an alternative. So it was like, ‘You can buy our CDs for 20 quid in the store’. That was the only option – but it’s not convenient. So I think the problem stems from the fact that copyright owners are not reasonable enough to provide a fair and affordable way for people to distribute music.”  
Others would disagree vehemently – and besides, the fact is that there has recently been significant progress in the battle against illegal file-sharing. Earlier this year, Ireland became the first country in the world to adopt a ‘graduated response’. Eircom and the Irish Music Rights Association (of which the ‘big four’ – EMI, Universal, Sony and Warner – are members) have agreed a three-strikes-and-you’re-out strategy. Serial downloaders will end up with their broadband cut off. For any artist who has suffered badly at the hands of illegal downloaders, it is an important victory which could represent a global breakthrough if it is replicated elsewhere. That might just be the future or at least part of it... 
Birch counters that convenience for the customer, rather than coercion, will be the key to any successful strategy for making money out of music online.
“Spotify is a fantastic solution,” he offers. “Everyone thought iTunes owned music but now Spotify has come along and it’s starting to dominate. If everyone pays a little bit and the copyright owners don’t get greedy, it becomes an affordable, convenient service. I mean, Spotify is a lot more convenient than downloading from file-sharing services. I think people are willing to pay for a level of convenience and Spotify provides that. And it provides social networking, through Facebook integration around it, where you can see what all your friends are playing. So there comes a point at which, if the price is not unreasonable, and the convenience factor and the product quality is there, people will use it.” 
Again, there are those who see Spotify as just another way of ripping off the artists – the payments from the streaming service have been pitiful to date, and there is no sign of that changing any time soon.
For the uninitiated, Spotify is a vast music library that can be accessed free and carries ads. A premium version, where there are no ads and the quality is marginally better, costs a tenner a month to access. In May 2009 Spotify had a million users. In May 2010, while available subscription-free in only seven countries, it had seven million users. But it is not successfully attracting ads. And neither is the premium offer winning customers in significant numbers. As a result, it is simultaneously paying a pittance to artists and losing money by the bank-full. In fact, artists earn so little on Spotify, that it’s really only useful as a publicity platform, kind of like Myspace: The Next Generation. But why should they give their music away effectively for free? No one has provided an adequate answer yet...
One of the challenges is that things move quickly in the digital world. As recently as 2007, Myspace had an 80% share of the social network market, while Facebook trailed with 10%. These days, Facebook has three times as many unique hits daily – 37 million to Myspace’s 11 million. Birch, for one, speaks about Myspace in the past tense. 
“The site didn’t evolve. Rupert Murdoch bought it and he doesn’t understand technology. I don’t think anyone really knew why it was so successful. Because it was successful they sort of left it. It became this antiquated site that was slightly broken and the community was unreal – there’s no real genuine community there. It was taken over by bots [software performing automated tasks; Myspace bots can make comments and add ‘friends’]. MySpace didn’t have the technology to stop the bots, so it became this huge self-promotion network.”  
As for Bebo, which Birch sold to AOL for $850 million in 2008, its user total is down from 40 million then to 12 million today. As the web becomes littered with long-abandoned Bebo pages, AOL last month sold the network on for only $10 million. Birch’s reputation as a mastermind of the net is partly based on the fact that he saw Facebook coming and sold Bebo at exactly the right time. 
In the Scramble for Africa-style race to annex huge swathes of the social network space, Facebook has been the obvious victor (the British Empire to Myspace’s rather dysfunctional Belgium, and Bebo’s past-its-peak Spain).
Might Myspace’s troubles make Spotify more important for independent artists? Facebook may be many things, but it is not a creative outlet.
Birch believes Facebook’s utilitarianism has been the key to its success. It’s unlikely the social networking giant will deviate from this strategy. Therefore, it remains to be seen whether some other start-up can step into the gap left by Myspace and Bebo’s loss of impetus.
“Our aim, when we designed Bebo – and it turned out not to be the right product strategy – was to be like Myspace but address all the problems that they had. To be about self-expression, not to restrict your users overly in what they can do, once what they do is harmless, but to have the utility of Facebook. I wouldn’t say we ever lived up to that.
“But Facebook is very restrictive in many ways. There are a lot of things that they don’t let you do. So in that sense it’s arguably not as much fun as a site that’s a little bit more liberal.
“There is potential for someone to come along and do it right and allow things like self-expression and music and the things that aren’t allowed on Facebook. There’s potential for some company to emerge and own the self-expression space.”