I've been blogging pretty regularly on TuneShout, mostly in the realm of how the internet is changing music sales and how people discover music. If the recent news is any indication, CD sales and the so-called "old model" of music marketing, sales, & distribution is on its way out. Nobody is going to be buying CDs any more, and the record companies don't seem to notice. They've been fighting tooth and nail with lawsuits and legislation to hold on to the old revenue model. Fortunately, its days are numbered.
Music must no longer be valued as a limited commodity. When a record company makes 100,000 CDs, that's all there is. But with the internet, music can be spread and shared an infinite amount of times. It can be as simple as a friend emailing a friend a song, and as large as a piracy group leaking the new Metallica album to the internet a whole month before its scheduled release date. The possibilities are unlimited. And when you have an unlimited commodity, you can't really expect to charge much - if anything - for it. Thanks to the internet and technology, people are always going to find a way to get their music for next to nothing. So any revenue model where you make money off the sale of music is going to be dead very soon.
One of the main music "futurists" in the world is Gerd Leonhard. He equates this death of the old business model and the rise of the new music economy to the rise in the bottled water market. Why would anyone pay for bottled water when they can get it for free just about anywhere? Because with bottled water there is guaranteed quality, added value (you get a bottle), a brand experience, and, as Gerd Points out, "it's special." But it does prove one thing: consumers are willing to pay for added value on a free commodity. Thus, in the music industry you should make the music itself cost next to nothing. But also offer enhanced extras like concert recordings, deals on concert tickets, interviews, etc, for additional fees. People will pay for it, like bottled water, if the baseline product is freely available.
As Gerd says:
[...] it is the concept of music that is as 'freely' (but NOT for free!) available and as omni-present as water or electricity, with everyone paying and everyone using, and with ubiquitous coverage, accessed via a large number of entry-points (Net, Cable, Wireless, Satellite...), using many different devices, and in many different shapes and incarnations. It is a system where all users, and / or their service providers (!), happily make small, 'feels-like free' payments to be able to access a large pool of music, without restraints, all-you-can-eat, anytime, anywhere. A system where the works of any creator and rights holder can easily be found and discovered, used and compensated for, simply by virtue of BEING IN THE POOL, and in the essence, proportionally to the actual use of their works. Sounds an awful lot like Cable TV or Radio... right?With scarcity of music (limited CD production), only about 25% of potential consumers make purchases. But with music as the baseline freely available commodity, 95% of potential consumers will make a purchase. And the sum of those 95%, while individual purchases may be at a lower dollar amount, are worth a lot more than the purchases of the 25%. Gone are the monolithic hits and artists who sell 10 million+ albums. Internet consumers are looking for choice and ease of use. They're looking to find that one niche area of media where they can call home. It's the classic long tail phenomenon.
With online music, as well as every other online media, the real value and money making opportunity lies not in the sale of the media itself, but rather access to the media. 95% of the people will pay for that. You can then upsell those consumers on varying degrees of added value. And anyone who can sell consumers access and then help them sort through and discover their next favorite musician or film star will be well ahead of the new media revolution.
The best idea I have heard to solve the p2p problem is ISPs should pay a blanket license that lets me, the user, download the music I want, similar to how radio pays a blanket license to play the music.
DRM is a waste of time. If I buy it legally, I'm limited with what I can do with it, but if I download it off a peer to peer network I can do whatever I want with it. If I buy the CD I run the risk of getting a root kit installed.
Exactly. As Gerd argues, a blanket price for access would be bought by nearly everyoe on the planet. $10/person x ~200 million customers = big bucks.
great post, well done
Just a few weeks ago there was an article in Rolling Stone about the fall of the “music industry”. Apparently there was actually a meeting between several record industry BSDs and the Napster people to try and make a deal before the Genie got all the way out of the bottle. For better or worse the greedy bastiges just couldn’t face the reality of changing technology. Just a few short years and they’re pretty much circling the drain.
I wonder though if the new model is the end of the concept album as a cohesive work of art. No more “Dark Side of the Moon” type masterpieces if music is all going to be marketed as single songs. What do modern potheads listen too anyway?
Actually, there are concept albums being released, you just have to know where to work. For instance, El Cielo, an album by the band Dredg, is a concept album about sleep paralasis.
And herin lies the problem. There is so much good music out there, but hardly anybody has the time to find it - let alone be exposed to it.
The Interwebz!
I've been introduced to indie/underground/rare music from all over the world - but if I wanted to support these artists the traditional way, it's also impossible to find a CD because the distribution is typically restricted to a few thousand copies... thank god for online providers.
Although the intent for the post is good, I think you miss a few important details. Just for the record, I own a record label and I actually know how much we can make via downloads etc.
You are wrong to think that 95% would pay more than the 25% labels still reach now in order to sell their stuff to. If you want to reach the remaining 95% you'll have to burry your prices in such a way that it does not even get nearby the amount the 25% currently generates.
Just as an example, people will probably more and more go for subscription / free download models and it is to be believed that the free legal download sites will set the same pricing as with the subscription models. That is: 0.01 cent per 'download' at max... I have artists 'selling' in excess of 10.000 copies of a single per month via subscription services... they get what? 100 dollar minus percentages for the tier party... at max. And this for pleasing 10.000 people.
I really love the downloadmarket, but some models will simply not do it for the bands and labels because one just doesn't get enough money from it.
The idea to add extra's on top: can work, but to handle this in a logistically acceptable way is not easy and sometimes simply impossible. Knowing the pricesetting above means there would be even extra money invested for even less return...
This market has to mature first and a shake down will happen, in fact it is already happening with labels closing down because they 'forgot' the new trends. Airing 'simple' sollutions add to the discussion but add no real solutions as for now.
I agree with you on the monitary figures of music downloads. I wasn't aruing that there is money to be made in the sale of digital downloads - there isn't any. Even at 50 cents per song, it's not going to work for record companies. There just isn't enough money in it.
The 95% figure comes from the fact that if you sold music as a subscription service, 95% of the people who could buy that package would. Look at cell phones - everyone is forking over at least $30/month when they have a phone at home and at work for nearly nothing. Cosumers are willing to pay for extra services beyond the very baseline simple package.
In fact there is lots of money to be made from downloads outside the subscription models. At the moment it is our 3rd income stream and increasing, I'm speaking of several tenthousands of dollars per month that come in like that. For the artists it is even the most important income alltogether since they get up to 60% of the income which makes they make up to 3 times more per download than per cd sale.
But if all the modesl go subscriptionwise then it's the end for both parties.
Personnaly I buy lots via iTunes and the prices are more than normal to me, knowing that when I was 'young' I paid 25 dollars for a normal CD and I didn't complain at all.
It will all change when Telcos charge for downloads. Instead of paying for the music directly yourself, the Telco's will pass on the Record company's share. Coming soon...
https://www.udancemusic.com
I don't think the music industry is dying, it's just being forced to change - and these changes just happen to be reducing the profitability of the old record label model.
Nowadays, any artist can distribute their music worldwide in a matter of seconds, on sites such as tuneshout and many more besides - i run a music technology blog that has covered these issues many times. As such, distribution is now (much like water) freely available - therefore, the 'industry' now must focus on promotion.
I agree with mpilatow - the noise being made by the majors claiming that they are fighting to ensure artists get a fair share is just a front. Artists can now sell their own music online and get close to 100% of the revenue - even CD replication is very affordable now.
The problem still arises, however, about promotion. There are thousands of bands out there, how do you get your name out? Radio used to do that for people, but thanks to consolidation that's no longer the case. I think it boils down to effecient means of suggestion of new artists to people.
There are some bands that have really embraced the online model but there are still many who are not willing to learn how they could benefit. The RIAA is trying to protect the interests of the record companies but they try to frame the argument by making it seem like the artists are being short changed. In a sense they are but the record companies have the most to lose. They make their money from CD sales, the artists generally get a percentage but the record companies take much of the profit. The online model can cut the record company out of the loop and bring all the proceeds to the artists. Like you mentioned online distribution may not bring huge profits but exposure increases t-shirt sales, ticket sales, etc. which benefits the artists and not the record companies.
The RIAA is scared because they see their stranglehold on the industry slipping. The power is moving to the artists and those that realize this will benefit greatly.
Nice post Fluxx - although I can't say that I agree with every point.
Is the music industry in trouble? Yes. Do some people overstate how much? You betcha.
I'm desperately trying to find the reference, but I recently read that CDs still make up about 90% of the global music market. And over here (in the UK), vinyl is actually making a bit of a comeback, in certain niches - it sounds better, there's more to personally connect to, etc...
In terms of how the music industry can save itself, my 2nd ever YOUmoz post was on that very subject - my answer was for the record companies to abandon their reluctance to act as producers & retailers, and follow the example of sites such as last.fm & Discog, along with the lyric sites, and SEO their back catalogue; if people can find what they're looking for legally, I honestly believe that most people will pay for it.
Recent deals between last.fm & Sony & the likes, suggest that they may be starting to see the appeal of this model.
BTW - the bottled water metaphor was a nice one, except that for me it really does show that marketing can sell everything. In the UK bottled water is mineral water, i.e. water that comes from a spring or similar. In the US (from what I could see during my stay in Seattle) it's tap water, with a snazzy label. That's literally a case of selling something that can be had for free...
PS - Looking at your avatar made me think of something - can you ever imagine a bunch of grown men flicking through iTunes for hours, the way they are in the record store on the cover of Endtroducing?
;)
No I can't. But the guys on that cover LOVE music - all kinds. Most consumers don't, however, so they're looking for a system to be exposed to new music as effeciently as possible. They'd be surprised how much good stuff is out there.
But that's where technology comes in. CD sales still account for like 90% of world music, but that number is dwindling fast. And even online music today is still in its technological infancy. There is no way the most advanced way people can find & by new music is by looking at people's playlists in the iTunes store. Things will advance, software will get better, we'll figure out a solution here soon enough.
Like I say, I think the solution is here - either trhe record companies 'copy' the last.fm & lyric sites of this world, or they allow those sites to sell downloads. If I search for an artist, and one of those sites comes up, it frustrates me that I can't buy a download..
Nice post & TuneShout is a GREAT looking website!
I'm absolutely fascinated by where the music industry is going to end up. Eventually I am hoping that sites like yours kill the big labels, but there is a LOT of money behind the labels & I'm sure they'll use it to the fullest extent to keep smaller players out.
Nevertheless, I think there's a greater chance to music to succeed more quickly rather than video--I just get the sense that network distribution will seemingly be king for a bit longer.
It's my hope that the big labels keep their heads buried in the sand and continue to actively alienate their customer base by suing them. If they keep this up they will spend all of their money on litigation and allow independent distribution channels to make strides while they languish in their outdated business model.
If they were smart they would have begun fixing their problems and using their vast resources to succeed in the new music market. Instead they decided that they would simply try to sue everyone into submission and keep their old model in place. It did not work. Maybe we will start to see less RIAA pimped garbage being released and more work from quality musicians gaining exposure as the RIAA companies lose their stranglehold on the music industry.
I love the look of the website - nice work. Will have to spend more time looking around. I'm using last.fm for most of my random listening needs when at a computer at the moment. I like the bottled water analogy.
Nice post & I like Tuneshout too. Very nice to use and great looking site :)
And like shor, i've recently (last year or so) gotten into a lot of music that is quite hard to get in shops (mainly psytrance), and its thanks to siteslike yours i can get access to the music i love :)
Great website!! I like the web 2.0 look. Need to incorporate that more into my own websites.
It's not all about the web 2.0 look. It's about implementing features that make it easy on users, Steve Krug's "Don't make me think", and making your site as accessible as possible. I know a lot of people get caught up with buzzwords, but making your website web 2.0 is more then look.
Just my two cents.