What is the future business model of the music industry?
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M$3 Answers
1) FREE
This is the easy choice for consumers. It's already very easy to obtain current music for free. A lot of money, time and effort goes into releasing albums for free.
However, this is a conceivable business model. Already, artists and labels know that diversified income results in the greatest profit. Sean Combs is well known for his empire of clothes, jewelry, accessories, let alone his popular music.
It's completely possible that music profits could be sustained by monopolizing on success in areas beyond music.
2) PAY WHAT YOU WANT
Radiohead made the biggest splash with this. However, it's been going on for years at local concerts all over North America. It's common place for a band to load up a table with CD's and ask $20 for them. The band may not necessarily get their asking price, but chances are they'll sell a good number of CD's if they're open to negotiation.
3) PAY BY POPULARITY
This idea is pretty self explanatory. However, if this was a viable option, why hasn't iTunes implemented it?
Apple makes very little per song [2]. Just like CD sales, iTunes is still responsible for splitting the revenue from each sale with a bunch of different people. It would make sense that they'd want to make more money and the best way to do this logically would be to charge based on popularity.
4) SUBSCRIPTION
The subscription model seems to be the most attractive in a compromise between consumer demand and publishers. Consumers would purchase a subscription just like NetFlix but rather than renting DVD's, they receive professionally encoded (high quality) digital audio.
The biggest problem with this scenario is that publishers are currently stuck on DRM (Digital Rights Management) issues. Consumers are currently demanding that content be available across the electronic devices they own. DRM is currently clunky, insecure and worst of all, horribly inadequate.
5) MUSIC TAX
As the name implies, the music tax is favored by governments (Canada especially) and Publishers alike. Quite simply, put a levy on each sale to offset the effect of piracy.
The huge problem with this is that the folks who are paying for music are penalized while people who download illegally aren't. That doesn't seem right at all.
CONCLUSION
The underlying issue to finding a business model is being overlooked by the Music Industry. They are so caught up in piracy and DRM technology that they are missing the fact that it's the product itself that's the problem.
I'm not saying that music is any better or any worse than it has been. I'm saying that the products that Producers are assembling and marketing do not reflect consumer demand.
Due to our recent history (Napster, Gnutella, Torrents, etc) consumers have devalued music and as a result, the music industry needs a complete overhaul. The industry needs to put quality and consistency in the forefront. They need to take a combined approach of these 5 methods to form products that can be (in part or in low quality) be given away for free, subscribed to, etc.
Above all else, at this moment advertising (online and offline) is going through a revolution. Advertising is in a state of disarray and everyone, including the music industry needs to redefine how they make money from ads. The comments given around this topic at the Grammys [3] are a direct example of this revolution.
The bottom line is that the music industry (as a whole) needs to carefully and completely reconsider itself.
1 http://www.last100.com/2007/10/11/music-industry-five-alternative-business-...
2 http://communities.canada.com/ottawacitizen/blogs/bitsandbytes/archive/2008...
3 http://ca.news.yahoo.com/s/reuters/090206/entertainment/centertainment_us_g...
In addition to these sources, I have deeply and professionally considered music piracy on the Internet and specifically P2P networks.
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M$
The only snag is marketing, but I think you'll find more and more musicians hiring marketing firms to help them with that aspect rather than going the label route.
Artist driven digital distribution can work. Look at what Trent Reznor has done with Nine Inch Nails. He's released two albums without the help of a record label, and has been very successful.
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M$
Very true about Reznor, but he was already one of the most successful musicians on the planet. For an unknown band, that kind of instant exposure just isn't on the table. Also, people still go to their local music store to look for CDs of bands they hear (though not nearly as many people as before), and no distribution to places like Wal-Mart and Target can seriously hinder a band's ability to get heard.
"Corey Smith was a high school teacher, doing weekend music gigs. Then, apparently, his manager had a revelation and started giving all of his music away for free: and last year Corey brought in $4.2 million."
- Even though he gives away free music, plenty of people still buy his stuff on iTunes.
- His concert tix go for $5 each
- When he takes his free music down, *his iTunes music sales go down*
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M$
I'm certainly a supporter of giving away free music, but there has to be more to it than that. Thousands of bands give away free music online (especially on MySpace), but there's a middle step between saying "here, this is free" and "cool, I have 4 million dollars!" (Although it would be sweet if it was that easy!)
Great answer... Best I could do was vote for this for best answer cause I accidentally left the question open too long!
Glad that you liked the answer. Hopefully you found it useful. As mentioned, I have a professional understanding of this topic. If you would like any of the points expanded, please don't hesitate to ask me directly!