The economics of the music industry
posted February 27, 2008, 2:45 pm | Log In To Post Comments | 
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Tags: Radiohead, Clinic, economics, music, models, free, chris anderson
I've been seeing a lot of talking/reading/watching about what is going to happen to the music industry. We all know the traditional model of the music industry is in trouble. Dire trouble. Universal/Sony/Warner/EMI etc can't keep up the way they have been doing business. I watched a Google Video yesterday with Seth Godin preaching to Columbia Records (I would link to it but it has been taken down now). He started out by stating the obvious: the music industry has had it too good for too many years. Magazines dedicated to selling their product, TV stations dedicated to showing their artists, Radio stations striving to find you a new star. This has all fallen by the wayside due to The Long Tail (thanks Chris Anderson).
Chris Anderson has been working on a new book called "Free! Why $0.00 is the future of business". He makes a lot of great points how companies are making money giving things away for free. The biggest example has to be Google. Every service it offers is free. Can this model translate to the music industry? Well in a way it already has.
Here's where the economics of music enters. Music needs to be free! Yes, all music. Distribution is so easy and cheap with P2P and digital delivery that the fees you could once attribute to getting a physical record, cassette, CD to the consumer (getting the music onto CD, getting that CD packaged, getting it to your warehouse, sending it to retail stores, advertising to get you in to buy from the retail outlet...) has disappeared. Geffen didn't have to do anything for me to get the new Angels and Airwaves album. No bandwidth or effort was used on their part AT ALL! Sure, they helped the band with studio time etc but delivery just happened.
So how does the music industry make money? Making fans. Like Seth said in his presentation, you have access to "tribes" who like a certain sub-genre of music. Make sure that that particular "tribe" gets access to ANYTHING that might interest them. The Radiohead fans need to be fed the new Clinic album. Some may like it, some may not. The point is to get them exposed to it.
No money made yet. So where does the money come from this "tribe" model. It's concerts! Live shows! AND licensing your music to TV shows and movies in order to create a larger tribe. Once your tribe gets bigger then you can have a larger concert. Merchandise is another great money maker. Also, Seth stated that you need to offer these tribes tools to find new music. That's exactly where a site like Music Emissions comes in. We strive on recommendations. You like one band, then you might like this other one. Look at our Radiohead page. You'll see a handful of new artists that you might like because of your declared love of Radiohead. You'll also see fellow fans of Radiohead you can converse with and befriend them, ultimately getting recommendations from someone with the same tastes as you. I digress. The point is Music Emissions has NOTHING to do with making the music. The purpose of this site is to get new music into the right hands. It works! Oh, and we sell advertising to bands/labels/services who want to be exposed to these rabid music fans.
So in the end, music is free, or needs to be! The hurdles to this model have already been overcome with tools like Soulseek, Limewire, and BitTorrent. The labels just need to ensure that the material being distributed on these networks is quality. If it is a low 96kbps quality then no one is going to enjoy it and pass it on. Labels also need to ensure that the right social networks are in place in order to get new music to the right place. A Jayhawks fan should be recommended the new Gary Louris immediately. They would probably not care about the new Pinback though.
Discuss.
Comments:
I'll start off by admitting that unless I particularly want to give some of my money to a group (I bought a physical copy of Scabdates after hearing how amazing The Bedlam in Goliath was, and I bought a physical copy of Year Zero Remixed). Other than that, to be honest, I haven't bought music in years. A lot of my music collection has come from a torrent website (which got busted by the po') oink.cd. But I also don't think I was doing anything wrong.
30 second previews aren't a good indicator of whether you'll like an album or not and even with those previews you know they are singling out the best 30 seconds of the song (if there is a best 30 seconds of a song). Besides that, I feel that if you can get music for free, you can get one album from a group and may like them enough that you feel compelled to give them your money and buy a physical copy of their albums.
Anyways, I fully agree with you on the concert topic. Live shows should be where a band makes a majority of their money. Especially considering the mainstream media. I absolutely despise the idea that a band like Good Charlotte can make millions off of their first album which is one of the most poorly produced albums I've ever listened to. Yeah the songs probably appeal to a large majority of idiotic listeners out there who don't know a C note from a broken leg, but it has no true musical appeal. If a lot of people want to come to their shows and give them money that way, by all means, do it. I just don't think they should be rewarded for writing a song about a boring and over-done topic that was written with the most basic of musical skill. That last album was more a general statement for all mainstream groups out there.
Also, I think there is great potential for bands who have established themselves in the music industry to still make money off of their downloads. Take Radiohead for example. When they first released In Rainbows, they were allowing listeners to pay whatever they wanted. However, since they avoided the cost of making physical copies of the cd's, even if half of the people that downloaded the album dicked them over and gave nothing, they're still making more than they would putting it out through a label who would dick them over more than their fans.
I'm just rambling so I'll end with that.
posted on February 27, 2008, 3:01 pm
