We’ve all heard the complaints about the current Music 3.0 music industry model: physical product doesn’t sell anymore, download sales don’t make up for the shortfall, and streaming music cannibalizes sales and pays a pittance in royalties. Then let’s heap on the accusation that music today is so formula and soul-less and generally a shadow of what it once was. But how does that explain the recent success of Mumford & Sons and Adele? Here are two principles that hold true in any age.
Entries in Business Model (12)
It seems like a week doesn’t go by without new proposals for streaming music services — some real, some imagined. Most services position themselves to be more convenient than digital downloads. Few promise better quality than CD audio. Therein lies the problem with listener-paid business models, a simple truth from the software industry that should be heeded.
When I got into the commercial software business, titles were delivered in boxes containing install discs accompanied by paper user manuals. From there it became commonplace to purchase a license key to download software and soft-copy documentation. It remains to be seen whether full-feature software can now be accessed solely through the cloud.
Author Alistair MacLeod once said starting to write a story without a vision of its ending to guide him was like handing a cabdriver $20 and saying, “take me somewhere.” I was reminded of this when the largest African-American-owned bookstore in the USA abruptly announced it would close. If you are in either the music or consumer audio industry, there is a lesson here for you.
It’s not that sales are down at the Hue-Man Bookstore & Cafe in Harlem. In fact, co-owner Marva Allen said in a Marketplace Radio interview that “sales are up 37 percent.” Though currently successful, the store ceased operations because the owners recognized their business model is unsustainable in the long t
Having been hearing about the growing success of the band Pomplamoose many times now, I decided to check them out and listen to their music/interviews and watch some of their videos to get a feel for who they were-both as artists, and see what we could learn from this independent band who have carved out a living with STRICTLY their MUSIC, using a 99% web-based business model. Listening to them in the first interview with Tech Crunch’s Andrew Keen, Jack Conte and Nataly Dawn answered several very basic questions, of which, although the interview could have been hosted better to get down to some more insightful questions, the resulting insight I continue to find the more I learn about this powerhouse duo remains consistent with the very simple mantra this band has so very successfully modeled for us as independent musicians in our brave new music business. Pomplamoose, who have now turned down all of the “big three” major labels – are in fact making enough money to live in a fully paid for house, primarily off iTunes revenue, and don’t see the need OR the strategic advantage to sign with a major record label. The bottom line is that Record labels today - are more like general contractors who hire other companies to do things for the artist, (when, with a little knowledge and ambition one could go hire that company directly) and decision makers for those who don’t want or don’t know where to start with building their own business model. Perhaps not as extreme as “the powerful praying on the ignorant and powerless,” but something close to that, is what perpetuates most of the unknown yet talented and intelligent signed acts that you’ve never heard of.
Recently music industry analyst Mark Mulligan presented his plea for a serious adoption of a new music format. He claims that most new business model ideas in the music business are retail innovations, but not format innovations. In short, he argues that the new music format should be Dynamic, Interactive, Social and Curated (DISC). For the full vision, check out his speech at midem 2012, or read his full 15-page ‘manifesto for the next generation of music products’.
In my thesis about marketing music through non-linear communication, I wrote a case-study about a record label called Twisted Music and their remarkable adoption of an excellent business mentality for the digital age.
Every year there’s a rush in the music marketplace after one trend or another, and in the past year it’s been cloud services and the concept of ‘music as water’ subscription services. While the notion of selling music subscription like cable TV may be appealing at first glance, it is proving hard to monetize on for both the companies that launch such services and the content owners who participate in them. There are several reasons why I have always been very skeptical about the future of all-you-can-eat subscription services and cloud service models:
Much of the talk about the music industry in recent days focuses on future transformative changes in the way music is consumed. Will it be streaming or downloads. Will we be listening to music files from an app or from a cloud, and if so, who will own that cloud? The possibilities for content in the future are limited only by technology we create, and there will be even more changes down the road that are hard to imagine at this point in time. It is a very interesting discussion. Lost in this discussion, however, are the possible transformative changes in the companies that develop the artists that will make music in the new system, and how they can be positioned to easily change revenue models as technology changes the way content is presented.
Success in the music Industry has long been measured by landing a recording contract, but with the ever-increasing digital distribution outlets available, and the shrinking physical market, the goal posts have certainly shifted. In reality, as 90% of those who had the (mis)fortune to find out first hand will testify, securing a record deal was never an indication that you had actually “made it”. It was a temporary influx of much needed cash, but any perceived luxury came with insurmountable overheads. With every limo ride and big city showcase offering free booze, your ever-expanding expense account would ensure that your musical career was never going to be a viable long-term business. A re-evaluation of what actually defines success in music is much needed. Especially as new artists take steps to build a working business model in the constantly changing digital world.
It was June 2009 when Radiohead and TOMS shoes produced a ‘love child’ in the business side of my brain. Flying from Dublin to New York on the US leg of, what has now turned into, a house concert world tour I was reading the inspirational story of TOMS shoes when the epiphany hit me….
By now we’ve all at least heard about Kickstarter. Many of us have helped to fund projects. I’ve supported 5 or 6 myself. The best I can discern is that Kickstarter projects follow one of thee models. The explanations are a bit long, but I hope to tie this back into music and into why I believe the Kickstarter models are mostly not the correct models for funding recordings, but are great models for other types of projects.
Additionally, if I ran Kickstarter, I’d disallow projects that did not meet a stricter set of guidelines because I believe that many projects that are on the site actually damage the Kickstarter brand and the entire concept of microfunding. I end this post with a proposal for a new fan-investment label model that I believe is viable, won’t burn out fan interest in investment, and inherently creates a dedicated “street-team” to help bands promote their work. Let’s start with my taxonomic breakdown of Kickstarter models:
Model 1 - Donation / Support
These projects are designed to produce art, ideas, operations, movements, or objects that supporters want the world to have. These notions (I’ve decided to use the term “notion” to describe everything in this category) are not really owned by any of the supporters and the supporters’ only reward is that they get to know in their warm, fuzzy hearts, that they helped make an otherwise impossible notion come into being.
In response to the ASCAP/HITLAB announcement that basically endorses the use of algorithms to analyze the hit potential of songs, I thought I would weigh in on the subject.
Proceed with caution…
As someone that spent the better part of a year evaluating similar algorithms, technology, services, business models and patents connected to acoustic analysis and hit potential measurement, I can tell you that you should proceed with caution when making a purchase or career decision that involves the utilization of services that sell computer-based, hit-analysis technology.
It’s fascinating technology, however…
Generally speaking, the technology is reasonably accurate (my experience: 80% accurate, and often close enough to my expectations) when it comes to plotting a song relative to a cluster of preexisting hits and then rolling the plots into a meaningful score. However a high score doesn’t mean you have a hit on your hands, or that “hits” even matter anymore. Read on…
Here are some pros and cons to consider when evaluating services that use computers and algorithms to evaluate music:
Computer-based hit analyzing technology - the pros…
Targeting. If detailed reporting is offered, this technology should show you how close your song is to clusters of previously recorded hits. This information is useful for targeting listeners of similar sounding hit songs.
Have you bought a video game recently? Have you ever made an in-game purchase? Do you consider pre-roll, banner or in-game advertising acceptable? Do you think buying video games online or on a mobile device is normal? Has the video game industry turned social networking into a revenue generator through multiplayer gaming?
Every day, I’m meeting people who could answer “yes” to all these questions - which raised a very important question in my own mind: if we replace the word “game” with “music,” why aren’t these answers still “yes?”
The music industry has a lot to learn from the video game industry. We’ve finally gotten past the “save the CD” era, but the music industry is still lagging when it comes to proactively developing new business models. Just as the video game industry has continually adapted and reinvented itself in the last few decades – arcades to consoles to mobile to online to apps to ad-supported and so on – the music industry must learn to quickly spot new consumer trends and behaviors, and then adapt the technology and business models to turn those trends into new revenue streams.
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(Updated July 8, 2015)