December 8, 2010 What’s The Best Music Business Model? You Might Be Playing It Every Day
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.
When discussing business models today, there are several critical consumer trends that should not be overlooked by the music industry:
- Consumers like to be social while they are entertained. This was always true to a degree, but now even the solo-music device (the portable player) has been flipped to become the most social device (thank you, iPhone apps).
- Consumers expect to personalize everything. We always saw it in mix tapes and remixes, but that was the domain of hardcore music lovers. Now, personalization is just an expected standard feature.
- Consumers don’t simply want to socialize, they want to compete. Socializing isn’t simply about talking to each other and sharing, it’s about showing who is king of the hill.
Our challenge as an industry to turn these trends into revenue streams, not by simply marketing music downloads but by creating new categories of products that fit how people listen, use, create, socialize, share and, yes, listen to music.
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Read more about our views on the future of the music industry at http://blog.mxp4.com/
Albin Serviant is an established digital media entrepreneur and CEO of innovative interactive music technology developer MXP4.
Reader Comments (5)
Hi Albian,
This is really some excellent advice here. I think you really nailed all three points with gusto, and I'd like to just reiterate the fact that all of these points bring up the idea of being consumer-oriented, not product or service oriented. This will make a big difference in the marketing strategy and business model of any emerging musician looking to build a loyal and engaged fan base.
As a fellow gamer, there are absolutely things that the gaming industry has done VERY WELL to keep up with the times that the music industry could learn from. Just look at how record labels are struggling to maintain even decent sales, meanwhile Activision has thousands of people lining up at midnight just to pick up their own copy of Call Of Duty... and lets not forget, we are talking about a $60 price sticker here, not $9.99.
Again, great article! Ill be sure to pass this on and subscribe to your blog. Feel free to reach out to me so we can stay connected in the future! @miccontrol and http://facebook.com/jon.ostrow
Thanks!
Jon Ostrow
MicControl
"with “music,” why aren’t these answers still “yes?”" -
Well, they are! Lets trade out video games for music in your paragraph:
"Have you paid for music recently? Have you ever made an at-concert purchase? Do you consider corporate sponsorship, banners at concerts? Do you think buying music online or on a mobile device is normal? Has the music industry turned social networking into a revenue generator through music sharing?
The answers are, in fact, yes to all these questions. (Except for in-game advertising. I don't know anybody who accepts in-game advertising, and certainly wouldn't accept a song that paused halfway through for a coke jingle)
All these things have happened... but where is your slice of the pie, you ask? It was taken up by the music middlemen; the only people who were really able to monetize music on the internet. Facebook and Myspace turned "music into a revenue generator through music sharing". So did Pandora and all the other internet radio sites. And now Itunes is turning itself into a social network. All these companies are doing exactly what you have said and are making money.
Whats that? You meant money for the artist, not some non-music-based company? Ooh, why didn't you say so? No, there is no real money for artists online, if this is your business model. Because consumers (listeners) primarily want, as you said, personalization. Personalization in music means choice of music, and choice of music means quantity. So, only sites that are able to host a massive quantity of music are going to draw an audience. Artists get to be one single product on the shelves of several dozen online wal-marts.
Social Networking is a tool, not a cornerstone of a music business plan for artists.
The reason this works "better" in the video game industry is because
1. It is still not socially acceptable to pirate\share games. DRM is and was never controversial in this industry
2. Given the difficulty of creating a game, they are almost always created by large companies with direct-to-mainstream-marketing capabilities. Talk to an "indie game developer" sometime, and you will hear the exact same story as you hear from indie musicians about lack of connections, opportunities, money etc.
I never posted on this site but I must say I love musicthink tank! The best musicians site since sliced bread!
Great post. Consumers now have a say in how we interact with and consume music. There could be a strong emphasis on streaming services as the primary consumption means going forward. Streaming platforms hit on many of the points addressed above, including personalizing on computer and mobile device, + sharing via social media. Huge shift in music consumption from previous years, from owning to renting music, but could be headed in this direction.
The competition part is really interesting. Many like to expose new music to friends & family and prove they are a music though leader. Excited to see what comes about in that area.
Right, most people nowadays tend to compete, they don't just focus on socializing. When the music industry understands this fact pretty well, then truly this will be perfect world for music lovers. :)
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