2014-01-17

Co.Labs

Beats Can't Save The Music Industry, But This New Business Model Could

Should consumers even pay for music? I'm proposing an alternative model.



On the eve of Beats launching its streaming music service, it’s hard to feel anything other than disappointment. Music services keep popping up promising a new era for digital music, but no one has been able to fix the downward trends that hurt the most: that is, people's increasing unwillingness to pay money for music.

The tipping point for me, personally, was seeing digital music sales graphed out and compared to the amount of apps being downloaded (graph above). It’s not the same format of media, so to some extent this comparison is apples-to-oranges, but visualizing the scale blew me away. Even if music sales hadn’t gone down steeply the last two quarters, the magnitude of apps people are downloading is staggering. The music business isn't about albums anymore--it's about distribution via app.

So why do we still pay attention to record sales as a bellwether?

Maybe it's time we questioned some of the assumptions that underpin the music industry. Music is now fundamentally a digital form of media and needs to be treated as such. There are a lot of things that need to be addressed and rethought, including:

  • Is Copyright still a relevant form of protection for the content owner?
  • What does it mean to own the right to copy something (i.e., the copyright) when everyone has the power to copy it?
  • Who makes money every time a song is played? Should anyone get paid per play anymore?
  • Do consumers have to pay for music, or should a third party subsidize it?

What's The Solution?

Imagining the music industry did actually crash and burn: What does a new music industry look like? The answer might lie in businesses from other industries. Whether through advertising, marketing, original content, or simply art-making, the companies have the money to pay for music for commercial purposes. And since music forms such an emotional link with consumers, it's awesome for selling products. Perhaps consumers should pay for songs indirectly when they buy products whose manufacturers use those songs in their marketing.

Paying for music out of corporate marketing spend makes the pie much larger. Samsung spent ~$14 billion on marketing in 2013. For 2012--results for 2013 haven’t been published yet--the entire music industry only made ~$16 billion. Even its peak of $38 billion isn’t so far off that it couldn’t be covered by the marketing budget of corporations. The difference between the late ’90’s and now--if this were to happen--would be a more even distribution of money across the middle class of musicians, also known as the people who can't make a living with the current system.

The instinctive pushback is one from the gut. Morally, how can artists or fans support big businesses–-ones motivated by greed–-paying for songs which might be in direct opposition? I agree, and the “sellout” factor adds friction. Many musicians are passionate about their grassroots support.

But to their consternation, this model is already getting traction--remember when Samsung bought a million copies of Jay Z's latest album and bundled it free with a Samsung phone? Smaller artists, however, are stuck still trying to sell to consumers. There isn't a good way or marketplace yet for artists and businesses to find each other.

Beats is on the right track to thinking differently. It's adding a billing option under your cellphone plan, it’s relying on human editors to curate music recommendations, and it’s even respecting artists more by paying them an even royalty rate. I still don’t think these changes add up to a solution. It's too late to change how an entire generation now thinks about paying for music. It's time to find someone else to pay for our playlists.

[Image: Flickr user Twang Photography]