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]






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7 Comments

  • Andressa Izumi

    Hello Tyler,

    I agree with what you say about the distribution of music. We are crossing a "business morphing" as said Bobby Owsinski on a Forbes article the other day. I think people in the industry are aware of it, and as in every evolution due to technology, followed by social behavior, if we are willing to get the most of it, the chances are we really will. So thank you for bringing light into not so much defined subjects.

    I leave also an article I wrote and quoted you: http://blog.goodbarber.com/What-Apps-Have-to-do-With-the-Music-Industry_a483.html

    All the best, dress izumi

  • Paying for music is pretty much dead & done. People are willing to pay for experiences, things that can't be replicated or replayed. That's why live music is so important.

  • Mark Kornak

    I believe that music will eventually be the lost leader that is given away to encourage consumers to make bigger purchases. In the case of music, that would be concerts and merchandise. This would represent a flight to quality where artists need to find their niche for their demographic and capitalize on it.

    I still believe that people should pay for downloading a song, but the price of the download should be commensurate with the cost of the product. You used to be able to purchase a 45 single for a dollar. There were costs associated with the product and I would estimate the artist received about $0.10 of a dollar sale. So why are download costs so high given physical costs have been removed. eBooks are being sold for nearly the same price as printed copies, consumers are either not realizing the benefits of digital delivery or are getting ripped off by the industry.

    Music artists need to adopt the WalMart model and make their music easily available.

  • I think this article is an awesome thought-provoker. The sheer abundance of mp3's and the ease of which we can copy the files has lead to what is slowly becoming a habitual way of consuming music — for free.

    People who support the indie artists are buying an experience, the feeling of doing good / helping someone. Amanda Palmer is a great example of a musician fuelled by her fans.

    Perhaps music should be free? Perhaps it's the experience that should be paid for? How might we find a way to create value through service innovation? New value. Value that can be charged for.

    One way might be to create an app in which music is free, but artists work together to curate playlists of different songs that can be "purchased" in app. Curating the best songs into albums that can be purchased becomes collaborative and service based, not commodity based. Content curation at it's best.

    Just a blue-sky idea...

  • Don't confuse the music industry with musicians. I'm a 45 yo musician and tech geek and I can tell you that there has never been a better time to be a musician, at least in my lifetime.

    Don't weep for the music industry - they've been giving musicians the short end if the stick since day one. When I was in college (Berklee School of Music, class of 91) there were entire courses devoted to how to negotiate a record deal without getting completely screwed.

    The direct access to an audience and virtually free method of distribution enabled by the internet is a godsend for musicians. There is virtually no end to the clever ways we can now connect with fans, monetize our work, and make a decent living doing something we love.

  • Moshe Moishelle MoWigder

    So what you're saying is the only artists who should get paid are people who make tv commercial music?

  • Ariana Hall

    Yeah, the author is going down a very slippery slope. Music is still an art form and to have music subsidized as though it were a commodity like corn or something would make it virtually impossible for a truly great artist to break through.