Musicians Realizing That Access Is A Key Selling Point
from the well,-look-at-that... dept
While I've been writing this series of posts about the economic models involving non-scarce things like content and ideas, a key element of understanding the business models that come out of this is recognizing that a key, scarce component is access to the musician. Clive Thompson has written up a great article for the NY Times Magazines about how new musicians are discovering the two sides of this coin. Basically, they've learned that the internet and the ability to communicate with fans is a key element in allowing them to be successful in the first place. That is, it's that ability to go straight to the fans that allows them to have a music career at all. I particularly like the one musician who strategically tours by using his online presence to figure out if over 100 fans will show up at any particular venue -- and then will make plans to perform there. Nearly all of the musicians being profiled probably wouldn't be nearly as successful without their online presence, without promoting their music for free, without asking others to help them promote their music for them -- and without being around and being accessible to fans.However, there is the flip side of this -- which is that as the musicians become more famous, being accessible becomes much more difficult. There are so many fans who want such a piece of your time (and time is a scarce resource) that it seems to push nearly all of these musicians to a breaking point. Eventually, this is likely to lead to more exclusive "access" to the more famous musicians -- and that's certainly another way to build a business model. When musicians are starting out, and they have abundant time, there's nothing wrong with cultivating fans. However, as that fanbase grows, you can then use the infinite resources (the music) to help sell the scarce resources (access). That could be as simple as holding concerts where only those who have bought a CD or donated to the musician can attend (or, at least, they get the best seats and possibly backstage access). Either way, it seems like the predictions many of us had years ago about how the market would shift are actually coming true. Rather than "killing" the music industry, the ability to go direct to fans is clearly enhancing it. CD sales may be dropping, but there's a lot more music out there -- and many more ways to make money for musicians. It may not be great for the big, corporate-backed mega-stars -- but it's opened up plenty of new opportunities for everyone else.
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I Dig!
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Some Artists Figured This Out Years Ago
Free Music Downloads
The RIAA doesn't want you to see this page!! Yes, free music (as in "Free Beer"!) Go ahead, download, listen! We promise not to sue you.
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It reminds me alot of Epic and Google. Looks like our future will be an American Idol popularity contest where the artists don't do well but the aggregators clean up. The long tail doesn't work for the individual, it works for the labels and the aggregators.
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Small marginal costs doesn't equal free
False Assumption #1: Music is an "infinite" resource. It's not. It takes a lot of time and effort to write, practice, play and record good music. Therefore it is not free or infinite. It is only the last step (distribution) which is even close to free (but is also not completely free). I understand that having one more person with a copy of a song does not reduce its value to the artist. That does not make the end product free. There are fixed costs that need to be recovered in some way. Your model provides one way for artists of a certain bent to recover these costs, but it is quite limiting.
False Assumption #2: Most people's primary interest in music is access to the musicians, their life stories, t-shirts, posters, a live performances, etc. This is not true of most music fans. Most music fans are fans of music. They want good music. They don't really have that much interest in most artists' t-shirts, posters, or even live shows, unless they happen to occur nearby.
Your model works well for artists who want to spend lots of time marketing, designing and producing t-shirts and posters, telling their life stories and touring around the country. These are (generally) the type of self-centered, market-oriented, mass pop artists the record labels produce now. The record label gets cut out of the model (a good thing, IMO), but it is essentially a flatter version of the same model and will attract the same kinds of "artists".
But for the artists who just want to make music, there is no revenue model within the framework you describe. They just give away their music forever and get nothing (monetarily) in return. Eventually, the vast majority of these people will spend less and less of their time making music, as there is rent to pay and children to raise, etc.
I still like the model of music with DRM that lets listeners listen to a song for a certain number of times (say 10), so that the listener has a good feel as to whether they like the music, before asking the listener to pay up for something they enjoy. And I think that an aggregator site with good search and taste-comparison tools could scale this to the point to where the per-song download costs would be so small (10 or 20 cents) that there wouldn't be much of an incentive to pirate the music, except maybe for mega-star type artists. This seems fair to me, and provides a revenue model for the artists who just want to make music, and not spend a lot of time designing t-shirts, marketing and touring around the country.
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barriers to entry
New players are seeing the barriers of entry getting smaller and smaller.
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Re: Small marginal costs doesn't equal free
False Assumption #1: Music is an "infinite" resource. It's not. It takes a lot of time and effort to write, practice, play and record good music. Therefore it is not free or infinite.
PLEASE PLEASE go back and read some of Mike's previous posts on this topic and his replies to comments. Mike is not saying that it doesn't take effort or talent or time to write music. Mike is saying that the marginal costs approach zero - which is true. And basic economics tells us that competition produces pricing pressure which forces prices to eventually equal marginal costs. In other words, in order to be competitive in a market, musicians will be forced - not by Mike&Co, but by the market - to price their music at zero. BUT this can actually work to the advantage of a musician by increasing distribution and exposure at little cost to the musician.
False Assumption #2: Most people's primary interest in music is access to the musicians, their life stories, t-shirts, posters, a live performances, etc. This is not true of most music fans. Most music fans are fans of music. They want good music. They don't really have that much interest in most artists' t-shirts, posters, or even live shows, unless they happen to occur nearby.
I disagree with you here. I DO agree that some, and maybe a lot of, people will just take the music and run, so to speak. But your mistake is assuming that that's a bad thing. But that's a rather short-sighted view. If your music is good, even if someone just takes the free music and doesn't spend a cent on anything related, they can still act as promotion and distribution. The wider your market, the more people there will be who WILL be willing to spend money on related scarce goods and added value.
Personally, if I like a band, I occasionally buy a CD, or T-shirt, or heck, even a bumper sticker. Not just that, but I will go to their shows whenever possible. And I am not alone.
Your model works well for artists who want to spend lots of time marketing, designing and producing t-shirts and posters, telling their life stories and touring around the country. These are (generally) the type of self-centered, market-oriented, mass pop artists the record labels produce now. The record label gets cut out of the model (a good thing, IMO), but it is essentially a flatter version of the same model and will attract the same kinds of "artists".
But for the artists who just want to make music, there is no revenue model within the framework you describe. They just give away their music forever and get nothing (monetarily) in return. Eventually, the vast majority of these people will spend less and less of their time making music, as there is rent to pay and children to raise, etc.
Music is a BUSINESS, just like anything else. Supply and Demand, and all the rules of economics still apply. I am a free-lance designer, and I would love to be able to just design and not have to do marketing and promotions and everything that comes with it, but that is not an option. The same goes for musicians, artists, butchers, bakers, and candlestick makers. The market will do as it will, and if a musician cannot or will not adapt, then they will fail. It is a sad but simple truth in life, that you cannot always do as you please.
As to what kind of musician is willing to promote their music and expand their listenership, I have to say that I think it is an awful and inaccurate generalization you have stated above. There are PLENTY of musicians - especially independants - who are succeeding by using the exact model Mike is advocating, and some are using really creative ways of making money while still giving away music.
I still like the model of music with DRM that lets listeners listen to a song for a certain number of times (say 10), so that the listener has a good feel as to whether they like the music, before asking the listener to pay up for something they enjoy. And I think that an aggregator site with good search and taste-comparison tools could scale this to the point to where the per-song download costs would be so small (10 or 20 cents) that there wouldn't be much of an incentive to pirate the music, except maybe for mega-star type artists. This seems fair to me, and provides a revenue model for the artists who just want to make music, and not spend a lot of time designing t-shirts, marketing and touring around the country.
This might work - it's a nice idea. Go ahead and implement it and see if it works. People are often willing to pay for convenience and other kinds of added value. Good luck!
Best wishes, Emi
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Re: Re: Small marginal costs doesn't equal free
Actually, Emi, that is not what economics teaches at all, once you get past about ECON 101 or 102. I am an economist by training, as well as an Internet entrepreneur (who actually had a free music-related website back in the late 1990's and through 2001), and any business that does not try to recover fixed costs is going to go out of business. If you think about it, it's obvious. And there are lots of other markets that have been around longer than the Internet that have large fixed costs and small marginal costs that show this to be true. Do you really think that the price you pay for a Toyota only includes tha actual cost of materials and labor necessary to slap together the parts? The same goes for most chemicals and anything else with a relatively large fixed cost component.
Mike's approach is ONE way to recover these costs. BUT it's not the only viable way in a competitive market. AND his model results in less total new music being produced than the model I suggested, which in my book is suboptimal.
Many people do buy other items related to the music they like, but let me ask you this: Do you own more songs than bumper stickers? How about t-shirts? How many hours of live shows do you go to compared to the number of hours of recorded music you listen to?
I think my approach is more inclusive and viable for more artists and will result in more new music being produced.
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Here's some more Faulty Mike Assumptions
You are on the right track that Mike's arguement is riddled with bad assumptions although you may have not fully verbalized them yet.
Other bad assumptions with Mike's arguement:
1. It is old fashioned "static economic analysis" that assumes that when one thing in a system changes, all the other elements stay the same. For example he assumes that you can raise the price of a live performance fee to more than cover the amount of money lost from giving the music away for free. How plausible is it that there would be no "price ceiling" amoung the concertgoers that are already used to getting their music for free? You guessed it, that assumption is faulty.
2. He assumes that the "get it free" people are such groupies that they will line up to pay for access to mingle with an independent (which 98% of the time means relatively unknown) artist. Again I will ask you, how plausible is it that much money would be given out for that access?
3. Mike makes the assumption that the exchange of the paid music market is equivalent with the revenues from the live music concert market. That is a ludicrous assumption because the paid music market is vastly larger than the live music market. Once again, this is flawed economic theory. You cannot replace a larger economic market with a smaller one and make it up on the pricing side.
4. Mike will continue to assert (without doing the analytical work- go to digitalmusicnews.com for a feel for what better market share analysis looks and feels like) that the pie for all things musical is getting larger. He will try to intimate that because music stores may be selling more guitars that it somehow enriches the independent musician. There is a reason that the music guitar store industry is not considered part of the recording industry. Again I ask you, how will Guitar Center's sales increases or decreases put money in your pocket as a performing musician. Right- you got the answer- there is very little correlation.
5. Another false assumption that Mike and many here are guilty of is to assume that because the cost of music in his model is free than there are no distribution costs. John you identified one of the major costs is the time that the artist spends marketing his stuff on social sites, blogging, doing PR. Everyone here incorrectly assumes that that is laziness and musicians should just try harder but they are ignoring basic economics, Ultimately the quality of music drives attention to it. You can chat it up all you want in spots all over the internet about how great your music is but if the goods aren't there you will never get the traction. With the reality of a fixed number of hours per day, if a quality musician spends more time on distributing music for free then that is time not available to create the song that someone really wants to hear. So again I ask you, ultimately as a consumer of music are you gonna be willing to pay some reasonable fee to an artist to create great music and stay off the grueling road rather than spend all of their time learning to become a Public Relations specialist who dabbles in music. If you answer that question correctly than you have a good idea of whether Mike's model will take over the world or be relegated to the "idea dustbins of history".
Believe me, I can easily come up with10 more incorrect assumptions that Mike has rolled into his theory, but for now I think I will take my own advise and write a song.
But John B, I would encourage you to continue to expose Mike's flabby thinking. And don't even get me started on the mistakes he makes when he jumps from micro economic theory to macro economic and public policy issues.
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Access is the Master Key
Before there were recordings or broadcast of music, word of mouth was the order of the day for success. The internet, at this stage, is still a word of mouth effort for awareness.
Much of the music that major music companies market is limited in scope of the full spectrum of musical styles. If an artist has their own fan/information site, that's better than no exposure at all. What artist can offer now because of the internet is options, and who can be against freedom of choice?
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Neo-classicist bias
But these guys can only think in terms of money, of economics and rational behavior. What they don't know is that music isn't something that can be rationalized, it's some kind of a religion, something that can touch the inner self of the listener. When that happens, you've got a follower that will support you for the rest of your life if you don't betray his trust.
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Re: Re: Re: Small marginal costs doesn't equal fre
What he DOES say is: 1- COPIES of songs are an infinite resource. This is essentially true. The resources/cost required to make a copy of a song is rapidly approaching zero. 2- that some people who are interested in music will also be interested in the people making that music, enough so that they will pay for certain types of related products/services. The more people who are interested in a specific musician's music, the more people who will be interested in buying related scarce goods. Also true.
So you are arguing against an argument Mike never made. And I don't think any theory of economics supports the claim that you can make money selling something people aren't willing to buy, and people as a whole are becoming less and less willing to buy music by itself.
As for my own spending habits. I happen to have spent more on shows/merch than I have ever or would ever spend on music by itself. Such is life.
Best,
Emi
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Yup.
Despite the "cost" (time invested in writing/recording the song, money invested in a recording studio, etc.), distribution is free. There is no server/bandwidth cost unless you choose to host your own server. There are plenty of free services (not to mention P2P networks) that will propagate music at no cost to the creator.
Also, I keep hearing the argument of "this model does not work for artists who wish to focus all their efforts on creating music". As Mike mentioned in a previous article, no one is entitled revenue just because he or she worked hard. There has to be a market/demand for whatever the creative output is. If an artist or group really wants to focus all efforts on creating more music then they need to hire outside help. If their music really has worth then the band should have no problem paying someone to focus entirely on a PR campaign. Heck, I can't write music to save my life, but I'd be willing to build a web site and manage a band's concert schedule! Hire me!
Another point I see being missed is this: people are assuming that Mike's model is identical to the current music model except that the artists give their music away for free. In order to fully understand the advantages of Mike's model (we really need a name for that), one must disregard (mostly) what they know of the current music industry. Reading the rest of Mike's series doesn't hurt either. ;)
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Re: Small marginal costs doesn't equal free
John, you brought these points up in the past and I explained why you were wrong on both -- and yet you keep bringing them up. I think Emi has done a great job explaining why the two things you say are false, so there's not much more to go into there.
The one point I will make is that you continue to confuse music, once created, with music prior to creation. For someone who claims he has economic training, I would think you would understand the difference.
Secondly, I never said that people's "primary" interest in music is access to musicians. I said that's where the money is. Those are two separate things.
Your model works well for artists who want to spend lots of time marketing, designing and producing t-shirts and posters, telling their life stories and touring around the country.
In other words, my model works well for those who recognize they're in a business to make money.
These are (generally) the type of self-centered, market-oriented, mass pop artists the record labels produce now.
Actually, that's not true at all... as the very article above shows. It's actually working very very well especially for niche artists.
But for the artists who just want to make music, there is no revenue model within the framework you describe.
That's not true. I've already explained how a musician who just wants to make music can continue to make money by teaming up with someone who helps to market the ancillary products around them.
Of course, if you mean someone who wants to just sit around and not try to make money... then... what can I tell you? Why should they make money? The market is telling them that it wants something else they're unwilling to provide. So if they can't make money, that's their problem. It's like saying how come the guy who sits at home and watches TV all day can't make money for watching TV all day.
Eventually, the vast majority of these people will spend less and less of their time making music, as there is rent to pay and children to raise, etc.
But, actually, the reality is exactly the opposite -- which again is shown in the article above. All of the artists they're discussing would have otherwise needed to go out and find jobs. But by adopting a similar model to what I've been talking about, they've been able to build audiences and make money and essentially have a music career they wouldn't have otherwise. I'm not sure why you think these people are lying.
I still like the model of music with DRM that lets listeners listen to a song for a certain number of times (say 10), so that the listener has a good feel as to whether they like the music, before asking the listener to pay up for something they enjoy.
You may like that model, but the market doesn't. There's nothing wrong with trying to build a service that does that, but I don't see how you'll compete with those who adopt the free music model. And, that's really the key. At that point, your model fails, and all of the musicians you convinced to adopt it... well, they're now out of business.
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Re: Here's some more Faulty Mike Assumptions
You are on the right track that Mike's arguement is riddled with bad assumptions although you may have not fully verbalized them yet.
I keep asking people to show these bad assumptions, but John B's examples were wrong... so let's move on to your list.
1. It is old fashioned "static economic analysis" that assumes that when one thing in a system changes, all the other elements stay the same.
Actually, it's the reverse. Most folks who believe the existing system works are thinking that way. I try to account for as many of the changing aspects as possible -- in particular how the competition changes.
For example he assumes that you can raise the price of a live performance fee to more than cover the amount of money lost from giving the music away for free. How plausible is it that there would be no "price ceiling" amoung the concertgoers that are already used to getting their music for free? You guessed it, that assumption is faulty.
I never said anything about *raising* the price for a live performance. I actually don't think that will happen. I do think, however, that there will be a lot more demand for live performances (the examples support this), since you'll have a much wider audience. That means you can sell larger venues. If you continue to play smaller venues, that increase in demand *could* lead to higher prices.
However, the key point is more people... and it's also not just about concerts, so an artist doesn't even need to bring in that much more from concerts if they start making more from those other avenues I've described.
So, this false assumption is actually a false assumption on your point.
On to the next one...
2. He assumes that the "get it free" people are such groupies that they will line up to pay for access to mingle with an independent (which 98% of the time means relatively unknown) artist. Again I will ask you, how plausible is it that much money would be given out for that access?
You again make a faulty assumption here by saying "mingle." I didn't say "mingle." I said "access" and that includes all sorts of stuff. It includes concerts. It could include a fan club. It could include private events. There are lots of things it could include.
And, you don't do much to disprove it other than say "how plausible is it?" It's actually quite plausible. Think of it this way. In the past, say you have 1,000 fans, each willing to pay $20 to buy a CD. Under this new model, with your use of free music, the fanbase grows to 200,000 fans, and then you ask them to pay $10 to join the fanclub, which gives them access to private concerts and a private mailing list... then you just get 2% of those people and you've already matched your old money base. The point is you increase the size of your fanbase, and charge each of them *less*.
3. Mike makes the assumption that the exchange of the paid music market is equivalent with the revenues from the live music concert market.
Again, you make a false assumption. I never said you replace it with JUST the concert market. I included a ton of different ways to make music. Live music is certainly one key component, but hardly the only one. I've described many different ones. The fact that you ignore this doesn't make your assumption correct. It's just another faulty assumption.
That is a ludicrous assumption because the paid music market is vastly larger than the live music market. Once again, this is flawed economic theory. You cannot replace a larger economic market with a smaller one and make it up on the pricing side.
I find it amusing that you claim I'm guilty of "static" thinking and then bust out this laugher above. The whole point is that the live music market (and all those other ancillary markets I talk about) get a LOT larger because of the free music that's out there.
4. Mike will continue to assert (without doing the analytical work- go to digitalmusicnews.com for a feel for what better market share analysis looks and feels like) that the pie for all things musical is getting larger. He will try to intimate that because music stores may be selling more guitars that it somehow enriches the independent musician.
You are conflating two different points I make. That doesn't prove you right. It just shows you can mix up two separate arguments to miss the bigger picture. The point about the music industry growing is a response to those who claim that fewer people will create music because there's apparently so little money to be made these days. That's laughable -- and the evidence is clear in the data (which we've pointed to) showing that the music industry is, indeed growing.
Your second point, about the independent musician profiting from this... I never said they profit *directly* from this. I said that what this shows is that there's more of an *opportunity* to make money -- which is exactly what the model I describe allows them to do.
5. Another false assumption that Mike and many here are guilty of is to assume that because the cost of music in his model is free than there are no distribution costs. John you identified one of the major costs is the time that the artist spends marketing his stuff on social sites, blogging, doing PR
You apparently want to believe this very badly, but I've already explained how we don't assume that at all. You again confuse two separate things. The actual cost of distributing the music... and the cost of promoting the music. Those are two separate things -- and it's exactly what this very post is about. The fact that you pretend I ignore those things in a post that discusses EXACTLY THAT ISSUE, makes me wonder how you can post the above statement in any seriousness.
Ultimately the quality of music drives attention to it. You can chat it up all you want in spots all over the internet about how great your music is but if the goods aren't there you will never get the traction.
I've never ignored that point. That's a key point, actually. If your music sucks, no matter what you do, this model won't work. I don't see how that goes against my point.
So again I ask you, ultimately as a consumer of music are you gonna be willing to pay some reasonable fee to an artist to create great music and stay off the grueling road rather than spend all of their time learning to become a Public Relations specialist who dabbles in music
Again, did you even bother to read the post above? I've also discussed in the past that the role of helping with the publicity is the type of thing that a new generation of record labels *should* be doing. So my model absolutely does not require artists to become master promoters themselves. But you ignore this.
Why? I wish I knew.
Believe me, I can easily come up with10 more incorrect assumptions that Mike has rolled into his theory, but for now I think I will take my own advise and write a song.
Well, since your first five were all wrong and easily explained as wrong, please do come back and point out some other mistakes in my reasoning.
And don't even get me started on the mistakes he makes when he jumps from micro economic theory to macro economic and public policy issues.
Please do get started. I'd love to find out where my thinking was wrong, but I haven't seen a good explanation of the problem yet. It is true that I discuss both micro- and macro- impacts, but that's because they're connected. What I've said from the beginning is that the macro impacts of the model are a much bigger industry. At the micro level, this does mean that the way you make money changes -- but it also means that the *opportunity* to make a lot more money has increased... IF you understand the basic economics.
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In my humble opinion
You stated that access to musician and musician time are scarce (as one becomes more in demand) - then it's perfectly reasonable for him/her to price his songs despite the very very low distribution cost. Right?
So, now in the following statement,
"You may like that model, but the market doesn't. There's nothing wrong with trying to build a service that does that, but I don't see how you'll compete with those who adopt the free music model. And, that's really the key. At that point, your model fails, and all of the musicians you convinced to adopt it... well, they're now out of business"
you contend that the market is not likely to be receptive toward priced online songs and will go to the free service - but I can't see how realistic that is - because songs are not substitute for each other. Perhaps it's just me, but if I don't like the fact that Sting charges for a download, I wouldn't go to a free site to download a song just to compensate for not being able to freely download from Sting's site. Unless of course, I can got to a free service that allows me to freely download the same exact piece - but this is an entirely different subject.
The key is for a musician to know the demand elasticity for his/her music given a price. But we can't simply generalize and say that all digital music should be free simply because distribution cost is very low. Even the cost of scarce access/time of the musician can be priced in every download of his/her music.
Interestingly, the decision to price a music download would give out certain signals. If a musician doesn't charge then is he/she perceived as (1) doing it just because he/she likes doing it - self satisfaction, or (2) he/she think nobody would pay for his/her songs - bad music/musician, or (3) he/she thinks that the free downloads would lead them to revenue-generating or more interesting opportunities? More interesting to see if we add another variable and see how the answer would differ in the case of (a) an unknown musician, or (b) an upcoming but not yet there musician, or (c) a famous musician.
My two cents...
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Simple
2) Copies can no longer be charged for as anyone can make their own for nothing.
So, sell the music, not the copies.
Music is expensive. Copies are free.
Musicians cannot sell copies.
Musicians CAN sell their music.
Copies are not scarce.
More music from your favourite musicians is scarce.
There must be some kind of mass hypnotism that prevents people grokking this.
How about a metaphor?
Labourers can sell their labour @ $100.
Labourers cannot sell photocopies of $100 banknotes.
Musicians can sell their recordings @ $10,000.
Musicians cannot sell copies of their recordings (at any price).
Paradigm shifted yet?
For god's sake hurry up! ;-)
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Re: Simple
The independent has less overhead support cost, and gains a exceptable return on their investment if they produce their own CDs. But, if they make digital downloads available (COPIES) for low cost, they've elminated the cost of CD creation and shipping, and added more to their economic return.
Digital copies are cost effective for everyone, except for companies involed in the business of making CDs (Duplicators, Shippers, Printers etc.)
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Re: In my humble opinion
you contend that the market is not likely to be receptive toward priced online songs and will go to the free service - but I can't see how realistic that is - because songs are not substitute for each other.
This is a reasonable point, but when you think through the details, you'll see that it doesn't hold up under market pressure. If *everyone else* is giving their music away for free, and you're trying to charge -- how likely is it that you'll get a following? Instead, even if your music is fantastic, you'll piss off people who would rather spend their time *and money* on those who give the music away for free to build an audience. So you end up with a much smaller audience and much less money -- even if your music is better.
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Re: Re: In my humble opinion
I think the statement above can't be applied across the board. What if the pricing is sensible enough? What if the fan base is already large enough - the Beatles perhaps? Of course, there are questions about what a sensible pricing is...but that's another question. The point is that one can't put out one rule to all.
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RE post 19 and 20
You are very much on track with your analysis and Mike is off track.
1. A percent of customers do buy based on moral concerns. Mike oversimplifies his model to ignore many many variables and when you bring them up to him he doesn't want to learn and state the circumstances where his theory will work versus where it won't. I and other customers will spend more on a shirt if we know that a 10 year old child slave labor didn't go into it. I and a certain percentage of customers (Mike you need to quantify these factors in order to do the math to prove or disprove your theory) ignore the free marketplace and voluntarily pay for our music product. Mike would have to show that we are a very small percentage of the population in order to prove that someone who charges for music would automatically go out of business.
2. Mike lists as a "fait accompli" (already done and decided) that in the 5-15 year war over digital rights that all the results are in and it will always be the wild west where the outlaws always win. As you can see in the long battle of the USA wild west that in the long sweep of history eventually the sheriff came to town and the outlaws lost ground (actually they went out of business). Sorry Mike, the battle about defining the online world will shift many times in the coming years and you should seriously entertain the risk to your model if we as an entire society decide that laws and new laws yet to be written apply to the internet and are enforceable.
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Wrong, sir.
1. Even if what you say is true, Mike is suggesting a model where there are no moral concerns. The artists give their music out for free (which they have the right to do), so there is no guilt in downloading, hearing, and transferring the music files. I don't know that you read the article correctly.
2. Again, law isn't really an issue with Mike's model. Even if laws stay the way they are now, artists can voluntarily distribute their music for free and make money from the larger audience. No matter how you dissect it, the larger audience would yield a larger revenue than the current business model does. The current model has so many middlemen that the costs are driven up to ridiculous prices. Much more effort goes into making movies than music, yet the costs are astonishingly similar between CDs and DVDs. Free distribution and no RIAA getting in the way leads to bigger profits for independent artists.
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Re: Re: Re: In my humble opinion
In all but the most extreme cases you absolutely can rule it out. Take a look at the online news business today. Lots of companies have tried charging, and almost all have failed -- because the competition is free. The WSJ gets away with it, but just watch and eventually they'll end up going free as well. In fact, they've slowly been creeping in that direction by freeing up their most popular stories. They, like the Beatles, can probably charge for some period of time due to their name recognition -- but no new entrants will be able to, and eventually the old fogeys look like dinosaurs. Already, the folks at WSJ.com admit that they're very, very worried because the younger generation totally ignores them. Since that generation can get so much content for free, they don't understand why they should pay for the WSJ. The same will be true in music.
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Re: RE post 19 and 20
I'm confused by your response. You make these assumptions that are simply not true.
1. A percent of customers do buy based on moral concerns. Mike oversimplifies his model to ignore many many variables and when you bring them up to him he doesn't want to learn and state the circumstances where his theory will work versus where it won't. I and other customers will spend more on a shirt if we know that a 10 year old child slave labor didn't go into it. I and a certain percentage of customers (Mike you need to quantify these factors in order to do the math to prove or disprove your theory) ignore the free marketplace and voluntarily pay for our music product.
Huh? That's not *ignoring* the free marketplace. That *is* the free marketplace. The marginal benefit you get from those shirts is greater, meaning the marginal cost you're willing to spend is greater. That's straightforward economics. The fact that you think it's not the free market is simply incorrect.
However, that has nothing to do with the point. I'm not saying there aren't people who will pay for music. Clearly, there are. What I'm saying is that the musicians will start to recognize that they do better and can build a bigger market by giving their music away for free and charging for something else. In that situation, why would they charge and keep a smaller market?
2. Mike lists as a "fait accompli" (already done and decided) that in the 5-15 year war over digital rights that all the results are in and it will always be the wild west where the outlaws always win.
I say no such thing. I say that the musicians will recognize that they're better off. That has nothing to do with outlaws. In fact, as I've made clear, I think it's bad for people to download unauthorized music (the outlaws you're discussing). I think it's good for the producers of content to realize they can do better by freeing it. That has nothing to do with outlaws.
Sorry Mike, the battle about defining the online world will shift many times in the coming years and you should seriously entertain the risk to your model if we as an entire society decide that laws and new laws yet to be written apply to the internet and are enforceable.
Oh, I've spent plenty of time entertaining that risk. There are numerous economic models that demonstrate what happens with more protectionism, and the end result is really, really bad. If you want to kill off innovation and creative output, that's a direction you can go, but it's bad news all around.
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Re: Re: Re: Re: In my humble opinion (Post 23)
I take a cue mostly from the old world where there are commodities that should be priced at similar levels. But there are plenty of companies that seemingly defy this rule of thumb and are able to charge premium price for commodities by enhancing value. For instance, Wholefoods vs traditional supermarkets - granted the distribution cost structure may be different. Or clothes by Giorgio Armani vs clothes by Gap. These example (there are many more) prove that there are possibilities for charging premium pricing for commodities and the market (consumers) accept it.
I can't see why it would be any different in the case of digital goods. Time will tell, I suppose, but I wouldn't bet against paid services yet.
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Yes ofcourse Access always needed!
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