40,000 Explanations For Why The Recording Industry Is Wrong About Business Models
from the start-counting dept
Among Apple's new iPod announcements was the inclusion of a 160Gb iPod Classic. As Steve Jobs noted, that means you could carry around 40,000 songs in your pocket. Forty thousand songs. Leave it to Bob Lefsetz to use this fact to point out how wrong the recording industry has been about music business models. He points out that this highlights how people want music -- in fact, they want lots of music -- and they want it conveniently and reasonably priced. That means at much cheaper prices (are you going to carry around $40,000 worth of music purchases in your pocket?) and without DRM.He also highlights how the idiotic focus on getting more per song just as everything else about music and technology gets cheaper is hurting the record labels much more than it helps them. He compares the situation to how expensive it was to use mobile phones a dozen years ago. People were scared to use mobile phones because the charges were ridiculously high. You only used it in special circumstances. Today, however, the rates are much, much lower and that's massively grown the market for mobile services. Do you think the mobile operators would prefer to go back to $1/minute charges? Yet, why does the recording industry insist on $1/song charges when the infrastructure can support an entirely different model. Instead, make the music cheap and easily accessible. Take advantage of the infrastructure that allows people to carry around 40,000 songs in their pocket. Sell iPods that are pre-loaded with all kinds of music and watch them fly off the shelves. The record labels (and their supporters) will claim that it doesn't make sense to sell music for less when people are clearly willing to pay $1/song, but that's misunderstanding the market potential. People were willing to pay $1/minute for mobile phone calls too. And they were willing to pay $150/month for broadband access. But as all of those things got much, much cheaper it opened the markets up much wider, provided all sorts of new applications and services that made them more and more valuable -- and helped make the companies much richer by providing better services at cheaper prices. Why can't the recording industry understand that?
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Filed Under: business models, ipods, lefsetz, riaa, storage, trends
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I thought the same thing.
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Re:
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'nuff said.
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i havent payed for music since 1998
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Seriously?
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Hey Mr "T"
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neither is orange juice, really...
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Thoughts on podcasts
Personally, my iPod 80gb is about 25% Podcasts, and I only have the "Last 5 un-listened" on my iPod. I find myself listening or watching the Podcasts more than anything else, and with at least 100gb of user-created content on my hard drive at home, it means that myself, as a customer, *use* and ultimately look forward to exceeds the capacity of my iPod...
But overall, the 125,000 podcasts really show how much content is out there that Big Media hasn't tapped because there supposably was no audience for it, or it didn't make sense to support such wide array of tastes. The corralled approach by Big Media can only last so long...
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back catalogue
comes preloaded with that corps back catalogue, stuff that is not currently on cd and can't be got legally otherwise.
maybe only a few hundred tracks but something, gets the company name advertised, people get music. and the corp gets some cash for something that is otherwise earning them nothing.
apple gets a promo too, nobody actually looses.
the music can be drm'd to hell on the ipod (it will play it, and if you can add it to your itunes setup *you* won't notice the drm) since it will actually, you know *work*, in that you can play it, and back the files up. just giveing them away gets hard.
if they want to kill piracy make the music cheap enough people don't mind paying for it, even if you still by in say £10 blocks, but get a fair bit of music for that, or maybe the videos as well etc.
amazed they haven't realised this is a cash cow waiting to be milked.
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Re: Hey Mr "T"
stop waving your tiny dick around with fake statements
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Re:
Not 1300 different artists, but about 2,000 different live concert recordings by taper friendly bands. Thats the answer to the whole "record industry greed" thing. support live bands that allow taping. Buy that bands albums. See their shows. Record the shows and trade them freely with other fans. More and more artists are encouraging this.
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Re: Re: Re:
He wants that much and enjoys listening to a huge selection of music. Just because YOU don't doesn't mean others are the same.
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Well yah...
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Re: Thoughts on podcasts
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portable HD
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Songs as a commodity
This doesn't follow. Having a huge library of jazz, classical, and rock in no way makes Jimi Hendrix equivalent to Esa-Pekka Salonen. Following your logic, I would just want to listen to "music" -- artist, song, genre would be irrelevant, right?
In fact, just the opposite is true: every so often I have to listen to The White Album, but it might not be on my player right now, because I have a lot of other music. Giving me a much larger storage space makes it MORE likely that I'll have this on my player, and more likely that I'll want to own it.
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song cost
however weighing in on the song pricing debate, $1 per song is ridiculous (any cost for a DRM song is more ridiculous). CNN once showed the cost per CD of all the components. I took a shot at breaking out costs per song and reducing the costs that felt could be reduced in an e-music environment (see snapshot here*)and using a conservative approach can get the cost per song below $0.50....i'm sure someone more knowledgeable can do a better job. Anyway, for me it needs to be well below 50 cents (i think i was getting 30 or 40 cents when using emusic) and there must be NO DRM, none, or i wouldnt pay a penny (Actually, i get "free" songs from my cafeteria occasionally and throw them in the trash)
*costs: http://farm2.static.flickr.com/1368/1346569173_f33fb6125d_o.jpg
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It's actually a great idea
So what do you do? You take 1 or 2 well known bands, you drop a *few* of their songs on an iPod, you add a bunch of your less well-known bands' songs, and you've got something that will appeal to more people. Think Pandora. You put in a band name (or song) and 30 minutes later (at least, if you're like me, an average listener) you have about 5 or 6 more bands you're interested in. Bands which you've never heard of before because they're not so big and they don't get regular radio air time. Granted, the added bands need to be tied in with the big names, but that can't be so hard, again, Pandora seems to do it magnificently.
Don't put every song from any band, put one or two from a group of bands to entice the listener. Then they go out thinking "I'd like more of this band" and, with the price drop, they're thinking "hey, this is a deal!".
And frankly, the music industry is in the perfect situation to do this. Think of gas prices in the U.S. Always higher, but if prices drop $0.10 everyone thinks they're getting a deal and stops for gas! Let alone that 4 years ago it was over a dollar less! It's a deal *NOW*, and that's all that matters. The $1 song had it's place, it put people on the precipice. Now is the time to drop it (by, say $0.75) and bring them in!
As many people have pointed out, compressed formats don't have the same quality. And so it becomes a quality vs. quantity issue. If you're not offering the same quality, then you should drop the price and make up for it with quantity. Otherwise it's like selling a Nissan at Ferrari prices. Yes, they both get you where you're going, but the Ferrari shopper is a bit more particular in what he wants (particularly a hand crafted engine that gets him where he's going at 120 mph instead of 80).
The worst part of this market is that people are agreeing to pay the price (as proven by the number of iTunes downloads). And with the legal junta supporting the recording industry, it's not like we have a lot of choice. Nobody in the "decision making clique" seems to realize that while we have a choice, it's not much of a choice (thanks to our old friend DRM). If I remember my (decidedly somewhat inaccurate) history, the U.S. was much more anti-monopoly than it is now. It seems that then it was "Oh, it's a monopoly, let's cut 'em up!" and now it's "Are we sure it's a monopoly? I mean, really, REALLY sure? It doesn't look like the board game to me at all!"
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Intellectually Lazy...
Meanwhile, the RIAA sells the eggs and buys themselves private jets and, probably, specially trained wombats that will be used to sniff out illegally downloaded songs.
Also, if you're going to turn the music marketplace into a commodity-driven market, then you can't (and shouldn't even try) to level the market place by having a "one price fits all" model. Commodity markets are driven by supply and demand, with a price that fluctuates in response to the demand. So, yeah, there would be some artists that would be able to command a whopping $0.001 a song because nobody wants to listen to them. Conversely, other artists could, in theory, command a larger sum.
However, there is one glaring hole in all of this, and that is to consider the impact of scarcity in valuation of any given product. Diamonds are expensive because they're hard to get, and they're available only in a few geological areas. How would you address this one? Make it to where only the first 500 people are able to purchase a given song? At that point, you're practically begging folks to start pirating the music.
Piracy exists for a variety of reasons. Some people engage because yeah, they just don't want to pay for music. Some people engage because they don't feel that the prevailing pricing model is not conducive to their economic situation.
The solution is to cut out the middle men and create a model that actually supports the musicians/artists rather than one that treats them like a collection of trained monkeys.
By the way, what the hell does "songs are not about technology" supposed to mean?
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Fair enough comments. Downsize the exiting high-cost high -margin distribution, replace it with network distribution but keep the supply-demand pricing model. I.e. The more demanding or desirable songs get to have a higher price. Even allow bidding for certain special music. Return more revenue to the musicians and producers. This will bring wonders to the creative juices and benefit listeners.
'Songs are not about technology' means one should not price music based only the cost of its distribution and the player. I.e. price of songs should not go down just because a player can store or play much more cheaply due to advancing technology.
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Sell time not music
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riaa teh sux
32% of music released in 2006 was not released on a CD.
When the face of an entire industry is suing employers (Like Deutsche Bank..!) to find out who was using a computer at work, spending thousands to recover $300 judgment, and claiming thousands of John Doe lawsuits, it's defies logic, and shows how desperate the industry is.
Have you noticed that everything seems outsourced at RIAA? MediaSentry does the footwork, RIAA website is hosted at GoDaddy's SecureServer farm, and their email system is hosted by some 3rd party webmail company called Postini.
Apple scores #1 in University of Michigan’s American Customer Satisfaction Index.. The culture of Apple is what happens when you break down barriers instead of building them.
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What happens when my CD gets scratched? The want me to buy another one. I purchased several cassettes multiple times for the ones I wore out, melted in the car, tape player ate... I would love to see a list of all the albums I have paid for more than once.
The artists make the majority of their $ via concerts, tours, and merchandise, not CD proceeds. That's why the Record companies want total control. I still have most of my cassette tapes and an Identical CD.
It would be interesting to see the % of sales that are for replacements of lost/damaged media.
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The other side of the story is that the technology for recording music is getting MUCH cheaper (not just the low-fi classics like Bruce Springsteen's Nebraska, either). Most musicians use some type of computer-based recording these days (like Pro-Tools), and as the retail outlets become more irrelevant, the music industry can't offer much in the way of distribution service. The future is in internet distribution, and the internet tends to cut out the middle-man (or make middle-man services much cheaper). Artists need to find a way to make community buzz lead to actual money in their pockets for recordings. One example is how Aimee Mann built her return by selling her cds on the internet.
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Because...
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downloads = in
deal with it and let others have said get a new business model to make money
people still like buying albums but only by artists that they LOVE... and lets face it, in the 21c of music, alot of sh1t sounds the same and over-produced. IMHO
so to LOVE a band anymore, takes alot to accomplish when in a sea of genericity
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Why they hold on to the old ways
So when you say Britney Spears owns three mansions and 20 cars and made $34 million last year, what does that mean the recording company NET?
In 1992 was sold to EMI for $1 billion. You don't pay that for a company not making a good fraction of that annually and has the potential for much more.
They don't want to change because they are making really, really, really big money off from the system the way it is. I submit to you the idea that they would still make much of that at $1 a track electronically. They just want more and more and more. It is greed and capitalism.
As long as we pay it, they will continually raise the prices. The problem is, they don't want to lower the prices and take a hit to their excessive lifestyles. That includes many of these "artists". So I ask, how much is too much? Stop buying their garbage and they will change or go away!
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Re: It's actually a great idea
They could put any DRM on they wanted, the drives cost about $15 or less now for 2 gig (sometimes free, they use them as loss leaders all the time). Load them up with music, and sell them. You would get the same results.
Personally, I don't see a market for it, but I have been wrong before as I am a cheap SOB.
I am all for not buying any of the music that is loaded with DRM or is over priced.
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Re: Thoughts on podcasts
I owned a 20 gig iPod and even with the 3 hours or more of podcasts I listen to daily (long commute + working out) AND my favorite CDs I still only used a little over 2 gig of it.
I would like to see podcasters come up with a monitizing method that does not take money directly from my pocket. I will listen to commercials and click relevant links if they want me too.
That would really rub RIAA noses in the dog poo so to speak.
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Re: recording "artists" income
Are you sure they make a majority from concerts and such? It makes some of my points less valid if that is true. Although I don't think totally invalid.
I agree with your point about paying several times over for license to use the product. I think that is why they are now coming out with "HD DVDs" and other new media. To force people to buy all those products again eventually. AND I won't be able to sell them as it will be on the old media!
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Drop the friggen prices
I wonder how much longer before the record industry wakes up?
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Re: Intellectually Lazy...
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Just for my car...
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Buy them out
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Re: Buy them out
Many here have bandied about the phase "middle-men" like its a single enitity. That is about as far from the truth as you can get.
Let me give you a snap shot of what hoops one has to go though just to use a thirty second snippit of a song.
Earlier this summer I more then toyed with the idea of starting a regular podcast and had a theme song picked out.
Its a fairly well know song that gets air-play even if it is about four decades old. And I only need it for the intro about 30 seconds or so. To be legal I would have get permission (which realy means pay a fee) from the writer of the song, the preformer of the song and the owner of the master recording.
Now the Composer rights are handled usually by one of three orginazations: ASCAP, BMI or SESAC and you can get the rights to a song for annannual fee of about $300 USD. This only gives you the right to preform it your self or to have somebody preform it for you, but you still must have this premission even if you want to use the Orginal Artist recording.
So, now you have to get the preformers premission and these are controlled by the record labels and is called
The Mechanical License which is the right to reproduce a preformence of a song, the Harry Fox Agency handles that on a song by song basis. The title I desired was about $1500.
Next is the Master Use License which is the owner of the master recordings and is usually the Record Label. This would have been $2500.
$300+$1500+$2500=$4300 not including the cost of certified mail and checks.
Much cheaper to invite my brother-in law over to pizza and have him do a riff or two in my home studio.
But if you noticed, its more then jsut one company and I doubt tht the privatly held Harry Fox Agency will entertain any buy outs from Google.com.
Kinda gives you an idea why the Stones keep touring. Can't Get No Satisfaction, indeed.
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Re: Re: Thoughts on podcasts
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Re: It's actually a great idea
The recording industry is afraid of any new media. They were afraid of CD's, cassettes and probably eight track tapes.
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Re:
I, however, do have a large music collection-- though, not yet 40k songs (that's expensive!!) and on that scale $1 a song is quite unreasonable. Especially when you think about how much it actually cost them to make a copy of that song for you, after it's recorded. $1 a song then becomes akin to highway robbery. Also, saying you can over-price something on the basis of when you consider how many songs someone is really going to listen to is like saying you can charge whatever you want for that set of knives, because, hey, they don't need to be buying too many knives anyway. Please. :P
And last of all, your headline is moronic, 1 song doesn't equal 1 reason.
Ignoring the fact that you've probably heard the phrase "I'll give you a million reasons to kill my wife/leave town/rob a bank.." the headline doesn't mention reasons at all.
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Shelf Space
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Re: Intellectually Lazy...
It means they're too young to have ever listened to Kraftwerk.
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Re: Hey Mr
"the combined space of all the computers in the world does not amount to one yottabyte. According to one study, the world stores 161 exabytes as of 2006, with 988 exabytes projected by 2010."
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Not to hard to fill 160gb
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Re: Hey Mr "T"
Since having even 1YB on a single machine is next to impossible unless he has some new storage device that has yet to be announced I will assume he has several NAS devices. A quick search and I found that Buffalo Tech has a 4TB NAS so lets assume he is using these. To get 250YB of storage space using these 4TB NAS devices he would have to have a total of 274,877,906,944 (that’s 274.8 BILLION devices.) Unfortunately I am unable to find a price for the 4TB version but their 3TB version is selling for $1,600 at Newegg. Using this price it would cost Mr Mondo a grand total of $439,804,651,110,400 or $439.8 TRILLION to gain him his stated 250YB of storage, not to mention the space, cooling, and power requirements needed for these devices.
The combined net worth of the top 20 richest people in the world according to Forbes adds up to $536.9 Billion. The est. national debt of the US at the time of this posting is $9 trillion. He would have to spend 819 times more than the net worth of the top 20 richest people in the world or 48 times more the est. national debt of the US just to purchase the devices.
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$1/album, not $1/song.
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Business model sucks
Eventually, all the big companies will break down into a collection of smaller companies until bands are forming their own record labels, and the only contracts signed are distribution contracts, and eventually, I think music will become something run by the musicians. A engineer will be part of the band, or part of a group of bands who decide to band together in a small label. There may be a big company or two thrown in there, but overall, the entire entity of the RIAA will likely dissolve over time.
And that's why they're so damn scared, they know they'll be out of business if things keep going this way.
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how much artists make
but .. just to clarify
on iTunes an artist makes roughly 11 cents from the 99 cents the song costs. since a lot of artists also release their own music on their own labels, they make a bit more.
I'm about to start my own indie netlabel and besides selling the tunes on the common dance music online stores like beatport, dancetracks, traxsource and of course iTunes, I will also sell the tracks on my own site. For less than all the other stores will since I'll make 100% of what I sell.
filling up 160gB is not that hard btw. esp. when you don't only listen to single songs but podcasts, dj-mixes etc.
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Re: Business model sucks
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Re: Re: Business model sucks
independent artist + independent labels = more power to the creators
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Re: I thought the same thing.
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Re:
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Re: Well yah...
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they wont go dry!
Thats what i think :)
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um... get a brain. People don't want 40,000 songs.
You're wrong, of course.
I just ordered the 160GB iPod, and I'm overjoyed. I have a CD library of 4000+ titles. I want them all in my pocket. I want to be able to choose any album I want, anytime, or else put the whole thing on shuffle and kick the ass of every possible radio station in the world, because none of them have a months-long playlist programmed entirely by me. (Well, every radio station except for WWOZ in New Orleans, of course, the greatest radio station in the Universe. But only them.)
This is the future.
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Cheaper than iTunes
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