No, iTunes And Amazon Downloads Are Not The Answer For The Recording Industry
from the not-going-to-happen dept
Over the past few years, you started to hear people in the recording industry claim that they were now "embracing" online music, but they were doing so in the form of iTunes. Even though they hated Apple's dominance in the market, they still felt that selling downloads was the key to the future. Not so fast. As plenty of folks have been pointing out for years, free downloads have always been the ones really dominating the market. No, it may not be legal, but to ignore that market reality is simply asking for trouble. So, it should come as no surprise that despite whatever "advances" have been made in pay-for-downloads lately, the percentage of music listeners paying to download is shrinking, while the number using file sharing systems (despite all those lawsuits and bogus "education" campaigns) has remained constant or grown. Given that we're seeing musicians both big and small use free music to make themselves plenty of money, isn't it time that the industry as a whole started to recognize the opportunities?
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Filed Under: business models, downloads, free, music, piracy, recording industry
Companies: amazon, apple
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This is not a surprise
This is indeed not a surprise. The fact that iTMS still has DRM on most of their songs (And is the #1 music store) clearly shows that the studios are still artificially restricting their market potential.
If they want their customers to pay for the music, they need to stop making the "paid" content less valuable than the "free" content.
Until they lift that artificial restriction they themselves place on Apple, not a word of their statistics is relevant.
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The Industry is Redundant
If by 'The recording industry' you mean members of RIAA, we need not concern ourselves with their fate. If they can have brain surgery to recognise the opportunities and make the paradigm shift, well, great, they can get with the program, but otherwise they'll simply wither.
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Re:
The 'as we know it' comes into play because Mike's got a running series about how content is and always has been advertisment (example: Techdirt content advertises the analytical skills of their experts), but you can read about that elsewhere on here.
The trick, then, is to figure out what it is you can leverage to make money on free music. That shouldn't be hard -- I think it's the easiest market to build off of with the economics of free -- but it needs to be done.
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Re: Re:
Yes, this is true. That part of advertising isn't the major goldmine that everyone claims. But, there is still a cost and benefit from advertising that is just face time. Like advertisements on TV, you can't click through, but you see it. There is a premium paid for shows that are watched more. Thus, this should correlate to a website as well. And I am not just talking about selling banners. I am talking about them selling the style of the full page (ala Myspace's homepage) or a little flash ad that pops up while the song is DL'ing. These are just two examples. There is more to advertising on the web that just click through banners.
On top of advertsing as a source of revenue, they could be marketing other merchandise for the bands directly with the music... t-shirts, posters, DVDs, etc... So, when you are looking at the songs you can download, right there on the same page is the merchandise staring you in the face.
Like I originally said, will it be enough... I don't know. But, if they can do it right, I think it would be profitable.
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Stupid industry...
On top of that, they licence different terms to different countries, and apply idiotic regional restrictions that simply don't exist with physical goods (e.g. I can buy a CD from Amazon or Play, but can't buy a digital download from either because of my geographical location).
Then, we have the pricing structure (still way overpriced, and the industry seems to still want to push the price UP, not down), the ridiculous advances demanded of new startup retailers, etc.
For some people, it's easier and cheaper to buy CDs (sometimes second hand). For others, it's easier not to bother buying at all. When other entertainment media (e.g. Grand Theft Auto 4) not only contains a higher level of entertainment than many new albums, but often come with music included anyway, why buy music downloads?
They need to buck their ideas up, go straight down the DRM route and allow retailers to negotiate better sale prices. Until this happens, people will continue to find other entertainment - and no, I'm not talking about piracy.
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RIAA Alternative
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Re: RIAA Alternative
Perhaps it wouldn't work, perhaps it would, but I would be quite interested to see someone attempting a sort of fundraising for an upcoming album through fan (or even corporate) donation, with incentives such as signed limited editions, progressive/milestone demos/samples, public acknowledgments on the album booklet/official website, live webcam access to recording/practice sessions, sweepstakes for private meet-ups with the band and so forth. At least I know such a thing would make ME shell out a lot more than I do for music now. Admittedly, such a system is more amenable to already established bands, but I don't think the popularity threshold would be very high to make it workable. In fact, I'd be willing to bet that even moderately popular artists would even overshoot their fundraising goals in a pretty short time... and in advance!
SellaBand's perspective is more geared for startups and looks kinda promising, although I find them a bit lacking in the incentive area.
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Re:
1)Music is subjective and 2) there is a lot of it out there.
If you can't find something that isn't crap you either need to expand your horizons or look somewhere else.
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Instead, one could try to start a system where people TIP for music they like. Fans can download all the music for free they want, but when they really like something, they would feel socially obligated to tip for it. It isn't free, but it just doesn't cost anything.
If the musicians cast themselves on our mercy, they could guilt trip us some.. whereas right now their record industry masters can only guilt trip us into flicking them a booger.
You can work within this system to encourage tipping behavior: pick a slogan 'tips for zips' representing a willingness to send you the mp3s with NO BULLSHIT, as easy as possible, all in one zip, in the thank-you-for-tipping page.
This primary election cycle has had a few candidates showing realtime $ tickers. This was controversial?? Hah. Musicians, put a ticker for your latest album on your homepage and tell us how much it cost to record. We will take care of you.
Come on guys, this doesn't take a lot of creativity.
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Re: Tipping is almost the right idea
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There 1st step should be to work with amazon, itunes and that new napster system we started hearing about.
I don't think a corporation such as RIAA can really work with the free downloads same way Trent did on a regular basis but they could/should use that on a promotional basis.
bottom line the RIAA is just a leach they don't really offer any product or service so it looks like they out lived there purpose.
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While perhaps some of these industries to varying degrees can adapt in varying manners to reflect this "paradigm shift", I am at a loss to envision adaptations in some of these industries. Using the software industry as an example, just how is a CAD/CAM software producer to proceed and maintain a viable revenue stream?
Perhaps Mr. Masnick can elaborate using the above example since it does seem to represent one of the more difficult cases clealy distinguishable from entertainment media content.
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Re:
The tactic generally used by music labels (and lately, movie and TV studios) has been to attempt to *artificially* inflate the market value of the digital good. Thanks to the aforementioned market forces, this is unworkable in the long run as consumers realise that the price is too high and go elsewhere.
The trick is to generate interest in your product, and leverage the free goods to either a) sell related, non-infinite goods or b) sell service and/or maintenance for the product after the sale.
With your example of a CAD system, the producer would need to change from a "traditional", Microsoft-style system (selling the code) to a more open source type of model (not necessarily selling the program itself but selling the support and expertise of its staff as per Red Hat, MySQL, etc.). That's not to say they would *have* to give away the code, but if their competitors did so then they may have little choice unless their core product is significantly better.
That's not a perfect example, since CAD programs are a niche business market, far removed from the general consumer market that we're discussing, but hopefully you get my point.
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Re:
No. Not that it ceases to be a marketable good, but that as the good becomes infinite, it becomes more and more difficult to charge directly for it -- but that at the same time, the fact that that digital product is now infinite, helps boost the market for many other scarce products.
While perhaps some of these industries to varying degrees can adapt in varying manners to reflect this "paradigm shift", I am at a loss to envision adaptations in some of these industries
I always find it to be an amusing argument -- that because one single person cannot come up with the associated business models that none can exist. You didn't say that exactly, but you imply that.
The amazing thing about free markets is that they do seem amazingly adaptable in terms of figuring out business models that help produce any product that's in demand.
Using the software industry as an example, just how is a CAD/CAM software producer to proceed and maintain a viable revenue stream?
Again, break out the value propositions and benefits associated with CAD/CAM software. The real benefit in many cases is being able to rapidly design/test different kinds of products -- and thus, those who can build bigger businesses due to widespread use of CAD/CAM products have the incentive to fund the creation of such software. Imagine, for example, the manufacturer who builds products based on CAD/CAM designs. Doesn't it have the incentive to create and release a CAD/CAM program that also happens to have a very easy system for sending the design directly to that firm to build an actual prototype, or even manufacture a production run?
That's just a quick example, without thinking too much through it. It does change the market, certainly, but the idea that there's no business model to support CAD/CAM software seems silly to me. There's demand for it, and business models can be made to make sense. In fact, with more readily (free) availability of CAD/CAM software, I'd imagine markets would change in very drastic ways. Think about much more customizable products.
If you associate that with more flexible manufacturing programs, you could even have better 'design your own' product offerings, that could totally change a market in ways that could grow those markets tremendously.
Again, that's just a quick one, off the top of my head. Given more time to investigate the market, I'm sure I could work out 10 to 15 potential business models that would allow companies to make a lot more money. I'm sure you could too. In fact, I'm sure almost anyone here could if they took the time to think about it.
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Re: Re:
I used the software industry as an example since it is probably at the extreme end of envisioning business models, at least with regard to software such as CAD/CAM. Such companies provide software, constantly update their software, and do provide significant software support to their users. It is difficult to envision a business model where services can be used to supplant revenue derived under their current business models.
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Re: Re: Re:
It seems like you picked through his response to find what you were offended by and then didn't shoot down his actual ideas. You want to give that another go then?
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Re: Re: Re:
You most certainly did imply that because you couldn't come up with a business model that none could exist.
I also note that you don't respond to the actual points I raised.
Wonder why.
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It would not matter if iTunes entire catalog went DRM free - music sold there is not being distributed in an open format (MP3) and is still device dependent and inherently restricted (gotta have an iPod/AAC).
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Re:
Wow, you are so utterly wrong its rediculous. AAC is MPEG4 audio, and it comes wiht fewer licensing rules than MPEG1 layer 3. In other words AAC is MORE open than MP3.
Go ahead, show me one current "mp3" player on the market tht doesnt support mepg4 audio.
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itunes not so bad
Now that i make significantly more money than when i was a regular concert goer, i buy alot of music (cd's - new/used, downloads - itunes +, amazon, band sites, etc.)
I like the business model Mike advocates but, i'm not 100% sure where the artists/distributors would make any money from me if music was 'free'. Sure i can introduce a friend who may buy something but, that isn't direct money from my pocket.....
P.S. Yes Itunes has DRM and it's attached to a proprietary device but, there is something to say about a the user experience of finding, buying and playing the content very easily (if you own an ipod)...... It's the ease of finding and the ui that brings me back to itunes.
(i never thought i would say that about anything proprietary i'm an OSS developer - but, my time is valuable.... )
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The most wonderful thing...
I had a roommate that had several thousand dollars worth of recording equipment and did sold some "amateur" recording services locally. I do not know what his customers did with the music but it did change from an idea to a cd.
Here is the thing; eventually musicians (more than those who already have) are going to figure out how to make money without the major recording labels. Right now major labels have a majority of the market because of their clout, marketing, and talent seeking infrastructure. Unfortunately for them, all this runs on money. The point at which their profits start to dry up is going to be paralleled by a couple things: a decline in their ability to produce and market music while musicians outside of their sphere of influence enjoy success.
They really are only the middle man. They do not really add anything to the product; they just distribute it. 30 years ago when recording equipment was expensive and the only way to distribute music was via hard copies they were a critical part of making the music available en mass. This does not even resemble the reality of music production today. Is anybody really that upset by cutting out the middle man?
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cut out the middle man
I prefer a minimal number of locations to find music to download ... and if i'm going to buy it then that number decreases (itunes/amazon), i'm only going to use my credit card at 'established' places that i 'trust'.
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Re: cut out the middle man
Now look at it from another angle. Say the music is free. You like the music and you want a T-Shirt or a ticket to a concert? You can't get those things from iTunes so your card would have to be somewhere else anyways.
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Not to disagree with Mike, but...
When I was young (high school), we pirated Atari 8-bit computer games at school. I bought maybe 4-5 titles and copied the rest. (Not that I would have bought 90% of them anyway...)
These were the days prior to DOS being something other than what came with your computer and there was no such thing as Windows.
Despite our rampant piracy which led to the demise of the Atari 8-bit platform, the richest man in the world got that way by, get this, selling freely copyable disks. Now granted, they later put keys and such to make it more difficult, but Bill Gates still made (tens of) billions, as did Paul Allen and many other Microsoft employees.
So, I don't agree that digital songs (un-DRM'ed MP3s) should be "given away free" as the best business model. History does not bear that out.
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Re: Not to disagree with Mike, but...
When we compare the success of people who have tried DRM free music and the success of DRM, we find that DRM free has a much higher success rate (it's worked for some people{if not all so far}) than DRM (not one has worked). Not saying DRM free is the way to go 100% but it seems to be the better bet.
As for Piracy killing the Atari 8-bit, that's just made up. It wasn't piracy it was a vary bad management decision. I also know of quite a few Atari systems after that and Atari is still around.
Windows 3.1 was not freely copyable nor did they condone the practice of piracy but they did turn a blind eye and have admitted that Microsoft would not be the powerhouse it is without piracy.
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Simplicity
First, I am not a big enough fan of any music to buy merchandise except maybe once every couple years. On the other hand, if the band has good music, I am willing to pay money for it. That said, I am not everyone. I know my friend wouldn't pay for anything if he didn't have to -- there are way too many people with too many different ideas and interests to assume that 'free' is the best option.
Obviously, I don't know if I have a better solution, but I have some doubt as to whether free music is the answer.
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Amen!
Hear, Hear!
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Street Performer Protocol
And about this variation: Digributor.com? (product must exist before sale and only those who paid can download)
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Re: Street Performer Protocol
The only way to do this is for the artist to provide more communication with the fan/patron than is available to the freeloader.
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isn't it time that the industry as a whole started to recognize the opportunities?
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isn't it time that the industry as a whole started to recognize the opportunities?
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Sue Sue Sue!
The RIAA is hurting my income potential!
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mu-sick
If your good, you will make it.
Many artists have gotten to that level by having all their songs, stolen, and file shared...
The fact is, not everyone can be a rock star... It's has a lot to do with Luck, and where your based out of...
How about sell other cool merch and then get credits for free music. If a fan really loves an artist they will buy gear or clothes with their brand on it. so buy gear = free music...
Does that make sense to anyone?
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mu-sick
If your good, you will make it.
Many artists have gotten to that level by having all their songs, stolen, and file shared...
The fact is, not everyone can be a rock star... It's has a lot to do with Luck, and where your based out of...
How about sell other cool merch and then get credits for free music. If a fan really loves an artist they will buy gear or clothes with their brand on it. so buy gear = free music...
Does that make sense to anyone?
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Re: mu-sick
Most of the bands I love (and support) I would have never known about if a friend hadn't said, "hey, listen to this," and given me a CD they burned. That's the sort of thing we want to encourage.
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Street Performer Protocol
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Granted, they are mostly cheap Chinese variety mp3 players
http://search.ebay.com/mp3-player-mp4-aac_W0QQcatrefZC6QQdfspZ32QQfromZR40QQfrtsZ50QQftrt Z1QQftrvZ1QQsabfmtsZ1QQsacatZQ2d1QQsaobfmtsZinsifQQsatitleZmp3Q20playerQ20Q2dmp4Q20Q2daac
Here' s one. I win.
http://cgi.ebay.com/UX-Linda-Mini-LCD-Metal-Chrome-WMA-1GB-MP3-Player-Blue_W0QQitemZ27023765 7154QQihZ017QQcategoryZ73839QQssPageNameZWDVWQQrdZ1QQcmdZViewItem
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[A]pathetic
How I long for the days of progressive radio on the local airwaves... good times.
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I want my music and I want own my music and transfer it where i want and listen to it how I want. I don't care that I can't resell it anymore, never have. I do want to be able to put it on any device I currently have or may purchase in the future or convert it myself.
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itunes
I have the 80 GB iPod and it is not as great as clamed because everything has to run on format that is synced and all input has to come form iTune store and or you can't use it. I have a huge music library and plan to give the ipod away and get a new Zoom MP3 based machine. It allows more downloads and photo and movie flex for user. ITunes is very restrictive. The iPod is very solid and a good buy but other more flexable venders are now avalable.
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