Music Execs Still Confused Over Music Business Models

from the getting-there,-though dept

Mon, Nov 17th 2008 3:13pm — Mike Masnick

Reader Chris Gruel writes in to point out that at a recent conference various music industry execs seemed to embrace the concepts of free music, but the details aren't as encouraging as they might be. While it is good that these folks recognize where music is headed, they seem a bit confused about how to make it work as a business model. First, as a group, they all seem to think that "ad supported music" is the business model that will work. We've seen absolutely no evidence to support that (and, in fact, most ad supported music ventures are struggling).

The second disturbing point is that, while the folks on the panel agreed that DRM is dead, they still claimed that "the industry needs to protect the rights of content owners by compensating them when music moves from one individual to another." The only way that happens is with DRM, and it misses the point. If they actually put in place business models that embraced the infinite nature of music to make scarce products more valuable, they would realize that they don't need to "protect" the content, and they would want to encourage the free movement of the music from one individual to another, because it drives up the value of those scarce resources.

As an example, if a musician is giving away their music to sell more concert tickets, then they shouldn't worry about annoying advertising that drives people away, or trying to cash in on every transfer of a song. Instead, they should want the songs to spread as widely as possible to build up a larger fan base. The larger the fan base, the more people who are interested in seeing the live show, the more tickets they can sell (and potentially at higher prices, too). And, before someone jumps up and down in the comments about musicians who don't want to perform live, this applies to other business models we've discussed as well -- such as getting fans to to pay for the creation of music or for selling exclusive limited editions. Oh well, the execs can keep arguing about what the world should be -- while others out there are actually making things work without them.

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Filed Under: business models, drm, economics, free, music industry

16 Comments

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PaulT (profile), 17 Nov 2008 @ 3:42pm

I used to put up with ads on WE7 when it first started, even though it was a no-brainer to strip them from the file, because it was free. After they've shifted to a streaming model with more emphasis on unskippable ads, I lost interest and moved elsewhere.

That's the problem - trying to force people to fit the model rather than vice versa. I've said this many times, but I've totally changed my listening habits thanks to free and/or cheap music downloads from places like eMusic, AmieStreet, Stereogum and Better Propoganda, and the KEXP, KCRW and Resident Advisor podcasts. All legal, all easy to get hold of, and I don't mind paying for the albums when they've less than $5. I also check out bands when they're in my area (though, as I live in the south of Spain right now, that's not often, but I will still by merchandise).

But, nobody's going to get rich off that model. That's why the music industry panics, and why real fans don't care. More bad music has been made in the pursuit of those riches than for any other reason. Most real music fans would rather see 100 new bands make a living from their music than a single American Idol winner make millions because they happened to win a karaoke contest, and most real artists (those in it for the art, not the cash) would agree.

Ads are a bad idea, but there are businesses that can support them. That's far from guaranteed in this financial climate however, and real musicians are better off using free to sell their sound. That doesn't mean that they have to give away everything - bands who give music away still sell CDs, DVDs, merchandise and tickets. It's down to them (or their business managers) to work out the best balance, but as is often said, the losers will be the ones sticking to the "traditional" model while others around them innovate.
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Harry, 17 Nov 2008 @ 4:12pm

Free Music
Look the reality is the built their business on Free Music was called RADIO and then MTV. Yes, you can't easily keep Radio and MTV but then Radio and MTV doesn't personalize and doesn't get viral the way one person can influence 100's w/ a download.

Not only was Radio FREE they paid for placement (Payola)... anyway they just need to wake up and get a clue.
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Semi-Pro, 17 Nov 2008 @ 4:26pm

New Wind
As an indie musician, I have seen the effects of free music and have also shifted our business model to support it, and now we fully embrace it. We also found that while touring to support our CD's, that we sold MORE CD's and shirts on the road than we ever sold independently online with no support.

Music Fans DO purchase CD's at the shows even when we have announced that they can get our songs for free from our website and MySpace. We also offer 'special edition' CD's for sale at the shows with a few outtakes thrown in that aren't available anywhere else but at the show and they sell like crazy. Even when gas was a mighty $4 a gallon, we still had plenty to pay for the tour, rooms, and food along the way.

Giving away our music for free created a fan base that we would not have had without some kind of 'official' label support (which is crap for new bands anyway because of the flood of bands being signed to 'low-wage' contracts). We have uploaded our music to the masses of online radio stations, podcasts, and free music websites out there and it has paid off tenfold for us. Yes, we work hard at self promotion, but at least at the end of the day, we're not paying the salaries of snobby A&R reps, managers, record execs, and others to tell YOU that you should be listening to the hot new thing.

The new business model?
Accept your extinction and get out while you can. There's healthy, young, business minded musicians out here ready to rewrite the business for you.....based on art, not money.
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interval, 17 Nov 2008 @ 4:29pm

Re: New Wind
New Wind:
Hear hear! *clap clap clap*
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Anonymous Coward, 17 Nov 2008 @ 5:53pm

I agree with PaulT - I'm willing to pay something for music but music is over-priced. Music just does not have nearly the value that license holders assign to it. A lot more music would be sold if music was a lot less expensive.
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Mikey Boy, 17 Nov 2008 @ 7:10pm

When are these idiots going to realize that DRM is DEAD...do you hear me? DEAD It will *NEVER* work and will kill the industry. Dont they see that for years music moved from one individual to another freely and that worked fine. In fact, it built the industry to what it is today. What? they are not happy weith the mammoth houses they live in now? People will always buy music. Especially now where youj cvan download a song right to your mobile device in seconds. Thats they way for them to make money. Just make it easy and cheap and people will flock to it.
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Anonymous Coward, 18 Nov 2008 @ 1:42am

Industry died. We just need to dispose of its rotting corpse.

They're just petty middle-men, needed once, but now obsolete.
And don't worry about their welfare, Lennon, Elvis, Hendrix, etc. are still making fortunes.
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AJ, 18 Nov 2008 @ 6:06am

I used to think...
Ad supported? I used to think that would be ok, but after last night... SHEESH..

I'm a big fan of Amazing Race. I was out Sunday evening and the show started 30 minutes late because of the football game. My auto-record recorded the last half of 60 Minutes and only the first half of Amazing Race.

So I scurried over to the CBS site to watch it. The episode from this past week was not up, rather they were a week late. Without realizing that, I started to watch and got a commercial. OK. I can deal with one of those. I tried to skip ahead to a point about 20 minutes into the show... got another commercial before it started and right after it started (played about 30 seconds) I got yet another commercial. It wasn't where I wanted it and tried to skip ahead and got yet another commercial. They wire it so you can skip in the program but not the commercial. I gave up, disgusted. I'm now downloading a free version off bittorrent with the stupid commercials removed. I get the current version and NO commercials. I really want to follow the rules and pay my fair share to produce good programming, but they just make it SOOO hard and push away those of us who realize those shows just don't magically appear, but cost lots of money to produce. But when their obsessive/compulsive need to advertise every fifteen seconds... you lose those who are your bread and butter.
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TDR, 18 Nov 2008 @ 7:20am

RIAA: I'm ready to tell you my secret. I... I sue dead people...

Definitely agree DRM is dead, and new models are the way to go.
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me, 18 Nov 2008 @ 9:08am

Re:
If you buy the overpriced crap you're part of the problem.
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me, 18 Nov 2008 @ 9:11am

The Music Industry NEEDS to die
Music is art not business. Business tried to co-opt it and failed. The "industry" needs to die that the art form might live.

Done.
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anymouse, 18 Nov 2008 @ 12:21pm

Commercials in Online Shows
Most of the Prime Time shows I have watched online have 3-4 commercial breaks (you can even see them in the timeline in some networks) and the commercials are rather brief (15-30 seconds) and usually tied to the network or a sponsor (on Fox most adds were for other Fox shows, on NBC there were Schwab commercials). I did notice that any skipping around initiated another commercial, which you would never see if you just started the show and watched it in it's entirety (with the 3-4 scheduled commercials).

Even with the commercials you can watch an hours worth of a TV show in 45-48 minutes, which is much better than sitting thru the extra 15 minutes of commercials that are broadcast.

To each his own.
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mookie von zipper, 18 Nov 2008 @ 3:39pm

after the break, another 10 in a row, and, hang on to your hats, a deep album cut!...
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Matt, 18 Nov 2008 @ 6:43pm

Re: Anonymous Coward
This thought needs to be processed a bit more. 'Lets make music less expensive' does not instantly mean more music would be bought, it just means margins would be smaller and less musicians would be able to make a living out of doing it.

How did you reach the conclusion that music is too expensive?
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Anonymous Coward, 8 Dec 2008 @ 6:13am

Re: New Wind
neato!
i dig the last liner! some money back for our efforts would be handy though...........
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truth, 8 Dec 2008 @ 6:17am

Re: Re: Anonymous Coward
very true,
new album prices in Australian record stores have not gone up.. if anything they have gone down, in the last 10+ years. compare that with fuel, food, eberything else has risen enourmously.
i dont think music is too expensive. their is just too much of it available for free, so it now seems that way.!
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