We May Have Unbundled The Music... But We've Smartly Bundled The Music Experience
from the doing-it-right dept
Ian Rogers, from Topspin, has an absolutely fantastic blog post on the question of "unbundling" and "rebundling," in the music business. What kicked it off was David Pakman's writeup about how unbundling the album into songs that can be purchased individually may have had the biggest impact on the record labels' bottom lines -- much bigger than unauthorized file sharing. It goes on to talk about the economic impacts of unbundling in a variety of industries. It's a good read.Rogers picks up on this, and notes that plenty of people agree with this point, but they may be missing out on the fact that while this aspect of the music business may be in the midst of a massive "unbundling," other parts are seeing themselves bundled in highly profitable ways:
A new, more positive story is emerging. As artists get their arms around all their rights and build direct relationships with their fans we’re seeing artists’ output RE-BUNDLED into higher value packages and average revenue per transaction greater than those delivered by the Compact Disc. Instead of selling their art across a variety of channels (CD at Best Buy, digital download at iTunes, t-shirt at Hot Topic, ticket at Ticketmaster, and vinyl at Amoeba) artists are able to bundle their collective output into a single direct-to-consumer sale where they are the retailer (and pocket half the retailer margin, too). It’s true the CD was an incredibly efficient product with massive distribution (the move from “record stores” to big box retail in the 90s was a large contributor to the bubble you see in the above slide) with an average revenue per sale of greater than $10. It’s also true both piracy and individual track sales have unbundled the product and driven the average revenue per transaction for most artists to less than $3. But at Topspin we see people selling new bundles, different from the CD and as a result very high revenue per transaction:We've seen this before. And, obviously, I've spoken about this for years now. There are all sorts of opportunities, and those opportunities often come in recognizing how to best bundle scarce and non-scarce goods. This is why I think it's important to recognize the differences between what Pakman is talking about and what Rogers is talking about. Pakman's discussion on unbundling is focused on taking apart artificial bundles that were put together due to the inefficiencies of the technology at the time. You put a bunch of songs together on an album so you could distribute (and sell... and promote) them all together in one shot.
What Rogers is talking about, however, is a more natural bundle. Rather than a bundle borne out of the inefficiencies of existing technology, the bundling he's talking about is bringing together natural bundles of products that fit together smartly in packages that give fans real options -- and which are done for the overall convenience of fans and buyers, not the convenience of retailers and middlemen. That's a key difference and we're going to see more and more of it in a variety of industries. The bundles that will disappear are the bundles that were done to help serve the middlemen, and what will replace them (much more profitably and economically efficiently) are bundles that help serve the end user/buyers.
In the case of music, what's happened is that the unbundling is of the album, which certainly many music fans enjoyed, but which was often seen as inconvenient for the fans who just liked a few songs. What the new bundles are about is not about bundling music per se, but bundling the full music experience, which is what the industry should have been selling all along...
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Filed Under: bundles, business models, experience, music, unbundling
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Re:
What I was going to say is that in the olden days some albums were more than a set of unconnected singles.
Bundling 10 tracks into an album was because of more than just the "inefficiences of the technology".
many single Pink Floyd tracks I could name would be meaningless without the context of the album, for example...
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Re: Re:
While I may have not been impressed with some of the themes represented by albums from the "olden days" (and "current days" as well), many were quite analogous with the chapters in a book. Unbundling seems akin to taking a novel, and then selling to readers individual chapters, or perhaps even idividual pages from a plurality of chapters (which in academic vernacular are generally known as "Cliff Notes").
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Pining for days that never really existed.
The idea that the album was ever an inseparable thing is just the industry deluding itself. It was never so, even for the bands that actually had the chops to make an album that was a coherent work.
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correct me if im wrong cause:
but the average album has about 12 to 15 songs, and average cost of a CD was under 15 dollars, so industry is getting more money per song that it use to, plus selling digital music costs less than selling an actual disk with the music on it, the only negative aspect of this in the industries perspective is that, the user only pays for songs he likes he is no longer forced to buy songs he isn't interested in, but this isn't all bad because now the user will likely still spend his remaining 11 dollars on 11 other songs he likes, plus at 99 cents a pop the user is more likely to buy the track he wants since he isn't forced to pay 12 dollars for the song he wants and get a bunch of other tracks he isn't interested in.
(for the grammar Nazi's nothing to see here just move along)
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Re:
They were selling 1 or 2 "good" songs for $7 or so. Now they are selling those songs for 99 cents each.
The other songs just aren't being sold. So they either have to invest more resources in an artist: songwriter, auto-tuner, dance instructor, body double, payola for clearchannel, etc for 15 songs (instead of 2) to make the same money... or they make less per artist.
Plus Apple is getting a cut for doing nothing. I know it's nothing because Napster did it for free.
So now the record exec is giving Steve Jobs money, he's having to pay more per song, and lots of good artists don't even feel the need to sign all their rights to him anymore.
For the record company, what is there to like? The consumers are winning the war.
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Re:
Yeah, 2 things there:
First of all, iTunes and most other retailers aren't selling the albums at 99c per track. You have the option to buy individual tracks at that price, but album are usually cheaper as a bundle.
Secondly - and this is where industry people are having problems - you don't *have* to buy the full 12-15 tracks. Back in the day, if you wanted 2 songs from the album you still had to buy the album (or overpriced singles). Now, you just buy the 2 songs you actually want and aren't forced to pay for the filler.
" the user will likely still spend his remaining 11 dollars on 11 other songs he likes"
But, he might not buy the tracks from the same label. Or he might get a pizza instead...
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Topspin bundling
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Bundling
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Re: Bundling
http://en.wikipedia.org/wiki/Gramophone_record#Speeds
Incidentally, 8 track, which is also mentioned in one of the cited articles, was a mechanically bizarre system. An endless tape, spliced together to make a continuous loop, was wrapped around a single spool, and tape was pulled from the inside, run through the player heads (eight of them, reading different tracks), and returned to the outside of the reel of tape wrapped around the spool. Since the tape was continually rubbing against itself, over its whole length, this was an obviously unreliable arrangement, and was driven out by the two-spool cassette system.
http://en.wikipedia.org/wiki/8-track_tape
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They are not the end of all merchandise, t-shirts sell at the same price point, with practically the same costs of production, and people mock them?
Does it matter that you get $15 from a coffee mug, t-shirt, socks or a shiny plastic disc?
You have an infinite number of combinations to try and make money out of it with a large number of products that can be made, market and sold.
The end of the album era is not the end of sales is the start of new ways of thinking, is the search for another product that can be market and it is a warning not to rely on a single product format for anything because eventually it comes to an end.
Artists will survive and the same number will still get rich every year, companies will fall and new ones will appear and become incumbents and fall again is all part of the cycle, something some call productive destruction.
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Re:
What you're saying is really exactly what many people here have been saying for years - if you're smart about business and sell the things people are actually willing to pay for, you make money. Companies whose entire bottom line is recordings, or artists who want to retire off the royalties from a song they recorded 30 years ago have a problem with the direction change is taking them...
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Sanity
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Hate to nitpick and yet...
It really is not a moral argument.
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unbundling is happening to newspapers now too.
Maybe they want their news bundled by search engines or aggregaters rather than buying a whole newspaper with parts they never read.
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The industry is irrelevant at this point. The artists have a much better ability to understand and respond to the fans than the middlemen ever will.
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Beastie Boys
You pick what you want to spend, from $9.99 all the way to $75, and at each price point you get the music, and they hopefully get some money. Everyone ends up happy.
http://beastieboys.com
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My last half dozen full album purchases break down like this.
(1) artist website/release announcement > multiple choices/tiers including physical/digital/other > chose digital download > album $9.99 > sold
Value=Excellent.
(2) same as 1 but artist artist offering album/bonus tracks/bio > heard streaming full length sample tracks via site > album $5.99 > sold (sent $7.99)
Value=Excellent.
(4) artist site > multitude of options all with extras > all in association with Topspin > had questions > all answered immediately > sold (got exactly what I wanted how I wanted plus extras vids/cover art/remix stems/bonus tracks.)
Value=Excellent.
Many $.99 downloads too. Typically songs released years ago.
I guess some people are figuring it out.
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