Rethinking Music Selling Incentives: Can A Pyramid Scheme Help Save Music Sales?
from the it's-creative,-but... dept
Capitalist Lion Tamer points us to an interesting post by Chris Holmes, a musician, who has come up with a thought-provoking idea for a different kind of business model for music, which he calls the Privateer System (named after the British attempt to "legitimize" piracy on the high seas). The post is pretty long, but the basic idea is this:1) An artist/label sells its record directly to the public through a The Privateer System website for $10.00.He notes that the prices and profit sharing margins are examples only, and can be changed by a participating musician/label. It's definitely a creative and different idea that got me thinking, but I'm not convinced it would really work. It certainly might be worth a shot, and it's nice that it seeks to do a better job aligning certain incentives. However, in the end, this still looks like a typical kind of multi-level marketing deal, better known as a pyramid scheme. Those tend not to work very well in the long-term, for a variety of reasons. I think this does improve slightly on the classic pyramid scheme, in at least there's some level of price differential between levels, which creates an interesting conundrum for potential "buyers." Do you pay a higher price thinking you can sell more and get more?
2) Any party that buys the record directly from the artist/label we will call a "primary buyer." The primary buyer receives a license and a Java widget with their purchase, enabling them to sell digital copies of the record for $7.50; $5.00 of that sale price goes to the artist/label, while $2.50 is profit for the primary buyer.
3) A party that buys the record directly from the primary buyer we will call a "secondary buyer." The secondary buyer receives a sublicense with their purchase to sell digital copies of the record for $6.75. $5.25 of that sale price goes to the artist/label, with $0.75 as profit for the secondary buyer, while the primary buyer sees $0.75 of profit. (The party that buys the record from a secondary seller we will call a tertiary buyer.)
In the end, I could definitely see this working in some instances, but I'm not sure it would really work on a wider scale basis, and still seems very focused on the idea that the music has to be paid for, rather than looking for better ways to leverage the infinite nature of digital works. So while it's intriguing, it still seems like ultimately it would be limiting. Still, I'm curious to hear what others think.
Filed Under: business models, music, privateer system, pyramid scheme
