How To Disrupt the Music Industry Once and for All
8 Comments Published by Louis Adekoya December 29th, 2007 in BlogMusic monetisation was one of my top technology segments ripe for innovation in 2008. Whilst there have been some signs of change in this space recently, it surprises me that no one appears to be doing what I am proposing here – at least not that I know of and not in the way I am proposing it. Perhaps I am overlooking some major obstacle beyond technology and the politics involved but I’ll let you be the judge of that.
As I see it, the main problem is that people just aren’t willing to pay for music these days when it is so easy to share and make digital copies. So instead of device and software makers wasting so much effort on trying to stop sharing and copying outright, why not enable fans to share tracks with their friends and make money from doing so, with a cut also going to the artiste and to the service operator.
The key to the success of such a model might be the platform(s) chosen for it. I can see at least two potential platforms for this sort of service – social networking sites like Facebook and mobile devices like the iPhone.
Social Networking Sites
It is no longer news that social sites like Facebook and MySpace are great for music discovery and sharing. Why not enable people to make money from songs they buy? It would work sort of like this:
- I discover a new track (perhaps the service – a third party application on Facebook – has recommended it to me based on my stated preferences, or one of my friends is listening to it). Let’s call the service MusicPay, for lack of anything more original at this time.
- I like the track and purchase it – knowing that I can now make money when someone discovers the track through me and goes on to buy it.
- My Facebook friends get notified that I have just bought track X.
- In addition, I recommend the track to some close friends.
- The track is also displayed on my Facebook profile.
- Friends click on the track to listen to it and are informed that if they buy the song, they can make money whenever someone buys the track through them.
- One or more friends buy the track.
- I get a small share of each transaction as does the MusicPay service, Facebook and the artiste, who of course gets the lion’s share.
The key things here are that a) there is an incentive – however small – to buy songs; and b) selling a song is just as easy for me as sharing it with someone for free – there is no extra effort required from me, so I might as well ‘sell’ rather than share for free. I also do not feel that I am being un-friend-like by not sharing the song with my friends for free, since I am giving them a chance to also make money.
Portable Music Devices
I am talking about your iPods, zunes, iPhones and other mobile phones here – in conjunction with their enabling software like iTunes. The MusicPay service would work on these in a similar manner to the following:
- I buy a track on iTunes or similar and download it to my computer and my iPod – knowing that I can now make money when someone buys the track through me.
- I add a “Songs I’m listening to” link to my IM/email signature/blog
- A friend discovers the track in one of the following ways:
- Clicks the link in my signature or blog (is taken to my MusicPay profile on iTunes)
- Comes to my house or is my car and hears the track
- If my friend has clicked on a link to go to my profile, he or she can then go on to listen to one or more tracks that I have purchased and proceed to buy them from iTunes, via MusicPay. iTunes, MusicPay, the artiste and I all get to share the proceeds.
- If my friend hears the track in my car or my house and likes it, I tell him or her that I can ‘sell’ it to them and that once they’ve bought it, they can also sell it on and make money. I can then either send my friend a link by email to the song (takes him to the track on my MusicPay account) or perhaps more smoothly point my device to his and share the song by some magic connection that is superior to Bluetooth. Either way, the result is the same – my friend buys the track and all parties involved get paid a share of the revenue.
Now some of you may be thinking that the incentive is likely to be too small to be worth users bothering to use the service. You would be missing the point, which is that it would be no bother since it would be just as easy as sharing a track today, or perhaps even easier. It would be a bonus to get paid for it. Also, you must realise that MusicPay could decide to allow users to download and perhaps even share music freely without purchase, but would take every opportunity to remind such users that they could be making money every time they share a track. It may well be a step too far, but MusicPay could even go the MLM route whereby the user gets a cut every time a track that originated from them gets sold – even when they haven’t directly ‘made the sale’, i.e. when someone they sold the track to sells it on and that person also sells on and so forth. Note that by ‘sell’, I mean to have someone buy the track through me, as opposed to selling my copy of the track and thereby giving up rights to it.
So what do you say – isn’t it about time the long awaited, much discussed but as yet (IMHO) weakly attempted disruption to the music industry actually happened? Any takers? Perhaps this is what Amazon or Microsoft needs in order to make a dent in Apple’s dominance in the music downloads and device space.
This is not a bad idea, by any means. But it’s not enough to disrupt an industry that has already been killed. Widespread sharing of music, megaupload, and the increasing mainstreaming of private bittorrent trackers like waffles.fm have already killed the music industry. Too many people of Generation Y have grown up not paying for music and they aren’t going to start now.
Thanks for the comment Kevin. My view (hope), as is probably be apparent from the original post, is that the industry itself is not dead – it is its present operating model that is. If that model is significantly changed – in the order of a paradigm shift – maybe, just maybe the industry can be salvaged.
Personally, I think that Generation Y (or at least some proportion of them) can learn to pay for music and other products/services that they consume online. Indeed I think the future of the Internet depends to some degree on them doing so. The only way that I can think of for getting people to pay is by giving them an incentive to do so. What better incentive than money?
By the way, I realise that it would be naive of me to expect the majority of Generation Y to suddenly accept this new model, but if only a small fraction did, it would be worth it. It’s not just about saving an industry – it is about saving music. OK that’s my bit of drama for 2007.
Listen folks,
I like the way you’re thinking, but it’s still wrong.
Music is a service — making money off the product is not going to work. Do you think people would be really motivated to make minimal money for sharing music with their friends?
Look at Facebook or Myspace, how many people do you see complaining that those companies are worth billions of dollars? They just keep on using it.
In the same vein, the majority of people aren’t interested in listening or sharing music to make money — its because they love it (check the sales of Apple’s Ipod if you do not believe this).
The killer idea for music (and I feel for e-books as well) will be this: give the music away for free with (or without) DRM technology.
The money maker — on the product, which doesn’t make much money for artists anyways, will be selling advertising, but the real money maker for artists is touring anyways.
By giving away their music for free the artist will achieve three things:
1. Increasing their fan base by making the music much more accessible
2. Possibly make money by selling ads — If LinkinPark, who is now independent, were to run ads on their website and then give away their music for free, you don’t think that would generate ads — imagine if Radiohead’s web page would have had ads how much money they could have made when they released their music for “pay what it’s worth.”
3. Get your service out there– again, music is NOT a product, it is a service. Look at the figures for Music Tours and see how they are rising, people will pay for this service because they want to hear music live, but if they already paid hundreds for their music player (you used to get a music player for cheap when it was CD’s and Tapes) , why they should pay again for the music.
People are still not understanding the internet— you have to give a reason for people to pay: people use Itunes not because they want to pay for music, but because it is so easy to put it on their Ipod.
They are paying for the ease-of-use, not really music as a product.
Thanks for the comment David. I must admit that it is news to me that artistes make money from touring than from sales of their music. It would surprise me if this has always been the case, but it would make sense these days when music sales are suffering.
Regarding advertising, my problem with that model is that ad-spported music is likely to have the same problem as ad-supported social networks are having – perhaps even more so. I am referring to the fact that people who visit music sites, do so to listen to music not to click on ads or buy things (other than the music itself). To my mind, the only ads that would really make sense are ads for other music, but why would artistes spend money advertising their music when no one will pay for it? I suppose, ads for concerts would also work but I am not convinced that concerts and ads for concerts are enough to sustain the industry. For one thing, I imagine it takes quite a while for an artiste to become popular enough to hold a successful tour, whereas with music sales, he or she might just earn enough to tide them over till they hit the big time.
Let me preface this comment by saying there are two music industries: Major label and Independent.
I have been learning a lot about the music business recently (in fact I just became an A&R scout) and even major artists do not make much of their money off of record sales.
A record label is pretty much a Venture Capitalist — but they get a lot bigger stake in the artists future.
Getting signed by a record label means they will invest in you, how much depending on how big they think you can get, as well as provide important networking resources: music producers, sound engineers, etc.
Don’t forget that an artist’s manager is likely getting a cut of all this too.
An artist initially gets 10% of records sold, initially, with the artist standing to earn more depending on how successful they are.
Again, artists with record labels make most of their money on touring (as well as merchandise, and related royalties, such as landing a song in a commercial, or movie).
In addition, many artists get big in fact BECASUE of music piracy — in the past we used to call this “underground,” such as rappers like 50 cent who got big as people heard and ripped his CD.
Limiting distributing of music in the end can only hurt the artist — the less people who hear their music, the less fans they will have. Distribution of music happens exponentially, so every person limited to distributing the music because it must be purchased is worth many more potential fans — (even accounting for overlaps in social networks) many social scientists mark the current number as 259– the average person’s social network of friends and family.
Again, most people outside the industry falsely assume that the money is to be had from the sales — this holds true for record labels and only the biggest artists (90% of artists do not recoup the original investment by a Record label.)
“For one thing, I imagine it takes quite a while for an artiste to become popular enough to hold a successful tour, whereas with music sales, he or she might just earn enough to tide them over till they hit the big time. ”
It is a very different story with independent artists, who bring home all the bacon (minus expenses) from record sales, but to think an artist under contract makes money by music sales is simply not true — again, refer to the 90% figure.
Thanks again David – this gives great insight. As an outsider to the music industry, I had always assumed and still do, that artistes themselves want to be paid for the music that they produce – and rightly so. Therefore, rather than the seemingly popular view that music must be given away for free, the point of this post was to suggest an alternative solution that could potentially be acceptable to everyone involved.
As a business person, I feel that it would set a dangerous precedent if the music industry were to just roll over and die, accepting this notion of “everything on the Internet must be free”.
What would be really interesting would be to hear the opinions of a few artistes – independent and otherwise – not necessarily on the solution I have proposed but on the DRM issue in general.
People want free music. 99% of the ideas I’ve heard to save the music industry is to give away the music for free. The only problem is you can’t save an industry by giving away the product. Do you think the record company will give away an artist’s music but still allow the artist to collect all of the tour, merchandising and advertising revenue? What would be the point of the record company at all?
The genie is out of the bottle, if you want to fix it, you have to put it to work instead of working to put it back in.
This is an interesting piece on wired (http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne?currentPage=all) by David Byrne, who is an artiste that has owned a record label and therefore has seen both sides of this coin.
He describes six different models for music distribution, at least one of which excludes the record label. I note however that at no point in this lengthy piece does he subscribe to the give music away for free model. Like David above, he tlks about artistes making a living from tours, but I don’t think he means as a complete substitute for music sales. In fact he admits that not all artistes are able to do tours.
It strikes me also that without much thought for what the artistes want, much of the discussion about this issue seems to centre on record labels vs. consumers, with the latter wanting music for free and the former feeling threatened by that. It seems to me – more so after reading Byrne’s article – that whilst consumers and artistes currently have a common enemy in the labels, if/when that enemy is eliminated, the two will turn on each other because the artistes will still want to sell their music and the consumers will still want it for free.
One last thought, which I alluded to in an earlier comment is that it is dangerous to accept that music needs to be free just because it has been digitized and can therefore be easily shared. If we accept that, we would soon have to do so for books as well, as more and more books get digitized for Kindle and other readers. I jest here but perhaps music and books should take the Hollywood approach – release first on an equivalent platform to the cinema and do so for a period of time before releasing digitally. Are tours the cinema for music? They would be if the artistes did not have to be physically present. For books, I guess it would have to be a public reading
.