Forrester Plan For 'Saving' The Music Industry: Annoying Windowed Releases?

from the copying-bad-movie-industry-ideas? dept

Last year, we wrote about a claim from Mark Mulligan, a VP and director of research at Forrester (the big analyst firm), who argued that music can't be free -- even as a bunch of musicians were proving him wrong. His argument was based on a faulty understanding of both the industry and economics. Mulligan is also the guy who wrote the Forrester report (funded by the recording industry) that involved some nifty guesswork and totally made up numbers that the UK government is now relying on to describe the "piracy problem" in that country.

His latest effort is to release a report on how "to save the music industry from the current Media Meltdown it finds itself in." Funny, I thought we were just seeing multiple studies -- including one from the music industry itself -- noting that the music industry is getting bigger, not smaller. Not quite a media meltdown. What's been getting smaller is one increasingly obsolete portion of the industry: selling songs (or, really, selling physical media with songs on it, and a weak attempt at replicating that online).

First, the good news: somewhere in the last ten months or so, Mulligan has recognized that free music can exist. That's progress! The second part of his theory is also a big step forward, claiming that the key to "saving" the industry (that doesn't need saving) is to create "a continual artist-fan relationship." Yes, exactly. Some of us have been saying that for years. There's more in there too about how much of the industry needs to change and innovate to keep up with the times. Good stuff and great to see Forrester finally catching up and catching on to where the market is headed.

But, of course, parts of the plan are a bit of a headscratcher. It still seems very much focused on getting people back into "buying music" rather than coming up with actual scarcities to buy. Instead, it tries to invent new artificial scarcities, mostly by copying an awful idea from the movie industry: windowed releases. The idea is that "premium club" members would pay to get access to music before others, and could get some sort of bundle of content. Two weeks later, the regular "release" would happen, with CDs, download stores and radio. Then, three weeks later, there would be a "free" component that actually is more "feels like free" using either ad-supported downloads or streaming.

Of course, like the movie industry, this ignores both reality and what people want. Those timelines won't make much sense, because as soon as the music's out, it'll be widely available. There's just no stopping that. Artificially holding it back doesn't do much good and doesn't give anyone a reason to buy. If anything, it actively drives people to unauthorized copies. Those who don't want that "premium club" offering won't wait six weeks for the official "free" streaming version with ads. They'll just go out and get an unauthorized copy.

So, while I'm glad that Forrester and Mulligan seem to be trending in the right direction with this report, it still seems to come up a bit short in terms of reasonable concepts for the industry.

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Yes, Actually, Music Can Be Free

from the if-you-know-a-little-economics,-that-is dept

A few folks have submitted links to a blog post by Mark Mulligan, who is a VP and Director of Research for Forrester. In the post, Mulligan talks about why music can't be free, noting:

Another argument being aired is that the music industry should stop being so hung up on trying to get paid online, indeed one story even referred to "the Music Industry's obsession with copyright". That's like saying "the car industry's obsession with cars". Copyright is the oxygen of the music industry. Without it there is no industry. Sure there may be cases for changing some industry practices but copyright remains the essence of making money from music.

Music cannot just be 'for free' anymore than cars or houses can 'just be for free'. If people aren't paid they don't make the product. Sure music will still exist, but you'll swap nicely programmed download stores and well stocked high street stores for buskers and millions upon millions of artist pages, all clamouring for your attention. Perhaps that sounds appealing? The problem is, most of them would sound a fraction as good as they would if they'd been able to give up their day jobs and been given proper equipment, studio time, mentoring and artist development support. And even those that would still manage to sound ok, would struggle to find their way to your PC or mobile screen as they wouldn't have any marketing support to help them get there.

Mulligan's post is actually in response to the various stories about France's SPPF suing a bunch of file sharing apps. However, it's a bit worrisome that a "research director" at one of the biggest research firms seems to have done so little research on the situation. While Mulligan's post is longer, let's just go through these two paragraphs and explain where Mulligan went wrong.

First of all, copyright is not, has not been and never will be the "oxygen of the music industry." The oxygen of the music industry would be fans, and if you treat your fans as criminals, you can be pretty sure that eventually they cut off that oxygen. Copyright may be an oxygen tank that artificially pumps oxygen into a sick and infirm patient, but it's hardly relevant to a healthy and robust system based on business models that take into account basic economics.

Next up is the claim that "music cannot be 'for free' anymore than cars or houses can 'just be for free.'" You would think that someone working as VP and research director of the second largest analyst firm would at least understand a little basic economics -- including the economics of scarce goods vs. infinite, or non-rivalrous, non-excludable goods. Apparently, not. So, Mulligan is simply wrong here. Yes, music absolutely can be free. Music, by itself, is quite different, fundamentally, than a car or a house, because those are scarce goods. If one person has a particular house, another person cannot. Yet, with music, everyone can have a copy of the same song. And, as we learned in basic economics, price is the intersection of supply and demand, and when supply is infinite, those curves meet at a price of zero. Alternatively, you can attack the same problem from another angle, which again was taught in basic economics: in a competitive market, price gets driven to marginal cost. The marginal cost of making a copy of a song is, once again, zero. Music can and should be priced at $0. That's just basic economics. To claim it "cannot be" without addressing such fundamental economics is troubling.

Even more troubling is that beyond even the "theoretical" aspects of the above paragraph, is the widespread proof that music absolutely can be free -- and that musicians can do quite well when it is free. Yet, instead of recognizing that, Mulligan trots out the tired and widely debunked line that "If people aren't paid they don't make the product." See what he did there? It's common among folks who are entering into such discussions for the first time. They say (a) music can't be free because (b) if people don't get paid, they don't make money. The problem with this statement is that he makes a huge leap that if (a) then (b). If music is free, musicians don't get paid. The problem is, that's false. We've spent over a decade chronicling various business models where people use free something to get paid for something else.

And, of course, this is hardly a "new" or "revolutionary" business model. It's the way the world has worked for ages. The pizza shop down the street from me offers a free soda with two slices of pizza. Yet, according to Mulligan's professional opinion on business models, the pizza shop should go out of business. After all, it's giving away a product for free, thus it's not getting paid. The problem with Mulligan's analysis -- which one would hope is not indicative of Forrester's quality of work -- is that he seems to have focused so narrowly on the market, that he doesn't know what the market actually is. He seems to think that the entirety of the market is selling music -- rather than using the music to sell plenty of other things. Musicians can sell a variety of scarcities, such as concert tickets, merchandise, access to the band, the ability to create new music and many other things.

The rest of Mulligan's argument simply builds on the spurious assertion that musicians wouldn't make any money without copyright. Considering that his underlying assumption is false, the rest of the paragraph makes little to no sense, especially in light of the reality of the music industry -- which is musicians can (and already do) make more money from focusing on selling scarcities.

Yes, we've all seen these arguments in the past -- but they're usually put forth by someone who hasn't thought through these issues, and has simply jumped into one of these debates without taking the time to understand the actual market fundamentals. Yet, here's a case where a top exec and director of research at one of the world's largest analyst firms is making these same very basic rookie mistakes. If your firm happens to be relying on Forrester for advice on such matters, perhaps it's time to consider an alternative.

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