Sorry, There's No Silver Bullet Business Model For The Music Industry
from the more-like-silver-blanks dept
Forrester analyst Mark Mulligan believes that the problem for the recording industry is one of demographics. Mulligan uses the fact that the billionth application purchaser on iTunes, 13 year-old Connor Mulcahey, was much younger than the 10 billionth iTunes music purchaser, 71 year-old Louie Sulcer, to highlight the issue: older users may still pay for music tracks, but younger users are more likely to “part with their cash” for apps than for music. To Mulligan, the problem is with the current digital-music product itself. Thus, he prescribes a feature-rich app as the savior — and the future — of the music industry. He proposes a music application that wraps digital tracks with social networking, live on-demand footage, song lyrics, games, and forums. This sounds like an interesting idea, which could see some success (if well-executed), but if the music industry is seeking a “silver bullet” business model, this is not likely to be it.
It’s pretty well understood that what has driven the recording industry for decades now is “format change,” where the record companies have continually asked their customers to essentially re-buy their recordings each time a new format is adopted — from records, to cassettes, to CDs. With each new technology, customers were compelled to buy the products not by legislature or law, but rather, by a continual desire to have their music be more accessible. First, the phonograph made music more affordable and accessible, as compared to hiring a band of musicians to come and play in your living room. In the 80s, the cassette tape made listening more portable, albeit with a loss in audio quality. Then, in the 90s, the CD combined both portability and high audio quality into one small package, leading to a huge up-swell in recording purchases. For years, the recording industry has had a fantastic, well-defined business model: Record music that people want to hear on physical media. Sell that media. Repeat. Then, the 00s brought the latest maturation of the recording format, the mp3, with its near-infinite portability and an audio quality that can only really be contested by audio snobs. Since it could be easily copied and used in many different devices, it had the opportunity to become the most widely used music format ever. But, because of its near-infinite portability, the recording industry’s old tried-and-true business model of selling physical media was no longer as viable.
The evolution of recording formats shows that what has really driven the industry has been a hunger for increased accessibility and portability, not necessarily the introduction of new features. So, while Mulligan’s music application idea may drive some interest in recoded music, by empowering the audience to do more with it, it is very unlikely to drive the type of purchasing behavior that, in the past, came with each new recording format — and it certainly won’t “save recorded music.” The problem is that the user is no longer locked into the recording industry’s physical product for the distribution of music. There is no “one thing” they can sell that the audience will have no alternative but to buy. To be successful, the recording industry is going to have to experiment and figure out how make revenue from many different sources, which requires creativity that the labels have so far been unable or unwilling to muster. While the industry is out there looking for the “silver bullet” of a business model, the reality is that the answer is more like a whole clip full of silver bullets, coupled with some garlic, and finished off with a wooden stake or two.
Filed Under: business models, music industry
Comments on “Sorry, There's No Silver Bullet Business Model For The Music Industry”
The fundmanetal problem to me here seems to be that analysts are consistently little more than public windbags who make all sorts of predictions based on little evidence, with no need for consideration in being taken up on what they say.
At least, that’s always been the experience whenever I’ve read anything from an analyst (see: Michael Pachter).
“the fact that the billionth application purchaser on iTunes… was much younger than the 10 billionth iTunes music purchaser”
Well, this means absolutely nothing. I bet that the billion-and-1st app purchaser was much older and the 10-billion-and-1st music purchaser was much younger. Picking one person completely at random does not prove a thing.
It would also be interesting to find out how many of these app “sales” involved money exchanging hands – I believe that the reported sales figures include free apps. I, for example, have over 200 apps downloaded on my account but I’ve paid for exactly 3. Hardly the model of how to save the recording industry…
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“Well, this means absolutely nothing. I bet that the billion-and-1st app purchaser was much older and the 10-billion-and-1st music purchaser was much younger. Picking one person completely at random does not prove a thing.”
+1
Though I guess its an interesting little tid bit, its certainly nothing to base any kind of facts or outlook on
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The point he was trying to make was that consumers are a diverse group of people with different needs and tastes. You can’t have a “one size fits all” solution to things as subjective as the arts like the RIAA has been trying to shove down out throats.
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That was probable Mike’s point, but that’s not what I’m getting from the linked article he was quoting.
Mr. Mulligan appears to be saying “this proves that apps are more popular with the young than music, so the industry should try selling music in the way apps are sold”. I don’t know how else to interpret passages such as the following from said article:
“Which is the reason why the music industry needs to start a period of unprecedented product innovation, whereby apps become a key channel for music sales.”
The Format Change business model sounds very similar to the Forced Upgrade business model.
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true. I’m reluctant to dive into the HDTV era for this very reason. Sure I could buy a cheap LCD TV, but then I would have to upgrade my cable box, Media Center PC, and receiver, most of which I just upgraded a couple years ago. So that $500 television just turned into $2000 worth of upgrades to keep my experience similar to what I have now in standard def.
Just not worth it at this time. I’ll limp along with my 27″ 4:3 CRT television until that option is no longer viable.
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Dude, 4:3 SDTV is long dead.
How many of those media formats mentioned were developed by the recording industry?
Old vs New Music Industry
The OldMusicIndustry (OMI) should keep on doing where they are good, namely supporting and cashing on big stars. They also should stick to their old business models. In my opinion iTunes is also OMI.
The NewMusicIndustry (NMI) will consist of music authors and composers that want to establish a direct link with their own fans, that start managing their own rights (with new licence types such as Creative Commons and VillaMusicRights) and will therefore do their own marketing (through social networking), will be aware that they do not want 360 degrees deals with music companies, cash for themselves their live gigs. Thus become more interesting for music halls and (web)radiostations that do longer have to pay off collecting organisations. Etc…..
Re: Old vs New Music Industry
The OMI VS the NMI is a good way to put..
only problem I see is the NMI hasnt really figured out how to get themselves out in front of the public..
OMI has radio & TV etc etc, NMI has what? myspace??
silver bullet
Mike, wouldn’t the silver bullet they are looking for be CwF + RtB?
The problem is that CwF requires work and RtB requires talent, so most big acts today need not apply.
In my opinion, of course.
Re: silver bullet
Aaaaaaand… Mike didn’t write this and now I feel like a douche.
Sorry Dennis. 🙂
Re: silver bullet
CwF+RtB isn’t a solution, it’s a methodology for building solutions. Twelve people could implement CwF+RtB in twelve completely different ways, and the odds that any of those solutions will apply to all cases (one shot to save recorded music) is slim to none.
That being said, CwF+RtB is a good mindset to get started with…
Re: Re: silver bullet
The challenge with the CwF+RtB model when it comes to music is that if what you want is the recorded music and it’s now available for free, there may be nothing else from that artist that you want to buy. If the hope is that now that you’re saving money not buying music, you’ll use it in some other fashion to support the artist, that isn’t always the case.
If fan purchases are mostly need-based rather than want-based, then any money saved by not buying recorded music is likely to go to necessities such food, fuel, housing, etc.
Even if we say music is a need, that need can now be met by free music. Anything else the artist offers beyond that becomes something of a luxury item and is less essential to music consumers.
“where the record companies have continually asked their customers to essentially re-buy their recordings each time a new format is adopted“
While on the other hand the labels claim we do not actually buy music but only license it.
He totally nails it shut with such factual hard evidence. I mean, he builds his entire argument around two random samples…nice, really nice. Gotta love that statistical analysis.
One of your most insightful posts yet
Really thought you nailed it with this one, Dennis. Intriguingly, this same dilemma/opportunity faces all of us in the digital goods business, including open-source software, where I live. The value is in packaging content (including software) in ways such that it’s easier to pay than to take and compile for free.
I’m sorry but I dont really see the value added in this article.
It uses some silly statistic, mentions an article from nearly 5 months ago, goes through the same song and dance about how the industry has evolved its music medium (which we’ve all heard hundreds of times before) and then it nicely wraps everything up in a vampire (or werewolf) metaphor.
A valiant effort but theres definitely lots of fat to be trimmed
but its not gonna die either...
despite the lack of a fruitful business model, new companies and music services keep launching every day. Is there anybody else who finds that crappy.
Op is a useless kid. Learn your facts before trying to post your thoughts publicly and embarrasing yourself.
Personal risk is a bigger issue than lack of creativity
Nice post, Mike. I would add, however, that it isn’t just “creativity” that labels have been unwilling to muster. They would if it were easier. The big problem is personal risk for the executives. In my experience, when you meat someone that has a well-paid job for a large corporation, you quickly learn that their #1 priority is keeping that job. #2 is getting an even better job (or increasing the year-end bonus). At best, looking out for the future of the business is #3, provided it doesn’t conflict with #1 & #2. And why should they care? In the musical chairs of mid-to-upper-level corporate appointments, decisions that will have an impact years down the line are usually irrelevant to the personal interests of the person making those decisions. If the results are bad, the exec will be off to the next job already, or the one after that. If the results are good, someone else will take the credit anyway. Consequently, it’s often much more in the self interests of executives to look like they are protecting the biz than looking for creative new models, which often cannibalize the current one.
not to be nitpicking but ....
“whole clip full of silver bullets, coupled with some garlic, and finished off with a wooden stake or two.”
Aren’t silver bullets for werewolves and the rest for vampires?
Re: not to be nitpicking but ....
Not according to my Dungeons and Dragons manuals.
The 'Recording Industry' is dead
It just doesn’t know it yet. Artists no longer need the distribution system that the industry set up, and are abandoning the major labels in hordes.
Of course the labels are upset about this, and would really like to make it illegal for artists to deal directly with consumers. Since even they know they can’t do that, they are trying to make it hard for artists to deal directly, like in Korea where an act cannot upload music to their own blog.
They also appear to be trying to redefine copyright, so that copyrights held by the labels are more important than copyrights held by the artists. The software industry appears to be trying the same thing, see the letter sent to the USTR which is pushing for the US to act against countries that specify open source software, with the claim that they don’t recognize copyright. That open source software is copyrighted too doesn’t get mentioned…
Demographics
ya know when they try and use big words they really mean
“i don’t know what the fuck i’m talking about so lets use big words that make me sound educated and intelligent but really i am a stupid ass”
“Then, the 00s brought the latest maturation of the recording format, the mp3, with its near-infinite portability and an audio quality that can only really be contested by audio snobs.”
Actually it can be contested by anyone with two ears and a decent stereo. What is amazing to me is how little the recording industry has done to promote decent sound. Yes, their product is more convenient; but No, it really doesn’t sound much better than a good LP and is often worse. They coasted for 40 years without putting much money into improving the sound of the compact disc and the equipment that plays it. Now that the convenience factor is no longer in their favor, they have limited ability to promote the medium. They cooked and ate the goose that layed the golden egg.
“Then, the 00s brought the latest maturation of the recording format, the mp3, with its near-infinite portability and an audio quality that can only really be contested by audio snobs.”
Actually it can be contested by anyone with two ears and a decent stereo. What is amazing to me is how little the recording industry has done to promote decent sound. Yes, their product is more convenient; but No, it really doesn’t sound much better than a good LP and is often worse. They coasted for 40 years without putting much money into improving the sound of the compact disc and the equipment that plays it. Now that the convenience factor is no longer in their favor, they have limited ability to promote the medium. They cooked and ate the goose that layed the golden egg.
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“What is amazing to me is how little the recording industry has done to promote decent sound.“
The reason is simple. There’s a good reason both SACD and DVD-A failed miserably in the marketplace. Very few people give a frick. Heck, some people actually like the sound of MP3s more.
You might hate the sound of MP3s, but to force your subjective views on everyone is simply asinine and a waste of time.
“Sorry, There’s No Silver Bullet Business Model For The Music Industry“
Sorry Mike, but you’re wrong. I just used my incredible mind to create a business model which will save the music industry:
T-shirts, that can play ringtones.
Think about it, let it sink it in. It’s pure genius, right?
Just a few nits: “Format replacement” was only a significant part of music sales for the CD era, where CDs offered definite consumer advantages over LPs and cassettes. (Let’s say, “format replacement” was big 1985-2005.) I don’t know anyone who bought cassette copies to replace owned LPs: commercial cassettes generally sounded crappy and could easily be bettered by recording your own tapes off your LPs.
Agreement with Watkins above on the sound quality of MP3. Hell, I can usually feel the difference between MP3 and a CD’s .WAV format in the CAR, at 70 mph. On the home stereo, no contest — I vastly prefer CDs for lengthy listening. But, hardly anyone owns standalone stereos any more.
On the bigger picture: The recorded music industry grew monstrous on two facts. (1) Recorded music was “the scene”, the network, for the baby boomers starting in the counter-cultural 1960s. Music has long lost that role to games and the Internet and I do not think it is ever coming back — the music industry needs to start thinking about the way it was back in the 1950s — the pre-Elvis 1950s. (2) Recorded music, in the 1960s and 1970s, was the only home media experience which you could control, other than print. We all sat around listening to the records and reading the liner notes over and over again BECAUSE THERE WAS NOTHING ELSE IN OUR HOMES. That paradigm, of course, was smashed to bits, first with affordable home DVDs, and next with the Internet.
I just don’t see any way for music to regain the cultural significance that it had from, say, The Beatles to the rise of the home Internet. The cultural factors which created that world are long gone: the economic and technical matrix has moved on and now offers much richer opportunities.
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We all sat around listening to the records and reading the liner notes over and over again BECAUSE THERE WAS NOTHING ELSE IN OUR HOMES. That paradigm, of course, was smashed to bits, first with affordable home DVDs, and next with the Internet.
I just don’t see any way for music to regain the cultural significance that it had from, say, The Beatles to the rise of the home Internet. The cultural factors which created that world are long gone: the economic and technical matrix has moved on and now offers much richer opportunities.
I agree that music doesn’t hold the same place anymore. People can get the music for free and there are so many other entertainment options that music in being treated more as a part of a bigger picture than the focal point these days. OK Go is a good example. What are most people talking about? Their videos rather than their music. The music just serves as a backdrop to the main attraction.
The Internet has given people the world so they can pretty much sample and move on with ease.
Fish – What subjective views did I force on everyone? I agree that convenience often does and often should trump quality, but what is asinine it is to suggest that there isn’t a loss in quality.
Wallow – Nicely put and sadly so! I still find it hard to believe that for the money spent on home AV systems, the average sound is relatively unpleasant and has not improved over the last few decades – unless you consider the a cheap subwoofer as a major improvement.
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“what is asinine it is to suggest that there isn’t a loss in quality.“
Ever hear of Lo-fi music? Here’s a bit from Wikipedia.
Some people love lo-fi. They think that genre of music is of high quality. (Much like a friend I had back in the 70s who would turn the bass way down and the treble way up. He thought the music sounded better because it was “more live.” I have no idea what that meant.)
What you are doing is confusing quantity, the number of bits per second, with the the subjective value the music as to a person, which is quality.
Adding more bits to a sound does not necessary increase the quality of a song any more than adding more notes would.
“What you are doing is confusing quantity, the number of bits per second, with the the subjective value the music as to a person, which is quality.
No, I’m not. Fidelity to the artist’s sound is the criterion of quality in music reproduction. The operative words are fidelity and reproduction. If the artist wants to monkey around and distort his sound, that’s his prerogative. I just want my equipment to be able to faithfully reproduce his ultimate product. I may choose to jack up the treble because I’m old and deaf, but I would like that to be my choice and not imposed by the limitations of technology. This discussion could get long and involved, and I am by no means an expert; but I strongly doubt that there are very many consumers (not artists) who would choose bad reproduction over good reproduction all things being equal as long as they could tweak it to their preferences.
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“Fidelity to the artist’s sound is the criterion of quality in music reproduction.“
To you and to many other people. But not to everyone. I’ve already cited to two sources to prove my point.
“I strongly doubt that there are very many consumers (not artists) who would choose bad reproduction over good reproduction“
You might be right. But merely because millions of people subjectively agree on the same thing, does not make it an objective truth. If that’s the case, then the music of Aerosmith is of a high objective quality. And I cannot possibly accept that as being true.
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I doubt you can hear the difference between a 320kbps vbr mp3 and the original wave file. Put them both through a frequency analyser and look at the wave forms, nearly identical down to the threshold of quantizement.
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“I doubt you can hear the difference between a 320kbps vbr mp3 and the original wave file. Put them both through a frequency analyser and look at the wave forms, nearly identical down to the threshold of quantizement.”
How about when you have to convert it to another format?
“The qualities of lo-fi are usually achieved by either degrading the quality of the recorded audio, or using certain equipment. Recent uses of the phrase has led to it becoming a genre, although it still remains as an aesthetic in music recording practice. “
This is a choice made by the artist. Phil Spector used to mix recordings so things would sound good through a car radio, but that was a creative choice.
You might be right. But merely because millions of people subjectively agree on the same thing, does not make it an objective truth. If that’s the case, then the music of Aerosmith is of a high objective quality. And I cannot possibly accept that as being true.
You are confusing standards of music with standards of music reproduction.
Sorry, editing problems with the above
“The qualities of lo-fi are usually achieved by either degrading the quality of the recorded audio, or using certain equipment. Recent uses of the phrase has led to it becoming a genre, although it still remains as an aesthetic in music recording practice. ”
This is a choice made by the artist. Phil Spector used to mix recordings so things would sound good through a car radio, but that was a creative choice.
“You might be right. But merely because millions of people subjectively agree on the same thing, does not make it an objective truth. If that’s the case, then the music of Aerosmith is of a high objective quality. And I cannot possibly accept that as being true.”
You are confusing standards of music with standards of music reproduction.
“Phil Spector used to mix recordings so things would sound good through a car radio, but that was a creative choice.“
And millions of peopled loved his recordings and his creative choices. Just like hundreds, maybe thousands of people love lo-fi.
“You are confusing standards of music with standards of music reproduction.“
Actually, I was making a joke to explain a point. My point has already been said, a million subjective opinions does not make it an objective opinion.
I’m not disagreeing with your subjective opinions. You subjectively find more bits per second to be of a higher quality. Other people find less bits to be of a higher quality. No one is right and no one is wrong. Until somebody starts objectifying those beliefs.
I give up.
Red vs Blue 🙂
Caboose: Bad industry, bad industry 🙂
lo-fi vs Hi-fi
Hi to all,
Very interesting article and comments.
About this discussion on lo-fi vs hi-fi, another way to look at it is through the size of the files. I think mp3 files spread because they associated the capacity to be copied without any loss of quality (even lo-fi)and small files (with enough quality) for portable devices with little disk storage space.
Today we all have enough of that disk space on our portables devices, and I bet we will see the return of higher quality music files, as the criteria of space has becomed irrelevant.
Would you agree to that?
Fred
Cassettes, Vinyl should be promoted too
Record companies should cater to ALL consumer and not what they think in the name of “high-tech”. There is still a “small fraction” who want audio cassettes. The dirty hiss and wrangled tape – is still an ANALOG FORMAT, that you cannot download. If someone maintains the tape player with a cleaning cassette run alteast once a week, the head would come a long way without the curses. This “small percentage” of cassette buyers still work out to be significant financially.
Stark difference in CD and cassette is the sound of drums and guitars – they really are not the same. CD is simply not studio quality – that is why SACD was developed, however as it turns out SACD is being dumped without any a good alternative. So is Dolby-S. It turns out a prevalent good quality music format is the most neglected of all formats, all that still prevails is 25-year CD standard that barely samples music to produce a “nice dry sound”. There is frankly no financial advantage in purchasing CDs, as you can download the same music with little difference in the sound. That is why the analog formats make sense, something you cannot download.
Beyond all arguments, record companies should cater to all users. If someone wants vinyl, he should get it, cassettes he should get it – or else let them face losses through downloads.
Rational thinking or Instinctive actions anyone?
Do you ever wonder why some smaller companies out perform larger organizations across the board? Could it be that smaller companies, which generally do not have to report to share holders, are able to act out in a balance between their instincts and rational thought? According to Jim Randel, people generally “Choke on Thought” due to over analyzing a specific situation. (see http://www.jamesarandel.com/blog/choking-on-thought) If you were to apply this study to the operations of most large labels, you may find that this could be the reason the industry is in it’s current condition.
While there may not be any one “Silver Bullet” for the music industry. There certainly are several revolutionary companies with strategies that will play a huge part in boosting the music industry as a whole.
Being a music marketing firm based here in Nashville, we are privileged to be part of a major new platform that will be introduced later this year that I can assure you will be pivotal in re-boosting album sales, digital and physical, across all genres. Once we are released to mention any further information about this new service you will know about it.
Find us on Twitter and we’ll keep you posted as new information becomes available. Our twitter family will be the first to know anything.
Regards,
Benjamin Wade Inman
Managing Partner
ZONG Music Partners LLC
Nashville, TN
info@zongmusic.com
http://www.twitter.com/zongmp
http://www.myspace.com/zongmusicpartners
http://www.myspace.com/zongmp (new site launching in the next few days)
Actually, I disagree ..
Actually, I disagree with the title and spirit of the writer in this article. There ‘is’ a silver bullet business model for the music business with regard to the internet. In fact there are many to choose from, and it’s my experience that many primary executives in major record companies know it.
The first problem is implementation and change management. Wall Street, which owns all of the major labels, wants no part of the expense and complication of such changes. They are making profits with the current models, and will only modify those models within the margins of profit. No profit? .. Then silver bullet be damned.
The second problem is the mindset limitations of the current senior executives within the major labels. Their ‘minds’ are more bogged down with old model thinking, far more than the material realities of the companies they run. They aren’t thinking of ruling and dominating the technological universe that surrounds music on the internet. They are thinking of ‘protecting their position’ no matter what may be that position. Whether legacy supply-chain or web based, it doesn’t matter, they still think ‘protectionism’.
Yes, the silver bullet is there- it’s always there to a society that is willing to join together and find it. It will never be found, today, in a technological world where ‘minds’ are closed to such possibilities.
Bill Wilkins, CEO
Melted Metal Web Radio
http://www.meltedmetal.com/
Fast advancement
The funny part is that this has all happened so quickly! In my 37 years, I remember going through all of the methods of music playback…records, cassettes, cds and now mp3’s. This is some fast advancement in such a short time! Things are growing tremendously, but I just do not see where all of this could go and what the next method might be?