Tag Archives: music industry survival

Music 2019

Ten years ago the RIAA fought the decrease in sales of music CDs by different means, including: taking their customers to court, lobbying to have the ISPs stopping Internet Access to anyone who shared music files, and imposing taxes to any device able to store or play music, assuming everyone was in piracy.

Ten years later, all these actions from RIAA seem ridiculous. In 2019 music is no longer sold in discs or in any physical format. All music is distributed online and, to what would have been a surprise for RIAA in 2009, for free. Artist distribute their tracks freely online, and encourage their fans to share them with their friends.

Social Networks like Facebook, MySpace, uTube and Amazon.net play now a central role in the music industry. All artists compete for attention and try to influence others to become fans. Becoming a fan of a band gives the user access to their songs, to their music videos and to buy their merchandise online.

Artists get the ad revenues from their sites, and more substantial revenues for the $0.99 monthly fees that the SuperFans (premium fans) pay to have access to exclusive content around artists, such as interviews, live chats,  or clips behind the scenes. Superfans enjoy other benefits, including discounts in tickets for live concerts.

In 2019, the labels and the RIAA have almost disappeared, and artists now deal directly with their audience, thanks to the social network platforms that manage the SuperFans subscriptions, as well as the online purchases.

Now there is a huge amount of semiprofessional artists that generate some revenues from their creations. Still there are a few celebrity artists that command hundreds of thousands of SuperFans.

Music did survive the era of the Recording Labels. The new Online Music era is more democratic in who gets the attention, and has removed inefficient intermediaries between artists and fans.

Cartoon found via Wired.com

This post is a prediction of what could be written in ten years from now about the Music Industry. Soon another post about Movies in 2019.

Is Internet Creating or Destroying Value?

As usual in bad times, the debate on whether progress creates or destroys value comes back, as questioned in Martin Varsavsky blog, this time referring to how RSS destroys affects to blogs reducing the amount of displayed advertisement.

As Martin writes:

“I once debated Michael Porter at Davos on the overall value creation of the internet. I argued that the internet created valued and he argued that the internet destroyed value.”

Many examples come to mind, where Internet seem to be killing multi-billion industries:

– Skype is dropping the cost of voice to virtually zero. What before was a hefty business of international telephone calls, has been reduced by several orders of magnitude with VoIP.

– Instant Messaging killing SMS. We all know that SMS is terribly expensive in terms of price/byte. At a rate of 5 cents per SMS, considering 140 bytes per message, we are paying at $375 per Megabyte!! As you can imagine, with IM and unlimited data plans becoming popular, in the mid-term SMS will die.

Music Industry. Used to charge $20 for a CD with 8-12 songs, the labels are struggling as they see the  revenues from music downloads far too low to offset the reduction in revenues from CD sales. Music distribution in discs is likely to disappear in a few years, replaced by online distribution.

– Online Newspapers cannibalize sales from print editions, with online ads revenues not always compensating.

Are these examples really showing that Internet is destroying value? or is value simply shifting?

Looking back in history, it is not the first time there is a perception that technology progress destroys value. The Industrial Revolution saw workers protest as they lost their jobs to machines. Demand for unqualified workers doing repetitive activities dropped, forcing workers to get trained and qualified to build, operate and maintain machines. Those machines produced goods (and new machines) that were cheaper and in bigger volumes, deriving in more people benefiting from those goods. What initially seemed like job destruction, in fact it was wealth generation for the society by making goods affordable for more people.

History demonstrates that innovation simply removes inefficiencies, and in its way destroys industries if needed, shifting value to other parts of the economy, not necessarily within the same industry. And Internet is a fine example of that. Internet (and mobile) makes communications affordable to billions of people, and it is one of the engines behind Globalization, making knowledge and information available widespread.

So where is all this value (business) shifting to?

Let’s take the Music Industry. By removing inefficiencies (like physical distribution of information in discs or in print) the Digital Revolution is shifting the value from selling expensive disc copies to improving fan’s experience, by forcing artists to do more live concerts and spectacular shows as Madonna’s latest World Tour. Value is also shifting from the monopoly of recording labels to select the next star, to the most democratic system ever, with Internet empowering all sorts of musicians to publish their work. Labels and intermediaries are clearly losing business, but isn’t the Digital Revolution bringing more value to both fans and thousands of creators?

There are still many things to do to make this World a better place for our children and grandchildren. Let’s put the focus on improving it harnessing the power of innovation that Internet brings.

Obama made a wise address last weekend, reminding us that we need a strong purpose and that we still have a lot to do in green tech as well as in broadband.

Internet clearly creates huge value for the society. A different question is, are Internet start-ups with unclear business cases (other than getting funds from VC) sustainable? We got an answer to that question when the late 90s bubble burst. Now we are getting the same answer after Bubble 2.0 is bursting too.

How will Music Industry survive Internet?

The Music Industry can not keep fighting to preserve their status quo. Internet, mp3 and iPods have changed the way we ingest music. DVD/CDs are doomed to disappear. The music and film industry will need to adapt to survive.

A wonderful extensive article has been published by Wired: David Byrne’s Survival Strategies for Emerging Artists — and Megastars. This is the best informed article I have recently read on this topic.

This chart from the article shows the trend for the Music Industry both in size and in formats.

With the costs of recording, manufacturing and distribution going down to almost zero thanks to Internet and new technologies, the role of the music labels becomes very thin, and many will disappear. At the same time, live performances are not part of promotion any more, but a business in itself generating revenues for artists. Similar to the music model before the 20th century, where artist made money mainly with performances. Only that today there is merchandising, advertisement rights, and publishing royalties (for adding the song to an ad or a movie) to add to the money inflow of artists.

Internet help artists to have their works popular to a wider audience. Artists have only to adapt to the new business models. Labels will need some painful restructuring, just as other industries had before.