Music Industry Growing
eMarketer's report today talks
about growth in the music industry (yes, believe it or not, GROWTH). Revenues last year (2006) were $60.7 billion and by 2011 will be $67.6 billion (about a 2% annual growth rate). The report states the obvious that CD sales will continue to plummet and digital continue to grow, however, digital sales will never make up for the loss from CD's. Thus, the growth will come from other innovative ways to exploit the music such as online and mobile, concerts, licensing deals with TV, films, video games, and tie in with various products (the report states
U2 and iPod and Bob Dylan and Victoria's Secret).
I think that the record labels have definitely enjoyed a monopoly on this business for a while, however, in order for good music to continue to be put out, there needs to be a way to monetize this business. Apple recently put announced that
100 million iPods were sold and about 2.5 billion songs sold via iTunes, which puts each iPod on average with 25 legally downloaded songs, a far cry from the thousands of songs that you can put on it. So where is the other music coming from? I wonder....Regardless, some very interesting models have come out, one of them I talked about before called
AmieStreet which is a true supply and demand model. However, with sites like MySpace offering streaming music how would a band make money from them? The answer:
Poptopus. Poptopus (reviewed by
Mashable), is a widget (we talked about these
yesterday) that you can embed on your site and revenue is shared by the artist and the publisher. Advertisements play in the video portion of the player and are paid on a per listen basis. It's actually a radio type model but uses the visual portion of the Internet to play the commercial while you are enjoying the music. I think its a great way to utilize the single servingness of the Web with a business model that could be sustainable. And since everyone makes money, or gets eyeballs, everyone should be happy....the one downside I see is that if a popular band doesn't want to be associated with a certain advertiser (but I think those are few and far between).
Regardless, its a good time for the music business as they've finally embraced the Internet as opposed to fighting it and it turns out that artists as a whole will be making more money than ever and some artists will actually be able to call themselves full time musicians because of this long tail phenomenon. We'll keep track of the music space as it continues to innovate....perhaps Sirius XM can take a lesson here? (i.e. Give away your units and advertise on your proprietary hardware?)
Labels: apple, commercial, drm, emarketer, ipod, itunes, mobile, music, myspace, record label, the long tail, widgets
Power of the People
Even
Digg couldn't withstand the power of the people or the so called
Wisdom of Crowds. Digg, traditionally against any type of DRM, monitors its posts and takes down anything that they feel is morally wrong. Yesterday (via
TechCrunch) someone posted the decryption key to HD DVDs. After the Digg team took it down, someone reposted it. Pretty soon, the entire Digg site went down with a deluge of the decryption key posted all over it. Kevin Rose, Digg's co-founder, says on their
blog:
But now, after seeing hundreds of stories and reading thousands of comments, you’ve made it clear. You’d rather see Digg go down fighting than bow down to a bigger company. We hear you, and effective immediately we won’t delete stories or comments containing the code and will deal with whatever the consequences might be. If we lose, then what the hell, at least we died trying.So that's it, that's what happens when you try to turn against popular opinion. Digg (valued at
$60 million per Businessweek's cover story) could become the next
Friendster, where users left at the blink of an eye. Fickle consumers have the power and especially online where the butterfly effect is magnified ten times over. It's a scary place to be right now for Digg as many of their million plus users have revolted against them.
What does this mean? Well, I've touched on it before, and again, I'm not sure how this phenomenon happens but if you think about companies out there
Apple,
Google, and
Craigslist are the "good guys" while
Microsoft,
Yahoo, and
Dell are the "bady guys." It's a connotation that can most likely be traced to a few choice events (Microsoft knocking down Netscape, Yahoo charging for email, and Dell's customer service debacle.) While Apple has come clean with its iPod batteries, Google discloses all (or wants you to think that), and Craigslist doesn't make that much money only through its job postings. Since then Dell has apologized, Microsoft has been a bit more open, and Yahoo provides free unlimited storage. However, the damage is done, and just like
Gladwell's book Blink, these corporations are the evil empire while our knight in shining armor are the former companies. Stay open, make sure that your PR team has experience in damage control, and address your customers because the power of the crowd is too much to handle (at least for a $60 million company).
Labels: apple, blink, digg, drm, google, microsoft, wisdom of crowds, yahoo
DRM Free at Last
EMI's announcement today to
make their music DRM free may change the entire consumer landscape of music. EMI will sell their new DRM free tracks through Apple's iTunes at an exclusive price of $1.29 (30 cents above the normal track), but they claim to have twice the sound quality of existing tracks. Without DRM (and their CD's do not have DRM), their MP3's will be able to be copied to other players, discs and other forms seamlessly. Will this expand the music business or will it further shrink it?
In my opinion, the removal of DRM from EMI's tracks will actually expand their listening base. Prior users of iTunes who were reluctant to purchase may now purchase more since the tracks can now be played not only on their iPods but on their home stereo systems. They'll be able to share tracks more easily with friends who may be enticed to purchase other tracks by the same artist.
As for the pirates? I think its fairly well known that to get around the DRM you can burn the tracks to a disc and then re-rip them to get rid of the DRM. Pirates that did this before now have to go through one less step. But pirates will always be pirates and even so, pirates will always find a way to crack any type of DRM while true consumers will be the ones that pay the price.
The record labels? The Long Tail is in effect here. Record labels are going to have to find more acts to sign to bring visibility to in order to satisfy their entire spectrum of listeners. They're monopoly is over, its going to be like finding the hidden Microsoft amongst all of the bulletin board stocks out there. Like finding the next lonely girl amongst every YouTube video out there. Like finding the next OK Go amongst every track on iTunes.....
Labels: drm, emi, itunes, music, record label, youtube
