This post kicks off Zemoga’s week-long guide to helping industry giants go digital. We’ll be looking at case studies of who’s done it right, as well as provide guidance for those who are struggling with the transition.
By Kimberly Reyes (@CommDuCoeur)
The Ashley playlist. The Stephanie playlist. The Katie playlist. The Jason playlist. If you’ve ever seen my iPod, you’ll find these and a whole host of characters, each marking a significant event or memory, each as vivid and accurate as any video or picture of their namesake.
For me, a playlist isn’t just a list of songs I like. They’re mixtapes I’ve made for friends, songs that blared from at epic college parties, tools to help me focus and concentrate, setlists from memorable concerts. I have about eighty of them, dating back as far as middle school. I would labor over them for hours, sometimes days. I needed to create the right mood, the transitions needed to be perfect, the songs needed to be timeless and brimming with meaning.
About a year ago, I discovered Lala, a streaming music service that allowed me to build and share my own playlists, as well as browse playlists by other users. Suddenly, there was a method to the madness.
Then yesterday I received this e-mail: Dear Kimberly R., The Lala service will be shut down on May 31st.
As you can imagine, I was a bit peeved. While there are plenty other subscription-based and even free streaming playlist services (Pandora and Rhapsody, to name a few), I’m a creature of habit, and was used to navigating around Lala’s user-friendly interface. But then I began to see the light, as speculation about iTunes “using Lala’s ‘cloud’ technology to incorporate a Web subscription service into its iTunes store” began to surface…Well, that certainly changes things.
For a while, cloud technology was said to be the downfall of iTunes’ pay-to-download storefront. Rumors about Spotify crossing the pond and infiltrating the U.S. excited American music lovers, but the thought of free content is digital garlic to music industry vampires.
The music industry has certainly had a tough time adapting to an Internet-based economy, and iTunes provided record companies with a practical solution: sell music online the exact same way you would sell CDs in stores. The industry breathed a collective sigh of relief and sat back in their leather executive chairs, which is exactly the problem.
How the Music Industry Used to Work
Talent agents discover up-and-coming artists and pitch the artist to a record label. The artist gets signed to the record label and records music, the agent gets paid out of the deal. The record label pays for the artist to record music, then it manufactures, packages, and markets the records. People buy the records. The artist receives a percentage of the profits. The rest of the money goes to the record company. In the old business model, the royalties still lie in the physical product, whether it’s a CD or an mp3.
What the Music Industry Needs to Know
This is not new. In order to predict your future, you need to know your past. It appears that record companies forgot about a little thing called the cassette tape, which was supposed to spell doom for the industry. When the cassette tape arrived on the scene, it was corporate pandemonium. “Wait, you’re telling me that someone can buy an album, transfer a few tracks onto this crazy thing called a mixtape, pass it along to his friend, and his friend can listen to the music…for FREE?”
Digital Rights Protection is not the answer. This may sound a little dramatic, but with the way people are sharing content these days, using the legal system to crack down on people who believe in free content may be criminalizing most of the country. In my opinion, this is a step backwards and the real cause of the industry’s downfall.
Free content isn’t the end of the world. Some industry observers think music should be treated as a loss leader – a free or low-cost product that is used to generate other, more profitable sales. Sure, you can sell millions of $12.00 CDs. Or, you can sell out an entire stadium of seats upwards of $35.00 per head. You can make millions of dollars in merchandise sales. Product endorsements. Paid appearances. I could go on. Free content can even generate sales for paid content. Radiohead went ahead and proved this to us – so what are record companies waiting for?
Major labels are not dead. There’s a reason why artists like Madonna and Britney Spears exist. For years, I could not figure out for the life of me what that reason was. Until now. Not all artists are created equal. Independent artists thrive on their talent. They play good music that people like, and usually have a limited shelf life. Newer, fresher artists emerge, and indie music lives on. Mega-watt entertainers aren’t necessarily talented and don’t necessarily make good music. They’re long-term investments that thrive on spectacle, glamour, and celebrity. They become cultural icons and living legends that magically withstand the test of time. And they need an entourage.
What the Music Industry Needs to Do
The answer is simple: recognize that people have significant relationships with the music they listen to. Some things are worth paying for, but it’s not necessarily a manufactured record. I build playlists and need a streaming subscription service that lets me do this, then purchase the music to make CDs that I can share with friends.
I recently wrote a post on how Justin Beiber is only one of hundreds of aspiring artists who recorded videos of themselves singing covers of popular songs and posting them to YouTube. There’s a huge market for high-quality karaoke versions of music singles, and very few record companies are taking advantage of it.
The digital space has opened up a wealth of opportunities for DJs to experiment with mixing music. DJs need sophisticated, multi-layer audio formats to manipulate into their mixes. How can record companies address this need?
These are only three examples of how the music industry can change its antiquated business model and still turn a profit. Can you think of any more?