The Music Industry is Stupid
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There were plenty of people who trashed the Microsoft Zune
You see I really thought Microsoft had figured it out when I saw comments from Zune’s Senior Director of Project Management (Scott Erickson) on MTV news when he said and I quote, "If it was ripped from a CD in your personal collection, you can import all of that including your playlists, album art, ratings and play counts." Unfortunately it turned out that Senior Director Scott Erickson did not know his own product (which seems like not knowing your ass from a hole in the ground to me) and DRM is applied to any and all music on the Zune not just what was purchased from the Zune Marketplace so that really crushed a lot of the wow factor of the sharing feature on the Zune.
When I finally got to handle a Zune finally and I had to admit it is a well made unit, great graphics, great feel, easy to use and as a device alone I like it better then the iPod but much about it and the Marketplace to me is still a flop!
Yet this is not another slam on Zune as there is enough of that was done a long time ago. Zune and its strict DRMs are just another symptom of the real problems with the entire music industry and all the services from iTunes to Zune Marketplace and others. This article is meant to be about the industry as a whole and I want to be proactive so rather then just telling you what I think is wrong with the model I will try to also outline what I think is the right way to build a music downloading service and family of players.
As I do this I am coming at it from three perspectives.
- One, a user of portable players and downloadable music.
- Two, an Internet marketer that knows what works online and understands industry trends and what Web2.0 really means.
- Third, from the view of the service provider and how the provider and music industry could make money.
My belief is users complain about services with no thought that the providers need to make money, the providers think far more about money then the users and most executives certainly don’t know what Web2.0 is other then an excuse to blow some venture capital money and throw some 1999 style parties.
Before I go on let me be totally honest with you about where I get my music at the present time. About half is from CDs I own that I have been buying since 1988 the other half is mostly from Limewire where I do what industry people would call “stealing music”. I am not alone I have it from very good sources that the number one service accessed from just about every major University in the U.S. today is Limewire and it has been almost since the day Napster was slapped down and forced to charge for music.
I do still buy CDs of some artists, some I want to support like the new Chris Daughtry CD and others where I really want the entire album and not just one or two songs. I want the reader to also understand that I would actually prefer to buy music if a service that respected my rights as the owner of the content I just paid for existed.
I have about 8 PCs in my house and we own over a half dozen portable players (including yes, gasp a 30GB iPod) and even an old fashioned CD player that holds 60 plus CDs. Our truck has a CD player and our cool new VW Jetta has a 6-disk changer that plays both audio disks and mp3 disks.
When I buy a song (and no I don’t F’ing “rent” music) I want to be able to move it to any device I want it on so I can play it the way I want to, as I want to, how I want to and for as long as I want to. I don’t want DRM on my music, I don’t want to not be able to rip it to a CD as the player in our truck only plays regular music CD’s and I also like to still make CD’s for my wife, yea I am an old sap romantic. I don't use Limewire because I am too cheap to buy music, I use it because it best serves my wants as a person that listens to music. There are millions of people just like me out there, make no mistake about it.
I also feel that we should be paying about half or less for music in soft copy not just as much or even 90% of the CD price as most music works out from Apple, Microsoft and the other services. Damn it we spent all those years from the dawn of vinyl records all the way through the golden age of the CD and what did the music industry claim was the reason for what we called the “high cost of CDs”? The industry claimed it was manufacturing and packaging and shipping driving up the cost, which remained the standard answer all the way up until the iPod age.
Funny how that old excuse is just not heard any more, now they have new reasons (excuses) and guilt us with sob stories about the “poor artists”. Anyone with any industry knowledge knows the artists make very little on the album sales and earn most money from touring which they have to fit the bill for and manage mostly for themselves by the way. Besides from Garth Brooks to the Chili Peppers to old timers like Bachman Turner Overdrive all the artists seem to be doing quite well for themselves. Well, everyone but the Dixie Chicks, which teaches us the lesson of know your target demographic before you open your mouth in public!
You see unlike many of our youth (which I consider those under 25 or there abouts) I have not grown up with mostly electronic music, CD burners and iPods. No, I still remember the first tape decks and how the music industry tried to stop them because according to industry fat cats back then, “people recording the radio was going to destroy the music industry”, yes they really said that. I remember the first dual cassette decks where people could dub one tape to the next and how the music execs forecasted doom and gloom and the very death of music and the same reaction to the first CD burners and then finally when P2P music came out the same cries of doom were uttered.
The crying of the music executives is an old story and despite how long it has been going on the bigwigs at Sony, Time Warner, etc still have leather walls in their offices and marble floors. I don’t begrudge them from making the big bucks and officing in downtown Manhattan either, no that is fine with me, I am a capitalist and making money is the American way just don’t sing me a sob story when you eat caviar for lunch, drive a Jag and have LEATHER WALLS!
(note: I have visited the Sony Building in New York, Yep they really do have leather walls.)
So now I have totally ripped the industry how about the solution I promised? I am getting to it I just wanted to lay the foundation first so you could see how the solution actually fixes the problems and why the model I am going to propose would not only work but work better and still create plenty of profit for the music industry the service provider and the artists.
Side Note: If you are one of those types that thinks that all corporations are bad and profit is a vulgar word, go live in the woods because with out profit you would not have any of the things that make your life enjoyable, like your iPod, your Car or your house.
The solution is really pretty simple…
First, charge a reasonable price for each down load that should be 25-30% of the price of a hard copy, or about 25-35 cents per download. I am sorry Mr. Sonny Executive but you can’t tell me cases, disks, printing, etc are your biggest costs for 5 decades and expect me to forget about that now. I believed you then and I still believe you today, your amnesia is not contagious, I won’t forget the reality of the cost of materials, distribution and printing that you told me about for 50 years.
Second, follow a principal of real Web2.0, which is the more people that use a service the better it performs. This is how Limewire works, the more users that have a song the faster it will be to download it. With an iTunes model the more users the more resources Apple must provide to serve them. Bandwidth transfer is a huge expense for any music provider.
Simply put a token of some type on your tracks (not DRM) or allow your system to compare files so pieces of each track can be downloaded from multiple users. This guarantees a user high quality music but defers a huge piece of the expense from the provider and improves the user experience.
That is win-win and it works just fine, my music off Limewire is proof. Honestly if, iTunes or Napster music is “better quality” it is a difference beyond my hearing ability and that of most other honest people as well.
Third, don’t DRM the music let people burn CDs, put it on any PC they want, etc. Why? Simply because you can’t stop it anyway, millions of people are sharing that song every day on Limewire and other P2P networks, emailing them and hell most new music is on 50 different YouTube videos anyway. Stripping out the audio is pretty easy, even an old men like Mark Cuban and myself can do it.
When I thought about this my first intention was to explain how greed is the problem here. The music industry executives are so afraid of loosing sales because of greed they can’t see the opportunity to make more money by getting people who are using services like Limewire to start using a paid service. The more I thought about it though, I think greed is the solution! Greed is bad when you fear loosing but when you think of what you can acquire, greed can be good.
The music industry needs to redirect that greed from preventing legitimate users from sharing music and point it at how to get non paying users to voluntarily and happily start paying for music. You see more people “steal” music then buy it today, a lot more! The system I am outlining would be able to capture so much volume and reduce costs to such a level that the industry could make MORE MONEY by doing it.
Fourth, Take sharing to where Microsoft should have gone immediately. Devices like Zune are just the first ones, PDAs have been beaming contact info since the 90s the technology is not hard to build so more players will come. I do believe that music users should not be able to beam songs at will to non-paying members but the solution is pretty simple. Let users who are paying members beam any song, let them play it a lot but at some point yes the song goes away.
You don’t have to universally DRM music to do this! Just DRM music that is beamed as it is BEING BEAMED. Don’t let users move beamed songs to PCs or burn disks, etc. Now here is the real kicker, if you have a unlimited download service, then token the users device to allow unlimited sharing for paying unlimited users. Why the hell not? If they have unlimited downloads they could get it anyway, right? Consider that if you did this again you are following the Web2.0 concept and the receiver does not use your system resources to redownload the song across your system.
Then do what the clueless Project Manager from Microsoft thought they were going to do and allow any music or any files not from your service to be exchanged at will. If you are thinking about lost sales, keep the greed pointed in the right direction, more users = more sales = more money.
Fifth, Follow the Web2.0 concept of Google and make money with advertising. Now this is not the nonsense that Spiral Frog tried. I know as an adSense Publisher that ads do not work well in environments where users are “highly involved” like downloading music or in forums. When a user is doing a task not just browsing they have a huge degree of ad blindness. In other words on a general information page some of my ads do better then 15% click through but on a forum page with high return visitors and user interaction my ads are generally below 1%.
So, knowing that people downloading songs won’t be in an ad clicking mood and knowing the most relevant things you can sell them, music and players they are already buying (from you buy the way) what source of quality third party advertising revenue can you find. One word Artists! Sure Puff Daddy, Jessica Simpson or Justin Timberlake won’t pay money to get you to offer free downloads their music (not at first anyway) but tens of thousands of undiscovered talent all over the world will.
Think about this you are a garage band or bar band trying to make it. You have cool original sound, your small group of fans love you so sending them out with a bunch of Zune type players, to beam you to users is not a bad idea right? Well with out the stupid three-day, three strong restriction. Well, what if you could have your music on a service like iTunes (I know technically you can already, stay with me here) or Zune Marketplace but it would work this way.?
The artist would classify their music almost like a pay per click account at google specifying the type of music they play, say alternative rock and list a group of artists who are famous say Pearl Jam, Breaking Benjamin, Fuel, etc. who their music is most similar to. Then when a downloading customer was downloading a track from Breaking Benjamin they would get the opportunity to also download the unknown artists track for free. Now, you charge say 5 cents a download to the artist to promote his music for him. So for about 500 bucks the Garage band could be heard by 10,000 new fans all over the world!
Now you tell me what other form of advertising that is highly targeted exists that is this affordable even at twice the price to undiscovered talent. What a MySpace page? Really? With several million (at least) fake accounts and no association with the listener’s favorite artists. With a annual marketing budget of say 2000 dollars a year a new band could be broadcast to over 40,000 fans each year and with viral sharing possibly a lot more. Of course you would track the sharing and let the artist know that he paid for 10,000 downloads but now 15,000 fans know about them.
I hope you don’t miss how the user benefits here! Every time they download some music they get a track or two from undiscovered talent for free, they start to develop a really cool and different music library! You over time can have an algorithm get better at targeting them by asking them to rate the free tracks on the simple star system. In time collective intelligence will take over and deliver the perfect type of music from the undiscovered artist to the waiting fan. Again the more people that use it the better it gets.
Sixth, Browser Integration is the final need in this service. Users should log into an account via a browser and all outbound traffic should open new tabs in FireFox or Internet Explorer now has tabbed browsing too. This will keep users on your portal as often as possible. Jazz it up with things the way Live.com works where users can drop in sports scores, news and other rss feeds.
Of course all users have accounts and all their actions are monitored and demographic profiles are developed. Partner with Google, Yahoo or Microsoft adCenter and work a deal for demographic targeting of seach results. Put a search box on the main portal and now you have highly targeted visitors whose traffic can be sold to your search partner. Since people need your page to download music and get those cool free tunes from unknown artists they will use it often. By making it browser based you make them use it more and keep them using it longer.
Now you don’t have to be a genius to understand that if the unknown band has a website the user gets to visit it while downloading the free track do you? The unknown band can now sell their full album to the user of course most likely across your service and sell their other stuff, T-Shirts, CDs etc directly from their sites.
You should be seeing the final piece by now! With this type of angle the big artists will want to buy LOTS of free downloads for their fans too. Think about it, buy 100,000 give always for a big artist is nothing, they spend more on one trip to the shoe store. With this type of promotional tool, they can then expect to do great with their new album, get lots of traffic to their sites and do what makes them the most money, sell ticket to concerts!
Ok that was long but honestly the above is a complete business plan for the right way to run a music distribution service. It does the following,
1. Cuts the cost to download music to a price low enough to make using your service more attractive and adds enough cool features to make it more fun then “stealing” from P2P applications.
2. Provides a way for users to share resources and relieves the provider of a huge expense all while making the user experience better.
3. Creates not one but three ad revenue streams from unknown artists, established artists and general search traffic while creating what might be the best demographic targeting in the online world.
4. Becomes part of the users daily online life, like email or google. The long-term revenue from this type of visitor loyalty is almost hard to comprehend. Just ask Eric Schmidt!
5. Fights piracy by embracing sharing rather then trying to prevent it. YOU CANNOT STOP sharing music. People will do it no matter what you do, your goal hear is to capture as much of the untapped market as you can.
Is my plan perfect? Not at all I am not naive enough, not to know that as you started to build this product that all types of “problems” would show up. Yet the framework of this plan is in my honest opinion better then any model we have in existence today. The biggest obstacle would be getting the music industry on board, so it would take a company with enough clout to make Sony fear Time Warner and vise versa, etc.
Honestly what Microsoft has done with Zune could be turned into my model far easier then anything else today. Still I think it will need to be some start up with a big named backer to get it done. It all goes back to greed, the big companies fear what they have to loose with misplaced greed. The start up would channel greed for what can be gained in and that would send them in the right direction.
I believe a model like this will come to be some day and when it does remember you saw it laid out in full, here first.
So what additions could you make to my proposed service? If you are a band would you pay 500 bucks to get your music into the players of 10,000 plus fans? Do you think a model like this can work or will ever occur? Let me know with your comments below.
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