Saturday, April 17, 2010

Music and Business: The problem nobody's talking about

The "Information is Beautiful" graphic to the right is the latest buzz around the music community regarding the state of the business. It is attracting attention because it looks neat and is controversial.

But like many "infographics", it is showing incomplete information and only a piece of the picture. The reality is complex and nuanced.

It's based on this article, titled "The Paradise That Should Have Been".

1. It Must Be The Internet
The thrust of the article and graphic seem to be "wow, these digital music services really don't pay the artists enough - they should probably pay them more."

But between the time this article and chart were created and when they were published, Last.FM announced they were stopping all streaming. Why?

Because Last.FM can't make a profitable business out of streaming music - the royalties they pay are too high.

They're not the only ones. The entire last round of new entrants into the digital music business all flamed out last year - iMeem went out of business, iLike sold to MySpace for pennies, and Lala was purchased for a low price by Apple after announcing they could not make their business model viable.

The veterans have not fared much better. Rhapsody has had 10 years of barely scraping by and is now trying to be a start-up again. Nobody's seen Napster in months.

The only company that seems to be making money is Apple, and as I've previously discussed, Apple doesn't care about music - they created the iTunes Music Store (inevitably about to become the iTunes Media Store or something similar) purely as a defense against piracy accusations. Thanks to the industry and other factors, it has now become a powerful tool for perpetuating their near-monopoly on music consumption.

I will certainly admit some bias here, as I am in the digital music business myself, but I can't agree the problem here is the businesses aren't paying enough for content.

Based on what I've seen about consumer behavior from research and experience, it's also hard to believe these services can simply raise prices to pay more and pass the cost on to users. People already feel these music services are too expensive.

When the average annual per-capita spend on music in the United States is ~$35, even a $5 per month subscription seems pricey.

The problem isn't the Internet. The Internet has been a great boon for both musicians and the music business.

So what is the problem?

Next on Post-Cocious: "Too Much Music?"

[Note: I'm trying something new - rather than one really long post, I'm going to break this into sections and post it over the next few days.]

1. The Problem Nobody's Talking About
2. Too Much Music?
3. Now It's Everywhere
4. The Audience Isn't Listening
5. What The Internet Really Means

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