The music industry has a big problem with illegal downloads of digital music. CD sales are down and control of digital music via DRM does not appear to be working. However there are some signs of new business models emerging, with the Apple iTunes Store being a good example.
The latest news is that the four biggest music publishers are negotiating with major ISPs (Telstra, Optus etc) to deliver a subscription service for music downloads. The only catch is that the digital music will 'expire' if the subscription ends. Another development is to use advertising to pay for downloads that MySpace is believed to be launching.
Other developments are marketing strategies that are more diverse, using pre-release digital downloads for free, mobile phone ring tones, mobile phone promotions, on-line ads, concerts, appearances tied in with TV, radio.
For a good roundup read the article Telstra, Optus talk music downloads in MIS.
An interesting quote from the article:
"(the internet) ....gives a way to reach fans and get them involved and engaged"
Q1. What does Sony BMG mean when it sees itself transforming from a CD company to a multi revenue, multi -stream, multi-business company?
Q2. Which business model is more likely to succeed: free downloads with ads or a subscription service with unlimited downloads?
Q3. How does getting fans to be 'involved and engaged' help the bottom line?
2 comments:
The key statement in this article is that they will have a hard time convincing young people to pay for music, because they are used to music being free. There are parallels here with cable TV when it started, but cable TV was able to get the content that people were willing to pay for, whereas with music, the content is already available for free.
The only way to stop it is to make the mp3 players and computer programes that play digital music only able to play music with DRM included in the files. If you take away the means to play it, you will change the behavior. This is unlikely though, as the proliferation of the technology has probably already gone to far.
Musicians have to learn that to make money from music, they will need to work for it, i.e play more live gigs. Recorded music will then become a marketing tool to attract people to the gigs. The gigs themselves need to change so that more people can get to them, especially young people. The late night shows in pubs will have to change to afternoon shows that are all ages. The growth in music festivals is reflective of this change.
Q1:
SBMG are no doubt looking at diversifying their risk. The traditional model of selling music through CDs is a single point of failure. SBMG will b looking at multiple markets and delivery mechanisms for their music product. Added bonus - it increases their ability to use discriminatory pricing.
Q2:
Advertising-supported content has an established track record of success - not just online, but in television, radio and print. Subscription services have a lousy track record.
Q3:
Engaging fans increases their sense of ownership and involvement, which in turn increases goodwill and mindshare... which induces them to Send More Money.
-K.
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