Monday, April 16, 2007
A New Long Tail Model for the Music Industry
In a recent blog titled The New Music Industry, the author argues for small labels or going it alone, hoping for the ad revenue from site visits to provide some revenue. At the same time a Reuters story, Universal, Amazon beef up MP3 sales space, explains that Amazon is considered the best bet to challenge the near iTunes monopoly. This jousting among the major labels reminds me of the tactics of cell-phone providers when each offer some hook to snag customers while gouging them in sneaking marketing ploys, such as the outrageous charges for text messaging. The major labels are not to be trusted. They will still find a way to screw the consumer. One label removing DRM should just be considered a sneaky tactic.
Amazon may have the clout to produce a winning formula for the indies. Each can set up their own store or pricing model. None of this one price fits all crap that Apple is foisting on us. That model worked to kick off the revolution but it is also sucking wind trying to keep up with the inevitable trend to abandon music labels entirely. You see, unlike cell-phone providers, consumers can pick and choose their music provider at a whim without DRM messing thing up.
The new model in the music industry goes one step further than the blogger describes. It is not quite the resurrection of the single. First, there is no B side. With few exceptions, B sides never amounted to anything. I could see a far greater trend in variations of tracks. Extended solo versions, live versions, accoustic versions and the like. I also envision a re-emergence of cover bands that records songs made popular by others. They may offer the music at a far less expensive price (or even free). I am not sure what ASCAP (wiki) would have to say about that. But I am sure Amazon will figure out a way to make it work. Reuters reported that Amazon initially was pushing for a 70 cents per track wholesale price. Indie labels have other ideas and should be heard. For example, one idea is to offer different pricing for higher quality tracks. This is similar to the Russian site AllOfMp3, which has been under assault by the International Federation of the Phonographic Industry (IFPI). The legality of such sites that offer downloads for pennies a song are being successfully challenged by the RIAA, such as their victory over a Spanish site.
The Long Tail (wiki) comes into play here. The term was coined to describe the log-linear curve on an XY graph expressing the relationship between Amazon sales and Amazon sales ranking. The idea is that a large proportion of Amazon's book sales have come from obscure books that are not available in brick-and-mortar stores. The benefit from increase variety is far greater then the benefit from lower prices. The Long Tail threatens established businesses, in particular the big four record labels. Before a Long Tail works, only the most popular products are generally offered. Unlike iTunes with there one size fits all pricing model, Amazon has a chance to introduce a pluralistic model that can include the pennies a track pricing strategy based on what indies will accept. After all, that's all the artists are getting now. It sounds like a great idea for cover bands, tribute bands and the like. If Amazon succeeds in a long tail that will create the reality that will cause the major labels to inevitable crash and burn.
The another reality of the new model of the music industry is that major labels spend big bucks to promote some artists. Just like the premium paid for Coke and Pepsi, the consumer is expected to pay for the hype and often gladly does. The consumer has a choice. Go with the higher priced name brand or with a just a good generic. Some people prefer designer clothes while others are quite content with the knock-offs. Cover bands, this is you chance! There will always be a place for this end of the market, but the oligopoly is over. Once a cover band establishes a following, introducing original material is much easier.
Amazon may have the clout to produce a winning formula for the indies. Each can set up their own store or pricing model. None of this one price fits all crap that Apple is foisting on us. That model worked to kick off the revolution but it is also sucking wind trying to keep up with the inevitable trend to abandon music labels entirely. You see, unlike cell-phone providers, consumers can pick and choose their music provider at a whim without DRM messing thing up.
The new model in the music industry goes one step further than the blogger describes. It is not quite the resurrection of the single. First, there is no B side. With few exceptions, B sides never amounted to anything. I could see a far greater trend in variations of tracks. Extended solo versions, live versions, accoustic versions and the like. I also envision a re-emergence of cover bands that records songs made popular by others. They may offer the music at a far less expensive price (or even free). I am not sure what ASCAP (wiki) would have to say about that. But I am sure Amazon will figure out a way to make it work. Reuters reported that Amazon initially was pushing for a 70 cents per track wholesale price. Indie labels have other ideas and should be heard. For example, one idea is to offer different pricing for higher quality tracks. This is similar to the Russian site AllOfMp3, which has been under assault by the International Federation of the Phonographic Industry (IFPI). The legality of such sites that offer downloads for pennies a song are being successfully challenged by the RIAA, such as their victory over a Spanish site.
The Long Tail (wiki) comes into play here. The term was coined to describe the log-linear curve on an XY graph expressing the relationship between Amazon sales and Amazon sales ranking. The idea is that a large proportion of Amazon's book sales have come from obscure books that are not available in brick-and-mortar stores. The benefit from increase variety is far greater then the benefit from lower prices. The Long Tail threatens established businesses, in particular the big four record labels. Before a Long Tail works, only the most popular products are generally offered. Unlike iTunes with there one size fits all pricing model, Amazon has a chance to introduce a pluralistic model that can include the pennies a track pricing strategy based on what indies will accept. After all, that's all the artists are getting now. It sounds like a great idea for cover bands, tribute bands and the like. If Amazon succeeds in a long tail that will create the reality that will cause the major labels to inevitable crash and burn.
The another reality of the new model of the music industry is that major labels spend big bucks to promote some artists. Just like the premium paid for Coke and Pepsi, the consumer is expected to pay for the hype and often gladly does. The consumer has a choice. Go with the higher priced name brand or with a just a good generic. Some people prefer designer clothes while others are quite content with the knock-offs. Cover bands, this is you chance! There will always be a place for this end of the market, but the oligopoly is over. Once a cover band establishes a following, introducing original material is much easier.
Labels: music industry, RIAA
