Technics: Digital file-sharing: Music industry thaws a bit to acknowledge the benefits of free downloads and P2P

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Techdirt contributor Mike hits the jackpot once again with his recent blog-entry,"Rethinking The Music Industry Business Model... Finally Going Mainstream." I've underlined his links, but not live-linked them. Click up his entry to navigate to his links, and to read the interesting comments that are already flowing in, replying to this piece. Excellent analysis, Mike! I'm interested in the whole idea of new tech-age business models he touts, convincing me at least. So, I'm looking forward to an attempt at some analysis of his thawts on that key idea. My colleague Spondent hopes to do just that over the next few days in the USE, Inc. Game series on correspondence refWrite. Heeeeeere's Techdirt Mike:

from the can't-stop-the-trend dept

For all the complaints we have about the way the RIAA conducts its business, we have always been optimistic that things would get sorted out eventually. It wasn't the music industry that was in trouble at all -- just the traditional recording labels. People often accuse us of hating the music industry, which is totally incorrect. When we discuss music industry strategies it's hoping that they recognize that these new business models have the potential to be much bigger than the old ones. This is based on a few simple ideas that really shouldn't be that hard to grasp, unless you're desperately tied to an existing business model and unwilling to change. First, treating all your customers as criminals doesn't create much loyalty or willingness to buy your product. Especially in a market where the product is based on being a fan, not filling a need. You want your fans to be happy -- not pissed off. Second, the basic economics are there. On the supply and demand curve the supply of digital goods is infinite, meaning that the trend over time will absolutely be for the price to get pushed towards zero. It's just the way the market works. That's not a bad thing if you embrace it and recognize that, rather than lost revenue, free content represents free promotion. After all, the hardest part of becoming a success in the music business is the marketing to get your product known. The third, and final, aspect of this is how new technologies have dramatically decreased the costs of every other aspect of the music business. Creation, publishing and distribution are all now much cheaper due to the onward march of technology, forcing a shift in how we think about copyright issues.

TechNotes, by Owlie Scowlie

Based on all of this, it's not hard to come up with a variety of different business models that are based on (1) using the music as a promotional good to get a lot more attention in a crowded market (2) offering customers what they want, and offering them plenty of different ways to get it and (3) building tremendous loyalty from happy customers who feel much closer to the musicians and are much more willing to spend money on secondary products (merchandise, concerts, access). Plenty of musicians have figured this out, and now it's moving further and further away from being a "fringe" idea and into the mainstream music business. Wired Magazine is running a bunch of articles about how the industry is realizing this, with two pieces that are definitely worth reading. There's an interview with Beck where he discusses continually giving fans more ways to interact with the content, and not worrying about things appearing on the internet. However, even more interesting is the article about Canadian music management and music label firm Nettwerk. You may remember that name from their announcement earlier this year that they would pay the legal fees for a teen sued for file sharing one of their own artists. The article also discusses how Nettwerk recognizes all of what we discuss above, in that it's encouraging each band on its roster to build its own label, and focus not just on how to "sell a CD," but on selling the entire experience of the music. When you look at things that way, it means you don't worry if some of the music is heard for free, because that just encourages more interest in other things the band is selling. It's also looking to try experiments similar to the recently announced Sellaband, who focuses on getting people to "invest" in a musician to help them pay for a recording, in exchange for a share of the later profits. In other words, the industry is evolving -- in many of the ways that plenty of people have been predicting all along. This is a good thing -- and one of these days the old record labels will finally recognize the mistakes they've made... or simply disappear.