The new paradigm of music has arrived!

Story.mp3Law on the Row used to be a periodic newsletter in the physical world that I would send to my clients and mailing list.  In the first edition of Law on the Row, published September 9, 1999, I published an article on digital downloading entitled “To MP3 or not to MP3?  The catalyst for a paradigm shift in the recording industry.”  That article was a harbinger of the paradigm which is still melding in the music industry even now.  The focus of this blog is where are we now?

There is a lot of discussion on the web and in the print press these days about the overall health of the music industry, including an article entitled “What’s the future of the music industry” published just last week in the New York Times.  The article points out the Nielson statistics for albums sales which indicate that sales have fallen 18% from 2000 to 2006.  Certainly, everyone in the music industry appreciates the downturn in sales, however, as the article also points outs, sales in other industries are also proportionately down , such as new cars which have declined 22% over the same time period.  Also, downturns in the music industry are certainly not atypical, and the digital download phenomenon is not the culprit of our current downturn.

I have always believed, as I still do, that people are essentially honest and want to pay for things they enjoy.  I believe that people do not mind paying for something of value, including music!  The success of iTunes, emusic.com, and all of the Russian download sites are indicators of the validity of my belief.  Yes, there is illegal activity.   Inevitably there will be people who abuse the system and will seek to get something for nothing.  But the average person just wants value.

I support the artists and songwriter’s rights to be paid for their time.  I even believe that a record label should recieve financial remuneration, even profit, for the marketing, promotion and distribution efforts involved.  The simple fact is that people will not work if they do not get paid.  If people stop getting paid for music, music as an industry will cease to exist.

Returning to the idea of value for effort, the author the NYT article reminisces about the historical “single,” an idea which deserves some consideration.  I remember going to a record store and looking at all of the singles displayed on the wall and picking one or two of my favorites.  The beauty of that system was that you got value for your money — you selected the music you for which you were paying.  In contract, with the industry’s current “record album” paradigm, you have to pay for 8–9 songs for which you don’t care.  Credit digital downloading for bringing back the “single” paradigm. 

But again, people want value even for this paradigm.  Most people I talk to insist that 99 cents for a single may be too much money.  Most people feel that somthing along the lines of 25–40 cents is an appropriate price point.  So, in essence, in considering everyone’s interest, including the songwriter, publisher, distributor (and/or record label) and artist, the question become how much are people willing to pay for a digital single to compensate the varying parties for their considerable effort.

The second component, in my opinion, of value for my money is DRM-free music.  People want their music to be free of any restrictions.  Any form of digital rights management has to be incorporated into this new paradigm.  Finally, selection is imperative.  People want variety.  Apple has only around 500,000 or so songs in their current catalog.  This may seem sufficient until you realize that peer-to-peer networks generate catalogs in the millions!

So, how will the new paradigm work?  The Electronic Frontier Foundation proposes voluntary collective licensing, which is to say that “the music industry forms a collecting society, which then offers file-sharing music fans the opportunity to “get legit” in exchange for a reasonable regular payment, say $5 per month.”  This is, of course, similar to the current method of collecting performance royalties by such giants as BMI, ASCAP and SESAC, as well as a multitude of foreign performance rights organizations. 

The collective licensing system is certainly a valid model, however, there are some disadvantages to consider:  first, with the risk of overgeneralizing, I note that these models typically favor, again, the players with the most power, i.e., the mega-conglomerates – not the independent artists and songwriters.  Secondly, the subscription method favors the supplier, not the demand.  Like most consumers, I personally do not like the “subscription-based” model.  I don’t like being obligated to a monthly fee, even if I can cancel it.  I want an ad hoc pay-as-you-go system — more like iTunes and less like eMusic. 

My personal prediction of how the new music paradigm might shake out is dependent upon the efficiency of search engines and indices on the Internet.  As the online community of music lovers grows, so does the online community of music providers.  Independent producers can sieze the day in many ways.  Myspace.com is evidence of this phenomenon.  but as anyone will tell you, the old addage of “build a better mousetrap” does not apply in the online world.  It less like looking for needle in a haystack and more like trying to find a dime on the ocean floor. 

There are certainly headways being made in this arena:  take the free Internet radio service, Pandora, as an example.  At this innovative site, people find new music similar to the music being played by Pandora’s web-based radio that is based on their selection of favorite music.   Another innovative search site is LivePlasma, which displays a graphical sytem of color-coded bubbles that are more or less related to your favorite artists.  As more of these types of search engines become available and intergrated into the Web, it will be easier for independent artists and producers to get their music heard.   For a much more detailed analysis of this idea, read Chris Anderson’s important book, The Long TailOnce that happens, the paradigm shift from major labels to independents will be complete.

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Filed under Entertainment Industry News, Life on the Row, Music Industry, Music Row News

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