Filed Under: FutureWatch
What I’m going to say will likely disturb some folks, particularly in light of the fact that iTunes just became the #1 music retailer in the world this month. But work with me a little.
The online music revolution has not occurred, yet.
That’s it. No wild speculation, or tin-foil hat accusations, (and yet your characteristic sensationalism remains –ed)
That is the whole of the thing. While other industries have seen often dramatic effects on their business as a result of the internet, the music business is much like it was when my dad had a music store 20 years ago. Consumers still shop, they buy records, or singles they’re interested in. In short, online music has not been changed by the internet (save for the piracy aspect), it remains the same “Buy and Consume” metaphor it has always been.
In the spirit of disrupting future software patents by publishing prior art, after the break we’ll discuss in detail exactly how Apple could change all that.
Way back in the dark-days when the internet was just FTP and DARPA net, when the World-Wide-Web was just some cool photos from NASA, I had occasion to discuss with an analyst from the Central Intelligence Agency, on the subject of the proliferation of networks, and information exchange, and how that might effect his core business (distilling information into actionable intelligence).
What he said was”¦ well we’re not going to talk a lot about everything he said, because there were all kinds of words in there that I didn’t understand”¦ but ONE thing he said that really, really stuck with me to this day was:
“With these new systems [the internet], we’re not going to be able to control information anymore. But we’ll be able to do something just as good. We’ll be able to know what information someone has access to. And knowing what your opposition knows is just as valuable as what he knows.”
Now that was some serious spy-gobbly-guck, and this cat really talked that way. What he was trying to say was (for example), simply knowing that the Chinese have the plans for the MK23 Mascot-Shoulder-Fired-Tee-Shirt-Launcher (what did you think they were going to do during the half-time at the Olympics?), is as valuable as having the plans for the MK23 MSFTSL itself.
I mention this because that’s a revolutionary thought.
You don’t think so?
Back in those days there was a company Lexis-Nexis (there still is) and they controlled information search. They had the data, if you wanted to search it you have to pay (and you still do).
Now a days, there is this little company that thinks that simply KNOWING what you’re searching for, and KNOWING your results is as valuable as all of the data they’ve indexed.
Or lets put it in terms of our present thesis: “KNOWING that someone has a particular song on their iPod, is just as valuable as the song itself.” Take THAT RIAA!
I say that lightly, but I am deadly serious here. If we were to couple in information like, frequency and times played, personal rating, how long they’ve had the song, and how that play has increased or diminished over time, you’ve got information that is Significantly More Valuable than the song itself.
If someone is willing to pay Google twenty cents just because you searched for The Doors, what do you suppose detailed information about your listening habits about The Doors might be worth?
This extends WELLLLLLLL beyond music searches. We have this thing called BI Analytics, it’s what Amazon or Netflix uses to make product recommendations for you. You suppose that if the analytic software worked out that folks who still listen to The Doors are more 500 times likely to buy organic fair trade coffee than Beyonce fans, that information might be worth 99 cents to someone to let you download ‘Love me two Times‘?
I want to be crystal clear: I am not talking AT ALL about ad supported music, Forget that. I’m not listening to “Buy gold, it’s great, so great we’re buying ads to try and sell it“ advertisements on my iPod, forget it. That’s not revolutionary, that’s not even evolutionary, we have that already, it’s called The Radio.
What I’m talking about is a browser that integrates with iTunes to anonymously provide information to ad-syndicates that work with various portals and sites which can be used to trigger topical advertising that might actually be of interest to me. For you visual thinkers, this:
I’m used to seeing ads on these sites anyway, from my perspective as a consumer it’s the status quo. It might even be more accurate; as my taste in music is a whole lot better indicator of what I like and what I might buy than what I happen to be searching for.
Thats revolutionary. There’s only one company in the world that could pull it off, that has the library, the audience, the browser and the pull in the industry to make it happen.
Meet the New Boss, Same as the Old Boss:
Apple.
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Credits: I don’t usually do this, but this post was inspired by Nick Carr, the ideas were all mine, but he has an almost magical talent for getting me to think of things differently. If you don’t currently read: Rough Type, you should.
30 responses to “What Happened to the Online Music Revolution?”
The revolution may not have happened, but the starting point for exactly what you are talking about it in the works: last.fm. Right now it is entirely voluntary. You install a tracker on your media player and it tracks what you play so that it can put together custom radio stations. All it takes is for some enterprising company to buy last.fm up and this music revolution you are talking about takes off.
I realize that you’re talking about revolutionizing an industry, and certainly your plan would be cool for the consumer and in these http://www.days, who doesn’t want to purchase things with their privacy; but I like to think of the digital music revolution as having more to do with taking the power of music out of the hands of the record companies and putting it back into those of artists and listeners.
For example, I no longer need to live in San Francisco and spend every Saturday in some obscure record store to find good, non- Top 40s stuff; I now have access to thousands of band’s who never had to try and sound like Nickleback or Britney just to get radio time.
But even as price is concerned, I think that without Napster, file sharing, etc., you’d see a much higher price point for songs. I say that because iTunes values a TV show at what? $5? That’s saying that an episode of CSI, which I’ll watch maybe twice, is five times more valuable than a song I’ll play thousands of times in my life. We set the standard for what music is worth, $0.0, and so the industry couldn’t raise it much higher.
Those are all bits of this revolution we’re talking about, because I’d like to think that revolutions come by way of the people, not big corporations. (Even if they are nifty ones like Apple.)
Nathan,
You’re exactly right on pricing and value of content. The secret sauce of this whole deal is that the revenue model changes. It ceases to be a distribution based model and becomes a revenue sharing model.
In this scenario: niche or alternative artists will actually make MORE money, because their audience value can actually be HIGHER than say. (Example, being able to get that Cadillac ad in front of a confirmed Pavoratti listener is worth more than getting a Mountain Dew add in front of a confirmed Britney fan)
Further because it removes “acquisition cost” from content, it will allow for new comers or niche artists to develop much wider or deeper audiences. It also provides for a more “Democratic” music experience, since the power of marketing is no longer exclusively, in the hands of the distribution channels.
Sean,
I agree, there are quite a lot of “parts” of this solution out there already. Heck, I could probably write the iTunes tracking component this afternoon.
Unfortunately it will take someone with WEIGHT to revamp their model. While it’s not substantially different than their broadcast revenue model used by the record industry today, a larger bunch of “Buy and Consume” model focused barbarians I do not know of. Someone’s going to have to drag them kicking and screaming.
Being a betting man, I suspect it will be a trifecta of Amazon, Apple, and Google.
Terrific post Leigh.
I think this is the direction things are moving. Trading your individual consumer habits and information for goods and services will be the defining trend in the coming decade.
First off, thanks one and all for your kind comments… I do this because I simply LOVE to engage in a 2 way dialog with our readers. It’s much more rewarding than print journalism IMHO.
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Secondly, I wanted to pose a question to the group, a couple of folks have already pointed out the notion of trading our privacy or information for good and services (as Jeff phrased it so well).
Do we think there would be any resistance to this outside of the tinfoil hat crowd?
I would like to think not as evidenced by the fact that folks are lining up to be Neilson households for minimal compensation.
Whats more your credit card company, and MANY major retailers already engage in very similar purchase records based demographic marketing and business intelligence, for which we receive no compensation at all.
Thoughts?
Oh, and Seth… sorry for calling you Sean… My dyslexia got the better of me there.
So at which point would we be being compensated? It sounds like Apple would be leveraging this information to profit itself and we would be getting more appropriate ads in our browsers (which is fine with me as an Apple stockholder).
What I REALLY want it to use this data myself to make better playlists and manage my music better. I got God knows how many tracks in God knows how many genres and I simply don’t have the time to actively manage that whole library. If I had access to all that passive feedback I give my iPod every day my life could be a lot easier.
Also, I’d like to see Apple acquire Pandora. Nothing in the whole world has ever opened me up to new music as that has.
Church,
Our compensation as consumers would come in the form of free music.
That said, I don’t know if you can tell from the image above, but I’m in the same boat as you, I’ve got close to 50K songs in my library, it would be REAL NICE for folks to be able to share ratings and such…
A while back I even started writing an iTunes plug in that would do exactly that, take songs you’d rated, store them in a database, and rate songs that you owned with ratings derived from the DB based on likeness of your ratings with other users.
Great idea, but expensive on the server side, and hard to monetize.
I think Church brings up an interesting point though. Won’t the smartest companies use consumer information, not only as source of income, but also as a way to build their site’s community and create traffic. Maybe it’s using your iTunes ratings, maybe it’s a different method.
P.S. I did a quick office survey just now (I yelled out the question of whether you would trade your listening habits and personal information for free music) and it was split about 50/50.
Absolutely,
IMHO, this information (listening habits and tastes) gives so much insight into the mind of individual consumers, it’s uses are virtually limitless, and extend WELL beyond simply being able to drive better marketing campaigns.
Hey, as long as you keep listening to Lords of Acid (no “Voodoo-U”?), I’ll listen to whatever you have to say.
Is what you are suggesting something like Phorm http://www.phorm.com/?
If it is I think you could run into some problems with what information people think it is okay to track. People need choice.
@ nathan
Don’t forget it costs millions of dollars to produce a single episode of CSI and tens sometimes hundreds of millions to make a movie. Rarely, and only in the cases of the biggest artists, do entire albums cost anywhere near that much to make, let alone single tracks. Not to mention the fact that TV shows and movies are much longer than typical songs. As far as play time goes you could listen to a 3 minute track dozens of times in the span of a one hour TV episode. So it’s relative.
What you are talking about is perceived value.
There never was, nor will there be any great “revolution” in the music industry. Music was, is, and will be the product. Some will buy it, some borrow it, and the rest steal it. The only thing that changed is delivery.
Bricks and mortar are disappearing, but online retailers are doing virtually (no pun intended) the same things done at Sam Goody for decades. Display, sample, and distribute the product. last.fm sounds a lot like the Columbia House record club to me; they send you recommended music, and you listen and keep what you like. Instead of your buddy giving you a pirate cassette of Dark Side Of The Moon, he sends you Zeitgeist as an attachment to an email.
The only revolution was the music publishers actually understood and got ahead of the online model, albeit by impeding its progress until they caught up. Granted, the Internet makes it easier for some musicians to produce and distribute their music independently. But that’s how the Apple label got started. Small acts will still need the record companies to build an audience.
Unlike other businesses, like software, travel agents, and stock brokers that were caught unaware, music companies still control the sale and distribution of their product. They saw what they needed to do to survive, and leveraged their position so they’re starting to thrive on the new business model.