They’re proving they can still be dangerous – in all the wrong ways.
Sony Music has just agreed to make their catalog (two years or older) available to the online music store eMusic, one of the largest music retailers on the Internet with 400,000 subscribers paying $11.99 a month to download 30 songs.
That comes out to about 40 cents a song.
Far less than iTunes or any other online music site.
The eMusic folks have been trying to get the major labels for years and continue to talk to Warner, Universal and EMI now that they have landed Sony. Of course, they landed Sony at a price as you'll see in a moment.
The head of eMusic says many of the independent labels have been pressuring him to raise their prices.
Perhaps you can see where all this is going.
The major labels hold out for the best deal. And eMusic relents and raises its prices.
After all, the labels finally succeeded at hoodwinking Apple to adopt variable pricing (older songs 79 cents and new tracks for $1.29) and as I have reported recently, all legal download sales at iTunes have declined as a result.
Nice job reading the marketplace.
You can only imagine the rest of the story.
As part of its deal with Sony, eMusic says it will raise subscription prices slightly and reduce the number of downloads for some of its monthly plans.
You know, Less for More.
Talk about self destruction.
Let’s do the math. Say the most you could pay is $1.29 on iTunes for certain songs and the least is some place above 40 cents if you are a committed eMusic monthly subscriber.
The real value of music is – nothing.
That is the price most people pay for music today online also factoring in filesharing and theft. All of this reminds me of the theoretical arguments about "Long Tail" and "Short Tail".
Chris Anderson coined the term "Long Tail" to describe the vast amount of music that doesn’t necessarily get radio airplay or exposure. Music that could be more valuable than just the hits that represent the most revenue to record labels.
Now there is the "The Long Tail of P2P", the study by Will Page of performing rights society PRS For Music and Eric Garland of P2P BigChampagne.
It attempts to disprove the "Long Tail" theory in modern terms.
Page examined song purchases at a large online digital retail store, which showed that out of an inventory of 13 million songs, 10 million had never been downloaded, not even one time suggesting that the unknown or slow selling songs did not represent a business model.
In other words, most of the profit is still at the “head” – not the “tail” of the music business.
Their contention is that the disparity between the so-called “best selling hits” and everything else is widening.
The authors are suggesting that peer-to-peer filesharing should then be licensed arguing that "If sellers sell it, it might never be bought. But if the swappers offer it, at least one person will likely take it”.
But I have a far more holistic and more complicated assessment of the music scene today.
I’m proposing a “No Tail” Theory – meaning that looking at the head for income or at the tail for a power curve does not fit in to today’s sociology.
A major change from the days when record labels really sold a lot of units when they got airplay is that they do not sell a lot of units today even with airplay.
Even with oppressively small radio playlists guaranteeing over exposure.
Today’s Hot 100 are selling a lot fewer units than yesterdays and that’s because an entire new generation has been raised on music diversity not the formatic restrictions imposed on radio airplay.
Radio has lost the next generation in spite of The People Meter showing radio stations that are rolling up millions of listeners. What this is is simply giving credit to radio for the listeners they already had but not credited due to the flawed recall methodology of the Arbitron diary system.
No doubt young people still hear radio. Sometimes it’s all that is available – say, in a car or a public place. A People Meter will pick that listening up.
But Gen Y has been raised on diversity – music discovery at their hands – rather than scarcity imposed by radio stations and their Benedict Arnold partners, the record labels.
There is a reason the labels are trying to get their former partners, radio, to lose their performance rights exemption. It’s because radio’s airplay doesn’t even mean that much to the labels anymore. Otherwise, they surely wouldn't risk alienating their former partner in sales.
Further, if you study the generational aspect, you can see that we continue to analyze music, record sales, catalogs – in light of the traditional record-radio-consumer relationship.
In fact, the Millennials have broken the old models because they can.
They don’t need radio to hear music.
Don’t have to buy a CD to own music.
No longer rely on radio personalities to tell them about new music.
And can, in effect, be their own program and music director with just a few clicks.
As long as the labels keep thinking of the next generation as possessing social qualities of the last generation, they will continue to come up with futile strategies to raise rates on legal downloads that the market is rejecting.
That would be like raising the price for renting a horse when almost no one rides a horse (except for recreational purposes). It may make the labels feel like they are back in the saddle again but the financial strategy is seriously flawed. This is what I call “The Donkey Tail Theory of Music Sales” because it is so asinine.
Any discussion of a “Long Tail” in a market where most music is never downloaded at all – even one time -- is therefore moot.
My “No Tail” theory of music is based on the reality that like it or not music is a commodity – a cheap one. As long as labels and indies cannot prevent illegal filesharing, they cannot establish a unit price. In the last analysis even if they sell a 99 cent download, shouldn’t that be offset by all the times that same song was shared for free?
What’s really going on is a generational nervous breakdown.
Radio is declining and has long lost its record buying public.
The labels continue to impose how they want to do business on a market that doesn’t have to do business their way at all.
So, the consequence is simple.
Music is worth five to ten cents at best – that’s what the market is telling us. It is also saying monthly music plans don’t work, variable pricing is counter productive to online music sales and, in fact, 99 cents is no longer the accepted price for those folks who want to buy a song.
Young people will tell you this all the time. Just ask them. The number is never over 99 cents and increasingly they will tell you the price of a song is not even 99 cents.
The answer resides in looking at the music industry together with the changing technology and sociology of today.
1. Music is like a text message – worth five or ten cents at the most.
2. The way to have a vibrant and diverse music business is to abandon the failed theories of “Long Tail” or “Hit Radio” and embrace music as an emotional choice.
3. When songs can be downloaded without any real concern for pricing – say at five or ten cents – young people will ingest music the way they consume text messaging.
4. When there are virtually no consequences to downloading music, the discovery habit can and should be fed.
5. Only then can labels offer packages similar to the $20 per month texting plans that just about every texter has. In other words, you can’t build an online eMusic store and sell subscriptions without creating the addiction to buy music. There’s no growth in that.
6. If I offered a texter a plan that allowed them to do 30 text messages a month for $11.99, it would die as fast as eMusic will when they raise their prices.
The new reality is that all music in effect is created equally.
All songs are the same.
All artists have the same status.
Is my text message to you about being late for lunch any different than my text to you to say “I hope the Pittsburgh Penguins lose to Detroit”?
One may be more important than the other, but both are being transmitted and cost me the same amount of money.
The same will be true for music.
Record labels will never – never – accept this. Artists will also resist. Managers will dislike it. After all, the pre-Internet world allowed them to dictate success based on the brightness of the star.
But times have changed and music is now a commodity.
Worth five to ten cents at best – according to the marketplace, not me.
For a vibrant, growth industry – the labels should find someone who understands that selling “records” is really over even if they call them “downloads”.
Music will no longer be a conglomeration of individual songs but a sum total of how many musical experiences a consumer can have at a price that is fair and acceptable.
And what a business it could be!
Every young person paying $20 a month to discover, own, use, distribute music in any way they want. $20 a person for an entire generation. That’s more money than the music business makes today.
Don’t believe it?
Ask the cellular carriers.
That’s where to look for the template to tomorrow’s music industry.
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