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Musique : la musique sera gratuite (au final)... ou du modèle produit au modèle service (Orbitcast, en anglais) [07.10.2007]
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The music industry is at an important paradigm shift right now, and there's a heated debate within the blogosphere about the economics behind the distribution of music. Mind you, this is far different than the value of music, but easily confused. In the end though - it's inevitable in my opinion - music will eventually turn away from its current product model, and into a service model.
In short, music will be "free."
It's not that people will stop paying for music, but it's how they pay for music that is the key.
DRM is falling apart, and we all knew it was going to happen. iTunes is selling DRM-free music. Amazon has opened up a DRM-free MP3 music store. Even Microsoft and its new Zune 2 is using DRM-free as a differentiator. The technical restrictions on owning and using music are disappearing.
And the reproduction costs (separate from the creative costs) are disappearing, if not already gone. As Mike Arrington from TechCrunch puts it:
"...like software, it doesn’t cost anything to produce another digital copy [of music] that is just as good as the original as soon as the first copy exists, and anyone can create those copies (meaning there is perfect competition and zero barriers to entry)."
Breaking it down even further, TechDirt (one of my favorite blogs) brings in the analogy of the software, and the film entertainment industry:
"For software and filmed entertainment, the inevitable shift is to a service model rather than a product model (which is the same as music). A services model recognizes that the creation (not the distribution) of content is where the marginal costs are. In reality, they've always been services models -- just disguised as product models."
What will happen, regardless of the moral implications, is that music will eventually become free. And the reality is, for many people, it already is... and has been for years.
At the root of the debate over music business models is Radiohead. If you're in the industry, or follow it, you've likely heard about Radiohead's "museum model" move. The quick take is that Radiohead, free of a record label, has decided to release their newest album at any price you want to pay. No really, any price (see the picture above).
Now sure, this isn't something that every band can pull off (just like every band can't pull off the Grateful Dead/Phish model of touring non-stop)... yet. But asking fans to pay whatever they want allows the hardcore fans to help support the group, and the less-than-hardcore fans to be exposed to the music at a minimal cost. "Performance" and "distribution" all wrapped up in one pretty little package.
This shift from a product model to a service model hasn't escaped the music industry. Please, don't discount these guys as fools... when it comes to making money, they're pros. And that's what SoundExchange is all about. They're making sure that all forms of distribution are going to be adding to the revenue stream. They're shifting from product to service. The nice thing is that at least the artists get paid for the airplay.
But even with the commodization of music, there's still another need for any artist/label to make money: Getting heard.
Having your music heard (or "discovery" - whatever you want to call it) is still at the essence of any revenue model for the artists. Terrestrial radio, when they lose their "performance tax" case (and they will), will no longer rest on the laurels of being contributors to the antiquated Product Model. And with future CD sales predicted to drop at an accelerated rate, there's little terrestrial can do to prove its effectiveness (especially at moving product). Terrestrial radio will move to a pure Talk Radio format before you know it.
That's right, radio is going to drop music from its airwaves eventually... and probably in the not-so-distant future. They're already talking about it, and once SoundExchange wins, that consensus will spread like wildfire.
What will be left for music discovery will be Internet Radio, Mobile Audio (which includes cellphones and digital audio players) and Satellite Radio. All of which do a phenomenal job at helping their listeners discover music.
The value that XM and Sirius bring to the table though - the single differentiating factor - isn't the just the songs, or the "depth" of the playlist. It's the brilliance behind the programmers. Many of the programmers who adorn the halls of The Eck, or the 1221, are former terrestrial radio programmers. They possess the intangible creative ability to be in-tune with the audience. To anticipate future "hits" and to paint an aural mood. Where terrestrial has ignored them, they've flourished on satellite.
So yes, music will be free, which will open up many doors. Many different and more creative streams of revenue, and among those will be commercial-free "pay radio" leading the way.
Orbicast
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