The Icing On The Cake
Bruce Warila
in Making Money In Music, Illegal File Sharing, Music Industry Commentary, Planning & Strategy
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10 Comments
A - Illegal File Sharing
In spite of all the chatter on the Internet about governments forcing ISPs to crack down on file sharing, I remain as convinced as ever that stopping illegal sharing is like playing Whac-A-Mole. Every time something is invented or some new law is passed to prevent, something new and simple will pop up that enables people to share stolen music. If a song can be played through a speaker, it can be simply captured and clipped. Nothing is going to change that fact. File sharing, as we know it may be throttled, but a new form of sharing will appear and explode. It can’t be stopped.
You can find this sentence all over the Internet: “When the cost of reproduction drops to zero, the price will drop to zero.” Sadly enough, that’s what’s happening to recorded music.
B - The Three Bright Spots For Recorded Music Artists.
1) Paid downloads are on the rise. More and more people are buying digital downloads. File stealing and sharing is inconvenient for 50% of the population. The time-starved segment of the world finds it more convenient to buy music instead of pinching it. So, people are actually buying convenience.
2) Streams of Convenience are popping onto the scene. I believe downloading and transporting a peck of MP3s is going to be replaced by personal streams of music that can be accessed from any device anywhere. Over time interactive streams will replace paid downloads. Once again, the product is convenience.
3) Personalized Packages (coming soon). Bundled packages of music combined with other relevant digital assets that are so personalized that people will not share them. These securely bundled packages will include things within like points, scores and details that people will not want to share. The music may be sharable, but the package will have sharing disincentives baked into the product. Other variations of this concept will also exist.
C - a Five-Year Transition
For 99% of the artists on earth the three bright spots I just mentioned are just pins of light. It will take another five years for these three bright spots to exceed the revenue that was once produced by CDs.
What’s My Point?
You already know about the file-sharing problem; if you read this blog you know about the bright spots on the horizon; and you could have guessed it will take at least five years for the new technologies to replace the CD.
When I add A, B and C together I come to the following conclusions: (I am using “my” figuratively here.)
Fling open the doors and take my MP3s. It does not matter. My MP3s will be on iTunes and Amazon for those honest soles that are purchasing convenience. For everyone else - come to my shows, traffic my site, buy my merchandise - and when you get too old to dedicate time to stealing, please buy the convenience I offer.
If I bust my hump now building a business that does not rely on selling recorded music - then in five years - Streams of Convenience and Personalized Packages will be the icing on my cake. It will be like found money; like finding money in the washing machine. It will be reoccurring revenue that I can count on someday.
What’s My Point?
If you can build a business over the next five years that minimally relies on the sale of recorded music then within five years new streams of revenue will fill your pockets. The need to be known (sprung) will still exist, but you should believe that your efforts would not be for nothing. Furthermore, this “business” that you may build over the next five years may stand on it’s own as a profitable entity.
The Direction of Unsprung Media
More and more I am going to focus on strategies for building a business that does not rely on the sale of recorded music. Yes, take the sale whenever possible and perform live if you are able. However, there are other opportunities outside of music sales and touring that should be considered. Over the next year, I am going to focus on developing these “other” opportunities (no not t-shirts and coffee cups).
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Reader Comments (10)
Cool post, Bruce. A lot of blogs seem to be running out of steam this year now they've talked radiohead to death.
5 years is still quite awhile. I think when artists get "problogger" type serious about ad supported revenue some good things will start to happen, bloggers are creating revenue out of free content and are obsessed with ad supported revenue, being episodic and the rest.
Today I have decided to start a rebranding exercise in describing what I offer as "digital coaching" for artists. (go the Seth)
Myspace, facebook etc. make a lot of ad revenue out of emerging artists that the artists never see. For the first time I've been seriously thinking about that.
I love your thoughts Bruce. I sent you and email and am looking forward to your reply as I believe your insights have led me to a big idea...
Keep it going brother....I RSS (due to your blog) many, many music futurists and when your pops up I go there first...period.
Andy
Red Cup Records
Andy, Matt - Thanks!
Andy - it's coming. I just have to get out from under the weight of my projects this week.
Matt - great idea, A saw that post from Seth. I have been thinking about the same thing. I would like to know how you are going to market yourself? What do you call it? How are you going to reach your audience? Let me know. I think it's a great idea!
I hate to once again be the one to drop a can of red ants on the picnic site, but hold yer horses a minute.
1. Five-year plans were tried in socialism (I'm Polish, I know all about it). Bad idea. I don't know what crystal ball you have Bruce, but I'd hesitate before articulating speculative advice so strongly.
2. If you have a business that doesn't require selling recorded music, you simply don't care about file sharing. Problems arise when you do and this is a point I see you clearly steer away from.
3. As a matter of semantics (I was going to mention this in an earlier comment), convenience isn't nor ever will be a commodity - it is a feature. People don't set out to buy convenience, but they might be persuaded among purchase options by the convenience of a given format. People set out to buy (hopefully) music, even more hopefully YOUR music. Convenience may be a factor, but not if they don't like the music.
4. I've seen the concert business die here in Poland because of the proliferation of free appearances (usually sponsored by civic authorities these days). The stars that play these shows don't play paid gigs anymore, simply because the ticket sales would be disappointing compared to the money they recieve for playing free shows (and since there is a small number of artists that always get booked for these things, they get to live quite comfortably). The end result is people aren't prepared to pay even minimum prices (comparable to a pack of cigarettes) for a concert. Beware, lest the same thing happen to your recorded music.
I will be happy to place my bets on a future for music that will arrive within five years, and in the wait time - build something that does not completely depend on the sale of recorded music - as selling music is challenging for most unknown artists. If you are happy (and smart enough) to do the first (exceptionally) the second will follow (within five years). I am not talking about starting a landscaping business, I am talking about building something that has complete synergy with a future that will eventually include selling music again.
When all other attributes are equal (except convenience) - a song on Bit Torrent compared to a song on iTunes - opting for iTunes is a purchase of convenience?
People do buy convenience all of the time. On an absurd level - I could go out and grow and kill my own food, but I go to the grocery store instead - because it is more convenient. In the states we have an entire class of stores called Convenient Stores. People pay more at Convenient Stores because they choose to buy convenience over other options.
I'd be very curious to see an article expanding and expounding upon the third bright spot -- personalized packages.
Justin - we just exchanged comments.. I could have directly linked to my product concept, but I did not want to be accused of flogging my own products again. I am confident other companies are working on similar products - as I monitor this segment continuously.
Just discovered this blog today, thanks to the magic of StumbleUpon, so you're gonna have comments from me in several threads.
Re: "purchasing convenience"... that's true for some, but I think you (and many others) give short shrift to those of us that are purchasing integrity. I download TONS of music - illegally. Tons.
But it doesn't end there. If I don't like what I've downloaded, i erase it - why would I keep something I don't like? If I do like it - I go to a retail outlet and buy it. I will special order it if it's not in stock. This happened to me very recently with Vinyl Fever in Tallahasse FL. I went there looking for, among other things, "ideal lives" by Rahim (easily the best band i heard in 2007). A band which I'd discovered thanks to Pandora, and grown to love thanks to Soulseek. They didn't have it, but I talked to the clerk and ordered it - and boy, did his ears perk up when i mentioned it was produced by j. robbins! He placed one order for me and one for himself, sight unseen... er, unheard. This clerk was a 20something college student who liked really good indie rock - you think maybe he told a few friends?
But I digress. My point isn't that filesharing directly contributes to the dissemination of good music, or that it has the effect of free promotion, or that it only works against you if the music you make doesn't inspire grassroots level personal involvement from a scene. I hold those truths to be self-evident.
My point is that I drove 150 miles to a record store to look for a copy of the music I'd already illegally downloaded. Whatever it was I was purchasing, it was NOT convenience.
And most of my friends operate along the same lines. Of all the people I know who download illegally (which is many) I don't know a single one who's just stopped buying music altogether. Everyone I know who "steals" music continues to buy either CD's, vinyl records, or downloads legally. Where do you think they heard the music to go out and buy? Hint: it wasn't the radio.
Bruce, once again a provocative and thoughtful post. I want to comment on your assumptions on streaming. There seems to be a general assumption that bandwidth is endless, or that it will grow to match the market. The most naive expression of this belief is McGuinness' speech at MIDEM, where he accused ISPs of profiting from p2p downloaders. The most perfunctory study would show that the ideal ISP subscriber is a guy who uses email and the worst is a heavy downloader -- bandwidth costs money! Today, figures have been published that give an indication of the cost. (I'm not including you in that airheaded group, I know you're way smarter than that.)
The BBC has released a proprietary player (iPlayer) that allows streaming or download of all the BBC's tv shows for one week after broadcast. It has been immensely popular, with about 2/3 of users opting to stream. The small UK ISP PLusNet has 280,000 members and its hosting costs have risen from app £17,200 per month in December to £51,700 per month in January. Extrapolating to an ISP with 8million customers, that's from £500,000 to £1.5 million.
I've heard on authority that the biggest issue in the US for ISPs is lack of bandwidth - there's no spare capacity. In an ideal world they would expand to grow with the market, but I suspect that ISP owners have a different view of the world and in the USA it's one where the two-tier 'premium' Internet is the desired model.
The notion that in 5 years we will have on-demand streaming to any device anywhere at any time depends totally on the guy controlling access - the ISP. I'm sceptical, currently, that any of these behemoths will move that fast without motivation. And that motivation will be money, lots of it, from someone whose interests are served by increased bandwidth. Google, perhaps? But are they willing to pay for the world's ISPs to upgrade?
John,
Great comment. I am confident that a healthy, competitive marketplace will work out a solution to the bandwidth dilemma. Where there's demand, there's opportunity. Now, that's a canned answer...
Here's what I think... It will always be cheaper for me to share something with you using our local bandwidth capabilities, than it will be for you to obtain something from your network operator (especially on wireless).
When the movie you want is being transported across the country; it would be far less "network-taxing" to obtain the movie from those that are sitting on nodes of the network that are being under-utilized when you need the movie... I believe the EU had it right when they decided to invest $15,000,000 (I believe that was the amount) in a next-generation bit-torrent client. I don't have any practical expertise in this area, but it seems that investing in increasing the efficiency of sharing will solve a ton of bandwidth (and resource) utilization problems? Torrent sharing seems to be the future of network / resource utilization and optimization (once again, this is not my area of expertise) (Sharing could also be the greenest solution to solving the problem of energy consumption by giant networks and server farms?).
It's interesting, in the Northeast US - Verizon and Comcast are fighting - ad for ad to see who can give away the most bandwidth for the money... Other data points - Look up what Akami makes serving Movies for Apple, it's not much. Then there's Limelight Networks - they just reported disappointing results (I believe), seems they could use more customers to suck up the capacity they have?
I bet the noise about "running out of bandwidth" has more to do with politics in the US than reality. Cable and telecom billing is regulated and those that are "regulated" want to change the game. If you research the Net Neutrality issue, you will find out who has what agenda..
I think we should all be concerned about who gets behind (lobbies the government) to stifle innovation when it comes to innovative sharing technology. It seems to me that sharing could be disruptive to some of the HUGE companies that have a vested interest in legacy network utilization, and I am not talking about the RIAA?
Reality is not always as it seems...
All things to think about...
-Bruce