Sunday, 28 September 2008

EconMusic - The Economics Of Digital Music 2008




The different panels during this conference were inadvertently but subtly tied together by “the long tail.” Whilst this wasn’t always referred to explicitly it is impossible to ignore this paradigm of the new economy. This is especially true of the music industry, in which the entire traditional value chain has been brought into question.

Whilst tools like MySpace can be a fantastic way to promote your music to a global audience with very little effort, the artists are not compensated fairly. This point was put across succinctly by Billy Bragg on the Social Media panel in which he berated MySpace for not sharing any of their £800 million per annum advertising revenue with the artists providing content on the site. There is the possibility that until recently MySpace individually viewed the collective content provided by artists as nothing more than fodder in order to attract eyeballs and ultimately provide audiences to advertisers. However, the recent launch of the MySpace Music point of sale platform should align the interests of MySpace and the artists to derive revenue from music sales. The service should prove to be mutually beneficial to labels and MySpace as all of the major labels hold equity in the new venture.

On the same panel Steve Purdham,(CEO,We7 voiced the difficulties between the royalty rates demanded by labels and the reality of revenues derived by his advertising supported streaming audio model. At present Purdham is paying out royalty rates to artists in excess of the revenues which the site is generating. He believes that regulatory changes and label demands will change in the near future to allow We7 to operate as a commercial going concern. Danny Rimer (Partner, Index Ventures) picked up on Purdham’s vision by comparing it to the forward thinking Spencer Hyman (COO, Last.FM), who was able to action a pioneering advertising supported model which has benefited other music related internet startups.

Whether the mobile phone companies are artist friendly is a bit sketchy. On the Mobile Music panel Tom Erskine (Head of Go-to-Market, Nokia Music) sang the praises of the much hyped, and soon to be launched, Nokia Comes With Music. Erskine was insistent that the service is going to be marketed as “premium not freemium.” However, if the service allows subscribers to download as much music as they want then surely this promotes the message of music being a commodity. With Sony Ericsson making noises about launching a similar service, it seems like that that this is one trend that is going to be around for sometime yet. Whilst such services will make music feel like free to consumers it is important to educate consumers through marketing that this isn’t the case.

The Direct-To-Fans panel revealed perhaps the most creative and artist friendly digital music business models. Services like Slicethepie and Sellaband harness the collective intelligence of their userbases to discover and fund unsigned artists. The interests of the artists, consumers and service providers are mutually aligned. Both services are essentially financing models but at the same time can help as being part of an online marketing campaign. The main pros for the artists is that they retain greater control over their recordings and are offered much more favourable terms than by going with a label. David Courtier-Dutton (CEO, Slicethepie) pointed out that the only reason to go with a major over such services would be to have access to their marketing muscle and huge advances.

In summary, the Econmusic Conference provided some lively and lucid debate but very much presented as industry still in transition. At present there appears to be a huge shift in power from the labels and artists into the hands of technology and media companies. The challenge is for artists and labels to monetise content from the plethora of services on offer, and to work in harmony with technology and media companies to create a pioneering new ecosystem where all stakeholders are fairly compensated.

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1 comment:

angelin said...

It is difficult to value digital music because the supply is nearly infinite and easily accessible. Legal Peer-to-Peer (P2P) services may struggle because P2P technology is not the most efficient way to deliver music to customers. A dedicated Content Delivery Network (CDN) is preferable.
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