Big Music will give up, but not earlier than 2011
- Transfer
This is a translation of Michael Arrington's Techcrunch article on free music and labels.
This week I had a surprisingly frank conversation at dinner with a person from the leadership of a large music label, and a significant part of our conversation was devoted to the future of music. I asked the usual questions: “Why are you guys so helpless? Your business is collapsing before your eyes, and all you do is chase short-term profits (lawsuits, gang extortion of money from venture startups, etc.). The long-term consequences are daunting - a whole generation or two young music lovers do not feel any remorse about the open theft of music. Since most of the online streaming content is free now, it's hard to understand why downloading or sharing music should be considered a crime. ”
His answer: All this is part of a big plan. Labels fully understand that music played online or downloaded will be free in the future (we argued about this before ). CD sales continue to fall by 20% per year, and this process will stop only when sales reach zero. Nothing can replace this income.
They also understand that recorded music will be little more than a form of promotional material.. This means that the Internet services that are now suing for copyright infringement will be used in the future as a means for the world to learn about new cool music. Today, these services pay in one way or another for the privilege of distributing music, but in the future, labels will pay them. This will be a completely new level of current payment for radio broadcasts by musicians, and there will no longer be talk about the fact that social networks should share shares with musicians . Money will flow in the other direction, as it should be.
By 2013 (perhaps already by 2011) it will make sense for labels to completely reorganize their business models with respect to the new reality created by the Internet and file-sharing services. Labels will no longer be tied to revenues only from the sale of records - by this time most or all artists will be connected by the so-called “360 music contracts” - contracts that give labels a share of almost all types of income that an artist can receive - fan sites, concerts, souvenirs, advertising revenue, and everything else.
But until then, as my interlocutor claims, from a business point of view, trials of users and services make sense. Venture capitalists, through their startups involved in litigation, send hundreds of millions of dollars to label wallets. To some extent, this money will be paid further, although the days of large payments, apparently, have already passed. Apple still pays a lot of money to labels for paying users to download music, and sites like MySpace Music, Imeem, Rhapsody, and Last.fm pay big fees for streaming content.
For most industries, holding on to old ways to generate revenue until they have exhausted themselves is a great way to open doors for competitors with more innovative business models. But the innovator's dilemmanot necessarily applicable to the music industry. Big labels keep talent under lock and key, and there is no reason to believe that new artists will not fall under the wing of one of the labels.
What this means for music consumers - don't expect significant changes in the next few years. But over the course of this decade, we will see significant changes in the way music is distributed and consumed. And who knows, maybe in ten years we will all forget about music labels.
This week I had a surprisingly frank conversation at dinner with a person from the leadership of a large music label, and a significant part of our conversation was devoted to the future of music. I asked the usual questions: “Why are you guys so helpless? Your business is collapsing before your eyes, and all you do is chase short-term profits (lawsuits, gang extortion of money from venture startups, etc.). The long-term consequences are daunting - a whole generation or two young music lovers do not feel any remorse about the open theft of music. Since most of the online streaming content is free now, it's hard to understand why downloading or sharing music should be considered a crime. ”
His answer: All this is part of a big plan. Labels fully understand that music played online or downloaded will be free in the future (we argued about this before ). CD sales continue to fall by 20% per year, and this process will stop only when sales reach zero. Nothing can replace this income.
They also understand that recorded music will be little more than a form of promotional material.. This means that the Internet services that are now suing for copyright infringement will be used in the future as a means for the world to learn about new cool music. Today, these services pay in one way or another for the privilege of distributing music, but in the future, labels will pay them. This will be a completely new level of current payment for radio broadcasts by musicians, and there will no longer be talk about the fact that social networks should share shares with musicians . Money will flow in the other direction, as it should be.
By 2013 (perhaps already by 2011) it will make sense for labels to completely reorganize their business models with respect to the new reality created by the Internet and file-sharing services. Labels will no longer be tied to revenues only from the sale of records - by this time most or all artists will be connected by the so-called “360 music contracts” - contracts that give labels a share of almost all types of income that an artist can receive - fan sites, concerts, souvenirs, advertising revenue, and everything else.
But until then, as my interlocutor claims, from a business point of view, trials of users and services make sense. Venture capitalists, through their startups involved in litigation, send hundreds of millions of dollars to label wallets. To some extent, this money will be paid further, although the days of large payments, apparently, have already passed. Apple still pays a lot of money to labels for paying users to download music, and sites like MySpace Music, Imeem, Rhapsody, and Last.fm pay big fees for streaming content.
For most industries, holding on to old ways to generate revenue until they have exhausted themselves is a great way to open doors for competitors with more innovative business models. But the innovator's dilemmanot necessarily applicable to the music industry. Big labels keep talent under lock and key, and there is no reason to believe that new artists will not fall under the wing of one of the labels.
What this means for music consumers - don't expect significant changes in the next few years. But over the course of this decade, we will see significant changes in the way music is distributed and consumed. And who knows, maybe in ten years we will all forget about music labels.