Written By: Jim Markunas
This aforementioned model was extremely lucrative and effective for decades until the introduction of the internet and Napster in the late 90s; then the rules changed. The unthinkable happened... labels no longer had a choke hold on distribution. Worse yet, people stopped listening to radio as the internet was much more satisfying. After all that... record sales tanked so badly, people were leaving their record label jobs to work at AIG.
As an industry, we can no longer depend on selling records as our main source of income in today's digital-driven market. The reason being, consumers have seen that we are powerless to make them pay for the old model. People that are in my age group (23-30) realize that stealing music is wrong, but do it anyway. That's bad enough, however... People in the 12-20 age range have no concept that music was ever sold as a product and have no qualms whatsoever about building vast music collections on Limewire.
With that said, I'd like to introduce a small tidbit of my new business model.
* Yes... It involves giving music away for free (author pauses for groans and screams of horror). But... I'm going to give you 4 reasons why giving music away for free will generate more revenue than selling it in stores.
Reason # 1 - New Age DRM - Forget about the totalitarian DRM of 2004 perpetrated by Sony/BMG and iTunes that enraged consumers. I'm talking about an idea that hasn't been invented yet. New Age DRM will revolutionize the way the music industry does business.
Imagine if you will, an MP3 on a website or P2P network. Embedded in that MP3 is an invisible demographic program that follows the file wherever it goes and collects user data without being detected by its user. The data-miner is able to show the copyright holder, i.e., the label distributing the free MP3 everything it wants to know about its consumer. If said consumer is playing said MP3 on his/her iTunes or iPhone while surfing the internet, the data-mining program will broadcast this demographic information to the label that owns the MP3.
This is quite powerful information for a company to have on a lot of levels. Imagine, if at the touch of a button, and in real-time, labels were able to discern their target market's favorite websites, buying habits, etc. That type of info is WILDLY invaluable, which leads me to point number 2...
Reason #2 - The Magic of Eyeballs A.K.A. Demographics - We can't control wallets and ears anymore as an industry, but we can control eyeballs; which are worth much more monetarily than $.69 from a sale off iTunes.
Imagine that we've given the new Lil' Wayne album away for free on the internet in return for demographic information (e-mail, address, 3 favorite websites, etc.). That essentially means, we not only control the demographic info for 5 million people worldwide, but we also in turn can control what they see.
Yes, they've gotten the Lil' Wayne album completely free via digital download, but in return they had to not only give us pertinent info about themselves, but we also coded each MP3 to play an ad.
Not only do we charge advertisers for our highly-targeted eyeballs, but we also control per-person demographic information that can be sold multiple times for $10 a head. Compare that to the pittance received from album sales nowadays.
Reason #3 - Passive Income - What's the difference between real estate, or property and "intellectual" estate, or property??? Ready?
Real estate owners are smart enough to earn substantial and ever-increasing amounts of revenue and asset allocation off of their properties without doing any back-breaking work (Better known as "passive income"). In the digital age, blogs and various other websites make most of their money from passive income.
What if music real estate (websites, blogs, Twitter pages, etc.) could generate passive income? Would we still need to sell records?
Reason #4 - Sponsorship, Cross-Promotion, and Advertising - You can't squeeze blood from a turnip (i.e., consumers), therefore, get money from people who have it, (i.e., advertisers and market researchers.)
Let me back-track a little. Suppose you're a college graduate and you're looking for a job. Let's also say that there are two companies that are interested in hiring you; Company A and Company B.
Company A wants you to clean toilets for $4.00 an hour 60 hours a week. Company B wants you to manage 10 toilet-scrubbers for $100.00 an hour. Which job do you, as the college grad choose?
Take a moment to think about your answer... Great!
Now... Realize that the college grad is the music industry, the average consumer is Company A, and other corporations with advertising/sponsorship budgets are Company B.
As an industry, we need to realize that getting consumers to fall in love with us again so that we can leverage their "eyeballs" in return for substantial revenue from advertisers and products will save the music biz.
If you'd like to discuss my New Media Plan in person, please feel free to shoot me an e-mail to set up an appointment.
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