Music and monay

I love my ‘Dilla changed my life’ t-shirt. It speaks to the unparalleled potential of music–in this case that of a prolific beat maker who died in his prime–to inspire me, take me new places and meet like-minded people. But if the music ecosystem were to wear a t-shirt, it would probably say something like ‘the internet changed my life’. For better or worse, large bandwidth, storage and processing capabilities have disrupted the music industry as we know it. The future is plastic. I first explain the nature and extent of the change, then analyse it from the perspective of producers, consumers and artists.

What changed: ‘piracy’

The paying model for music albums is on the brink of obsolescence. Online file transfer, from unsophisticated ftp transfers in the early 2000’s to peer-to-peer distributed file sharing data transmission architectures of the present, offer consumers virtually unlimited free access to music. Combine this with large bandwidth and storage at an ever-decreasing price, and you have a disruption of the business model of the traditional recording industry. The consequence of this change is two-fold. First, the availability of online files creates an ontological evolution of the conception of music. Music is now disembodied. It is non-competitive, because my consuming the digital version of the latest So Shifty album prevents no one from listening to it. The fiction of intellectual ‘property’ thus breaks down and loses its legitimacy in the light of current patterns of acquisition and consumption of music. Secondly, massive illicit downloading deprives music labels and artists bound to it from their traditional revenue stream.

Executive producer’s nightmare

Producers are losing money. But they can adapt their business model to new constraints. Executive producers in charge of overseeing A&R, recording and distribution contracts feel the strain of dwindling record sales. But monetization outside album sales offers some commercial opportunities. To name a few, royalties from online subscription services, a shift to promoting live shows (LiveNation is doing quite well but is benefitting from the economy of scale factor which may be hard to reproduce in a tight market), and 360 deals allowing a revenue stream for all related artist’s activities and merchandise can help producers transition to this new reality. The takeaway is that relying on royalties will play a peripheral role at best.

Consumer heaven

Consumers benefit from a wider catalogue for free, but they are paying more for the infrastructure associated with music consumption. Even when sourcing one’s melomania in Pirate Bay and the like, it is an expensive habit. Bandwidth, storage and processing power required to give life to digital music requires an investment, both upfront and recurring. Interestingly, the offer introduces music consumers to a wider palette, as there is no cost to acquiring music outside one’s comfort zone. Music recommendation systems, such as those powered by Echo Nest, play a key role in facilitating contact between curious audiences and emerging genres. If this proves true, then piracy will have been the impetus for a move away from mainstream music towards mutlispecializing musical tastes.

Not for long, not for long.

Artist dilemma

Gratuity benefits emerging artists. Many have launched a successful career with free downloads. They built a solid fan base, toured, got the consecration of the music intelligentsia. Drawing from somewhat anecdotal evidence, the trend seems to be to put one or two albums out for free, get the recognition, and switch over to a pay for album traditional model. Das Racist for instance went viral with the free single ‘Pizza Hut and Tacol Bell’. They put out two albums –which they call mixtapes, reminding us that free releases predate the digital disruption— and went with a paying model for their third one. The gratuity of music has two immediate consequences for artists. On the one hand, it compels people to make music ‘for the love’. As romantic as this may be, it can be unsustainable and relegate musicians to an increasing state of vulnerability. Yet at the same time, some musicians have always been business people. The problems they face today are not substantively different that anyone in the creative class; freelancers seeking a balance between artistic freedom and stability. The gratuity launching strategy is just one of the innovative models initiated by young artists in tune with the possibilities of the new digital ecosystem. Unlike the passive royalty receptors they once were, musicians are now in the driving seat of the new music economy. We should look closely at their responses to the changing consumption environment.

The fork: monetizing differently / modern troubadours

The future is in monetizing music outside the property model. Only lawyers of a dying breed cling to the fiction that music is property. If they are to survive, music label executives must overhaul their business model away from de facto unenforceable royalties to monetizing peripheral products and live performances. In that sense, the album becomes a promotional tool for another product. If the money is not in the album itself, what will be the consequences in terms of music quality and artistic freedom of signed artists? While a ringtone-oriented music economy does not bode well for music purists, it may be that artists become free from focus group-induced editorial constraints. As for consumers, they seem to have a net benefit in music gratuity. Yet hardware and connection investments implied in music consumption as we now know it entails significant costs as well. Many would like some of these proceeds to go to the artists, hence the legitimacy of taxing ISPs. Musicians, especially emerging ones, are now inevitably involved upstream in marketing strategies. They must find monetization outside the box. While some see the death of royalties as a pauperization of musicians, returning to their troubadour marginal status, I do not believe that it the case. The shift in the music economy will simply have a differential effect on musicians. It will benefit risk-takers with a sense of business to the detriment of musicians tied, by ideology or contract, to an obsolete royalty model.

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