Michael Arrington of TechCrunchs wrote an article just now on in which he talks about the CEO of Warner music admitting “we were wrong”:
We used to fool ourselves…We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.
Michael finds the admittance of the industry that they went to war with the consumer limiting his options is the most interesting.Obviously a war that cannot be won. Mathew Ingram his response to this is that Warner is getting religious 5 years too late.
What misses in all this retrospective analysis is the way to go forward. How should the music industry, and especially the major music distributors, change their business in order to survive and start creating value again. They are already past the Innovators dilemma. They have been going about their business not realising that resistance to change is futile.
But I don’t hear any answers from Warner Music to this dilemma. Ian Rogers from Yahoo Music wrote an emotional and so very true post on the previous 8 waisted years in the music industry. He will only invest in 2 things, consumer convenience, and reasons to experience the music. I think Ian does a brilliant analysis.
Thinking about this and looking back at some initiatives that drew my attention I thought it would be good to go into this a bit deeper. As usual, let’s try this from the consumer’s perspective.
People download music like crazy. Sometimes legal, but mostly using P2P technology (this has become such common practice, I wonder if we should just declare this legal, but this might be a thin line to anarchy) . There is definitely a subset of consumers willing to pay. They got to Amazons, iTunes, or deal directly with their favorite band. But most don’t, and the reason for it is obvious.
The transaction cost for music distribution has dropped to 0 with p2p technology and platforms like Facebook, Virb, MySpace etc . Where the music distributors used to provide value with distribution (thus getting payed for it), there is no value in distribution anymore. It took them 8 years to figure this out, and they haven’t got any answers to that yet.
The same argument holds for the band. Why use a record label if you can record, produce, and distribute your music yourself? Arguably this might be easier for a major band like Radiohead, but small bands do the same. And lets not forget that bands make their money now in the events they play and the merchandise that sells during these events. That is why the Radiohead move is excellent. They put the consumer/fan in the driver seat, making them responsible for paying for the music they download. This strengthens the emotional ties between the fan and the band, which will pay itself back via the concerts and the merchandise.
And it is here that lies the answer for the music industry in my opinion. They should stop thinking in terms of distributing music, and start thinking about distribution of emotions. Instead of alienating the bands and the fans from them, why not embrace them and become the platform of emotion distribution. There is a lot of revenues there.
And they have everything in place already. They have access to the bands, to the fans, to the content, to the merchandise. It’s all there, and all it takes is to let go of the single revenue stream they hold on to so tightly, and create a new emotions based revenue stream. And instead of fighting the fan who seems to be doing all these illegal things, embrace them, study their actions, and support them, thus locking them in again.
Having said all that here my 5 Ct’s on things they could do:
- Have you looked at the video I linked in this post? I chose this one because it is a mash-up between “official” video material and a user adding his own music to it. People love to do this. Browse YouTube, and you will find millions of examples where people add video to music or add music to video. My first advise: stimulate fan interaction. Provide the fan with a platform in which he can access the music content and mash it up into something new and exciting. provide the fan with the platform that connects him to his favorite band and let him contribute to it. Can you imagine what happens if Warner would set this free for ALL their artists?
- Focus on additional content. If the music is free, why not give it to the fan for free? But lock him in with additional merchandising stuff, exclusive pictures, video’s, tickets to live concerts, contests, live chats with the band, etc. And while you are at it, combine that with the excellent branding opportunities it provides. And make damn sure it is easy and convenient for the user.
- Think interaction. People love to interact, and a fan is more than willing to pay for it. That is why they go to concerts and listen/sing along to the music. Add the mobile platform to this. Interact with the fan via SMS, and let him pay for the value it provides. Set up video walls at concerts where fans can be on during the performance with text, video, pictures. Do the same on the Internet. Let the fans meet up and interact.
- How about providing the user easy ways to record and distribute his own music. We are talking on-line tools for recording and editing music. I am struggling my way through Cubase as an amateur musician, and although it is a powerful tool, it is also pretty complex. There are many user generated music distribution platforms out there, why not embrace them yourself?
- Provide the music for free and across any platform the fan uses. Think iPod, think mobile phone, think stereo set at home, think computer, think p2p etc. Make distribution even more convenient than it already is, and make a living of the emotions.
The music distribution game is dead. Now that you know it, why not bury the hatch and start thinking consumer value again. You will not last in the distribution of music game. Move into the distribution of emotions. That is always the place where the money is!