Creating a Merit-Based Music Economy: Compulsory or Blanket Licensing for Interactive Subscription Services

B6. The Final Analysis

It takes a lot to make this all profitable at the end of the day, and getting all the pieces to come together is not automatic, even if you are talented and do everything right. The small-venue market is very uneven, and not particularly well coordinated or integrated.

More often than not, artists still need some sort of additional part-time income to make ends meet. It's a relatively rare thing to meet artists who are making this work entirely by itself. It requires not only artistic talent and business responsibility, but a healthy dose of luck in terms of satisfying venue needs, geographical location, local promotion, and audience distribution. Take away one or two of these characteristics, and it probably isn't an exclusively music-only career that is happening.

That cannibalizes the resources of time, energy, and attention that the artist might otherwise be able to devote to the art itself, and might well keep such artists from fully achieving their artistic goals. Taken as a whole, the grass roots market is not a consistently fluid music market. In too many cases it's a "grass rots" market. It has some potential, some real promise, but in its current state music can't fully flower on its own terms. So far, this "stepladder to success" is still just a step stool.

This is especially frustrating when we see the potentials of new online technology for exposure and distribution: Something is growing here that could make all of this work much better.

The Internet: We get a hint of this with artist-operated web sites that provide a brochure of artist information, some music sampling, and even online ordering of CDs with a credit card. This is new for the grass roots, extending the equivalent of mail order to national/global access. So, if acts can promote themselves to a wide audience, it is now possible to convert some of that awareness into sales without geographic limitations of live regional performing.

But just putting up a web site doesn't guarantee that awareness, since there are millions of web sites and pages. Search engines and portals are not fully up to the task of this "content filtering" since they are generic, without a special music focus. Access to distribution by itself does not complete the marketing process.

Unfortunately, getting effective widespread exposure is still not very fluid, even with the extension of mailing lists to email. Potential fans of fringy artists may be much less likely to be directly acquainted, because they are more geographically spread out. Without that direct acquaintance, word of mouth comes to a screeching halt unless there is some extra help to bridge the gap.

Piecemeal exposure on little radio stations around the country might spark enough interest in a few fans to search out the web site for the purchase.

But that requires several things to all come together:

The station must identify the artist when the music is played.
The station must provide the URL when the music is played.
The listener must be listening at the time the music is played.
The listener must be listening at the time the artist and URL are identified.

These stations are less likely to play any particular piece of music very often, because they don't use high-rotation program formats as much as the big commercial stations. So, the chances of making this connection are still relatively small, even if the station does everything right.

The live gigs still remain the most powerful way to motivate a CD purchase. First they provide an even more pungent sampling of the music than radio. And then they immediately provide as convenient and powerful a point of sale as any retail music store.

Free Peer-to-Peer: Many people point to the Napster phenomenon as having great potential for creating a new music market online. However, it has yet to be demonstrated that "Free P2P" could provide a lasting paradigm for using recorded music to generate significant revenue.

It should be noted that the original Napster was sued by the major labels, and then was acquired by one of their parent companies, so Napster no longer qualifies as an example of Free P2P. However, other systems such as Gnutella and Kazaa may survive, if their more purely distributed architecture provides more insulation from prosecution. Some people argue that even these alternatives are vulnerable to copyright enforcement for various reasons, and will not survive. If so, the entire Free P2P issue is moot. However, since that is not certain, I will consider the possibility that Free P2P may survive indefinitely.

Free music file duplication/transmission has a potential to completely replace paid distribution of CDs, and to destroy the revenue stream from recordings that extends beyond grass roots performing revenue. Many people argue that they will go out and buy the CDs anyway, but many others have been heard to say they never expect to buy another CD ever again. Anecdotal evidence suggests that the younger fans are less likely to buy CDs than older fans that are already in the habit. As these young fans grow older, it is not certain that they will all of a sudden begin to buy CDs. Intuition suggests that they won't.

One drawback of this model is that promotional opportunities are still not very robust. Free P2P provides a relatively easy way for some people to sample music that they have already heard about elsewhere, but it is less effective in systematically exposing people to music they don't already know about. The original Napster system did allow people to explore the music directory of other users from whom they are getting a file transfer, and that acted as a sort of word-of-mouth mechanism of exposure. But it is still inconsistent, and requires fully interactive use, unlike passive radio programming. Many people don't have a lot of time to go actively exploring for music, especially if they don't know until they actually listen to the music whether they will like it or not. It is a small step in the right direction, but not nearly all the way there.

Part of the remaining incentive to buy CDs is that P2P systems are still not all that easy to use with Internet access over dial-up modems. Most people still use modems, but this is a temporary state of affairs and as more people get broadband access, this incentive will tend to diminish.

Another incentive to buy CDs could be the packaging, with pictures, credits and other information about the artist. However, much of that information is increasingly available from other sources, especially from the Internet, especially from the artist's own web site. The market for "collector" products in their own right is relatively small. It's unlikely that many music fans would fill an entire library of recordings with collector copies of CDs.

In summary, Free P2P has yet to definitively prove that it can be a lasting tool for generating revenue from recordings. Meanwhile there are many reasons to think it won't. Without that revenue, the grass roots market is unlikely to grow into a stepladder.

If an alternative system is to replace Free P2P, it will have to provide a meaningful improvement over the value that fans can get from Free P2P. I think this is possible.

Other potentials for online technology are intriguing...

Summary | Contents | Previous | Next