Where or Where Has the Music Business Gone? Where, Oh, Where Could it Be?

I cringe just as I hear the apartment door close loudly behind me. Quickly dropping my jacket and bag onto a nearby table, I rush to the kitchen, throw on an apron, and tie my hair into a bun. It’s 5 PM, I’ve just arrived home from work, and I’ve got 30 minutes or so to prepare dinner for the family. Still in a skirt and heels, I’m chopping up cucumbers and tomatoes on one side of the kitchen, while waiting for the water to boil at the stove. I glance at the calendar hanging in front of me, almost forgetting that it was already Thursday—Thursday, December 20, 2027.

Before I know it, I hear keys wiggling at the front door. My daughter Sabrina storms in, yells hello—still not understanding that speaking with her ears plugged with music equals screaming on the top of her lungs—and runs to her room. At 13 years old, Sabrina’s got a regular routine; she gets home, changes out of her school clothing, and plugs her mobile device into her computer—transferring all the songs she downloaded while in school that day onto her hard drive. Five minutes later, she comes out of her room, jumps onto a kitchen chair, and chirps, “What’s up mom? What are you making?” Before I can answer, she begins playing around with our digital kitchen countertop and asks, “Wait, mom, do you remember how I can order soda from the iKitchen store again?”

Ah, the frustration of raising a kid growing up in the 2020s. I remind her that we have plenty of juice and water in the refrigerator, and then ask her how her day at school went. “Well,” she began, “we actually learned something really interesting in history class today. Mom, is it true that when you were a kid, people would pay for music?” I laugh and ask, “Well how do you think all of mine and dad’s CDs sitting in the den got there in the first place?” Sabrina looks at me sort of cock-eyed and says, “Um, I don’t know. I guess I thought…” And from there a springboard of questions came pouring out of my daughter’s inquisitive brain…You mean that if I wanted to hear High School Musical 23 then I would have had to use my babysitting money to buy it? Wait, you mean Lily Allen wasn’t always in Converse commercials and on Converse.com—and she wasn’t always part of the Converse logo? Does that mean that if I wanted to hear Rihanna’s newest single, I would have to wait till I got home and then wait for the radio to play the song—wait, are radios those things that sort of look like funny boxes that are in some of your old pictures, mom?

Back to Reality: Year 2007

I know that might have seemed like a strange way to begin this assignment, but I really think we need to think a little crooked and kooky in order to think straight. We have to think of the extreme case scenario for the long-term future in order to think of the practical scenario in the immediate future. We all know music is taking a radical turn somewhere, at some near point in time, but it’s really hard for us to imagine it. Having lived through so many years of the music purchasing world, it’s hard to even comprehend what a whole new restructuring of the music business might look like.

I know that when I entered the music business program at NYU in 2005 as a freshman, myself and all my classmates constantly voiced our frustration with illegal downloading. We talked repeatedly about telling our friends that illegal downloading was wrong and illegal—yet explained how our friends didn’t feel so guilty. Instead they rationalized—“when I usually buy an album, I only end up liking 2 songs, it’s a total rip off!” or “well Britney Spears has a ton of money, why does she need mine!?” or—the best of all—“everyone else is doing it.” Even after explaining to our non-music business friends that illegal downloading was stealing from whole slew of people—artists, songwriters, producers, studio musicians, and all the others—they merely shrugged us off. It’s funny because now that I think about it, we—as music business students—were fighting like the RIAA, just on a smaller scale. Now in 2007, after taking this class and another music business class (Village Records—a class where students perform the functions of a record label), I’m seriously realizing that things are going to drastically change.

Yet there’s still a hesitance. For example, I remember one day in class, we suggested that music might morph into a cable TV-type subscription model. I listened to you talk about perhaps there being different channels that provided different music services. I considered it. I imagined sitting in front of something that looked like a TV, picking up a remote, and turning on a device that allowed me to click to my preferred channel. And the second I envisioned it in my mind, I rejected it—no, that couldn’t possibly happen, I told myself. A subscription model would mean that I wouldn’t really “own” any of my music; instead it would just play and then be stored as a piece of data on my TV-like music device. What was even crazier—the music would probably be deleted if I ended my subscription with the music service! I got a little sad thinking about all this—I couldn’t imagine music materializing into a service like that. All I really wanted was to be able to hold my music in my hands—to flip through the lyrics and be able to have that full-album listening experience.

Each time I try to imagine music being delivered in a different form, there’s a block and I feel some sort of resistance. So I figured the best way to approach this is to use my imagination. I’m going to try my best to focus on several trends and models within the industry and ponder their strengths and weakness, as well as try to anticipate what may happen if implemented. At this point, no idea or stretch of the imagination is outrageous. Again, it’s important to think a little crooked before think straight.

Case Study: Emusic

Emusic is currently the second biggest online music site—after iTunes. That’s quite an accomplishment. Emusic offers a combination of the subscription model (such as Napster) and the a-la-carte model (such as iTunes.) Users pay a monthly subscription and can download a certain number of MP3 files a month (that means DRM-free files) from the eMusic catalog, which is increasingly growing.

I signed up for eMusic sometime during freshman year. I cancelled my subscription a month or two later. Why? Well, the human mind works kind of strangely. While eMusic offered a decent price tag, an appropriate filteration of music, and flexibility with MP3 files, I still wanted the option of downloading anything I wanted! I valued eMusic’s function as a filter; though the site contained a limited amount of R&B and hip hop (the type of music I find that I gravitate towards), I was able to discover a lot of world music that interested me. Ultimately, the human mind—or at least my mind—wants a filter, but at the same time wants everything! Little insatiable me…

Trend Study: Company Sponsorships, Brand Alliances, and Licensing

In class we offered the idea that perhaps future musicians would be supported by some sort of company. With the decline of recorded music sales, musicians would sustain a livelihood through corporate sponsorships. A company would be willing to pay artists because they believed an alliance with the musician’s brand would be beneficial to them as a company. Additionally, the company would be willing to pay the money in order to license the musician’s songs in different advertising ventures; as we’ve seen throughout the semester, the power of music in commercials, movies, and TV is incredibly powerful.

At the same time, artist-friendly sites like Pandora.com believe very strongly in helping create a music landscape in which musicians can support themselves. Although the site is a tiny pocket of the industry, it doesn’t hurt to look at how Pandora has structured itself. The site doesn’t charge consumers for their usage, rather is ad-supported as well as investment-supported. In this way, musicians are able to get their royalties from streams on Pandora’s online personalized radio.

Pandora’s model is a great success story and is effective in its function as a small pocket within the industry. However, it seems that in the grander scale of things, revenue made through sites like Pandora only represents ancillary income for the musician. Another great opportunity for musicians is the chance to license their music to film and ad companies. Though, it still seems to me like this revenue is still ancillary income and that it cannot be the focal strategy for an artist. Or could touring + licensing music provide a sustainable income? Perhaps for some musicians, but certainly not for all; I keep wondering how hip hop will sustain itself when its acts tour less and additionally are not coveted for licensing deals because of much sampling clearance.

Though, let’s not be so pessimistic about all this. What if musicians do end up sustaining themselves through partnerships with companies? What if an artist like Amy Winehouse ends up partnering with a Budweiser type company? Will Winehouse then need to reference Budweiser in her songs or have them appear in her videos? Is that something that will turn fans off? Is that likely to even happen?

Trend Study: Ad-based Models

While SpiralFrog* is fading into obscurity, it doesn’t seem like RcrdLbl will. When SpiralFrog announced its free legal downloading ad-supported site, a bunch of my music business friends and I were psyched—until we heard that we’d have to watch short ads before “purchasing” our songs.** That wasn’t it—we wouldn’t even be “purchasing” the songs really; instead the songs would be uploaded onto our computers, but then had the potentiality to disappear if we didn’t log on to SpiralFrog within a month (to see their ads, essentially.)

RcrdLbl seems to have the right idea—functioning as an online record label, offering artists advances, and then offering the artists’ music for free, all of course being supported by the ads on the site. I like this idea and think it’s really innovative. Though, it sort of makes me wonder whether there will ever come a point where advertisers will become a strong force in influencing which artists RcrdLbl chooses to sign.

It seems to me that traditional radio is so lackluster and dull these days because advertisers have such an influence and are pushing radio stations to play the same tracks over and over again to ensure higher ratings. This also leads me to think of all the other forms of media which operate on ads. For one, newspapers that charge anywhere from a dollar to zero cents make their profit from advertising, as do magazines and as does television. Will the newspaper model work for the music business?

Funny Anomaly: Japan

Sometime last year, I was sitting in my friend’s dorm, hanging out, looking through her iTunes library. I noticed that she had a nice and diverse array of music and asked her where she got her music from. She laughed and said that over the summer, she had gotten most of her music in Japan. She went on to explain that CD rental stores were pretty common in Japan; consumers would go into the stores, rent whatever CDs they wanted, burn the music onto their computers, and return the CDs. It was common knowledge that consumers were doing so; often rental stores offered CD-Rs themselves! My friend, Wenjia, explained to me that she discovered pretty cool music this way. She excitedly showed off some of her collection.

When this happened I was still in my illegal-downloading-is-bad stage and I was disappointed to see that such things were commonplace in Japan. Another sign that the music industry was doomed, I had thought. Yet what I completely missed was the excitement on Wenjia’s face when she showed her collection to me, when she told me that she was now beginning to like jazz—a genre she had never touched before!

This Japanese anomaly presents a new approach—give people what they want. So, what do people want? Then, we need to consider, when exactly will the buck—or yen—come swinging by?


Talk to the People!

I spoke to some of my NYU non-music business friends about their relationship to music, and here are some of the things I heard:

* “I’ve never downloaded illegally. If I want to buy music, I’ll buy it off of iTunes. I’ll even by a full album if I know I won’t have enough time to go into the store and purchase it.” –Gracie, 20 years old, Italian major
* “I’ve never really bought music before or went to a performance that I can remember. I love to sing, but I don’t listen to music.” –Jacob, 20 years older, Vocal Performance major
* “I don’t think I’ve ever bought an album. I like buying singles—if I hear something on the radio, I’ll buy it through iTunes. Before I never really wanted to buy an album because it would be annoying—I just wanted the single, not all the other songs….I guess I just really buy musical soundtracks. Oh, and recently I bought the Garden State soundtrack—I watched the movie and I liked the music so I bought it.” – Erica, 21 years old, Social Work major
* “I used to listen to a lot of music when I was younger, with the radio and all. Now I don’t really—it’s just much harder to find music these days…though, I did get really excited when my boyfriend Jared bought me my first Beatles CD—he built it up so much for me, and the packaging was really cool and everything.” –Yvette, 20 years old, Psychology and English minor
* “I like music, but I don’t really care to know what artist I’m listening to…I like music because of the mood it puts me in…sometimes I go to AOL Radio and just click on the classical music button and listen…sometimes music makes me feel as if I’m in a different era or generation.” –Tamar, 21 years old, Psychology and Art Studio minor
* “I like hip hop because of the way it makes me feel. It makes me feel confident, it totally pumps me up. It’s great music to listen to on the way to an interview.” –Doug, 24 years old, NYU Medical School
* “Why would I pay for something that I could get for free?” –Matt, 23 years old, NYU alumnus, Finance, Accounting, and Economics major

These are so many points of views! These quotes personify so many customer personas and I think it’s really hard to clearly understand this question—who is our target audience? Is the music industry trying to sell to a specific persona? How much are they thinking about what people want?

Where Does the Buck Come In?

If our last interviewee asks why he should pay for something that is free, then we need to really consider this question: what are people willing to pay for? Through that we can understand what they value and how to deliver on that value.

The following is a chart I put together to delineate this though process.

Conclusions

I came up with more items for the “thing people are willing to pay for” column than for the “things people aren’t willing to pay for” column. I think that’s a great sign. It signifies that while the record industry is practically dead, the music industry has a grand opportunity to survive and thrive. As far as my chart, I would say that the music device category has very little room for entry due to the iPod’s mass appeal. However, the concert sector and the cell-phone-plus-music-bundle sector seem to be places the consumer is willing to spend its money, therefore areas in which the music industry has opportunity.

I do believe that within the next five years or so the industry will restructure itself to wean off of the recorded product and instead place focus on live performances, licensing, and providing consumers with essentially free music with some sort of cost (whether it be a service, a bundle-like item, or a filtering system.) The industry just needs to do it right.

* SpiralFrog's business model has changed since I wrote this essay in the Fall of 2007. They have made deals with several labels, most recently with EMI. The site has also garnered more than a million registered users and five million monthly unique visitors.

** Correction: SpiralFrog members do not have to watch ads before downloading songs. Instead, users see banner ads that do not interfere with their music listening.