The business model that has worked so well since the beginning of the music industry is almost broken; the “cash cow” was always for labels to charge as much as the market would bear for albums and CD’s. Artists would tour when they had new product to promote and they would supplement tour costs through on-site merch sales. The tours would reunite the artist with their fans, attract new ones and introduce the latest release which in turn would hopefully sustain sales of the record throughout the tour. If we had to spotlight a tipping point it would have been that fateful meeting back in 2001 when the major labels rejected the partnership with Napster. No one could see the writing on the wall that there was an exciting new delivery system for dedicated music fans that had the potential to not only support the old business model, but also to become a more cost effective means to introduce new artists without the massive resources it took back then to launch a new artist through radio airplay and tour support. To be fair, labels did have another powerful tool with MTV supporting new releases by playing the artist’s latest music video, but the writing was already on the wall with success of MTV reality shows like The Real World which ultimately took the “M” for “Music” out of MTV which then ended up being just TV.
Consumers who were used to downloading music through Napster weren’t about to change their ways – record labels be damned – which led to the rip and burn mentality that just about ruined the business. To add fuel to the fire, labels began going after what would have been their most valued customer, the true music fan, by punishing them for illegal downloading (the labels really had no choice at that point) which effectively was like killing the proverbial goose that laid the golden record egg.
Some may argue that the death knell for the industry could also be attributed to the lack of quality music being released in the last decade, but even our biggest artists like Coldplay and U2 sell significantly less records today than their counterparts did decades ago did. Speaking of decades ago, Jerry Garcia and the Grateful Dead had an interesting business model which was “Give the music away for free and the fans will pay for everything else.” Of course they fought tooth & nail to protect their merchandising rights and distribution, but most artists and labels at the time thought they were either on drugs, or just simply insane. Now we look back at that model and realize they were true visionaries. Today, artists put their music up on their MySpace pages and encourage downloading just like the Dead encouraged fans to record their live shows and rip for their friends. Today, some touring artists sell t-shirts that come with their latest record as a “valued added” download. Free downloads of master-tones and single tracks are aimed getting the consumer to opt-in for the complete album. Concert promoters are already building studios at venues to record that evening’s performance as a souvenir of the show (but you still have to pay at this point).
I’m not saying that music should be free all the time, but except for “jam bands” in the Grateful Dead mode, when’s the last time you saw hundreds of fans of a major artist caravan from city to city to attend several shows in a row?
Coda: This blog was inspired by a lunch I had with Ken Lopez, professor at USC, prior to a lecture I presented to his class. Ken gave me so many valuable insights into this type of “new-old” business model for today’s artists so I am, well, grateful.
