REASON 4 
EVOLVING BRAIN MATH
Over the next three to five years, new broadcast technologies like HD Radio and WiMax Radio, and improvements to Internet and satellite radio propositions will make the need to store 10,000 songs in your pocket less and less necessary.  Gradually, the consumer purchase decision matrix, or something I call here “BRAIN MATH”, will evolve to include new and improved platforms for listening to music.  As the new technology seeps into our consciousness and into our culture, as the BRAIN MATH changes, the paid download business will crumble.  

DISCLAIMER
Although I don’t believe that selling digital downloads is a sustainable business for either the platforms that sell digital tracks or for the artists/labels that create music, you should not rush to pull your music from retailers like iTunes.  Why?  Because things die over time and behavior happens on a spectrum.  Everyone’s not going to go out and hunt for free music next week and many consumers will continue to opt for the convenience and reliability of platforms like iTunes for some time to come.  Moreover, I believe iTunes will ultimately become one of the top, if not the top, advertising-supported AND paid streaming platforms in the world.

BRAIN MATH
When people buy stuff their brains actually compute a mathematical equation called a multi attribute decision matrix.  On the top axis of the matrix are all of the competitive alternatives (Rice Krispies, Captain Crunch, Raisin Bran, etc.) and on the left side of the matrix are all of the essential product attributes (crunchiness, sweetness, shape, fiber content, vitamin content, etc) that constitute a person’s decision criteria.  As we walk down the cereal isle we subconsciously assign weights to each attribute/criteria and scores to each competitive alternative, and then our brains instantly cross-multiply and sum everything to arrive at a computed - Captain Crunch - purchase decision.  

BRAIN MATH AND MUSIC CONSUMPTION
When we want to be entertained, soothed, motivated, rocked or jazzed for example, we use the same brain math to make a listening and ultimately a consumption/purchase decision about the method we will use to listen to music.  

WHAT WE CARE ABOUT
On left side of the matrix, the product attributes that constitute our decision-making criteria are probably: price, convenience, choice, intrusions (from ads and announcers), portability, fidelity and etc.  “Etc.” could include many other attributes, trailing off in a long list of decision-making criteria ranging from most to least important.

CHANGES WITH CONTEXT
The importance or weight we assign to our decision criteria will vary depending on the context of the situation. For example, when we are driving, portability is more important than when we are sitting at the computer.

IF WE WERE SCIENTISTS
To be really scientific about analyzing the death of paid digital downloads we would look at all of the major situations where music is consumed like driving, working, relaxing, etc. and plot all of the decision making criteria (current and future) against all of the competitive alternatives (real and hypothetical); then we would survey five hundred people and tabulate the results to make an informed pronouncement about the future of paid downloads.  Note: we are not scientists.

THE BRAIN MATH OF CURRENT LISTENING METHODS
Currently, when we want to listen to music this is the brain math (multi attribute decision matrix) we examine subconsciously (see table below). Note: This is all hypothetical and simplified.  You can see that consumers are choosing MP3/iPods (highest score) over other alternatives because of choice, selection, zero ad intrusions and portability.  Obviously, this varies depending on context and the segment of the market.

 
THE BRAIN MATH OF FUTURE LISTENING METHODS (NEAR TERM)
As we move forward in time the world always changes.  Consumer preferences evolve and we collectively decide that various attributes should be weighted differently.  Existing products improve and new competitive alternatives are introduced.  In addition, entirely new product categories can be introduced that make older product sets obsolete.

HD RADIO AND BRAIN MATH
HD Radio is a relatively new competitor in the competition for how consumers listen to music.  HD Radio (does not stand for High Definition) offers high quality music over the airwaves and most importantly, HD Radio will ultimately offer CHOICE and SELECTION at a very LOW PRICE.  When you combine the inevitable evolution of consumer preferences with the outstanding attributes of HD Radio you can see (chart below) that carrying 10,000 songs in your pocket becomes less and less important.

 

WIMAX RADIO AND BRAIN MATH
WIMAX is a new broadband wireless network technology that is being built (2009-2010 for widespread availability) by companies like Sprint. WIMAX radio will be a new spin on an old competitor.  WIMAX combines choice, selection, the minimal intrusions of Internet radio; combined with the convenience of FM radio and the portability of an iPod.  Imagine being able to listen to Pandora or your own custom mix of songs on a wireless, handheld device – anywhere a WIMAX network exists.  The assumption are that WIMAX radio will even further erode the need to purchase downloadable music; everything will be streamed wirelessly; the choices will be endless; the music will be available with or without ad intrusions; and the price will be attractive.  

OUR BEST GUESS
As I stated at the beginning of this post: things die over time and behavior happens on a spectrum.  However, my gut feeling is that for most of the circumstances when we listen to music (driving, relaxing, working, exercising), that the compelling attributes of both HD Radio and eventually WIMAX Radio will overwhelm the need to purchase downloadable music.  You can already see the iPod evolving to embrace wireless provisioning of music.  It will be just a matter of time when the storage of the songs does not occur on the iPod device, but on a central server to be streamed to consumers on demand.

WHAT DOES THIS ALL MEANS TO AN ARTIST/LABEL
This is the central question right?  How does technology and the eventual evolution of the brain math change the way artists and labels approach the music business?

FOR ARTISTS - Unknown artists need spins/exposure more than download revenue.  Make your music available for free everywhere and put your music on every paid download platform; as 50% of the world may still buy your songs, and the other 50% never will – and the two halves of the population are two entirely different species; with different habits, patterns and motivations.  

FOR LABELS/MANAGERS AND ARTISTS - the money from music is ultimately going to come form a dozen paid and advertising-supported streaming options.  The fact is, labels, managers and artists need each other; in spite of what the rest of the world thinks.  When it comes to music revenue, artists and labels are going to have to be creative about sharing publishing revenue. 

Artists, you should know that investing time and money in music will not be worth it in the near future unless the people helping you can participate in the publishing.

It is my firm belief that most of the revenue from music will come from royalties and not from the retail sale of CDs or digital downloads.  If you want to surround yourself with the best possible people, you will have to use some portion of your publishing as an incentive.

MAKE YOUR OWN ASSUMPTIONS
If you would like to download the simple EXCEL spreadsheet that I used to make the tables above, click here.