Stop Worrying About File Sharing or You Will Be Plowed Under by The Future
Bruce Warila | Wed, April 23, 2008 at 02:11 PM | Illegal File Sharing, Planning & Strategy, Record Labels, The Substitution Challenge 
Study the diagram attached to this post. This diagram is the future. When I say that substitution is going to be a far bigger challenge for record labels and artists than replication/file sharing - this is what I am talking about. File sharing should be a dead issue. Use your energy to conquer the future.
Sudden Substitution Impact
Attached to every play, forward, reverse and shuffle button will be a digital aggregator, a recommendation engine and ten million songs. Every link on this chain is or may become a commodity.
Devices - Commodity
Apple has a device manufactured like the one shown in the diagram for less than $50 USD. It doesn’t matter if the thing is bolted into a cell phone or implanted in your head, the hardware to play music will be a commodity business. Any record label or group of artists will be able to buy/sell/give-away these things by the truckload. MP3 players will multiply like the one billion used cell phones rotting in your junk drawers.
Digital Aggregators - Commodity
Paid downloads, ad-supported music, personalized streaming, etc. - any company will be able to wrap songs into a business model that uses inexpensive point-of-sale and/or ad-coupling services; supplied by the companies that will compete to supply this low-margin, high-volume service. It won’t be much different than seeking a company to process credit cards - it’s will be an obtainable, competitively priced commodity.
Recommendation Engines - Commodity?
It’s early days for recommendation engines. I’m still undecided if one service will outperform another service to the extent whereby they all don’t end up competing on price? Nevertheless, any company will have the ability to plug and unplug recommendation engines into their consumer offering.
The Song Pool - Commodity
Record labels don’t like hearing this, but the combination of device + digital aggregator + recommendation engine + ANY large pool of songs makes every pool of songs a commodity. So what if Universal is missing from the pool - take this device (Brand Z) - it’s free. Press the play button, press the play button again, press it again, press it again, press it again… Sounds pretty good huh? Brand Z doesn’t need 100% of consumer mindshare to make money - no, they just need an hour or two a week of their target market’s disposable time.
It’s a Great Time To Be an Artist
Artists please take note that I did not say your song will be a commodity - it’s the pool of songs that will be the commodity. While the eventual reality of this scenario is a problem for some, for artists that make great songs - this is the future that will cause the companies with cash to bid for your songs and services. Every company that can offer a branded music solution will seek to differentiate itself from every other company offering a competing product. While I stressed “commodity”, it won’t be a commodity like bananas are, it will be more like cars or television channels; switching will occur within the category less frequently than it does in the produce isle.
Strategies For Artists
Stop worrying about file sharing, forget everything you know about promotion and do nothing but make great songs. Everything else will sort itself out. But seriously, read about P-SPINS on my previous post and think about how to improve the odds of enabling your songs to be found within a large pool of songs connected to a recommendation engine. Translation = great songs placed everywhere and anywhere, paid and unpaid - will increase your odds for success.
Strategies For Labels
Stop worrying about file sharing, clone the red square, put it under the blue container and stock your pool with the best songs. Cut overhead, hire the Google guy and prepare to bid on the best songs and artists. Start building/looking for products that will generate higher margins and offer a deeper level of engagement for consumers. Pray that Live Nation isn't doing all this.
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Reader Comments (4)
The companies that are going to succeed are already doing all of this. Let the music folks make great songs and let the kid who can get the front page of Digg and YouTube do the marketing.
Regarding the last sentence, I bet they already are!
I still don't see how the money is going to filter back to me. Seriously, an aggregator is going to be nothing more than a mega-huge record label with all the problems multiplied ten-fold.
Consider this: if you aren't on an aggregator, you're nowhere. There are millions of bands writing millions of songs, but there are going to be only several services occupying most of the market. Notice how Apple has everyone dancing to their tune? Even if they hate to do it? So the aggregator is in a position of strength and the artist has to accept their terms. Period.
Great songs will float to the top, you say? They haven't been doing so for the past couple of decades, so I don't see why they should start now. There is a great quote from a classic Polish comedy that illustrates an important point to remember: one of the characters says "How can I like a song that I'm hearing for the first time?"
This seems to tie in nicely with you P-SPIN theory, but what it really means is that people are going to be looking mainly for songs that receive heavy promotion. As they have done in the past. If you're given a huge choice of substitutes (to the extent that songs can be substituted for one another), there's no way you can ever plow through it all.
Enter the recommendation engine: it can come in two sizes - small or huge. If it's small, guess who's going to be featured: those who pay or those who get the most spins (who paid to promote their stuff). If it's huge, then it's a lottery - regardless of whether songs are selected for a short-list at random or a long list is offered, the chances of your song being picked by a particular consumer is slim.
Finally, we come to the money distribution problem. It's natural that the people with the most spins will get the bulk of the money. I've no way of knowing how much will be available for distribution, but it's likely that the majority of artists will get zip, zilch, nada. Since the element of choice will be removed from purchase (you don't pay for listening to a given artist, but perhaps a subscription fee of some sort, maybe nothing if the service is ad-supported or whatever), the artist has no way of influencing an individual consumer to spend money on him or her. The best you can hope for is a hit and the quality of music has stopped being a factor in having a hit around the end of the nineties.
The point is that promotion is going to become an even more important factor than it is now and if artists could successfully promote themselves, there'd be no need for record companies.
K - great comment. That's why I call it the Substitution Challenge. I think you have to look into how recommendation engines work. There are multiple sizes and flavours. Yes, promotion will still be important - that's why I recommend that artists do what ever it takes to generate P-SPINS. For artists with little or no money, their songs are their currency to be used to buy spins on the new radio. See my next post..
I'll be reading it in a sec.:D
What worries me about REs is that while there may be many of them, only a few will really matter - just as with aggregators - and they'll be dominated by the big players, because that's how the market works.