Unsprung Media

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.

REASON 3
SPINS ARE MORE VALUABLE

If you are an unsprung artist (unsigned, unknown, undiscovered, emerging) and your wondering how to make money from music, you should not plan your future around selling CDs or digital downloads. In fact, holding out for your portion of a $.99 cent download may be hurting your career. There are 4,000,000 bands/solo artists in the English-speaking world and many will come to the conclusion that exposure is more valuable than download revenue.

If you are one of these enlightened artists, then you are on the right track. Not only are you going to climb the mountain faster than those waiting for digital download revenue, you are one of the primary reasons why paid downloads will cease to exist as a business.

Forgetting CD sales all together, let’s look at costs and the paid download numbers. In my world, it costs about $3,000 dollars to make a radio-ready song in a quality studio with a reputable producer. So, let’s say for sake of discussion, that it costs around $50,000 to make the album of your dreams, and it costs another $50,000 to fund the promotion budget of your daydreams.

In the hypothetical example above, when the songs start selling, 30% goes to the download platform and then 100% of every dollar goes to whoever backed you until you have recouped the $100,000 dollars spent on your album and promotion. Under this scenario, you will need to sell about 142,000 digital singles before you earn a portion of a single dollar.

Now, just doing simple napkin math, if the total paid download market hits $2 billion in annual revenue, and it may someday, and if this revenue were theoretically divided evenly between the top 20,000 artists (0.5% out of 4 million artists), each artist would receive $70,000 each after the download platform takes 30%. Realistically, because revenue is not divided evenly, you will probably need to be one of the top 2,000 artists in the English-speaking world just to break even on a $100,000 investment – if the only product you sold were digital music singles.

Because nobody completely appeals to 100% of the population, your music needs to be in 200,000 to 300,000 iPods now, to convince and convert 5,000 fans (2 to 2.5% conversion rate) to pay to attend your show, to buy a shirt, buy a hat and/or visit your website numerous times over the next year.

I believe you should put your music on every site/system, legal and not, in the world. You should turn on the download option and deploy download buttons everywhere you can. You need spins to get to the point where you can sell shit that has a higher margin than .69 cents. The CD is dead, digital music is here to stay, illegal file sharing will live on, and the sun will shine tomorrow. Go for exposure and get to a point where you can make money; if you hold out for digital music download revenue, that business may not be around in three years.

REASON 2
USER INTERFACES

User interfaces (technology) and partnerships between platform providers will enable new business models that are easier to consume than most of the first-generation music consumption propositions that are in the market now.

Imagine going on line to your favorite Music Recommendation Engine (Platform A) and entering ten songs you love and five songs you hate; then picking a Streaming Store (Platform B) where you can choose a streaming plan for the month or year; then jumping into your Dodge (Platform C) for a sixty minute round trip to buy exotic fish… Once in your Dodge, you are confronted with a touch-screen and two soft-buttons; one button allows you to enjoy the trip advertisement-free for five cents, and the other button charges you four advertisements; which is your cost of listening for “free”.

Eventually everyone will be able to input the songs they like, input the songs they don’t like, and then they will receive a continual stream of recommended songs via their personalized broadcast engine; receivable on every device, at any time, and in any place. User interfaces will enable consumers to continually tweak their streams, mix them, or alternate them with the streams of friends (cross streaming). User interfaces will be so powerful and simple that people will no longer desire to own every song.

A lot of wood needs to be chopped to make this vision a reality. However, if you believe they put a man on the moon, read my previous post on THE PROBLEM WITH MUSIC SUBSCRIPTION SERVICES.

REASON ONE
MARKETERS SAY IT IS, SO THEREFORE IT SHOULD BE.
In our society marketers can convince us to do just about anything. Marketers drive style, attitudes, perceptions, commitments, actions and even the language we use. Anything that is marketed long enough becomes culture. From diet drinks to hybrid vehicles, we can be guided into anything.

So, the other day I was reading my own blog for inconsistencies and mistakes (I always find them), and I decided to glance at the block of text advertisements that Google had pushed onto my page. Every advertisements was pushing FREE MUSIC (circled in red).

 
Every one of these companies is pushing FREE MUSIC because they believe that's what people want. They believe they are communicating a value proposition that will resonate with a target audience.

All I can say is: smoking is healthy, guns save lives, shorts should be below the knees, breasts should be firm, erections should last for hours, margarine is better than butter. If you hear it enough, everyone believes it, and it becomes culture. Hopefully FREE MUSIC will go the way cigarettes are going now.