Unsprung Media

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.  
   

This post is a follow up to my last post titled The Wrong Trousers where I described substitution as a far greater challenge to the music industry than sharing/replication. 

The Substitution Dilemma 
The iPod giveth, and the iPod taketh away. The digital music technology that enables your music to be effortlessly substituted for music created by someone else is the same technology that enables someone else’s music to be effortlessly substituted for yours.

Searching For Another Emotive Spike
I’ve had this quote (below) from Karla Starr’s excellent article titled 22,000 Songs And Nothing To Listen To rolling around in my head for months.

“My iPod is like a remote control or a slot machine, flicking through 500 songs, searching for another emotive spike.  I now find myself getting bored, even in the middle of songs, because I can. The paradox of spending so much time changing songs, trying to find one that you like—without giving it time, meanwhile thinking about what else you could be listening to—is that you wind up attached to none of them.”

I can’t find any hard research on behavioral patterns of digital music consumers.  However, when someone gets around to it, I bet you’ll find “emotive spike hunting” right up there with “playlisting” and “shuffling”.  

New Technology - New Behavior Patterns
Within a couple of years one billion people will have tens of thousands of songs at their fingertips; accessible through mobile phones and iPodish devices.  Think about the new behavior patterns:

• Emotive Spike Hunting - just explained.
• Playlisting - building playlists for personal consumption and sharing.
• Shuffling - random generation from an endless list(s) of songs you have control over.
• Button Pushing - Endless fast-forwarding and reversing - because you can.
• Recommending - Machine to human and human-to-human.
• Sharing - effortlessly sharing because it’s finally acceptable.

It’s all Substitution
All these new (easier to do now than ever) behavior patterns add up to what I am going to call the Substitution Challenge.  There are so many great songs in the world, and it’s going to be so easy to skim, skip and linearly or randomly churn through thousands of songs.  It makes me wonder how much of this activity, over any given interval of spare time, will displace what was once spent on passive listening?

Substitution and Economics  
In a competitive market, where products can be easily substituted, prices get pushed down to marginal cost; thus practically eliminating the ability to generate a profit.  MP3 players (and the Internet) are the new radio (my favorite line) and every artist wants to be on the radio.  Where record labels pay to place songs on the radio today, it makes sense that artists will certainly continue to offer songs for free in exchange for placement in the new “radio” tomorrow.  Unfortunately, those that are selling songs have to compete with those that are trying so hard to get on the “radio”.  And, as the first line in this paragraph says - where products can be easily substituted (see behavior patterns above), prices get pushed down to marginal cost; thus practically eliminating the ability to generate a profit.

The Substitution Solution
If you have some time watch this video by Barry Schwartz titled The Paradox of Choice - Why More Is Less.  My solution will be forthcoming.  There are two challenges that have to be dealt with simultaneously; the first challenge is the Lack-of-Margin-Challenge (in a .99 cent sale) and the second challenge is the Substitution Challenge described here.  The solution(s) to these challenges are intertwined.

Start Here - Practically Indisputable Economics:
In a competitive market, where products can be easily COPIED, prices get pushed down to marginal cost; thus practically eliminating the ability to generate a profit; therefore the solution is to create products or features that can't be simply REPLICATED.

And Then The Music Industry Said:
In a competitive market, where products can be easily COPIED, prices get pushed down to marginal cost; thus practically eliminating the ability to generate a profit; therefore the solution is to stop people from REPLICATING our products.

But, Someone Put The Wrong Statement In The Play Book.  It Should Have Read:
In a competitive market, where products can be easily SUBSTITUTED, prices get pushed down to marginal cost; thus practically eliminating the ability to generate a profit; therefore the solution is... (a post covering this is in the works).

Common Sense Says - Rule Out This Option:
In a competitive market, where products can be easily SUBSTITUTED, prices get pushed down to marginal cost; thus practically eliminating the ability to generate a profit; therefore the solution is to stop people from SUBSTITUTING our products.

Substitution Is a Bigger Problem Than Replication
At this point in time, given the adoption of MP3 players (including cell phones), broadband Internet, Internet everywhere, video game consoles and the pending media recommendation tsunami - substitution of one song instead of another is a far bigger challenge than replication; that is, if you don't have the right strategy... 

Continue to the follow up post on substitution. 

 

 

I am taking the advice I give to Brand Together.  You will be able to find new articles I post on Music Think Tank.  I am flattered to be part of such a great group of people.   

 

A - Illegal File Sharing
In spite of all the chatter on the Internet about governments forcing ISPs to crack down on file sharing, I remain as convinced as ever that stopping illegal sharing is like playing Whac-A-Mole.  Every time something is invented or some new law is passed to prevent, something new and simple will pop up that enables people to share stolen music.  If a song can be played through a speaker, it can be simply captured and clipped.  Nothing is going to change that fact.  File sharing, as we know it may be throttled, but a new form of sharing will appear and explode.  It can’t be stopped.  

You can find this sentence all over the Internet: “When the cost of reproduction drops to zero, the price will drop to zero.”  Sadly enough, that’s what’s happening to recorded music.

B - The Three Bright Spots For Recorded Music Artists.
1) Paid downloads are on the rise.  More and more people are buying digital downloads.  File stealing and sharing is inconvenient for 50% of the population.  The time-starved segment of the world finds it more convenient to buy music instead of pinching it.  So, people are actually buying convenience.

2) Streams of Convenience are popping onto the scene.  I believe downloading and transporting a peck of MP3s is going to be replaced by personal streams of music that can be accessed from any device anywhere.  Over time interactive streams will replace paid downloads.  Once again, the product is convenience.

3) Personalized Packages (coming soon).  Bundled packages of music combined with other relevant digital assets that are so personalized that people will not share them.  These securely bundled packages will include things within like points, scores and details that people will not want to share.  The music may be sharable, but the package will have sharing disincentives baked into the product.  Other variations of this concept will also exist.

C - a Five-Year Transition
For 99% of the artists on earth the three bright spots I just mentioned are just pins of light.  It will take another five years for these three bright spots to exceed the revenue that was once produced by CDs.

What’s My Point?
You already know about the file-sharing problem; if you read this blog you know about the bright spots on the horizon; and you could have guessed it will take at least five years for the new technologies to replace the CD.

When I add A, B and C together I come to the following conclusions: (I am using “my” figuratively here.)

Fling open the doors and take my MP3s.  It does not matter.  My MP3s will be on iTunes and Amazon for those honest soles that are purchasing convenience.  For everyone else - come to my shows, traffic my site, buy my merchandise - and when you get too old to dedicate time to stealing, please buy the convenience I offer.

If I bust my hump now building a business that does not rely on selling recorded music - then in five years - Streams of Convenience and Personalized Packages will be the icing on my cake.  It will be like found money; like finding money in the washing machine.  It will be reoccurring revenue that I can count on someday.

What’s My Point?
If you can build a business over the next five years that minimally relies on the sale of recorded music then within five years new streams of revenue will fill your pockets.  The need to be known (sprung) will still exist, but you should believe that your efforts would not be for nothing.  Furthermore, this “business” that you may build over the next five years may stand on it’s own as a profitable entity.

The Direction of Unsprung Media
More and more I am going to focus on strategies for building a business that does not rely on the sale of recorded music.  Yes, take the sale whenever possible and perform live if you are able.  However, there are other opportunities outside of music sales and touring that should be considered.  Over the next year, I am going to focus on developing these “other” opportunities (no not t-shirts and coffee cups).  

Thanks to Bruce @ Hypebot for pointing out this article about EMI's desire to cut back on RIAA funding. If the article is correct, then I am stunned.  I thought the RIAA's annual budget was about $5M.  If the RIAA has $100 million USD to play with each year then what a freaking waste of money!  Sorry RIAA staff, the labels are pushing you in the wrong direction?  The RIAA has this blurb on their website (below):

 

The Recording Industry Association of America (RIAA) is the trade group that represents the U.S. recording industry. Its mission is to foster a business and legal climate that supports and promotes our members' creative and financial vitality. Its members are the record companies that comprise the most vibrant national music industry in the world. RIAA members create, manufacture and/or distribute approximately 90% of all legitimate sound recordings produced and sold in the United States.

 

What does "PROMOTE CREATIVE VITALITY" mean?  Honestly, I don't give a hoot about the lawsuits; but if you have a budget of $100M and you are charged with promoting creative vitality then what are you doing?   How many artists do you all know that are surging on creative vitality?  None!  The average artist gets more out of can of Red Bull then your efforts.

The vitality of anything begins at caring for the "roots".  The root of every label is the pipeline of artists that will hopefully become rock stars someday.  Some of the most talented people out there are postponing the dream because the economics of this business are currently terrible.  Here's how the RIAA can nurture vitality:

 

Stop right now - any effort that is directed in any way - at saving the CD.  Yes - labels - I realize you want to squeeze every last penny out of CDs, but what about the future?

Reexamine the value of the MP3.  The MP3 can not be the future of this business.  The MP3, as a technology, does not transport enough value.  If you don't understand this statement then find someone to explain it.

Invest in innovation.  The industry must create desirable digital products that generate high-margin, reocurring revenue.  Boom! There is not another thing that is more important to every artist.    

I don't usually rant, but come on.  How can you have a $100 million dollar budget and have so little impact on your members.  Readjust and have a clue!