The Record Industry - Clawing at the inside of its coffin

The Record - what a lovely piece of nostalgia. Initially a physically graven drum, then disc, then a magnetic tape, then a compact laser disc, and now the demise of physical media.

People don't need proprietary physical media to get access to their audible entertainment. What does this mean? In my estimation, it means that the production side of the recording industry is as good as dead. Let's remember why these businesses evolved; It was to create economies of scale in the acquisition, leverage and exploitation of talent with the goal of mass producing and distributing as many physical "music storage media" as possible to the public. With the advent of online music sales, much of the record industry's infrastructure is redundant. Further, they are harder pressed to compete for eardrums with new online outlets for indie music. Classic marketing channels are wasting away as the iPod generation eschews the radio altogether and instead joins iMix and other playlist services - driven by independent community members unlikely to be swayed by marketing execs, largely because the "swaying" would spell their doom among their peers.

How about the artists? Traditionally, a record company would pay the fairly steep costs of studio time and production expertise to produce a recording, then take on the marketing and promoting of the artist in the hopes of getting a significant return on their investment. In order to minimize their record companies cultivated A/R (artist and repertoire) talent who became the gatekeepers of "stardom" and marketing departments focussed on ensuring that the talent supplied by A/R was promoted to the point of profitability, regardless of quality (it was asssumed that A/R only provided quality). While we have yet to see an artist or group achieve fame without the help of a record company, I don't believe we are going to be able to say that in 5 years.

So where am I heading with all this?

What if . . .

. . . some enterprising soul figured out the following;

1. Production costs for recordings have declined to almost $0. The infrastructure required for that production has dropped to as little as $3000.00 for a computer and some recording software. Anyone with the will, a little cash and a bucket of talent can create a professional recording in their own home.
2. The "cost" of marketing (or creating "buzz") on a global scale has dropped to $0 in real terms. Yes, you need some smarts and time, but social networking sites are a perfect example of what is possible with little up front money. Leveraging these environments, or a new one, to act as a "clearinghouse" for artists is not a significant mental stretch.
3. Radio (and record company marketing departments) along with media critics, have long been part of our natural filtering mechanisms - providing a "service" which narrowed our choices to something "manageable." As many have noted, "playlist" sites are cropping up everywhere. These provide the same "service" as radio, critics and peers - but are more widely distributed and offer much broader choices.
4. Systems such as Pandora are advancing the art of filtering to new levels - making it possible to broaden our artist base without straying uncomfortably far from our artistic comfort zones nor relying on the whims of other musicophiles. Currently the drawbacks here are licensing issues with major labels and the (current) lack of recognition by the labels of the growing role of services like this in their own marketing.
5. That P2P, and especially bittorrent provides a method to "host" a massive library, without having to purchase mammoth bandwidth.
6. Music lovers don't mind paying for good music.
7. Music lovers DO mind;
   - paying for crap,
   - being limited in how they can use music they have purchased,
   - being overcharged for music,
   - being forced to buy a bundle when they only want a song,
   - watching everybody but the artist get rich from the artist's work.

. . . that enterprising soul decided to build the music industry infrastructure for the world?

A single site, multilingual, global reach where;

• An artist/group would have their own sub-site where they could create their marketing, manage and interact with their community, make sample works available for immediate download, directly sell their works, as well as manage (license, co-promo, etc.) their "published works" within the greater catalogue of music available on the network.
• A critic, pundit, DJ, former A/R rep, music lover would create their own sub-site where they create downloadable "radio" tracks or "channels," review the works of other artists, publish playlists, and generally contribute to the culture of the network.
• A producer would have their own site, and (having the huge base of all artists on the network to draw from) promote themselves and the works they "produced" as well as participating as any other artist would.
• A music lover could join, pay a small subscription fee as well as per track fees. They could then download their purchased tracks as many times as they want, whenever they want, download "radio" tracks at their leisure (radio tracks are lower quality and include some announcer voiceover and possibly some minor ads) as well as grab promotional snips from artists.

The system above does several things that reduce the end-user cost of music, and increase the artist's revenue:

• There is no physical media to deliver, and bittorrent significantly reduces the bandwidth requirements to serve the entire library simultaneously.
• Piracy will never vanish, but this platform will reduce/eliminate the benefit to end users of pirating music, as well as make the "crime" less victimless, since 80+% of the fees for tracks will go directly to the artist - pirates are no longer "fighting the man," they are stealing from someone they actually appreciate.
• The small amount of sharing that will occur (among friends etc.) will be the best marketing an artist could ask for.
• Because there are literally no "costs" to the platform (infrastructure costs should be covered by ad revenue), the price per track per user should drop to less than 50 cents.
• Users can listen to lower quality full versions of the music they want for free - when they buy, they know they want the music.

A business model where money goes the right places

• The network owns the "banner" are on all pages;
• The sub-site owner owns the rest of the ad space - the network serves the ads on their behalf, but all ad revenue for those impressions goes to the sub-site owner.
• Ad revenue pays for the infrastucture costs of the network
• 5-10% of transactions revert to the network to fund updates, expansion and financial costs.
• Offshore foundation of systems and corporate entity means no tax issues to the organisation or users/clients (until they repatriate funds).
• 80+% of transaction revenue reverts to the artist/group/producer
• So long as user continues to pay subscription fee, the system will maintain their "library" online and they can re-download anything in their library as often as they want, forever.

The technology to accomplish this exists, and could be assembled in no time by almost anyone with a little technical knowledge and management ability. With the right set of models, it could easily supplant existing platforms such as iTunes and effectively (hopefully) create a renaissance in contemporary music. With the ultimate goal being to decimate the existing content owners' revenues to the point where the network could acquire their libraries and artists merging them into the network and becoming the custodian of mankind's musical culture past and present.

Would this be the ultimate Microsoft play for the music business - hell no! In my ideal, the controlling interest in the network would be held by a shareholder trust, controlled and owned by all active subscribers and clients to the system. - No one would be able to hijack the system without decimating the trust of its users - which would simply cause the network's demise, as users migrated elsewhere (and took their tracks and artists with them).

Think big or go home! :-)

As always, I would love to hear suggestions for improving on this rather generalised overview. And of course, making this a reality would be a wonderful thing! I'd be happy to help anyone who thought they could make it happen!