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Editor's Choice

The future of the music business

Via Barry Ritholtz comes this transcript of the keynote speech by Ian Rogers, who runs Topspin, an online music distributor, at the Northwest MusicTech Summit. He cites some interesting data with regard to the future of music: Media companies are making less money from music sales, but music consumers are as eager as ever to consume music.

Rogers argues that power in the music business has shifted to artists: "when I talk to managers and artists they feel it, they feel an ability to take their careers into their own hands, to redefine what success means for them, and that is the emergence of the new music business." The redefinition of success seems to me the pivotal idea -- the idea that success is less a matter of money than what it is to most working artists, to be able to make a living through their art and not have to treat it as a passionate hobby. The trouble begins when ambitions begin to exceed that horizon -- art is denatured and brokers seize control. Right now, technology is disintermediating the brokers (from the A&R people down to the record-store clerks), which has given musicians across the board a chance to recalibrate their ambitions on a sustainable scale, rather than going into it for the stardom and the cash.

That's not to say the essence of Rogers argument is an appeal to making art for art's sake. His point is the new music industry promises to remunerate artists more directly, since there is next to no overhead with regard to production and distribution costs. "When your costs are low, your royalty rate high, and your channel direct, the marginal profitability from the artist's perspective can be far different than in the old model, to be sure." Key to the marketing plan Rogers outlines, though, is something I instinctively cringe at -- price discrimination, or letting people decide what they will pay in return for the same product.

fundamentally I believe the model is shifting from mass-marketed (via radio and TV) and one-size-fits-all (one $15 CD suits fans of all levels of commitment) to a target-marketed approach where fans can self-select where they fit on the scale (when Trent [Reznor] offered Ghosts at five price points he was really asking, “How big a fan are you?”).

I don't why this bothers me so much, since this is the essence of what's probably the oldest form of commercial interaction, bartering. The idea that a fair price for a product is established and applied uniformly is a relatively new phenomenon, a response to the massive problems of information asymmetry that larger-scale production brings on. Still, the idea that someone else can get the same thing for cheaper fires my competitive spirit. It makes me feel like a chump. In other words, I won't be on of the superfans volunteering to pay musicians as much as possible for their music so that I can prove my fidelity or earn their gratitude or whatever the rationale is. When I read about volunteer spenders, I end up thinking that those people are under the sway of some kind of irrational personality cult with regard to the artists they are supporting. Am I really supposed to believe that Trent Reznor gives a single shit about how big of a fan I might be? (Not a fan at all, for the record.) I suppose the idea is that you can prove to other fans that you are more in love with the leader by spending more, but that seems almost worse than the pre-digital star system in which we were told which mass artists were acceptable by A&R people, and at least had to be creative or much more dedicated if we wanted to manifest our superfandom. So when Rogers claims that consumers are "more satisfied" in today's music market, I have to assume he means that we can let our money testify to our devotion -- as opposed to the fact that anyone can get anything they want for free. But since I play music myself (in a total amateur way) I always want trends in the music business to lead away from creating more fans and toward creating more garage bands. I can't tell if the game Rock Band is the beginning or the end of that dream.

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