How to destroy the music business
This will only take a second
Analysis Put yourself in these hypothetical shoes for a moment. My goal is to make as much money as possible by doing as little work as possible. I have no creative talent except for generating and recycling marketing buzzwords. I have no technical knowledge or ability - but I can get my head around a Twitter feed. It doesn't sound promising, but you'll want in, I promise.
Now let's imagine a business that can achieve our goals.
The natural place to start this business is on the internet - where one can harness the labour of millions of people and pay them sod all for their work. Under the smokescreen of "collective intelligence" or harnessing "the wisdom of the crowd", we can keep our supply costs at zero. And if we can keep reminding these rubes that "power lies at the edge of the network" or "in the Long Tail", they'll produce lots of stuff for us for nothing, without complaining.
That's the supply side sorted out. However, we need to attract an audience.
We know that the traditional vices - gambling and porn - will drive substantial traffic to our service. But gambling has regulatory issues - and porn takes us away from the mainstream. That leaves music - the stuff of life, and proven crowd-puller. So let's make music the main feature of our service.
There's a couple of problems however. One is that simply throwing up millions of crowdsourced user-generated MP3s isn't going to draw much of an audience, as the (undoubted) gems are too hard to find. Copyrighted material is what people want, and while economic activity persists around music, there are thousands of talent-spotters slightly better than our algorithms dedicated to finding it: the promoters, DJs, talent scouts, A&Rs, and so on. We can give our music finding technology a fancy name, but it's still rubbish, and no match for a human talent scout.
The second problem is that owners of musical rights are frustratingly reluctant to surrender their assets for a smile, a promise and two magic beans - which is about all we have to offer. What music service companies like ours need is somebody in the music business stupid enough to hand over their master rights assets for next to nothing. Thirdly, and this follows on from the second point, asset-owners have civil law on their side. So unless we negotiate individually with many different licensing entities, the threat of litigation or seizure hangs over us. What we need is a Get Out of Jail Free card - something that allows us to pursue our goal of creating as much money as possible, while adding as little value to the human condition as we can muster. But now I think I've heard the cure for all these problems. Peter Jenner again proposed it at a MusicTank seminar this week - and it fits our needs perfectly.
It's an "Access to Music Charge", and it's our Holy Grail. Under an AMC the rights holders couldn't refuse us - and everyone is opted in at once. So this lifts the mortal threat of being sued for using someone else's assets without their permission, and doesn't oblige us to do anything innovative. The clincher: the cost of this, Jenner helpfully explains, will be so low we can consider it as a one-off shake down.
So an Access to Music Charge is great for talentless non-entreprenuers like us - but why is it bad for anyone with an economic interest in music? Well, this scenario should explain it.
As Jenner sees it, an AMC will simply lift the threat of litigation from music services companies like ours that offer file sharing, and creates a new pot of money that goes to creators. (We'll start by offering you a fiver, Pete). What should happen - he explained to the MusicTank audience - is that enterpreneurs and innovators will then create value added services that people will voluntarily pay for, over and above the AMC. For example, people will pay for services that offer FLAC file format versions of songs to share.
However, there's no need for us to spend a penny on such a service. Because under Jenner's AMC, every Oink is now legal, and they'll be offering FLAC versions for us. (It's hard to find a piece of music on the Torrents that isn't already available in lossless format.) So there's no reason for anyone to invest in creating a SuperFLAC P2P premium service, because people are already getting it for free. And because people are getting it to for free they won't, out of the goodness of the hearts, suddenly start paying for one.
Meanwhile, we're home and dry. Remember the question posed at the start of the piece - how can a completely talentless but cynical entrepreneur flourish? The answer is - they need an AMC. Pete, I suspect, hasn't met as many "internet entrepreneurs" as you or I have.
Next page: Incentives and blankets
I'm not really sure what I've just read. The music business is thriving. Perhaps you are only talking about the record (content) business. This, it is true, is going through some drastic changes. It is time for the industry to become customer facing. The consumers have been empowered by the internet. The consumer is king. They do what is best for them. Record labels and copyright holders don't have a God given right to make profit. If the environment changes they have to adapt or become extinct. Natures law. A blanket license would be great. Of course the governments should intervene as the large copyright holders can't sort it out between themselves, as they have now proven. Free markets have their pitfalls too even if we don't like to admit it. Maybe the majors should go cap in hand for a billion dollar bail out and with continue their uninnovative and narrow mind sets. A content tax on ISP & MSP fees, to create a pool of money for recorded music, would sort it once and for all and then we could all get on with our lives.
Time for the labels to think outside of the box. They have to realise that the game has changed for ever. As far back as 1985 business strategy guru Micheal Porter suggested that the information revolution would create new linkages across previously unrelated industries and in the extreme cases cause a redefinition of certain industries. The record industry is one of them. Apple have beaten everyone to it long long ago when labels were squabbling with their customers in the courts. They brought out the iPod and iTunes. iPods rely on illegally downloaded music for sales but just in case they provided iTunes as a smoke screen which also happens to make them a decent profit for virtually nothing. They also started investing heavily into ISP's and developed the new iPod replacement the iPhone. They realised that there was no money left in recorded music copyright owning from a consumer sales orientated perspective and then duly placed themselves at all points on the value chain where there was a profit to be made. Now they are kings. This related diversification strategy has been proven genius. Perhaps if the majors hadn't squandered their capital reserves on court cases against 8 year olds and had instead also invested heavily in the content delivery value chain they would not be in the situation they are in. Now it is too late perhaps, so the only thing for it is to change to a 360 strategy and accept that content development is a necessary evil marketing cost, unless of course a change of heart leads to the acceptance of the ISP tax blanket license.
How to revive the corpse...
1. Make ATM like Automat CD Audio dispensers -- connected to the Net with big pipes, so you could choose your twang from a menu and it would get it from a central archive (lossless if you pay more, lossy for a few cents a song) wrap it up in industry grade packaging, and get it charged on your VIsa (but please insure the better part of the payment DOES get to the Creator/Performer);
2. Have the Internet surveyed by an independent artist supported agency in order to determine what is getting (mostly) downloaded and share royalties collected accordingly;
3. Put out a special 0.1% levy on the profits of every media related operation and add that to the (fair) royalties fund;
4. Police the collection agencies to ensure they are collecting for the artists, not for the industry.
You'll have a flourishing industry in no time...
The Joly Roger -- you know why.
5 REAL reasons for FAILURE
1. Hans wants music, but he doesn't want to pay for it
2. Hans wants music, but he doesn't want to pay for it
3. Hans wants music, but he doesn't want to pay for it
4. Hans wants music, but he doesn't want to pay for it
5. Hans wants music, but he doesn't want to pay for it
"destined to fail" eh, Hans?