By Mike Skelton

The following is a list (because everyone likes lists) of the top ten truths of the music business taken from, “The Future of Music: Manifesto for the Digital Revolution”, by David Kusek and Gerd Leonhard. The book was published in 2005 and even though the music industry changes rapidly, it is still very relevant today. Here is the list in no particular order:

1. Music matters more than ever: the music market is alive and vibrant.
You may hear people say, “the music industry is crumbling” or something along those lines. They may refer to such facts as fewer people are paying for music (physical sales are declining) and that the major labels are downsizing heavily. While this may be true, more people are listening to music than ever before, are being bombarded with music all day, and have a much greater number of avenues to discover new music. It is the record industry that is in decline, which brings us to number two on the list.

2. The record business is not the same as the music business.
The music business is a lot more than just selling records. While CD sales may be going down the tubes, there is still a lot of money to be made from merchandise sales, live shows and touring, publishing, licensing, sponsorships, endorsements, and more.

3. The artists are the brands, and the entertainment is the main attraction.
I’m going to let the authors of the book field this one.

“…despite the productization of music that the record industry created, most people still place the greatest value on their connection to an artist. We cherish particular artists because they are purveyors of feelings, special moments, experiences that we value…few people cherish Columbia Records (Sony Music) because it’s the home of Santana.”

4. Artists and their managers will shape the future.
The emergence of the DIY model and the advent of new online music platforms, which allow artists to reach a much larger audience and connect with fans, are helping managers and organized, tech-savvy artists create their own paths with less reliance on labels, distribution companies, and the like.

5. Publishing income is a crucial income stream.
From the book:

“… publishing income tends to be a more valuable and reliable revenue stream than recording income-providing that the recording artist is also the songwriter…Public performance, synchronization (the use of songs in films, video, or advertising), and other song-related licensing incomes often provide substantial additional publishing revenue.”

6. Radio is no longer the primary way that people discover new music.
This is a fairly obvious one. A lot of music listeners are tired of the censorship, lack of diversity, and even commercials on the radio. There are now many other means of finding new music including, streaming sites, podcasts, satellite radio, online radio that can recommend songs to you, p2p sites, legal download sites such as iTunes, and more. Some of the more popular of these are Last.fm, Blip.fm, and imeem music.

7. Digital niche marketing outperforms mass marketing.
Again, I will let the authors explain.

“The idea that an artist has to sell more than five hundred thousand records to be successful is a bizarre myth propagated mostly by the music cartels that have to make up for the huge overhead they carry…The key to success in music niche marketing is to focus promotional dollars where they will bring the highest return…to allow for the highest possible conversion rate from ‘interested user’ to ‘buying customer’.”

8. Customers demand-and get-increasing convenience and value.
This is another fairly obvious one. Customers have always flocked towards what is convenient in any industry and they want value for their money. The recording industry should have realized this with the advent of p2p file sharing and adapted instead of suing music fans.

9. The current pricing model goes out the window.
A current CD pricing model looks approximately like this:
Artist=8%
Label=49%
Manufacturing=8%
Shipping=5%
Retailer=30%
Customer=100%
This current model is already changing and so will the iTunes model of selling albums for $10 as music fan habits change. Likely music pricing scenarios include music subscriptions, memberships, donations, and pay-per-view offerings. Some of these scenarios are already happening with similar services being offered by sites like Sellaband.

10. Music is mobile, and new models will embrace a more liquid view of music.
Music was meant to be mobile from the start. Music users want to listen to music anytime and anywhere. That’s why the Walkman was popular and that’s why iPods, smart phones, and similar devices are popular. With listeners always wanting music on the go and the variety of applications that not only allow this but target the users’ tastes, it would be ridiculous not to embrace it.

For anyone interested in the future of the music business, I recommend picking up the book, “The Future of Music” .

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This entry was posted on Monday, October 19th, 2009 at 9:49 am and is filed under Music Business, Music Culture, Wisdom. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.