Rolling Stone, the magazine that still prints All the News that Fits, tells us something we know and something we don’t in the February 23, 2006 issue.
We already know the music industry is at war with downloaders it believes are the cause of unrealized income. No surprise there. Here’s some of what a Rolling Stone /Associated Press survey found about that:
% who say CD’s are too expensive 74
% who say 99 cents is a fair price for a digital single 71
% who say CD sales are declining because of high prices bad music and competing entertainment 63
% who say Music is getting worse 58
% who say they find out about new music from FM radio 55
% who say they have downloaded music 26
% who say they have paid for music online 15
% who say downloading music without permission is stealing 80
% of free music downloaders who say they don’t care if it is copyrighted 61
One thing we didn’t know for sure till now is that the music industry is actually at war with it’s best customers. We know this because the Rolling Stone survey found that, in a climate of declining album sales, music downloaders are more likely than others to frequently buy CDs in stores. My enemy, my friend. Go figure.
And talk about room for growth: According the Pew Internet & American Life Project upwards of 65% of American adults – over 137 million people with credit cards – use the internet. The Rolling Stone poll found that 71% of adult Americans think 99 cents is a fair price for a download but just 15% report having taken advantage of the offer so far.
In 2002, the last year CD singles were available, there were just about 12.2 million units sold. Apple’s iTunes online store opened April 28, 2003. The Washington Post, reports 100 million paid single downloads in 2003, 200 million in 2004 and 350 million in 2005 (a number that does not include 600 million dollars in ring tone sales that were non-existent at the turn of the century). Still, this trend is not enough encouragement for some in the industry. "Digital sales aren’t growing fast enough to replace the losses in our traditional business," Charles Goldstuck, president of BMG North America, told the Post (this is the same BMG who last year settled a payola case with New York State Attorney General Eliot Spitzer; the same BMG currently settling lawsuits for planting hidden software on consumers’ computers via music CDs). "The challenge for the industry," Mr. Goldstuck said, "is to find some balance between singles sales and album sales. We want to create an artist experience, not a singles experience."
Blah, Blah, Blah, Baloney. Artists are paid between 14 and 24 cents for a downloaded single and something close to two dollars on the sale of a CD. Split the range at 19 cents per single download and that may be 19 cents the artist would not get if the single were not available. If the downloader takes the entire album at, say, $9.99, it’s about the same money the artist would receive for the sale of a CD. Take the high end at 24 cents per song and an artist may make more on a digital download than on the sale of a CD.
Put the shoe on the other foot and these transactions are propelled by consumers who get to buy only the songs they want. If the music appeals to a broad audience, the artist is not hurt by paid downloads, nor is the music company who has no manufacturing, shipping, or warehousing for digital product. For everyone except the retailers and truckers who are cut out of the digital deal, what’s not to like?
Add the long tail effect unleashed by digital content and, yes, the music industry business model is dramatically changed, but not destroyed.
Strong-willed customers won’t destroy the music industry. The ones who may really destroy the music business are in the music business.
- Besides the music business, what other industry looks similarly vulnerable to you?
- What do you think it would take to reach the kind of conceptual breakthrough that could save a business (if not a whole industry) from itself?
- What does this passage from Ecclesiates suggest about this business dilemma?
Do not say, “Why were the old days better than these?” For it is not wise to ask such questions. Wisdom, like an inheritance, is a good thing and benefits those who see the sun. Wisdom is a shelter as money is a shelter, but the advantage of knowledge is this: that wisdom preserves the life of its possessor.
— Ecclesiates 7:10 - 12 [New International Version]
