Thursday, April 03, 2008

Never Go Up Against a Sicilian When *Death* is on the Line!

US music market shares, according to Nielsen SoundScan (2005)Image from WikipediaVizzini vs. The Man in Black in "The Princess Bride"... one of the most quoted and memorable movie scenes of my generation. The battle of wits to the death comes to mind often when I sit and watch what is going on right now in the music industry. The labels are Vizzini... overconfident, over-thinking, but also over-looking (the obvious). The consumers are The Man in Black... practical, nimble and immune.

For those of you that watch the industry, you have seen a flurry of announcements lately about the new approaches the labels are taking, the partners that used to be defendants, and how everything is the next "iTunes-Killer". While hyperbole is aplenty, clarity is hard to come by when it comes to making bets on what happens next.
  • offering free streaming of millions(?) of tracks has also just announced that they will also offer streaming simulcasts of CBS Radio stations (sister division)
  • imeem cutting deals with all the majors with other "gray" services being coerced into similar deals
  • MySpace Music's announcement today about offering free streams (from 3 of the 4 majors) and selling both DRM'd and DRM free tracks
  • Nokia's "Comes with Music" offering (aka "the hardware tax")
  • Apple's rumored discussions around their own subscription plans ("hardware tax")
  • Omniphone's music subscription as bundled with wireless plan service in Europe ("wireless tax")
  • Universal Music Group's "Total Music" plan(s) that are still unclear ("hardware tax"?)
  • Warner Music Group's announcement last week that they hired Jim Griffin to drive and promote a service offering that would be bundled with your ISP bill (aka "the ISP tax")
  • MP3 Search Engines (aka "information retrieval tools") and online storage lockers, like Seeqod and MP3tunes, being sued by major record labels
  • New playlisting and music services popping up daily (see Muxtape and Mixwit)
  • Other services getting acquired (Foxytunes, Qloud) while others close up shop (Ezmo)
  • XM & Sirius merging
  • EMI hires ex-Google CIO to head up their digital division
  • Yahoo and MTV shedding their subscription music services (to Rhapsody)
  • Yahoo Music VP, Ian Rogers, decided to move on to a new job focused on the *creation* side of the industry... presumably because the consumption side is such a mess?
  • AOL farming out their radio programming (and presumably royalty liabilities) to CBS Radio
  • Amazon is now the second biggest digital music retailer, but iTunes is now the biggest music retailer (digital or physical) surpassing Wal-Mart
The list goes on and on. The good news is that there are a lot of smart and passionate people dedicated to trying to change the way the music business operates. The bad news is that most of the business models being pursued above can only succeed at the expense of all the other models.

I like the notion of making music "feel free" even if it's not. The problem is are you going to pay Nokia, Apple, Verizon and Comcast all an incremental fee for the same rights (all the music you can enjoy)? Some would say the labels have finally gotten smart by recently making some online bets after years of just trying to wish the internet away. Others would say that they are extorting the digital music companies, forcing them to make huge upfront deals and trade away big chunks of their companies in the name of self-preservation. Taken a step further, many claim the labels are moving towards extorting the consumers directly (after years of suing them) by trying to inflict an "optional" ISP music fee that basically buys you (and the ISP) immunity from being sued.

The only thing clear to me is that there is a nuclear bomb coming, and I'm not betting on any of them until the smoke clears. Any one of the (r)evolutionary models will send ripples throughout the music/tech community.... anointing new kings while massacring hundreds of others in the process.

That is, of course, if Steve Jobs decides to let any of it happen or not.


Anonymous said...

One trend I think you missed is the emergence of music blogs as a force to be reckoned with, along with aggregators like hype machine.

These would perhaps fall under "gray" services, but so far the labels have left them alone (for the most part) and in fact I think they are seeing the value in them as a voice that "romances the music."

Music bloggers are the new DJs.


jherskowitz said...

Mark -

I agree that there are some great things going on with music blogs and aggregators. My problem with the "new DJs" is really the same problem I have with the "old DJs". There are very few that will expend the (often thankless) effort required to program content for others. Particularly when there is very little monetary upside, and potential massive legal liabilities on the downside.

Most people don't expend the effort even to make playlists for themselves, let alone blog about each of the tracks in them. This leads to a very small number of people creating one-to-many programming. I think there are some better opportunities to turn *everyone* into a passive programmer - no additional effort required for the programmer - lots of additional channels for people to listen to.

Granted, I don't think these approaches are mutually exclusive. There are lots of great ways to program and consume music. I just think the *really* interesting ones won't emerge until after the bomb goes off and the music civilization re-evolves from the cockroaches left when the dust settles.