|Title:||New business models for music|
|Author(s):||Perritt Jr., H.H.|
|Citation:||Perritt Jr, H. H. (2011). New business models for music. Villanova Sports and Entertainment Law Journal 63.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||The author refers to "empirical evidence collected from interviews with musicians and music consumers," but provides no description of methodology, data collection, or descriptive detail about the interview data.|
|Data Type:||Primary and Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
This article is the fourth in a series by this author seeking to explore the impact of the technological revolution in the music industry. The first three built the case for three propositions concerning costs, copyright, and DRM, while this article explores the question of what economic incentives will suffice to facilitate an effective market in the absence of intellectual-property or copy protection. It bases its analysis, in part, on empirical evidence collected from interviews with musicians and music consumers.
The article first defines the problem: explaining why the old business models have eroded in the face of new technologies and of the changing role of the law — especially copyright law. Then, it builds on the author’s work in his New Architectures article, explaining who makes music, who consumes it, and why. These sections explain that while money plays a role in the marketplace for music, it is secondary to “hedonic” factors both for musicians, who make music largely for self-expressive and self-affirmation reasons, and for consumers, who listen to music for reasons including idiosyncratic perceptions of its quality, a desire to be part of a particular crowd, and vicarious identification with or attraction to the performers.
This Article then explores the essential role that intermediaries play in the marketplace. This section acknowledges that the new kinds of intermediation needed in the new technology-driven market place will not occur unless intermediaries can make money. Building on this foundation, this Article develops the elements of a business model that can sustain new forms of intermediation.
Main Results of the Study
Main propositions of the study:
- This article explores the question of what economic incentives will suffice to facilitate an effective market in the absence of intellectual-property or copy protection.
- There is no sustainable business model for indie musicians unless new sources of revenue can be tapped.
- New revenue sources include: Live performances, publishing, merchandise, ring tones, music tracks for movies, advertising, and access to celebrity.
- Income from creative endeavors has greater variance than day-job income and is more evenly distributed among artists who can support themselves solely from their art than among artists who depend on day-job income. This suggests that the lower one travels down on the status hierarchy, the greater the variance in revenues and income.
- The job of the new intermediaries is to shift the probability function to increase the likelihood of celebrity status, while not eliminating uncertainty altogether.
- Copyright becomes mostly irrelevant in a market in which technology has reduced the cost of producing and distributing recorded music to near zero and competition has force prices to these near-zero costs.
- Copyright still has a role to play in mitigating large-scale commercial piracy, and trademark can play a major role in protecting the identities and personas of musicians.
Policy Implications as Stated By Author
- Advances in technology and the resulting reductions in cost make recorded music essentially free.
- Record labels may insist that no business model exists for either musicians or intermediaries unless the flow of unlicensed music to consumers who do not pay anything for it is shut off, but this is incorrect.
- Many very successful firms can and do compete with free.
- A prescription for making a market based on free successful includes:
- 1. Build a community around the persona and music of a musician.
- 2. Involve the community in shaping the musical and other performance activities of the musician. Offer new songs free to this community and to others who might be motivated to join it.
- 3. Design and make available other products and activities that fans are willing to pay for. These might include more elaborate forms or mixes of the free songs, paid concerts, videos highlighting the personalities and social activities of the musicians, and special “backstage” opportunities for fans to interact with the musicians.
- 4. As celebrity status develops, sell targeted advertising opportunities to advertisers interested in the demographics of the fan group.