THE ONGOING DEVALUATION OF MUSIC
With the constant onslaught of new digital music retail and consumption habits, it is obvious that the value of recorded music is under constant pressure. Free streaming services, it might be argued, have potentially pushed the devaluation faster than would otherwise have occurred. However, on the flip side, it could also be argued that these same streaming music services have helped to stem online piracy. Going one step further, it could also be argued that streaming music services are catering to the consumption requirements of music fans.
Certain labels have kicked back from licensing freemium propositions, insisting that certain services only push their premium subscription services. It has to be presumed that this is what has held up Spotify’s planned US launch. Yet the labels never seem to question the issue of whether they may have been riding a good wave where, in actual fact, recorded music has always been over-valued in the eyes of the music fan.
Price point is no doubt increasingly important in the move to lock down music fans into streaming music services, offering unlimited access massive catalogues at the fans’ fingertips. One would think $5 per month for unlimited music streaming is a generous offering and an entirely affordable one, as well as a dynamic proposition in encouraging consumers away from file-sharing.
The recorded music business has pushed to move to an ARPU model, following in the footsteps of the mobile operators for a number of years. If anything, an ARPU model is viewed as a panacea in the recorded side of the music industry, especially with the move to more 360-degree structured deals. But, is a true ARPU model viable, and is the measurement used by it a true indication of music fan purchasing habits and power?
Labels do need to consider, according to the IP Carrier blog, that “…the expectation of access to quality content online is ‘devaluing’ professionally produced content, which means there will be less of it produced.” If music fans already receive record label content for free (as well as having to listen to, or view a few ads) then labels have also contributed to record music content’s devaluation. Yet it is true that labels have had little choice but to proactively devalue music content in their fight against ‘free content’ that p2p networks have facilitated.
Going further, whilst the rise of digital distribution in some industries “only” changes distribution channels, for music, TV and news, it involves the movement from plastic disks and paper to internet distribution. For some businesses this transition to digital distribution has undermined the traditional business ecosystem. With the music business, for example, the revenue and cost structures of producing content have changed.
Paidcontent.co.uk gives an interesting overview of this process of devaluation stating, “…Rhapsody and Napster – and labels – have been asking this very question since the early part of the last decade. When digital music conferences were packed and billions were at stake, subscription success was almost viewed as a future truism by some. A matter of time. So many songs, so much access, how could it not make sense?”
Alternatively, according to the Music Think Tank blog, value and price are not the same thing. “Price is monetary value, but value is so much more than money. Price gets driven down to marginal cost, but value factors into the demand side of the equation. Expensive things aren’t necessarily valuable, and valuable things aren’t necessarily expensive…Songwriters who get hung up on “devaluation” confuse recordings with music. They equate the two. A recording is not the song, it’s just an instance of it, and a digital audio file is just an instance of the recording. Equating these reduces music to recordings, to files.”
One thing both labels and streaming music services need to consider is that the cheaper their retail offerings become, naturally the music fan will perceive the value of music as being less. NIN, Radiohead and others have shown that offering low quality file formats for free can aid sales of special limited-edition box sets, as well as provide other merchandising opportunities for fans. The HP survey of consumer content consumption TMV wrote about last week provides plenty of evidence that music fans still want physical products e.g. CDs.
So whilst it is perhaps true that recorded music has always been overvalued in terms of price point, and the digital content revolution has brought this fact to bear, real value is to be realised by monetising the plethora of music experiences available to the music fan. This does mean potentially further devaluing recorded music content in the short to medium-term. However on the positive side, if labels get this right, the rewards could be massive.
Other Readers also Read:
UK Evolution of Digital Media Survey Points to Consumer Rejection of Subscription Services?
The Continued Devaluation of Music
When Commerce Eliminated Art… (The Story of the Music Industry)
The Economics of Making Money as an Artist in the Digital World…
How Will We Listen to Music in 2020?
The Human Recommendation Engine
What’s in it for Me?
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Posted by Jakomi Mathews
on May 24 2010. Filed under Business Models, Digital, Labels, Marketing.
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Great post; thanks for the information. I’ll be checking back… you have officially been bookmarked!
“the cheaper their retail offerings become, naturally the music fan will perceive the value of music as being less.” what strong evidence to you have to make this claim? and especially so when your proceeding claim go against it, “NIN, Radiohead and others have shown that offering low quality file formats for free can aid sales of special limited-edition box sets, as well as provide other merchandising opportunities for fans.”
“whilst it is perhaps true that recorded music has always been overvalued in terms of price point” you could dispense with the term “perhaps” or it renders the authors article unbelieving by the author.
I think that, in large part, this is going to be about getting customers accustomed to this new format.
Spotify, for example, now that it’s growing both in name and reputation, has started choking off its free option, Spotify Open; users of that tier now only get 20 hours of music per month, in addition to frequent ad interruptions. They only started doing that after millions of people were using their service regularly.
The streaming experience is as new to the consumer as it is to the labels. I think that, eventually, as streaming subscriptions grow increasingly common, the price will start to tick back up again.